Amtrak Says It Needs NY Station That May Be Too Costly

For Amtrak to move more passengers on trains between Washington and Boston, its only profitable route, it must move out of New York’s Penn Station, said Drew Galloway, assistant vice president for the eastern region.

The new space it covets is across the street, where New York state and two developers plan to transform the 97-year-old James A. Farley Post Office into a $1 billion train hall and retail complex.

The rub: Officials at U.S. taxpayer-subsidized Amtrak, which lost $1.3 billion last fiscal year, say they can’t afford to leave Penn Station, which the railroad owns, unless their new home is effectively rent-free. With the development’s finances unresolved, New York officials haven’t made guarantees.

“Either we are able to expand the station capacity to accommodate more passengers, or we can’t expand the service on the corridor,” Galloway said. “It’s that simple.”

Other potential sources of project funding have dried up or face constraints. Congress last month killed the fiscal 2012 budget for President Barack Obama’s high-speed rail program and cut Amtrak’s annual subsidy by $65 million.

The Port Authority of New York and New Jersey, which is managing construction for the state, raised tolls in August by 56 percent over five years to shore up its budget. The real estate developers will spend money on the project after negotiating final terms with the state, Timothy Gilchrist, president of Moynihan Station Development Corp., a unit of New York state’s business-investment agency, said in an interview.

The project is named for the late Senator Daniel Patrick Moynihan, a New York Democrat, who first championed it almost 20 years ago.

‘Modest Increase’

Amtrak won’t have to help pay to build its new home, Gilchrist said. How much it will contribute to operations is under discussion, though Washington-based Amtrak won’t occupy it if it faces more than a “modest increase” from costs at Penn Station, Galloway said in an interview.

Penn Station is North America’s busiest passenger- transportation center, handling more travelers than the New York region’s three airports combined, according to the June 2010 state plan outlining the project.

It’s in the middle of Amtrak’s Northeast Corridor, where ridership on regional and Acela trains grew 30 percent to 10.9 million in fiscal year 2011 from 8.4 million in fiscal 2000, according to the railroad.

‘Running of Bulls’

The Acela, which can reach 150 miles per hour, captured 74 percent of the airline-rail market between New York and Washington in fiscal 2011, Stephen Gardner, Amtrak’s vice president of Northeast Corridor infrastructure and investment development, said at a conference last month. In 2000 it was 37 percent.

Amtrak passengers represent a small fraction of people who use Penn Station, which is also served by New Jersey Transit, Long Island Rail Road and New York subways. More than 600,000 people enter the station daily; 25,000 to 30,000 ride Amtrak, Galloway said.

Separating Amtrak from local trains would stop some of the ripple effect in operations that a problem with one train can cause, Galloway said.

It also would remove Amtrak riders from the crush of commuters that descend on Penn Station during rush hours like a “running of the bulls,” Fred Bartoli, transportation project manager for Moynihan Station Development, said.

Two former Amtrak presidents questioned whether the railroad must relocate to carry more passengers on Northeast trains.

“The tracks under the Farley Building and Penn Station are the same tracks,” Tom Downs, president from 1993 to 1998, said by phone. “Without a way to increase the number of platforms, it doesn’t increase capacity.”

Longer Trains

David Gunn withdrew Amtrak from the project in 2004 when he was president, saying it was too expensive as the railroad faced possible bankruptcy. Current President Joseph Boardman in 2009 renewed the commitment.

The post-office redevelopment is “an example of how the whole transportation planning system has broken down,” Gunn said in a phone interview. “It was controlled by a bunch of rich developers.”

Galloway agreed the project won’t add tracks to the 21 that run under Penn Station; 13 of those continue beneath the Farley building. It will create “much-needed passenger waiting space” and escalators, elevators and stairs to platforms, he said.

“Even though the number of trains may not increase they can grow in length” as the new station could accommodate more riders, Galloway said.

The Farley complex is distinctive for its inscription “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”

Development Rights

The first phase of the renovation, to expand the underground concourse on Penn Station’s west end, began last October and is scheduled to be completed in 2016. The second phase is to include the train hall and developing the complex’s west side for residential and commercial use.

Building Amtrak’s new site will take 3 1/2 to 4 years and make available 2.5 million square feet of development rights the private-sector partners can transfer to other sites or sell, Gilchrist said. Phase two will be financed by a public-private partnership with New York-based developers Vornado Realty Trust (VNO) and Related Cos LLP.

‘Funding Gap’

The development rights may yield several hundred million dollars “but there will still be a funding gap and it’s not clear how that will be filled,” Juliette Michaelson, director of strategic initiatives for the New York-based Regional Plan Association, said in a phone interview.

The U.S. Transportation Department rejected the state’s request for $50 million for Moynihan Station design plans earlier this year. U.S. Representative John Mica, the Florida Republican who’s chairman of the House transportation committee, said the department shouldn’t put more resources into the project until the developers contribute.

“There’s plenty of federal money in it,” Mica said in an interview. “I want to see the green dollar bills from the private sector.”

Vornado, Related

Vornado and Related in 2006 committed $313.8 million to the project. Though a final deal wasn’t struck, they made a $10 million refundable deposit, according to a 2005 document prepared for the Moynihan Station Development board.

Joanna Rose, a spokeswoman for Related, and Wendi Kopsick, a Vornado spokeswoman, declined to comment on negotiations.

Governor Andrew Cuomo, a Democrat, last week offered a job- creation plan that includes $300 million for the Port Authority to spend on capital projects. That may provide enough money to start the second phase, Michaelson said in an e-mail.

To offset any costs of space at Moynihan Station, Amtrak may renovate and rent its space in Penn Station to retailers, New Jersey Transit and the Long Island Rail Road, Galloway said.

Moynihan Station may end up saving Amtrak money, Galloway said.

“If we didn’t have this opportunity, then we would be looking at probably several hundred million in capital investment, in life-safety improvements for the area of Penn Station that Moynihan is taking care of for us,” he said.

To contact the reporter on this story: Lisa Caruso in Washington at lcaruso7@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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