Christie’s Transportation Trust Fund Plan Built on Borrowing, ARC Tunnel Money
- Credit: (Governor's Office/Tim Larsen)
Governor Chris Christie yesterday proposed a five-year renewal of the Transportation Trust Fund plan that would be funded primarily by issuing $4 billion in new debt and using $3.1 billion in Port Authority and New Jersey Turnpike money originally earmarked for the cancelled ARC rail tunnel.
Christie's five-year plan would authorize the same $1.6 billion a year in state funds for highway, bridge and mass transit capital projects as his Democratic predecessor, Jon Corzine.
More surprising, however, is Christie’s willingness to borrow somewhere between $3.6 billion and $4.378 billion in order to refuel the state Transportation Trust Fund (TTF).
Christie's plan immediately came under fire from the Democrats, who said the governor will be saddling the state with even more debt instead of fixing the problem.
Creating "Jersey Jobs"
Christie’s $8 billion program, coupled with $8 billion in expected federal aid, would pump $16 billion into transportation capital programs over the next five years, a much-needed stimulus in a jobless recovery where unemployment continues to hover just below 10 percent.
"Ensuring these critical transportation projects move forward will create thousands of Jersey jobs,” said Christie, who added proudly that other states “are looking at New Jersey as the model for restoring a state to fiscal health.”
Christie’s plan keeps his campaign promise not to raise the state’s gas tax -- which is the third-lowest in the nation -- and it requires no pay-as-you-go funding from general revenues for at least the new two budgets.
Instead, Christie relies on $1.8 billion in Port Authority funds and $1.3 billion in future New Jersey Turnpike toll revenue originally set aside for ARC.
The other portion of the plan depends on Christie’s willingness to borrow as much as $4.378 billion to replenish the exhausted Transportation Trust Fund. This is instead of simply patching together a smaller program by using the money originally earmarked for the ARC Tunnel and some money from the general fund.
Christie sharply criticized Corzine during his campaign for increasing the state’s bonded indebtedness and for mortgaging all of the remaining gas tax, sales tax and motor vehicle fees dedicated to the Transportation Trust Fund for the next 30 years to pay for his five-year program. Corzine’s actions created a funding crisis by leaving TTF with no money for new projects as of July 1.
Christie’s insistence that his $8 billion plan is more fiscally responsible than Corzine’s because it included $1.6 billion in pay-as-you-go financing was ridiculed by Senate President Stephen Sweeney (D-Gloucester) and Assembly Transportation Committee Chairman John Wisniewski (D-Middlesex), who accused Christie of hypocrisy.
"The Governor campaigned against greater debt and spent a good part of his first year telling us how we can no longer saddle residents with more debt," Sweeney said. “Billions of dollars in more borrowing is just pushing the real costs onto future taxpayers.”
The attacks by Sweeney and Assembly Speaker Sheila Oliver (D-Essex), the leaders of the Democratic-controlled Senate and Assembly, and Wisniewski, who also serve as the state Democratic Party chairman, are crucial because Christie’s plan will require the approval of the legislature.
The need for legislative buy-in guarantees that negotiations over the future of Christie’s $8 billion Transportation Trust Fund package will be inextricably tied to the politically charged negotiations over the next state budget, which must be approved by July 1. That's just four months before state voters go to the polls to decide whether Democrats or Republicans should control the Senate and Assembly.
Sweeney’s opposition is particularly tricky because he serves as a business agent for the Ironworkers Union in Gloucester County, and the building trades unions would normally be expected to support a large Transportation Trust Fund that creates construction jobs no matter how it is funded, as the Associated General Contactors of New Jersey quickly did yesterday.
With Republicans needing to gain just four Senate and eight Assembly seats to take control of the legislature, Christie seems to have weighed his previous opposition to expanded state borrowing against the boost in jobs -- and votes from members of the building trades unions where unemployment of 40 percent to 50 percent is not uncommon -- in opting for a more expansive Transportation Trust Fund program.
Perhaps reflecting the expectation that final details of the program would be hammered out later in negotiations with Democratic legislative leaders, the plan presented by Christie, Transportation Commissioner Jim Simpson and Treasurer Andrew Sidamon-Eristoff at a press conference in the Governor’s Outer Office yesterday was thin on details:
Christie’s office issued just a two-page press release and two pages of charts, with no indication what future state revenue would be pledged against the state appropriation bonds to be issued and no indication of how much interest would need to be paid on the bonds over the next 30 years.
Christie said during the press conference that $3.6 billion in bonds would be issued, but the bonding columns on the accompanying chart totaled $4.378 billion.
It is clear that Turnpike Authority revenues originally earmarked for the ARC Tunnel will cover the $78 million and $261 million pay-as-you-go portion of the TTF program in the first two fiscal years. Christie indicated that state appropriations from the general budget would be needed in the third, fourth and fifth budget years of the program (presumably $51 million in FY2014, $166 million in FY 2015 and $281 million in FY2016 to supplement $324 million per year in Turnpike Authority revenue). However, another administration official said that in no year would pay-as-you-go funding exceed the amount of money being provided by the Port Authority and the New Jersey Turnpike Authority.
"This is all going to be part of the budget negotiations anyway," one Christie administration official said in explaining the gaps and discrepancies. "You don’t want every number out there."
Another reason for some of the vagueness in the numbers is that the Christie plan assumes that bonds will be issued at an average interest rate of 6 percent over the next five years, but with interest rates low, the first-year bonds will probably go out at 4 percent to 5 percent, the official said.
Whatever the interest rate is, however, the bonds will be paid off at a uniform rate over the next 30 years, rather than allowing interest to build so that there is a big balloon payment due at the end, Christie said.
While Democratic leaders attacked the Christie plan, Republicans were uniformly effusive in their support.
"The fact that taxpayers will not have to shoulder the burden in order to fund the $8 billion program is something many skeptics didn’t think could be done, but Gov. Christie has proven them wrong," asserted Assembly Minority Leader Alex DeCroce (R-Morris).
Assembly Republican Budget Officer Joseph Malone (R-Burlington) said, "The Governor’s plan moves us in a direction toward responsibly funding vital transportation projects throughout all of New Jersey. This plan does not raise taxes or tolls and any borrowing will go directly to infrastructure projects instead of operating expenses."
The insistence by Christie and Malone that the governor’s plan did not require any increase in taxes or tolls particularly incensed Wisniewski, the Democratic state chair, who noted that the more than $1.25 billion in New Jersey Turnpike tolls that Christie is relying upon “for the responsible pay-as-you-go financing he is taking credit for” is directly due to a Turnpike toll hike that Corzine, approved. "He should thank Corzine for doing his dirty work," Wisniewski said, adding that if Christie wanted to be intellectually honest, he should have lowered the toll hike when he killed the ARC Tunnel project it was approved to fund.
Wisniewski, however, refused to offer an alternative plan to fund the Transportation Trust Fund when challenged by reporters to say what he would prefer to do. Instead, he called for Christie to convene a meeting of Republican and Democratic leaders for a responsible discussion on the future of the Transportation Trust Fund.
Christie dismissed the criticism from Democrats. "I’ll be waiting for telegrams of congratulations from those people who said this could not be done without a tax increase," he said sarcastically.
The Environmental Angle
Environmentalists and mass-transit advocates, almost all of whom have championed an increase in the gas tax in the past, were split in their reaction to Christie’s plan.
"The proposal presented by the Governor today begins to head in the right direction," declared Peter Kasabach, executive director of New Jersey Future, "It addresses the immediate need to replenish the Trust Fund, moves away from excessive reliance on debt and back toward the 'pay-as-you-go' model on which the fund was founded. Importantly, it provides an increase in funding for NJ Transit, a critically important step in the wake of last year's fare hikes and service cuts.”
Kasabach noted that the proposal fails to provide the needed long-term solution to the TTF and will wind up saddling New Jerseyans with more debt at the end of five years.
David Pringle, executive director of the New Jersey Environmental Federation, which broke ranks with other environmental groups to endorse Christie against Corzine, called the Christie plan "an improvement over the last five-year plan in its emphasis on mass transit funding” by providing $672 million a year for New Jersey Transit.
But Jeff Tittel, executive director of the Sierra Club of New Jersey, said Christie’s plan suffers from "the same problem we have seen in previous administrations: borrowing money from other pots instead of raising the gas tax."
Tittel continued, "Killing the ARC tunnel project to raid funds to replenish the TTF is irresponsible and bad transportation policy. New Jersey still needs a tunnel to New York City and a long-term solution for transportation funding."
There was little discussion of future passenger rail tunnels to New York yesterday, but much debate about how and why the ARC decision was made.
U.S. Sen. Frank Lautenberg (D-N.J.) said it proved "that the governor killed the critically needed new tunnel to Manhattan so he could use its funding as part of a fix for his political problems."
An Independent Decision
Christie said that his decision to kill the $8.7 billion ARC Tunnel because of cost overruns expected to total $2 billion to $5 billion was made prior to and independent of his consideration of how to replenish the Transportation Trust Fund. Jim Weinstein, Christie’s New Jersey Transit executive director, acknowledged last summer that the potential benefit of using money earmarked for the ARC Tunnel for the Transportation Trust Fund instead was at least discussed at the staff level.
Christie said, however, that there was never any question once the ARC Tunnel was cancelled that Port Authority and New Jersey Turnpike Authority funds earmarked for the tunnel should go to other transportation capital projects in New Jersey.
One Christie administration source noted that diverting the money from ARC to the Transportation Trust Fund actually provided more jobs for New Jersey construction workers because half of the ARC jobs were going to go to New York unions, for jobs on the Manhattan side of the Hudson.
The $1.813 billion in Port Authority money included in the Transportation Trust Fund will all go to projects that fall within the Port Authority district, which is defined as being within a 25-mile radius of the Statue of Liberty.
Principal projects to be funded with Port Authority money originally earmarked for ARC include the repairs to the Pulaski Skyway linking Newark and Jersey City via Routes 1 and 9; the Route 7 Wittpenn Bridge in Kearny that connects Routes 1 and 9 with New Jersey Turnpike Exit 15W; Route 139 linking the Holland Tunnel; the I-78 New Jersey Turnpike extension; local roads in Jersey City and Hoboken; and the Portway New Road in Jersey City.
If approved by the legislature, Christie’s proposal would be the sixth five-year funding plan for the Transportation Trust Fund approved since its creation by Republican Governor Thomas H. Kean more than 25 years ago.
Mark J. Magyar is an editor-at-large for NJ Spotlight.