New Jersey’s Troubled Transportation Outlook

Mark J. Magyar | December 3, 2010 | Budget
A proposed subway to Secaucus and a depleted Transportation Trust Fund are only the beginning.

New Jersey’s transportation policy has never been in a greater state of flux or confusion, and it will be many months, if not years, before a comprehensive transportation funding and construction plan is put into place, experts agree.

Consider a short list of just a few of the issues that remain to be resolved:

  • Is extending the No. 7 subway to Secaucus really the best substitute for the moribund Access to the Region’s Core (ARC) tunnel? And shouldn’t mayor Michael Bloomberg have checked with his own MTA before going public with the plan?
  • Why do we think that the back-of-the-envelope $5.3 billion cost estimate for the No. 7 subway will be any more valid ten years from now than the original $3 billion estimate for the ARC rail tunnel that roared over $10 billion before Christie killed it?
  • With the Transportation Trust Fund running on empty and Christie ruling out a gas tax hike, how will we pay for road, bridge and mass transit repairs?
  • Can President Obama force Governor Chris Christie to pay back $271 million in federal money spent on what is now “The Tunnel to Nowhere”?
  • Kate M. Slevin, the executive director of the Tri-State Transportation Campaign who sharply criticized Christie’s cancellation of the ARC Tunnel project, expressed concern that the administration would come in with a sharply scaled-back transportation capital program.

    NJT Train
    “We’re struggling to pay for existing transit needs,” Slevin said. “Depending on the choices the administration makes, we could see roads and bridges in worse shape and longer delays for commuters.”

    “It’s hard to remember a time when so much was unsettled, or when transportation policy was so tied up in politics,” said Martin E. Robins, the founding director of the Alan M. Voorhees Transportation Policy Institute at Rutgers University. Robins’ New Jersey transportation experience goes back to the rail commuter protests of the late 1970s.

    “What is certain is that nothing will be decided or accomplished quickly — starting with the No. 7 train to Secaucus,” he said.

    Return of the Secaucus Seven

    Although Mayor Bloomberg’s suggestion earlier this month that the No. 7 subway could be extended to Secaucus was treated as a new idea by most news organizations and hailed as a potential solution by Christie, the idea is not a new. Most likely, the announcement did come as news to New York City’s Metropolitan Transportation Authority, since Bloomberg apparently revived the idea without consulting his transit officials first.

    “Extending the No. 7 train to Secaucus was looked at as an option in the earliest days of the ARC project,” recalled Robins, who served as the original ARC project director from 1994 to 1998. “The MTA was part of the original ARC team and they discouraged us from considering it. They were concerned about station capacity.”

    “What the No. 7 train does now is to bring tens of thousands of commuters from Queens into the Grand Central, Fifth Avenue and Times Square stations,” he explained. “Extending the No. 7 to Secaucus would create an opposite flow into those same stations, and Grand Central in particular would be taxed by the additional patronage. That’s why the team that eventually put together the final ARC plan decided to build a new station for New Jersey commuters at 34th Street.”

    While the ARC Tunnel project would have been completed by 2017, the No. 7 subway extension will take a half-dozen years to bring it through the planning stages and environmental impact statements. At that point it could potentially bring in federal construction money. Another six years would be needed to complete construction, which would put it on line no earlier than 2024 if planning began this year.

    The $4 Million Downpayment

    “The city of New York and the states of New York and New Jersey need to put down $3 million or $4 million for the engineering studies, ridership forecasts, impact studies on the existing system and environmental impact studies,” Robins said. “Until they do, they’re not serious about it.”

    Robins cautioned that the $5.3 billion cost estimate for the No. 7 extension is based on a four-page memo and “is not a carefully developed price. Don’t forget that ARC started as a $3 billion project, then people added to the scope of the project.”

    “First, you need to know whether the New York people have thought through the cost of the structure and design of the new transfer facility that will be needed at the Secaucus station,” Robins said. “Second, a station in the Hoboken-Weehawken waterfront district is essential to connect to the Bergen-Hudson light rail line that will be bringing down commuters from Bergen County. And third, are they factoring in the costs of station improvements and expansion in Manhattan? If that isn’t included, that $5.3 billion pricetag is going to go up quickly.”

    If the No. 7 subway extension is put on a planning fast track, one source of money for the project could be the $3 billion the Port Authority of New York and New Jersey originally set aside for the ARC Tunnel Project. The Port Authority, which raises its money from tolls collected on bridges and tunnels, funds projects regarded as benefiting New York and New Jersey on an equal basis. The $3 billion that was going to go into ARC was “New Jersey money,” authorized as a tradeoff for Port Authority funds going into reconstruction of the World Trade Center.

    If the No. 7 subway extension does not go forward, that money would most likely go into reconstruction of the Goethals bridge or other New Jersey projects located within the port district of 25 miles of the Statue of Liberty.

    Rail advocacy groups have been divided over the attractiveness of the No. 7 subway extension to Secaucus. “Our board has yet to make a recommendation, but we’re studying it,” said the Tri-State Transportation Campaign’s Slevin. “It has the clear advantage of expanding trans-Hudson rail commuter capacity, but New Jersey commuters do not get a one-seat ride. They would still have to transfer in Secaucus.”

    While the No. 7 subway extension is at least six years behind what would have been the ARC Tunnel’s scheduled completion date, it does have the advantage of being on a relative fast track compared to the new Amtrak rail tunnel that has been discussed. The Amtrak tunnel is 20 to 30 years in the future.

    Restoring the Transportation Trust Fund

    Slevin’s main focus is the Transportation Trust Fund, as evidenced by the Tri-State Transportation Campaign’s release of a study Wednesday urging that New Jersey Turnpike Authority funding originally ticketed for the ARC Tunnel should be redirected to repair some of New Jersey’s 200 aging bridges.

    She is right to be concerned about the Transportation Trust Fund: It appears likely that transportation capital funding will be sharply lower next year than in any of the past five years.

    Jon Corzine, Christie’s Democratic predecessor, financed a $1.6 billion state transportation capital program, matched by $1.6 billion in federal transportation aid, for each of the past five years. He did so by borrowing so heavily against future gas tax, sales tax and motor vehicle revenues that as of July 1, 2011 all future revenues — $895 million for each of the next 30 years — will go to pay off the interest on the Transportation Trust Fund bonds. Corzine planned to push for a gas tax hike or another new revenue source in his second term, but Christie won instead, and he has made it clear to New Jersey and to national Republican audiences and to talk shows that he has no intention of raising any tax.

    That means that the days of $3.2 billion in combined federal-state transportation capital spending are over. The problem isn’t on the federal funding side, but on the state side of the ledger.

    The $1.6 billion in federal transportation aid that New Jersey has received each of the past five years should still be available for the fiscal year that starts July 1, 2011, even if New Jersey puts a lot less money into the Transportation Trust Fund than in previous years. That’s because federal rules allow the New Jersey Turnpike Authority’s massive road expansion projects to count as part of New Jersey’s state matching funds, and because the $895 million in interest paid annually to fund previous Transportation Trust Fund projects should count toward the state’s “maintenance of effort” requirement for federal aid. Included in the $1.6 billion in expected federal transportation aid is $100 million a year that Corzine had pledged to the ARC project that can now be spent on other state transportation needs.

    Behind Schedule

    The Christie administration is already two months behind its own schedule for producing a new financing plan for the Transportation Trust Fund, but the real deadline for Christie to come up with a plan is February or March, when his next budget has to show what he plans to spend on transportation capital projects.

    The New Jersey Turnpike Authority has already announced that it expected to make the $195 million a year it had set aside for the ARC Tunnel over the next six years available for other transportation projects in the state, confirming suspicions that the ARC cancellation would free up $1.25 billion in future revenue from the 2012 and 2018 toll hikes for the Transportation Trust Fund.

    The Turnpike Authority’s disclosure that it would allow the $1.25 billion to be diverted prompted Moody’s to lower the authority’s credit outlook from stable to negative in the expectation that the Christie administration would seek additional diversions in the future for transportation projects unrelated to the needs of the state’s toll roads.

    The Christie administration could seek to apply all of the $1.25 billion to fund a more robust Transportation Trust Fund over the next two or three years by borrowing against the future Turnpike Authority revenues, although, as Robins noted, “that would be like borrowing against borrowing because the Turnpike Authority revenue is based on the issuance of Turnpike Authority bonds based on future toll receipts. I’m not sure if it’s appropriate, and it’s a very ineffective way of raising money because you would be incurring two interest costs.”

    If the Christie administration can count on only $195 million a year from the Turnpike Authority revenue originally earmarked for the ARC Tunnel, that means the remaining amount would have to come from the state’s General Fund in what is again expected to be a difficult budget year.

    Presidential Hardball

    Meanwhile, the Obama administration has demanded repayment within 30 days of an estimated $271 million in federal money spent on the $8.7 billion ARC tunnel project that Christie killed after publicly voicing concerns over potential cost overruns. The Christie administration has authorized New Jersey Transit to retain the Washington, D.C., law firm of Patton Bogg at a rate of $485 an hour to challenge the Obama administration’s demand for repayment. A Christie administration source who asked not to be identified said the dispute could drag on for months.

    With or without a $271 million reduction in federal transportation aid, however, the $1.6 billion state share of transportation capital funding that has been in place for the past five budget years will be sharply cut.


    Christie pledged during his 2009 gubernatorial campaign to restore transportation capital funding to a pay-as-you-go basis by taking money out of general budget revenues. With state aid to schools, counties and municipalities already expected to be frozen and state revenues only improving marginally, Christie could be hard-pressed to find much more than $200 million within a $29 billion budget for transportation capital programs.

    Christie himself acknowledged during the campaign and after his election that funding transportation capital programs out of the general budget would undoubtedly mean a “less robust” program. That would indeed be the case if the Transportation Trust Fund he proposes provides only about $400 million — $195 million from the Turnpike Authority and the remainder from the general budget — as the state share of transportation capital spending.

    Rutgers policy institutes and transportation policy advocates like the Tri-State Transportation Campaign and the Regional Plan Association have issued reports in recent years asserting that even Corzine’s $3.2 billion transportation spending plan was not adequate to prevent New Jersey’s roads, bridges and mass transit systems from sliding further into decay.

    “At the levels we’re talking about today — a combined federal-state program of $2 billion or so — you’re looking at nothing but maintenance, and inadequate maintenance at that,” Robins said.

    Democrats will undoubtedly criticize Christie’s Transportation Trust Fund plan as being inadequate in the short term and for failing to provide a long-term funding solution for the state’s transportation needs. But Democrats are unlikely to propose a gas tax or any other revenue measure to increase transportation spending on their own.

    Democrats currently control both houses of the Legislature, but all 120 seats will be on the line next November in a midterm election that Christie hopes will return the GOP to control of the New Jersey Statehouse in a continuation of the wave that produced Republican majorities last month in the U.S. House of Representatives and a slew of Rust Belt states from Pennsylvania to Wisconsin. The last thing Democrats want to do is give Christie a tax issue to hammer them with.

    “Democrats can criticize all they want, but when Christie challenges them to come up with a solution, there’s going to be nothing but silence,” one Christie administration aide said.

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