New idea to revamp Penn Station would pay billionaire James Dolan roughly $500mn

Receive free New York City updates

We’ll send you a myFT Daily Digest email rounding up the latest New York City news every morning.

James Dolan, the cable baron who owns New York’s Madison Square Garden arena, would be paid roughly $500mn under a new proposal to rebuild the decrepit Penn Station railway hub that lies underneath.

The plan announced by Italian infrastructure company ASTM on Wednesday involves paying the amount to Dolan for his Hulu Theater, which sits next to Madison Square Garden. Developers would then demolish the theatre to open up space in the notoriously cramped station, creating a main hall with a ceiling that is 55-feet tall.

Fixing Penn Station has become one of New York’s most agonising civic endeavours since the original was torn down in the 1960s. The station is a gateway to Manhattan and handles more daily passengers than the three New York-area airports combined.

But any payments to Dolan could prove politically fraught. He most recently raised the ire of New Yorkers by employing facial recognition technology to ban perceived enemies from the Garden. The billionaire has long been reviled by activists who decry his venue as a bad neighbour.

ASTM estimated its plan would cost $6bn — or $1bn less than an alternative design presented this week by New York Governor Kathy Hochul, which would leave the Hulu in place.

Peter Cipriano, senior vice-president of ASTM North America, rejected the suggestion that a payment to Dolan could be construed as “a giveaway”, and said Dolan’s MSG Entertainment would also pay for other contributions to the proposed project, including new exterior cladding for its 1960s vintage arena.

“It’s private property in New York City. The only path forward for this project is to acquire control of some of that property . . . There’s no giveaway,” Cipriano said. He declined to specify the agreed price but told reporters it would be “less than half a billion” dollars.

Patrick Foye, a former head of New York’s Metropolitan Transportation Authority who has since joined ASTM as its North American chief executive, said the price was the result of a robust negotiation: “Just to be clear: we wanted to pay less and they wanted more — like any negotiation. And we reached a number.”

MSG Entertainment declined to comment on the roughly $500mn figure, saying: “Recognising that the decision on which the plan goes forward is not ours to make, we look forward to collaborating with all key stakeholders on improving Penn Station.”

An official from the MTA, which has a central role in the redevelopment, expressed scepticism about ASTM’s cost estimates and the need to pay public money to Dolan to shutter the theatre.

More broadly, the official complained about the private company’s attempt to force its way into the running after a preliminary design contract had been awarded. “They’ve offered an unsolicited proposal for a design that’s already under way,” this person said.

The design favoured by the MTA and touted by Hochul on Monday would place the main train hall close to Seventh Avenue, in contrast with the ASTM plan. Its backers believe that would obviate the need to remove the theatre.

The long-running effort to overhaul Penn Station entered a new phase with Hochul’s recent acknowledgment that it was no longer feasible to rely on revenue from as many as 10 new office towers around the site to fund the project.

Instead, both proposals would tap state and federal funds.

The ASTM plan would be a public-private partnership in which the Italian company would have a 50-year contract to operate the station and make a $1bn equity investment. In return, it would seek $250mn in annual payments, upon completion, to be split by Amtrak, the station’s owner, and its two main tenants, New Jersey Transit and the Long Island Rail Road.

ASTM and its partners, which include the architect and urbanist Vishaan Chakrabarti, the former director of city planning for Manhattan in the Bloomberg administration, are asking for an open competition for proposals — something the state says is already well advanced.

Chakrabarti and other architects have drafted plans that would remove the Garden altogether in order to restore Penn Station’s grandeur and open its corridors to natural light. But even some who supported that approach now believe it may be unrealistic — particularly after Dolan undertook a $1bn renovation. Removing the Hulu, a 5,600-seat venue that also sits above the train tracks, would be a less dramatic alternative.

“We’re happy to compete,” Foye said. “We want an open, competitive process.”

This article has been amended to clarify the titles of Cipriano and Foye and a former role of Chakrabarti