A Better Path for East Midtown

Early in January 2017 the City of New York began the official public approval process for a proposal to rezone East Midtown Manhattan. The proposal was based in part on a report by the East Midtown Steering Committee co-chaired by the Manhattan Borough President Gale Brewer and the District 4 Council Member Daniel Garodnick.

The new 2017 proposal is the third proposal for rezoning East Midtown. In 2013 the Bloomberg Administration proposed to rezone East Midtown, but was forced by opposition to withdraw the proposal.  In 2015 the City rezoned the limited area along the Vanderbilt Corridor adjacent to Grand Central Terminal.  Both the current 2017 proposal and the 2015 adopted Vanderbilt Corridor rezoning are an improvement over the Bloomberg Administration’s withdrawn proposal; a developer cannot just write a check to receive bonus floor area, but must build an improvement to the public realm.  Still, both the new proposal and the Vanderbilt Corridor rezoning represent “zoning-for-dollars,” and take zoning in a wrong direction.  How might we do better?

For East Midtown we propose that the City create a comprehensive Design and Finance District for the area around Grand Central Terminal. The Design and Finance District should combine three components:

• An urban design plan for the public realm governing both public and private property,
• A cooperative organization to operate the public realm so as to realize its potential synergies, and
• A tax increment district to help pay for construction of those improvements to the public realm that are not on private property.

This level of planning and control is not a new idea for East Midtown. During the first third of the twentieth century the New York Central planned and built what it called Terminal City based on a well-considered plan which used a variety of regulatory and funding tools.  The New York Central held a competition for the design of Grand Central, prepared and revised plans for the area, built the infrastructure of streets and utilities, and coordinated the design of terminal and buildings. Electrification of trains had made it possible to place the train yards and platforms of Grand Central Terminal below street level.  The New York Central rebuilt the terminal and the yards between 1903 and 1913.  It then leased the area above the train yards for the development of hotels, office buildings, and apartment buildings to help pay for electrification of the trains and for the new terminal.

One of the most important aspects of Terminal City was its grand hotels, which complemented Grand Central both in design and purpose. Terminal City was a successfully completed project when the Waldorf-Astoria and the New York Central Building were finished in 1929 and the Chrysler Building in 1930. Since then buildings have been remodeled and replaced, the terminal has evolved from inter-city rail to commuter rail, and the New York Central Railroad has divested its interests, removing its guiding hand.

The Role of Zoning in Midtown Today

Terminal City was conceived before New York City had enacted its zoning resolution. Today, zoning is the main way that the City controls and channels development. But zoning alone is not the best way to develop East Midtown.

New York City established the nation’s first zoning resolution in 1916, amended it comprehensively in 1961, added a Special Midtown District in 1982 and, in 1992, created the Grand Central Subdistrict. The 1916 resolution mainly addressed (i) incompatible uses and (ii) obstruction of light and air. The proverbial incompatible use was a glue factory which then involved rendering dead animals.  In New York City it was garment factories near the stores on Fifth Avenue.  Light and air was a reaction to the Equitable Building at 120 Broadway, which occupied its entire site in Lower Manhattan to a height of 41 stories and blocked light and air to the adjacent streets and buildings.  The Woolworth Building on Lower Broadway across from City Hall was a model for the new rules.

In 1961 the City revised the rules protecting light and air to encourage towers in plazas such as the much admired Seagram Building on Park Avenue. The 1961 amendment also added density controls based on floor area ratio (FAR). FAR, which varies by zoning districts, is the ratio of floor area of a building to the area of the lot on which it is built. FAR sets the maximum size of the building that might be built on a particular lot.

To encourage public open space, the 1961 amendment introduced incentive zoning that allowed additional FAR in return for providing a plaza or an arcade. Incentive zoning trades additional density for a density-ameliorating amenity.  It is, therefore, important that the public benefit of the amenity relate to the anticipated impact of the additional density in terms of the nature of the impact, the scale of the impact, and the location of the impact.

In 1982 the City added the Special Midtown District to the zoning resolution. This action encouraged development to shift west where there was more subway capacity and more readily developable sites.  The Special Midtown District also established pedestrian circulation requirements for the privilege of building in Midtown and new height and setback rules to provide more architecturally flexible envelopes for new buildings.  These requirements protect light and air to streets and plazas and to adjacent buildings and do so in a quantitative way that allows one to measure the degree of any modification or variance.

A motivation for creating the Special Midtown District was the loss of daylighting in Midtown, similar to the effect of the Equitable Building on the 1916 zoning, and the realization that the loss was associated with discretionary zoning seeking other public goods. The Special Midtown District made many of what had been negotiated improvements into requirements.  It also established daylighting regulations that allow flexibility of design while producing buildings that provide at least the minimum expectation of sky exposure in streets and public spaces.

The Grand Central Subdistrict was added to the Special Midtown District in 1992 primarily to provide for transfers of unused development rights from Grand Central Terminal. The ability to realize the value of the unused development rights was a supporting factor in the Supreme Court’s decision to uphold the landmarks law protecting Grand Central.  Originally the transfers were intended to take place under section 74-79 of the Zoning Resolution through a chain of ownership. When the New York Central divested its real estate interests the Grand Central Subdistrict was created to allow transfers without a chain of common ownership.

Vanderbilt Corridor

The new special permits authorized by the 2015 rezoning of the Vanderbilt Corridor moved from the predictability of well defined, largely as-of-right, on-site requirements to the unpredictability of ill defined, largely discretionary provisions. The developer and the City/MTA negotiate the transfer of landmark development rights, identify on-site and off-site improvements to the public realm and the bonus floor area they are to earn, and modify many of the requirements of the Special Midtown District.

Although the Vanderbilt Corridor is presented as a special district it is more like a package of special permits that only apply to sites in the five blocks of the corridor.

If the Vanderbilt Corridor were a legitimate special district it would have a unifying theme or plan. For example, its rationale might be to provide better access to the Long Island Rail Road concourse that is being built below Vanderbilt Avenue.  If so, one would expect the district to encompass all sites that might be able to provide access to the concourse and one would expect a plan describing the improvements.  However, the five blocks of the corridor are not coincident with the concourse, which extends north to between 48^th and 49^th Streets, while the Corridor stops at 47^th Street, and there is no plan for improvements to the public realm that would serve the LIRR’s East Side Access.

Zoning, including special permits, is required to treat like sites in a like way. In the Vanderbilt Corridor sites in each of the five blocks may increase their FAR by as much as 15.0.  However, these blocks are not alike.  Each block differs in the number of characteristics that might justify greater density.  One Vanderbilt (i) has frontage on more than one wide street, (ii) overlooks the “air park” above Grand Central, (iii) can connect to the Terminal City pedestrian circulation system, and (iv) is adjacent to a subway station.  The other blocks enjoy fewer of these characteristics.  As a special district one might expect a range of maximum FARs related to the number of density justifying characteristics of the site or as a package of special permits one might expect only sites with all four characteristics to qualify.

Such loosely structured regulation encourages unintended consequences. Zoning functions best when it regulates what happens on a site – providing an easement for access to a subway station or requiring a subway entrance be moved from the adjacent sidewalk onto the site.  The sections of the zoning resolution containing these requirements provide considerable specificity as to the size and design of the facility, administrative relief for impractical situations, and no bonus floor area – what is provided reflects the privilege of being located adjacent to the transit station.  The property owner, the City/MTA, and the community each know what is required and the process is largely as-of-right.

A special permit for improving a subway station is different. It requires work to be done off of the building site, on the MTA’s property; it requires a scope of work and a compensating bonus to be negotiated between the property owner and the City/MTA; and it requires a public review.  A public review is needed because there are not clear standards in the zoning for the types and amounts of improvements that would generate a public benefit equal to the amount of bonus floor area being granted.

The Example – One Vanderbilt

One Vanderbilt is the huge office building currently being built on the entire block bounded by 42^nd and 43^rd Streets and Madison and Vanderbilt Avenues.  It will contain 1.6 million square feet of floor area for an FAR of 30.0 and will rise 57 stories to a height of 1,300 feet with a spire extending another 100 feet.

It is difficult to know whether the City negotiated a good deal with One Vanderbilt. The use of the Vanderbilt Corridor’s incentive zoning in the absence of a broader plan created a conflict of interest for the City.  It put the City in a position of both regulator and beneficiary in the market for development rights.  This created an incentive for bad land use policy.  Such a conflict undermines public confidence in land use regulation by casting government as a self-interested marketer rather than as a disinterested arbiter seeking a balance among interests.

One Vanderbilt increased its FAR in two ways: first, from 15.0 to approximately 17.7 by transferring unused development rights from the Bowery Savings Bank and, second, from approximately 17.7 to 30.0 through a Public Realm Improvement bonus. Approximately 2.5 FAR of the Public Realm Improvement bonus is for investments in the Lexington Avenue subway station that were already promised to be provided by the MTA and the City as mitigation for the East Side Access and No. 7 train extension projects, respectively.  This relieved the MTA and the City of approximately $42.5 million in obligations while burdening the community with 2.5 FAR of building bulk without compensating density ameliorating amenities.

The City gave One Vanderbilt numerous modifications of the Special Midtown District requirements, including forgiving the requirement for a significant unbonused improvement to the public circulation system of Grand Central. The City also allowed a negative 62 sky exposure score rather than a positive 75 minimum passing score.  A negative 62 sky exposure score indicates an excessive canyon effect resulting in loss of daylight. It is a return to the lack of daylight resulting from unregulated buildings before the 1916 zoning and from negotiated buildings before the establishment of the Special Midtown District in 1982.

The steeper, more nearly vertical, building envelope of One Vanderbilt constrains views along streets. This reduces the visibility of buildings further down the street, for example the Chrysler Building viewed from the west along 42^nd or 43^rd Streets. Without a better understanding of the kinds of office space needed in the area it is difficult to judge whether the shape of One Vanderbilt has to do with needed floor sizes and shapes or with exterior aesthetics.  Without seeing alternatives it is difficult to understand to what degree the negative sky exposure score is the result of fitting too much FAR into the envelope.

There will be some worthwhile improvements to pedestrian circulation and to the Lexington Avenue subway station. But it is clear that the calculus had to do with dollars rather than the implementation of a well-considered plan for the Vanderbilt Corridor and the proportional mitigation of the increased density of the new building as provided by the zoning power.

A Better Path for East Midtown

A better path for East Midtown starts with as good and complete a plan as possible for the area and accepts that zoning is only one part of the regulatory regime employed to realize the plan. Urban change based on well-considered plans and using the most appropriate tools to regulate, fund, and operate improvements provides a better path for East Midtown.

The 2017 proposal for East Midtown, by contrast, is reliant on zoning rather than other tools and is not based on a well-considered plan for the public realm. Instead its goals are to encourage some very large office buildings, help the MTA pay for the improvement of several subway stations, and transfer a large amount of air rights from a few landmarks.  It is designed to raise funds for subway and street improvements through a transit improvement bonus and fees on the transfer of air rights and the rebuilding of overbuilt floor area rather than to integrate development with the public realm.

A new generation of development in East Midtown is emerging. The City’s response must be broader than the proposed rezoning. The response should be an updated urban design plan, an operating group to protect and manage the plan, and a source of funding through a tax increment district.

The starting point is an updated urban design plan for the area. The attractiveness of East Midtown as a premier business address reflects its rich mix of uses including special stores, restaurants, and galleries, its convenience to nearby residential neighborhoods, its existing historic fabric, and its varied scale and styles of architecture. The plan for East Midtown should begin with the assumption that all of the buildings in the area share a special pedestrian circulation system that benefits the participants synergistically – that better connectivity, more retail frontage, enhanced maintenance, and light, air, and circulation improvements benefit all.

Access, both to the place and to and among the activities and people nearby, is the essence of the attractiveness of East Midtown and the area immediately surrounding Grand Central Terminal. Local circulation depends on the quality and connectedness of the public realm.  Access to the place depends on trains, and has since 1856 when New York City’s Common Council banned steam locomotives from south of 42^nd street.  Today Grand Central is served by Metro-North, by the Nos. 4, 5, and 6 trains of the Lexington Avenue IRT subway, by the No. 7 train of the Flushing IRT subway, and by the Times Square shuttle.  Soon it will also be served by LIRR trains via the East Side Access project and eventually it will be served by the Second Avenue subway. Two more improvements are needed; a direct rail connection between Grand Central and Penn station and direct rail access to the airports.

An operating group would need to represent all property owners of East Midtown, including the City of New York and the MTA, and the community, including local elected officials.  Perhaps it could be an offshoot of the Grand Central Partnership.  Membership might be proportional to the amounts of the public realm controlled by each property owner.

The primary role of the operating group would be to coordinate the operation and maintenance of the public realm of East Midtown, especially the pedestrian circulation system linking buildings, transit, and streets. It would provide the guiding hand similar to that originally provided by the New York Central for Terminal City and, currently, by operating groups such as the Battery Park City Authority for Battery Park City.

The tax increment district would capture a portion of the increase in land value resulting from the completion of East Side Access.  This would not be a surcharge on real estate taxes, as is the case with a business improvement district, but a segregation of part of the natural increase.  That portion would be calculated to allow funding of improvements to the publicly owned portion of the public realm, particularly those that would more graciously integrate the LIRR with the rest of East Midtown.  It would not include the increment of the building value resulting from redevelopment.  That would go to the general fund to pay for increasing City services.  The use of tax increment funds would be limited to capital investments and not allowed for operating costs.

Because East Midtown is largely an existing built environment there is a question of how to encourage the participation of existing buildings in improving the system. One approach would be to identify improvements in existing buildings and to allow a floor area bonus that may be used on site, if practicable, or transferred to another site, similar to a transfer of unused development rights from a landmark.  An existing building might provide a new access to East Midtown’s pedestrian circulation system or light and air to the system through a skylight in a plaza; the urban design plan would identify the bonus floor area the improvement would earn; and the property owner would be able to use the floor area or sell it to a developer of another site in the district.

Tax increment financing would avoid conflicts of interest between planning and raising revenue, would spread the cost over all the properties that benefit from the transit improvements, and would likely provide significantly more funds for improvements to the public realm than fees being proposed through zoning. There are arguments against tax increment financing, not least of which is that it diverts tax revenues from the City’s general budget. Nevertheless, we believe it is a tool that is worth thorough and objective consideration.

By: John West and Michael Gruen (John West is the Chair of the City Club’s Urban Design Committee. Michael Gruen is the President of the City Club. This article is adapted from a paper prepared by the City Club of New York)