Despite Fed Demands, NJ Should be Spared ARC Tunnel Bill

Numerous sites reported last Friday, that the Federal Transit Administration has ruled that the state of NJ must repay $271M in grant money. This morning,  Bloomberg reports that Christie has pledged once again that the state will not repay the sum. In the mean time, the bill is now increasing by up to $52,000 a week in interest.

Where did this money go?

The $271M went to final design for ARC and for early construction items, most notably the construction of a new overpass on Tonnelle Ave, the planned site for the entrance of the now-defunct ARC Tunnels.

Christie vs. La Hood

Chris Christie has argued that NJ should not repay the money, since the tunnel work can go to support other transportation projects, most notably the proposed Gateway Tunnel. From a legal perspective, it would seem that Christie’s argument has little standing.  In a letter to NJ Senator Frank Lautenber, US DOT Secretary Ray LaHood explains:

“The taxpayers, acting through FTA, committed more than a billion to NJT in exchange for which NJT was committed to build a defined transit improvement for the benefit of the American people … New Jersey broke the terms of the contract.”

In other words, the funds were promised on the grounds that the state would complete ARC. Without ARC, the state has no claim to the money.

The Failure of Federal Investments

Although Christie’s logic isn’t right, NJ is arguably being forced to pay for the failures of Federal government’s ineffective transit investments. The feds’ pledge of $3.5B for ARC represented less than 50% of the original cost estimates. That percentage sinks even lower with projected cost overruns that pushed the total to $9-10B.  Even if Christie had other intentions intentions when pulling the plug on ARC, he was right in arguing that NJ should not be the only state left on the hook for cost overruns.  The entire Northeast Corridor would have benefited from the project, particularly New York and Pennsylvania.

Furthermore, the fact that the $271M must be repaid is a testament to the ad-hoc nature taken by the federal government in addressing regional infrastructure, where it should be take the lead early and often. The $271M remains tied to ARC because, officially speaking, there is no other project to apply the money toward.  The proposed Gateway Project has not undergone any kind of Environmental Review process, and thus is ineligible for any federal funding.

The problem is that there is no long-term coordination or investment plan for the Northeast Corridor. In May 2010, Amtrak released a Master Plan for the NEC and in September, the company offered its proposal for HSR in the Northeast Corridor. Although these projects provide a longer-term vision, without an accompanying, long-term investment strategy from the Federal government, improvements on the NEC remain piecemeal. For example, while century-old bridges in Connecticut are currently being replaced along the Corridor, tunnels under Baltimore remain inadequate. Every state along the corridor has a stake in seeing these projects completed.

Without regional coordination, states along the corridor also continue to compete for federal dollars, instead of identifying investments that would be optimal for the entire corridor. This issue is particularly acute for the Trans-Hudson rail issue, since NY State was unwilling to support ARC financially beyond the Port Authority’s contribution. Instead, NY State focused on its own investments: East Side Access for the LIRR and the 2nd Avenue Subway. The tri-state region, in particular, would benefit from a comprehensive, long-term plan that could guide ongoing investments.

Potential Improvements

There is a possibility that some of these shortcomings could be fixed in this year’s Surface Transportation Legislation.  As reported by Streetsblog last Thursday, President Obama is providing the Legislature with a written form of its proposed legislation.  According to Tanya Snyder, this  is uncommon, since the President usually proposes the terms of proposed legislation, but rarely articulates it fully in draft legislation. The move signals that the Obama administration is serious about pushing its transportation agenda — which includes $53B in HSR investment over six years — in the face of strong opposition to spending by the GOP.

Funding for HSR in the northeast would also demand an improvement in regional coordination. After years of piecemeal investment, a long-range investment strategy would dictate plans and require states to work together.  A recent study by graduate students at the University of Pennsylvania, for example, proposed a new regional entity to manage the construction of HSR in the Northeast. Such a body would represent the interests of the states along the corridor and provide an interface between state governments and the operator of HSR service.

LaHood’s demands for the ARC money could be delivered better if they were paired with a pledge to address the Trans-Hudson Capacity question. According to LaHood’s letter to Lautenberg, the purpose of his fight to save ARC last fall, “was to avoid the very circumstances in which we now find ourselves: no jobs, no congestion relief, and an enduring debt whereby New Jersey must return $271 million to the Nation’s taxpayers.” Although LaHood failed to save the project, his involvement at the time was the kind of active involvement that is necessary for these complex projects. The US DOT should be a leader in helping NY, NJ and Amtrak effectively work together.


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