In transit air rights, is the sky the limit?

While officials and developers want to reach for the sky in transit-oriented air-rights development projects, the sky itself could have limits.

Officials at the Port Authority of New York and New Jersey have announced plans for a new in-place Manhattan bus terminal. The project, which could cost up to $10 billion, features a multi-pronged financing approach that would include air rights from up to four new high-rise towers — three office and one residential — and funding from payments-in-lieu of taxes, or PILOTs, from developers subject to city approval.

Air rights, while subject to real-estate market variables, represent a public-private approach to transit land use amid challenges of public funding. They also provide options in tight urban spaces and with taking of private land less viable.

“You have a reimagination that’s going on,” said Joe Crowley, a senior policy advisor at Squire Patton Boggs and a congressman from the city’s Queens borough from 1999 to 2019.

“The air-rights issue is something that’s outside the box a little bit in terms of funding streams in these days of ever-smaller budgets or fare increases, so people have to be thinking outside the box for ways in which to produce the revenue that will provide for the maintenance and the upkeep and the modernization of transit.”

Port Authority of New York and New Jersey

Port Authority officials have acknowledged the uncertainties while announcing the project two weeks ago. Executive Director Rick Cotton said officials would look for clarity on the real-estate market for the area in question.

“Air rights are valuable as a first step in a major transportation hub,” said Mitchell Moss, director of New York University’s Rudin Center for Transportation Policy and Management.

“If you believe in New York’s future, that area is very important long-term transportation access, not the myth of august development in Long Island City,” Moss said. “Far more people come into New York from the west than from the north or the east. New York depends upon the workers from Pennsylvania and New Jersey. We need a new bus terminal.”

Moss envisions large-scale growth from north to south along Manhattan’s West Side.

“The people with money — young, smart people with money — are leaving their caves on Park Avenue and are going down to Tribeca. The Upper East side is for people who live in Palm Beach, Florida, for half the year.”

Nicole Gelinas, a senior fellow with the Manhattan Institute for Policy Research, said Port Authority officials were wise not to reveal a price tag for now. She added the bistate authority should tap all federal funding opportunities.

“I wouldn’t want to depend on air rights,” she said.

COVID-19 has hit New York’s real estate market especially hard.

According to data from the Real Estate Board of New York, Manhattan had only 21 new-building job application filings in the fourth quarter. It accounted for the least number of filings and was the only borough to show a decline either from the third quarter of 2020 or year-over-year.

“I think much of this will be determined by the markets themselves,” Crowley said. “We just can’t wish that this property becomes valuable because we want it to be. It has to be because the markets can sustain that, whatever that price may be.”

The pandemic's effect has slowed down another transit-oriented development on the West Side, the $25 billion Hudson Yards project, an amalgam of condominiums, retailers and office space above rail tracks.

Rodney Slater, a Squire Patton Boggs partner and U.S. transportation secretary under President Clinton, cited efficient use of air rights abroad.

“I believe that if you look at some of the investment in, say, Japan in particular, and especially along their rail tracks and their high-speed rail connections, especially, they have done a tremendous job with this issue of real estate, air rights and looking at all of that as a means for infrastructure investment.”

Sam Turvey, chairman of transportation infrastructure nonprofit ReThinkNYC., is skeptical about the Port Authority plan.

“We’re not so sure rebuilding a bus terminal with huge towers above it is the best way to handle this situation,” he said. “We think whatever these transit facilities are, they should have a serious public-space component to them.”

Liam Blank, policy and communications manager for the Tri-State Transportation Campaign, said planners should not look at the Port Authority project in a vacuum.

He cited Amtrak’s Gateway program to replace two rail tunnels under the Hudson River, which will include a “Bergen loop” to provide NJTransit riders with a one-seat ride to Penn Station.

“This project could impact bus demand in New Jersey by encouraging more rail commuting, so why are Amtrak, NJTransit and Port Authority planning these projects in silos?” he said.

“What is so desperately needed is a regional approach to transportation planning and fixing the cross-Hudson commute, especially when we are talking about megaprojects with multi-billion-dollar price tags.”