With Infrastructure Projects Sidelined, Who Pays for Broken Contracts?

Chase Brush | September 23, 2016 | Transportation
Counties and municipalities are coming under the gun for road and bridge projects Christie has shut down until cash is found for Transportation Trust Fund

Credit: Jim Schacter / WNYC
road construction
Growing concern over the cost of Gov. Chris Christie’s statewide shutdown of road and bridge projects until money can be found for the Transportation Trust Fund provided the impetus yesterday for an Assembly committee to pass a bill that would bring some relief to counties and municipalities suffering under the freeze.

During the morning meeting of the Assembly Transportation and Independent Authorities Committee, lawmakers voted out A4114. The legislation would require the Department of Transportation to compensate local governments for contractual damages due to stalled TTF projects.

Sponsored by Assemblywoman Liz Muoio (D-Mercer), the bill would allow certain initiatives to continue and protect local governments from costs overruns resulting from Executive Order 210, which halted infrastructure projects earlier this year.

An amendment to the bill also passed. It would ensure that any local government with the “resources and desires” to complete a project started with TTF funds would still receive that money in the future.

“The bill essentially does two things: it takes the responsibility for the cost of the delays caused by the order off the shoulders of local government — and as a result the local taxpayers — and places it on the shoulders of the state as a whole,” Muoio told NJ Spotlight.

“And the second part of the bill,” she continued, “allows any local government entity that has the resources and the willingness to complete TTF projects that have already been started to complete the projects without the threat of having their funding yanked away once the freeze is lifted.”

In June, amid an ongoing impasse over how to fix the infrastructure fund, Christie called for the shutdown of $3.5 billion worth of “nonessential” road and rail projects until a funding solution could be found. The list featured more than a thousand projects across all 21 counties, including mass-transit improvements and preliminary design and planning, and put countless unionized workers, many of whom met the order with protest, out of work.

In the wake of the crisis, which has dragged for more than four months, stories of gridlock and statistics about the cost to the state’s economy have been common.

According to Forward NJ, a coalition of organizations that have put pressure on lawmakers to come together on a refinancing plan for the TTF, the state has lost nearly 4,200 jobs and absorbed some $41 million in work-stoppage costs since the shutdown began.

But workers and the state’s overall economy aren’t the only things that have been affected by the TTF debacle, lawmakers said yesterday. Counties and municipalities — almost all of which receive state aid through the TTF to pay for infrastructure improvements — have grappled with the effects of the shutdowns as well. It’s unclear, they said, where the financial burden for costs relating to suspended projects lie.

Right now, Muoio said local governments — and by extension taxpayers — could be on the hook for the thousands of dollars in costs overruns and contractual-delay damages that might eventually result from the shutdown.

In addition, some towns that might want to move forward with their own funds to complete unfinished road and bridge contracts might not be reimbursed, even though the aid has already been set aside.

She called both possibilities “not fair.”

“It’s not right, and it’s not in the best interests of our state,” the Democrat said. “The governor must take responsibility for these costs and not foist the costs of the standstill, this self-created emergency, onto the back of taxpayers.”

Muoio said she decided to sponsor the bill, which was introduced last month, to bring help bring “clarity” to the issue of what kind of responsibility local governments might have for stalled contracts. Other organizations, such as the League of Municipalities and the New Jersey Association of Counties (NJAC), have also raised questions. Testifying at yesterday’s hearing, representatives from both groups said that they too have inquired with the governor’s office, but have received little guidance on how to proceed.

Mike Cerra, assistant director of the league, said that the organization sent a letter to the governor’s office in July asking for some sort of clarification. Two days ago the office answered that it couldn’t offer legal advice.

“These were commitments that were made. Local governments entered into the contracts, they will be expected to uphold those contracts, and we simply ask that the state does as well,” Cerra said.

John Donnadio, executive director of the NJAC, said local officials in the meantime have been forced to deal with the shutdowns on their own. Several counties, including Passaic, Camden, Union, Hudson, and Mercer, have filed notices of claim for breaches of contract with the state, he said. Others have decided to pay for the completion of projects with their own funds.

All but two of the lawmakers on the 13-member committee voted for the legislation. Assembly Republican Whip Scott Rumana (R-Bergen) raised concerns over how much the legislation might cost the state, arguing lawmakers have “no idea where this might go.” He suggested the legislature focus instead on coming up with a permanent fix for the TTF, a problem that has dogged leadership in Trenton for several months.

Earlier this year, the Assembly, under Speaker Vincent Prieto (D-Hudson), passed a bill that would provide financing for the TTF by trading a hike in the gas tax for a cut in the sales tax, a measure Christie himself supported. Senate President Steve Sweeney (D-Gloucester), however, is standing behind his own proposal, one that would swap an increase in the gas tax for a phase-out of the estate tax and other more targeted cuts. The three leaders are still having trouble coming to a compromise on the deal.

Rumana said he finds it “ironic” that this bill is coming from the Assembly, noting that similar legislation has yet to be introduced in the Senate.

“That’s not to disparage anyone here, but the fact is that we are the ones that supported a bill to solve the TTF problem,” Rumana said. “The Senate did not. And that’s not to point fingers, but we supported the bill. And it’s kind of ironic that now we’re the ones here trying to clean up the mess.”

Muoio, however, said her intent with the bill was not to start a debate on the TTF impasse, but to “address a real problem we’re facing right now.”

“My point is that the local government and their local property taxpayers are not to blame for the Governor’s executive order, and the financial responsibility for the costs of this shutdown should not be foisted on them,” she said.