Penn Station Rebuild Funding to be 80% Feds Hopes Byford

Amtrak’s man in charge of rebuilding Penn Station said he will be asking the federal government to pay 80 percent of the projects total cost, which he now estimates at between $6 and $8 billion.

The statement, from Andy Byford, seemed an effort to tamp down criticism from Representative Jerrold Nadler and others that the projects financing is opaque and could leave commuters or taxpayers holding a large unpaid bill.

Byford spoke at a virtual town hall on Monday July 27, the first of what he pledged would be many engagements with users of the station and residents of the surrounding neighborhood. Byford spoke from his office next to Penn Station, with a poster of the old station on the wall behind him.

He told the gathering that “a very, very large contribution” would be “required” from the Federal government, and that if adequate funding did not come together in the next few months, he could pull the plug on plans to start construction by the end of next year.

“We have to have that,” Byford said of the federal funds.

“I’m looking to try and get 80% of this project funded out of federal grants,” Byford explained. “So that’s a big chunk of money because the anticipated cost is between six to $8 billion.”

Byford and Peter Cipriano, head of the consortium Amtrak has selected as its private partner for the redevelopment, said they were drafting grant applications now to submit to the federal government.

The 80% figure is the maximum portion of total costs that Federal grants are permitted to cover, a federal official explained. That translates into $4.8 to $6.4 billion in federal funds to rebuild – Byford says transform—the cramped and decrepit station, depending on the final cost.

Byford said Amtrak was still working with Cipriano’s consortium, Penn Transformation Partners, on what that final cost would be.

If Byford succeeds in winning the federal funding, he outlined that leaves a balance of funding that is considerably less than had at times been anticipated, between $1.2 billion and $1.6 billion.

Before the Trump administration wrestled the project away from the MTA the state of New York had set aside much of that amount for work on Penn Station. But Governor Hochul took back the state funds after the feds took over and is spending the money instead on a Brooklyn-Queens light rail link.

Land of Hopes and Dreams

Byford has repeatedly said he still hopes New York State, as well as New York City and New Jersey, will make contributions. New Jersey Transit has helped pay for some of the early planning of the project, Byford said, as part of the “full partnership” it has signed with Amtrak. The MTA has declined to sign the same agreement.

He repeated his vow that increased fares would not be part of the financing.

Separate from any funding from local or state coffers, Byford described, but did not commit to, several other sources of funding.

He noted that beyond grants, the federal government also offers loans which could be used to close the funding gap

He also mentioned so-called “value capture” in which developers build around the station and then make payments in lieu of taxes to help fund the improvements to the station, which they benefit from. Vornado Realty, a member of Penn Transformation Partners, says it wants to build an office tower across Seventh Avenue.

Byford noted this was proven practice in transit development around the world. Amtrak has asked for the authority to do this around its stations, including Penn Station. But Congress has not yet approved that.

Senator Chuck Schumer, the Democratic minority leader, said he would kill any Transportation Bill if it included a provision, requested by the Transportation Secretary, Sean Duffy, to rename the station. Byford said the debate over naming the station for President Trump was above his pay grade.

Another source of funding, Byford explained, could be Penn Transformation Partners itself, a consortium of some of the largest construction and development companies in the world.

“There is some contemplation of an availability payment structure,” Byford explained. “What is that? That is, once the station opens, once it’s been completely transformed and rebuilt, availability payments are where the private sector has put money in and they need payback against that investment. We pay the developer a fee to keep the critical elements of the station available, such as, you pay to have the elevators and escalators working to a very, very high percentage of availability.”

Sources have said PTP, a consortium led by Halmar, the Italian developer, and Skanska, the Swedish construction company, could invest up to $1 billion and then be repaid at a rate of up to $250 million a year for maintaining the station. “But that has yet to be determined,” Byford stressed.

Byford did note that there could be benefits to consolidating management of the station, where currently, for example, there are three separate cleaning contracts, one for each of the station’s main users, Amtrak, which owns the station, New Jersey Transit and the Long Island Railroad.

“It really will come down to how much can we get the feds to pay for in the first place,” Byford said, “and only then will you know what the gap is that’s left to be paid.”

Byford said he was optimistic because the Trump administration is enthusiastic about the project and has put him on a tight deadline to have shovels in the ground by the end of next year.

“That is dependent, however, on us being able to fund the project,” Byford said. “So, there are off ramps. If we can’t agree a final design, if we can’t raise the amount of money described, then it is possible that we’d have to say this thing isn’t going to be able to proceed. But I’m very confident that with the Fed’s backing, the administration’s backing, rock solid to date, we will be able to get that design right, such that this shovel can go in the ground at the end of 27.”

He said he expected construction to take five to six years and that the station would continue to operate safely through that period.

The Low End Theory

Byford’s low-end estimate of $6 billion to rebuild the station seemed to be a reduction from his previous statements that the cost would be in the ballpark of $7 billion. He did not offer an immediate explanation, other than to say final costs were still a work in progress.

Secretary Duffy’s office had put it the total cost at $8 billion.

The Trump adminstration’s handling of the project has faced sharp criticism from the neighborhood’s Democratic congressman, Rep. Jerrold Nadler.

“Federal financial help and planning acumen are undoubtedly necessary to rebuild the station,” Nadler wrote in a New York Times opinion piece. “I am not opposed to a beautiful, renewed and reliable Penn Station. I am opposed to a process that keeps New Yorkers outside the room while the country’s wealthiest and most powerful decide the fate of millions of New Yorkers — and everyone who passes through Penn Station.”

Byford said he would be holding various events to answer public questions in coming weeks, including “pop-up” appearances at Penn Station, town hall conversations and the required federal environmental impact proves, which calls for public hearings.

“We are determined to keep talking to you,” Byford said to the online audience.