Federal and state officials gave the plan to build a new rail tunnel under the Hudson River a major boost earlier this month when they announced a commitment to evenly share costs that could be as high as $20 billion.
But now comes the hard part: Determining exactly how to come up with the money.
A report issued last week by Moody’s Investors Service drove home that challenge, offering up some sobering facts about New Jersey’s ability to help fund the tunnel project, dubbed Gateway, including a tight state budget, significant debt and a fund for new transportation projects that’s on course to run out of money by the middle of next year.
But the report also offered a glimpse at how New Jersey could eventually afford its $5 billion share by the time a new tunnel is ready to open in about a decade. It cited the likely availability of low-interest loans, the potential to defer initial debt payments and the expected participation of the Port Authority, which maintains its own robust capital-planning budget.
“There will be many options to divide costs and leverage a variety of grant and loan opportunities,” the report said.
Dark cloud’s silver lining?
For New Jersey officials, those options provide plenty of reason at this point for optimism, even if many initially viewed the report from Moody’s, a major Wall Street credit-rating agency, as a warning sign.
“I think it’s just too early to engage in this pessimistic discussion, assuming New Jersey just won’t be able to pay its share,” said state Sen. Robert Gordon (D-Bergen), who’s been leading a series of legislative hearings in recent weeks on the Port Authority and capital projects including Gateway as chairman of the New Jersey Senate Legislative Oversight Committee.
Under the funding agreement announced on Nov. 12, New York and New Jersey would each be responsible for covering up to half of an estimated $10 billion state share of the Gateway project.
But New Jersey will have some time to clean up its messy finances if, as Moody’s suggests, the first debt payments for Gateway can be deferred until the new tunnel opens, which could be a decade away.
That extra time would also help ease New Jersey’s most pressing transportation-funding challenge right now, which is the pending expiration on June 30, 2016, of the state’s current five-year, $8 billion Transportation Trust Fund finance plan.
Lawmakers have yet to say how they plan to reauthorize the trust fund, but an increase of the state’s 14.5-cent gas tax along with a constitutional dedication of the new revenue for transportation is now widely expected to be proposed as part of the next five-year plan.
If debt payments for Gateway aren’t due until the new tunnel opens, the first bills would likely be covered not in the five-year TTF plan that lawmakers are working on now, but in the following plan when revenue would likely be more stable. And low-interest loans from the federal Railroad Rehabilitation and Improvement Financing program that have been discussed for Gateway could make New Jersey’s payments as little as $150 million to $200 million annually spread out over 30 years.
Like Gordon, Chris Santarelli, a spokesman for the state Department of Treasury, downplayed the funding concerns raised in Moody’s report. And he expressed confidence that a new TTF plan would be in place when the state’s next fiscal year begins on July 1.
“The Moody’s report is not saying the state will be unable to pay its share,” Santarelli said.
Pressing need for project
The Gateway project, which features other infrastructure improvements in addition to building two new rail tubes, is viewed by many transportation advocates as the last best hope for fixing a commuter-rail system that right now precariously supports up to 200,000 daily riders through Penn Station in New York via New Jersey Transit and Amtrak trains.
Commuter demand is expected to double by 2030, but damage caused to the existing 105-year-old tubes by 2012’s superstorm Sandy remains largely unrepaired. That means a reduction of per-hour tunnel traffic from 24 to six trains could come at any time, a scenario that would hit New Jersey commuters hardest since New Jersey Transit trains account for 20 of the 24 hourly crossings.
But thanks to Amtrak, planning for the Gateway project is already well underway, and construction could begin as early as 2021. The new tubes could open as early as 2025 under the current plans, which were boosted by the Nov. 12 funding announcement from New Jersey Gov. Chris Christie, New York Gov. Andrew Cuomo and U.S. Sens. Cory Booker of New Jersey and Charles Schumer of New York.
In 2010, Christie cancelled Access to the Region’s Core, the last major effort to build a new trans-Hudson tunnel. He cited a potential for cost overruns that would be covered mostly by New Jersey taxpayers as the main reason for dropping out of that project.
But this time Christie is supporting the Gateway project and the involvement of the Port Authority.
Gordon said he believes Gateway is exactly the type of regional transportation initiative that the Port Authority was urged to prioritize in a special report issued late last year by a panel that was asked to study the agency in the wake of the George Washington Bridge lane-closure scandal.
Lead role for Port Authority
That report called on the Port Authority to return to its core mission of facilitating transportation in the bistate region, and recommended the divestment of its real estate assets as a possible way to finance new investment in transportation infrastructure.
The funding agreement for Gateway, meanwhile, also called on the Port Authority to play a lead role along with Amtrak in forming a new entity for the project, the Gateway Development Corp.
Both Gateway and a new midtown Manhattan bus terminal should be capital-planning priorities for the Port Authority going forward, Gordon said, adding the projects will benefit both New Jersey and New York.
“It really is critical to the region that we make these investments,” Gordon said.