Fresh Doubts on Mega-Projects as Paterson Supplants Steamroller

Governor David Paterson faces a host of uncertain economic development initiatives at the very time that the economy is showing new signs of instability.

The projects, most notably the multibillion-dollar expansion and renovation of Pennsylvania Station, known as Moynihan Station, have been dealt a new level of doubt in the past 10 days now that the two figures at the helm, Governor Eliot Spitzer and his deputy for New York City economic development, Patrick Foye, have resigned.

The reach of the Empire State Development Corporation, of which Mr. Foye was the downstate chairman until he resigned on March 16, is extensive, spanning from the expansion of the Jacob Javits Convention Center to the Atlantic Yards development in Brooklyn to the creation of 85 acres of parkland along the East River waterfront known as Brooklyn Bridge Park.

The situation Mr. Paterson inherits is hardly ideal: Nearly all of the major projects at ESDC have met problems of cost overruns and funding problems recently, given the rapidly rising cost of construction in the city; the shrinking state and city coffers amid an economic slowdown; and the tightening of financial markets. Inaction in coming weeks could deal irreparable injury to the projects, especially Moynihan Station, as Mr. Paterson settles into his role and the ESDC goes without a permanent leader.

“The level of uncertainty on both private and public sides is at unprecedented levels,” said Assemblyman Richard Brodsky. “The problems with those projects have more to do with inadequate funding than they do with anything else. There’s no public money around to meet the commitments.”

Mr. Foye penned his resignation letter Sunday, and while the move appears to be one of his own volition, there was—or at least there was soon to be—strong pressure from the Paterson administration for him to leave, according to multiple people familiar with the situation.

Mr. Foye wrote that he would stay for a transition period if Mr. Paterson desired, though a spokesman for the ESDC said that Avi Schick, the agency’s chief operating officer and a former prosecutor in the attorney general’s office under Mr. Spitzer, would serve as the interim CEO of the agency. As of Monday, a date had not been set for Mr. Foye’s departure.

Mr. Schick is said to be close with Assembly Speaker Sheldon Silver, though some onlookers said they consider his permanent promotion to be unlikely, as his background is not in economic development but in law—he served as the lead prosecutor in Mr. Spitzer’s case against former New York Stock Exchange chairman Dick Grasso.

The ranks at ESDC will be further thrown into disarray by the departure of Mr. Foye’s chief of staff, Alexandra Stanton, who decided to head to the private sector before Mr. Spitzer’s scandal broke.

With the departures, eyes are turning to the Moynihan Station project above others because its realization was already on shaky ground despite strong support from Mr. Spitzer.

The plan calls for moving Madison Square Garden to a new arena to the rear of the neighboring Farley Post Office; a complete redo of Penn Station in its current site and an expansion into the Farley Building; and millions of square feet of new nearby commercial development that would remake the Midtown South area.

For 14 months, Messrs. Spitzer and Foye had been attempting to lift the project off the ground amid a heavy load of government agencies and complex dealings with landowners, and had seen little concrete progress as they tried to round up between $2 and $3 billion in funding commitments. The clock was ticking, as Madison Square Garden, anxious to shed its second-oldest-arena-in-the-NBA status, indicated it was strongly considering a renovation of the existing facility, a move that would effectively cripple the plans for Penn Station and most of the surrounding development.

Now Mr. Paterson, who has signaled his support for Moynihan Station, faces many of the same challenges as the prior administration, and he will tackle them just as he takes on every other big issue in state government. For the next two weeks, the governor is likely to be spending much of his energy hashing out a budget with the Legislature as the search starts for a new downstate ESDC chairman.

“Without Spitzer there and his sponsorship, it does create a void, and we’d like to see the state continue to maintain a leadership role as it relates to shepherding that project through to fruition,” said Robert Lieber, the city’s deputy mayor for economic development.

Fresh Doubts on Mega-Projects as Paterson Supplants Steamroller