ARC: The 21st Century Tunnel that Wasn’t

Mark J. Magyar | October 8, 2010 | Budget
Citing billions in potential cost overruns, Gov. Christie killed off the ARC Tunnel. Democrats charged the governor really wants to redirect money to the bankrupt Transportation Trust Fund

After a meeting with U.S. Transportation Secretary Ray LaHood, Governor Christie agreed to grant a two-week reprieve to the ARC tunnel project while staffers for NJ Transit and the federal agency explore policy and funding options that might meet with Christie’s approval.

Gov. Chris Christie has turned what was the largest public-works project in the nation and a 20-year plan to double rail capacity to Manhattan into an empty promise.

The Christie administration admitted that canceling the $8.7 billion passenger rail tunnel to Manhattan means giving up $3 billion in federal funding for construction jobs and perhaps repaying the federal government $300 million it has already spent. Critics also said it will put a stranglehold on New Jersey’s economic growth, capping access to high-paying New York City jobs and inevitably creating more congestion and pollution near the Hudson River crossings.

That is why U.S. Senator Frank Lautenberg (D-N.J) said “killing the ARC tunnel will go down as one of the biggest public policy blunders in New Jersey history.”

But Christie contended that New Jersey taxpayers cannot afford what he projects to be $2 billion to $5 billion in cost overruns on the tunnel project. “We don’t have it to spend, and we can’t spend money we don’t have,” he said.

Democrats charge that the money the governor really has his eye on is the $3 billion in Port Authority funds and $1.25 billion in New Jersey Turnpike Authority cash that were going into the tunnel project. Now, that money could be redirected to pay for transportation construction projects that would otherwise have to come out of the depleted Transportation Trust Fund over the next three years.

And that would be enough to get Christie through his 2013 reelection campaign — and the 2012 presidential election year, assuming he’s still a hot commodity on the national Republican circuit — without needing a gas tax hike and without having to pay for highway, bridge and mass-transit capital projects out of a state budget that is already facing a major deficit for the upcoming fiscal year, Democrats said.

Cancellation of the ARC tunnel, they charged, would cost the state 6,000 construction jobs and 45,000 long-term jobs. Instead of a 45 percent increase in ridership mostly on new nonstop rail service to New York and an $18 billion increase in property value along the rail lines, New Jersey would get an extra 66,000 tons of carbon emissions from commuters who would choose to drive instead, Zoe Baldwin of the Tri-State Transportation Campaign asserted.

An Accusation

Both Lautenberg and Assemblyman John Wisniewski, the Democratic state chairman from Middlesex County, suggested that Christie’s real motivation in killing the rail tunnel was to “steal” billions of dollars to refuel the Transportation Trust Fund.

“The governor has deliberately painted us into a corner and taken solution after solution off the table,” Wisniewski said. He is referring to Christie’s refusal to consider a hike in the gas tax or any other new revenue source to replenish the Transportation Trust Fund, which will run out of money for new projects next July. The fund is in trouble as a result of more than a decade of overspending and borrowing against future gas tax, sales tax and motor vehicle fee revenues by both Democratic and Republican administrations.

Christie said in a Statehouse press conference that his sole concern was the estimate by his ARC Executive Steering Committee, chaired by NJ Transit Executive Director James Weinstein and including senior Port Authority of New York and New Jersey officials, that the final cost for the planned $8.7 billion tunnel “is likely to top $11 billion and
could exceed $14 billion.”

Christie said the $8.7 billion cost estimate was “a fiction, and I’m not going to ask the taxpayers of the state of New Jersey to take it on faith that a project tunneling under Manhattan Island and the Hudson River will run even close to these cost estimates. Our previous experiences with these type of projects and current ones tell us that it will get even worse before it gets better.”

“The State of New Jersey is broke” and cannot afford to underwrite the projected cost overruns on the ARC tunnel, Christie thundered, waving around the three-page ARC committee memo. The memo cited a possible range of final cost estimates of $10 billion to $13.7 billion but did not provide any details.

Christie insisted that the Transportation Trust Fund was a separate issue, but it was Weinstein, the NJ Transit chief who chaired the ARC committee, who publicly linked the two issues when he acknowledged that there had been discussions within the administration about the potential benefits of canceling the tunnel and using the money instead to refurbish the Transportation Trust Fund.

Furthermore, the ARC committee report stating that “in the current economic climate, New Jersey and its project partners cannot afford this project” was signed by “project partners” Anthony Coscia, the former state Economic Development Authority director who now chairs the Port Authority of New York and New Jersey and former state Senator Bill Baroni, the Port Authority deputy executive director who played a leading role in the Christie campaign.

The $3 Billion Tradeoff

The $3 billion in Port Authority funds dedicated to the ARC tunnel was a tradeoff to New Jersey for funding being spent in New York on the World Trade Towers site, so the money would presumably have to be spent in New Jersey. Coscia and Baroni, as the ranking New Jersey officials on the Port Authority, would be the key figures in deciding whether that money should be redirected to other North Jersey projects.

Christie appointees already control the board of the New Jersey Turnpike Authority and could easily redirect that $1.25 billion in promised funding for the tunnel project. The governor also has the power through the budget to redirect the $100 million a year in federal transportation aid that his Democratic predecessor, Jon Corzine, pledged to the project.

Under federal Department of Transportation regulations, capital construction projects paid for by authorities within the state can be used as matching funds for the $1.6 billion in regular federal transportation capital aid that New Jersey has received for the past five years. The New Jersey Turnpike widening and other authority projects already are providing the match for more than $1 billion in federal aid over the next several years, and redirected Turnpike Authority or Port Authority expenditures would be more than enough to make up for the remainder of the match.

The Statue of Liberty

While Port Authority spending is restricted to the port region that falls within 25 miles of the Statue of Liberty, some of the state’s most expensive bridge and mass-transit projects already fall within that region. The regular federal transportation aid could then be used elsewhere in the state.

Diverting funding from the tunnel, however, is just another short term fix for the state’s transportation funding program. The pay-as-you-go Transportation Trust Fund has been bankrupted by the refusal of legislators from both parties to consider raising a gas tax that is one of the lowest in the nation — and far lower than neighboring New York and Pennsylvania.

What even the ARC committee acknowledges would most likely be lost as the result of Christie’s decision is the $3 billion in discretionary federal New Starts money dedicated to the tunnel, which Lautenberg noted was not only the largest public works project in the nation but also dwarfed every other New Starts grant. Only Boston’s $2.1 billion Silver Line rail expansion was scheduled to receive more than $1 billion from the federal government, and Lautenberg warned that states like California and cities like New Orleans would be lining up eagerly for the $3 billion Christie was prepared to give up.

Christie suggested during his press conference that Lautenberg and his Democratic colleague, U.S. Senator Robert Menendez, should “redouble their efforts and get his money redirected to other worthwhile projects for their constituents.”

But Lautenberg and Menendez, who played leading roles in securing the ARC funding along with New Jersey’s House delegation, both said Christie didn’t understand the process, and furthermore, that he had never consulted with them before or after he placed a 30-day moratorium on the ARC tunnel, then decided to kill the project.

Lautenberg said in an interview in Newark that if the governor had concerns about either cost overruns or about the merits of the project, whose failure to connect directly with Grand Central Station or Penn Station has been a subject of controversy among rail passenger groups, he should have discussed them with federal transportation officials or the state delegation in Washington rather than killing the project outright.

Christie dismissed the suggestion that he could have renegotiated or scaled down the project in any way. “I don’t know how you’d scale back under the river,” he snapped. “How do you scale back, build two-thirds the way and [have] a boat meet everyone?”

The Governor ‘Doesn’t Get It’

“Governor Christie clearly doesn’t get it — the money that would have gone to ARC will now be headed to Houston or Orlando or another city with an approved, shovel-ready project,” Lautenberg declared. “It could take New Jersey another 30 or 40 years, and a much higher pricetag, to recover from the loss of the ARC Tunnel.”

Furthermore, Lautenberg suggested that Federal Transit Administration regulations will require New Jersey to pay back up to $300 million already spent on the tunnel out of the New Starts program, the Obama administration’s American Recovery and Reinvestment Act stimulus package and federal Congestion Mitigation and Air Quality Improvement funding. Christie’s ARC committee acknowledged that $458 million had been spent on the tunnel through September 30, but did not comment in its memo on any potential repayment. Christie said during his press conference that he thought most of the money spent had been Port Authority funds.

Both the unavailability of the $3 billion in New Starts money for other New Jersey project and the potential demand for repayment are likely to be part of the discussion when Christie meets this afternoon with U.S. Transportation Secretary Ray LaHood, who requested the meeting after learning of Christie’s decision.

Tunnel Beneficiaries

The new nonstop service into New York that would have been created by the tunnel would have benefited commuters in the Bergen County suburbs and along the Raritan Valley Line that serves the Union and Somerset County suburbs. The late Congressman Bob Franks, New Jersey’s “Mr. Republican” and a mentor to both Christie and Richard Bagger, the governor’s chief of staff, was a particularly strong advocate of the ARC tunnel project.

But New Jersey Republican leaders rallied around Christie’s decision yesterday.

“I fully support the governor’s decision to terminate the ARC tunnel project,” Assembly Minority Leader Alex DeCroce, the Morris County Republican who once chaired the Assembly Transportation Committee. “Unlike Assembly Democrats [John] Cryan and Wisniewski, the governor clearly understands that taxpayers cannot shoulder the estimated $5 billion in cost overruns facing this project.”

Wisniewski retorted that bids for the tunnel have been coming in at or below budget, and Lautenberg challenged the Christie administration to prove its contention that cost overruns would be as high as its memo contended.

Cryan noted that the $8.7 billion New Jersey Transit cost estimate for the project, with a $1.7 billion contingency fund, was approved by Christie’s transportation commissioner, Jim Simpson, when he was serving as a senior U.S. Department of Transportation official under Republican President George W. Bush.

Simpson served on the ARC committee that evaluated the tunnel project for Christie, but recused himself from the unanimous vote because of his previous involvement with the project.

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