New-York News

Mayor commits $2B to Port Authority bus overhaul, now to include a third tower

New York City is doubling its wager on the recovery of Manhattan’s office market by committing up to $2 billion in property tax revenue from three potential commercial towers to help finance a long-awaited overhaul of the Port Authority Bus Terminal.

The announcement Tuesday includes a new third tower, to be built on land bounded by West 30th and West 31st streets and 9th and 10th avenues near the Lincoln Tunnel.

Mayor Eric Adams said, in an agreement with Gov. Kathy Hochul and the Port Authority of New York and New Jersey, that the city will commit 40 years of tax-increment financing to raise up to $2 billion — “subject to market demand” — for the $10 billion bus terminal redevelopment. The tax revenue would come from the three proposed commercial towers all planned for Port Authority-owned land.

Two previously announced office towers are expected to rise over the 41st Street bus terminal along Eighth Avenue. New York City’s contribution would amount to 20% of the overall project cost. The Port Authority said selling development rights for the proposed towers would generate $500 million.

Mayor Adams described the deal as a key step toward making the vision for a reimagined Midtown bus terminal a reality.

“For decades, New Yorkers have watched the Port Authority Bus Terminal deteriorate from the world-class facility it was in the 1950s to the stain it is on Midtown today,” said Mayor Adams in a statement. “Our investment over the course of the coming years, and our partnership with the Port Authority, will help develop a new crown jewel for Midtown — a state-of-the-art bus terminal that will add acres of new public space and storefronts, decrease congestion in Hell’s Kitchen, and improve the commuter and community experience in and around the terminal.”

The deal, however, comes with quite a few caveats. The Port Authority and the city are betting big on the recovery of the office market to partially finance the redevelopment at a time when a major shift in work patterns has made the project’s math more of a gamble.

A similar tax-increment financing mechanism helped fund Amtrak’s Moynihan Train Hall, but the model is riskier now that Covid-19 has reshaped the commercial real estate industry. Manhattan’s office market, for instance, currently suffers from a nearly 20% vacancy rate, according to global real estate services firm CBRE.

Still, Port Authority Chairman Kevin O’Toole has said he’s confident in the industry’s recovery by the time the commercial developments would build, likely in the 2030s.

“Our agreement with the city to provide a portion of the financing toward a new Midtown Bus Terminal will allow the Port Authority to move forward with a project that will generate economic benefits for our entire region while improving the quality of life in the community where the terminal is located,” said O’Toole in a statement. “We will replace this aging eyesore with a world-class gateway our region deserves.”

As part of the redevelopment plan, the Port Authority is proposing an office tower on the corner of 42nd Street and Eighth Avenue. The current zoning allows for a height up to 1,300 feet — 30 Hudson Yards, the tallest of the Hudson Yards’ development, is some 1,270 feet. A second tower would rise beside it on Eighth Avenue and could top out at 900 feet. Neither project would need special permits, according to the authority.

The new, third commercial development would be built on a C6-4 zoned district, which is typically mapped within the city’s major business districts, for a maximum floor-area ratio of up to 15. Payment in lieu of taxes or PILOTs would be generated from a maximum of 2.3 million square feet, the city told Crain’s. Officials say they’re not currently in talks with prospective developers and do not have an estimated timeline for the latest commercial development.

A version of the bus terminal redevelopment first planned during the early 2000s included two additional buildings: a residential high-rise and a mixed-used tower. But because the authority decided to tweak its overall design based on community feedback, two skyscrapers were cut out of the proposal. 

Tuesday’s announcement does not bring either proposed tower back, but is a return to a more expansive commercial development component for the project.

Caroline Spivack , 2024-03-12 17:03:03

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