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What Lies Ahead for NYC Transportation Infrastructure

ULI infrastructure panel From left: Thomas P. McKnight, Samara Barend, Rick Cotton, Janno Lieber, Edward Pallesen

NEW YORK CITY—On the heels of President Trump’s State of the Union address where he unveiled plans to ask Congress to pass a $1.5 trillion infrastructure bill, on Wednesday the Urban Land Institute New York emphatically tied together the critical role of public transportation with the success of real estate projects and the city.

In a panel discussion “Driving Development: The Future of Infrastructure,” at the Times Center in Midtown, the moderator Thomas P. McKnight, EVP and head of planning, development and transportation at the New York City Economic Development Corporation, asked transportation and land use decision-makers direct questions about funding and priorities of the region’s infrastructure—all too often described as “crumbling.”

Transportation Priorities

McKnight asked with limited dollars, whether the agencies should be focused on repairing the existing infrastructure instead of on growth.

“The answer is we have to do both,” said Rick Cotton, executive director, Port Authority of New York and New Jersey. “The shortcomings of the infrastructure are significant and need repair. But the fact is the region has grown. There are different centers of population that are growing, so if you are not finding ways to expand, you’re really not serving the agency’s needs and purpose.”

Janno Lieber, the chief development officer at the Metropolitan Transportation Authority, said repairs versus expansion presents a false dichotomy. Projects such as the $2.5 billion Long Island Railroad mainline are described as mega projects. However, the current system when built was designed for 50,000 commuters. Now it serves three million riders.

Transportation Funding and Financing

Tremendous pools of capital available for infrastructure projects exist in the private sector, according to Edward Pallesen, managing director, infrastructure investment group in the merchant banking division at Goldman Sachs & Co. In a low return environment, institutional investors are looking for long-dated, reliable, stable assets to match against long-dated liabilities.

“People from around the world really want to get into quality infrastructure projects,” said Pallesen. “The good news is if you ask people to pick where they would like to invest, the US would be right at the top of that list and in the US, New York City has no better set of opportunities.”

However, he noted a challenge in the US is finding projects where there are few political risks. Permitting, delays, and political infighting can quickly turn off institutional investors. The private-public partnership for LaGuardia Airport was a strong fit because there were revenue sources that could be identified and isolated. For a sustainable role, risk must be transferred to the private sector, whether it’s traffic demand, upside potential or a construction risk, said Pallesen.

However, he reiterated that the private sector is not well positioned to take on governmental entities fighting over what actions to take.

“Leadership and initiative from public officeholders is really essential. If those are put into place with high certainty, a lot of capital will be available,” said Pallesen.

Growth and New Projects

“The essence of transformational projects is unlocking potential,” said Lieber. The extension of the 7 subway line opened up potential for roughly 50 million square feet of development, more than half of which will be commercial, the rest residential and hotels. He emphasized that the economic benefits would be heading toward $300 million per year of recurring public revenue.

In addition to the public transportation supporting Hudson Yards, Lieber touted the completion of Phase 1 of the Second Avenue subway, and underscored the importance of Phase 2. This latter project will extend the subway from the 96 Street stop up to Lexington and 125th Street. Lieber stressed that it will help connect economically deprived populations in Harlem with jobs and access to the Metro-North railroad system at 125th Street.

The estimated $6 billion project includes three new stations, power substations, signal and communication systems, and car cleaning facilities. Instead of being a blank wall station to catch trains, it will focus on a value capture model to integrate its above-ground presence and streetscape additions within the neighborhood.

The city council has already approved the East Harlem rezoning. However, it is the subject of litigation that warns against untoward effects of gentrification, as the rezoning allows for a special transit land use district with luxury high-rises, along the Q subway when it is extended.

Janno sees the project as taking advantage of real estate opportunities that will help the neighborhood with more economic activity. Opponents fear the influx of luxury housing will drive up prices, making real estate too expensive for long-term, lower income residents.

Maintenance and Repairs—Signal Systems

Lower profile projects that do not gain headlines are nonetheless critical in improving the existing infrastructure. The MTA and PATH are updating signal systems, so throughout the subway system, cars can safely run more closely together, increasing the number of trains operating on the system during peak hours.

“In addition to the systems being old, the technology they are built on is ancient,” said Lieber. “So, thinking about technology to allow more throughput is not just a state of repair project.”

The current signal system was blocked by outdated technology that required a great deal of equipment to maintain communications. The new technologies will reduce the need to do work in the right-of-way.  Lieber anticipates the process to lead to an announcement in the next couple of months.

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