State at Least $1B Behind in Funding Moynihan Station

State officials say they are at least $1 billion short of securing the $2.3 billion needed to fund the Moynihan Station plan to remake Pennsylvania Station and move Madison Square Garden to the rear of the neighboring Farley Post Office, which would also house a new train hall.

In today's economic climate, with less availability of financing for large real estate transactions, and worsening state and city budget crunches, the progress report on West Side development delivered yesterday from Governor Spitzer's top development aide, Patrick Foye, is not inspiring confidence, lawmakers say.

Assemblyman Richard Brodsky, a Democrat of Westchester who chairs the Committee on Corporations, Authorities and Commissions, said he is skeptical of the feasibility of Moynihan Station plans and a number of other public projects, including the proposed expansion of the Javits Convention Center and the extension of the no. 7 subway line. For Moynihan, he said, "They need over $2 billion and they have maybe around $1 billion. They need maybe $3 billion for the 7 line, they have maybe $2 billion. They are trying to figure out what to do on Hudson Yards and it looks like that is not coming together. With Javits, it looks like they are wasting $800 million on a plan that does nothing." "The West Side stuff is in really tough shape," Mr. Brodsky said in an interview yesterday, following the hearing.

In his testimony delivered yesterday to the state Assembly's Committee on Corporations, Authorities and Commissions, Mr. Foye, the chairman of Empire State Development Corporation, said that the state is still trying to piece together public funding for the creation of a new Pennsylvania Station.

The largest commitments to date have come from the project developers, the Related Companies and Vornado Realty Trust, who have committed a combined $550 million to the project, according to Mr. Foye. The developers could reap profits from surrounding development, as the project agreement allows them to use an additional 7.5 million square feet of air rights nearby, the equivalent of more than two Empire State Buildings. In 2006, the chairman of Vornado, Steven Roth, said the project could create more than $1 billion in new value on his properties in the area, where the firm has significant holdings.

Mr. Foye said the state and city have committed $300 million, leaving a gap of slightly more than $1 billion.

Mr. Foye said the funding gap could be bridged through increased contributions from the developers — to the tune of $100 million — and through a request for federal funds.

"We believe that the city and state can make a case to the developers that they contribute more than the 550 that has been committed," Mr. Foye said, adding, "A project of this significance is deserving of federal aid."

It also appears that the state could be seeking an equity sharing agreement with the developers similar to that being proposed by the Metropolitan Transportation Authority in its bid to sell and develop the West Side rail yards.

Mr. Foye said yesterday a "50-50 sharing agreement on the upside of the project" would "align the interest of the public and private parties."

A spokesman for the developers declined to comment.

A real estate attorney with Greenberg Traurig, Robert Ivanhoe, said that an equity-sharing deal would be good for the city and state, but he said a balance needs to be struck regarding the developers' risk and reward.

"Why would they take all that risk?" Mr. Ivanhoe said. "The developers have to get a certain return on their investment."