Governor Andrew Cuomo's $3 billion planned overhaul of Penn Station and James A. Farley Post Office received a setback Tuesday when the Port Authority of New York and New Jersey announced that it was backing out of leasing a 40,000 square foot space in the post office building, The Real Deal reported.

Port Authority had signed a lease back in 2000 with Empire State Development to use the space in the transformed building (which would be known as Moynihan Station) for 35 years, and pay $10.5 million each year.

A majority of the overhaul is privately funded, but about $325 million is supposed to be a government contribution, of which the Port Authority was supposed to contribute $150 million.

That's not totally out the door however. At a board meeting on Thursday the Port Authority decided to study the role the agency would play in the redevelopment project, so all's not lost yet.

That board meeting also led to approval of billions of dollars towards several projects including the LaGuardia Airport upgrade, a new Hudson River tunnel, and a new bus terminal in Midtown, the New York Times reported. The meeting also revealed friction within the agency with with the executive director Patrick J. Foye and the chairman John J. Degnan arguing over how the funds should be allocated.