[NYguy]

https://www.nj.com/news/2024/03/insi...l-it-work.html

Inside the Port Authority’s deal with N.Y. to fund a new $2B bus terminal. Will it work?


Mar. 14, 2024
Larry Higgs

The Port Authority, New York City and state officials struck a tax agreement to help finance the $2 billion replacement for the aging Midtown bus terminal that will use tax payments from three towers to be built over it to cover 20% of the costs.

The agreement counts on revenue from three commercial towers, two over the new terminal and a third on a site nearby owned by the Port Authority and private owners. The agreement announced Tuesday commits 40 years of tax revenue to the project and was agreed to by New York City and state officials.

…Development of the new towers isn’t expected to begin until the end of the terminal construction project or after the main terminal is completed, Topousis said. The payment in lieu of taxes is based on a maximum of 6 million square feet of development, he said.

…The agreement announced between New York City and state Tuesday allows private developers to make payments in lieu taxes instead of regular property taxes, mortgage recording taxes and sales taxes at market rates, Topousis said.

The Port Authority would receive those payments for 40 years after construction of the towers and after that time, payments revert to the city, he said.

…New York Gov. Kathy Hochul was counting on similar private sector investments to help cover the cost of her new $8 billion Penn Station Vision project, Penner said. These competing projects for tenants are only blocks apart, he said. The Penn Station plan, which calls for building a series of super-tall buildings to provide funding for redeveloping Penn station, faces intense community opposition.

…Another expert disagreed with the Penn Station comparison, and said the real estate market could be very different when the bus terminal towers are built, said Tom Wright, Regional Plan Association executive director.

“This is apples and oranges, there are so many moving parts (with Penn Station) a private sector owner of Madison Square Garden and Amtrak owns the station,” Wright said. “The Port Authority owns the bus terminal and the community is supportive of the project.”

The real estate market is likely to be different when it’s time to build the towers, he said.

“Even in today’s market, Class A new office space is doing extraordinarily well,” Wright said, He cited the performance of the 73-story office tower at One Vanderbilt place at 42nd Street and Vanderbilt Avenue, which counts TD Bank and TD securities among it’s occupants.

“It’s the older buildings with subpar space with high vacancy rates,” he said. “We see new product is highly desirable and office buildings so close to transit, as these would be, gain a premium, so this is solid play.”

Since the towers are the second phase of the bus terminal project, market conditions could change several times, as could the plans for the buildings, Wright said.

“These won’t be in today’s market,” he said. “I’m pleased they reached this agreement…the Port Authority, city and both states are committed to modernization and expansion of the bus terminal.”