The numbers just don’t add up in the recent announcement by lame duck Governor Chris Christie of New Jersey and 2020 Presidential wanna be Andrew Cuomo of New York concerning their respective funding commitments for the Hudson River Gateway Tunnel project. Cuomo promised $1.75 billion, Christie $1.9 billion with the Port Authority of New York and New Jersey kicking in $1.9 billion. They proudly claim coming up with 50 percent or $5.5 billion for the local share should justify Washington quickly kicking in another 50 percent or $5.5 billion to pay for the Gateway Tunnel. Both Christie and Cuomo conveniently forgot that the total Gateway Development Corporation project cost is $29 billion.
Cuomo promises to come up with his portion of the local share by obtaining a $1.75 billion 35-year loan from the federal Department of Transportation Rail Road Rehabilitation & Improvement Financing program. First, the loan has yet to be approved and would have to be paid back. Cuomo plans on paying back the loan by including a long term reimbursement plan starting with the next April 1, 2018 – March 30, 2019 state budget. Ironically, this announcement coincided with another by New York State Comptroller Tom DiNapoli. He reports that state debt will reach $67.7 billion by March 30, 1018. Each New Yorker is responsible for $3,116 dollars. It will grow to $71.8 billion over the following four years. The Empire state is number 2 among fifty states in long term debt. Only California with $87 billion carries more debt. A significant portion of this growth is due to Cuomo’s addiction to borrowing for financing especially transportation projects rather than pay as you go. For the Gateway Tunnel, the state would commit to annual debt service payments ranging from $80 to $100 million per year. Second, this would require approval by the State Legislature. Cuomo naively believes that these dollars could be used as part of the 50 percent local share to leverage federal dollars. Why would the Federal Transit Administration accept this under its New Starts program local share financing requirements? The Gateway Development Corporation would in essence be double dipping. They would be using Federal Rail Road Administration funding toward local share to obtain additional dollars from the Federal Transit Administration.
Gov. Christie’s “friends” at New Jersey Transit propose financing their $1.9 billion initial contribution by attaching a 90 cent “fee” to riders coming to Penn Station starting in 2021 going up to $1.70 in 2028 and $2.20 in 2038. This might be used to pay back their own federal loan. Any proposed fare increase or surcharge would require public hearings followed by approval of the New Jersey Transit Board of Directors. Incoming Governor Phil Murphy and New Jersey State Legislature would also want to weigh in. New Jersey Transit fares have gone up five times for a total of 30 percent since 2010. This includes the most recent 9 percent 2015 fare increase. New Jersey Transit riders pay 50 percent of the cost per ride, which is more than most other transit systems around the nation. These fare increases help pay for operations including basic service and employee salaries. These proposed “fees” would be on top of other inevitable upcoming fare increases in future years. How many fare increases and “fees” does anyone believe New Jersey Transit riders will put up with? Using the New Jersey Transportation Trust fund for financing would make more sense.
Remember that the $11 billion cost Christie & Cuomo claim just pays for the stand alone tunnel from New Jersey to New York. There is still another $18 billion worth of work on both sides of the Hudson River including almost $2 billion to rehabilitate the existing two tunnels virtually all of which needs to be funded. Completion of this other significant work is needed if the Gateway Tunnel will fully function at 100 percent capacity as intended. Check out the Federal Rail Road Administration Gateway Tunnel Project National Environmental Protection Act environmental document. This provides details for various other essential project components that make up the total $29 billion Gateway program besides the tunnels.
Gov. Cuomo’s actual share is 25 percent or $7.25 billion. This means he is still $5.5 billion short. Governor Christie’s share is also 25 percent or $7.25 billion. This means that New Jersey still needs to come up with $5.35 billion. Two years ago, the overall estimated cost grew by $3.9 billion from $20 billion to $23.9 billion. This past summer, the new cost estimate grew another $5.2 billion to $29.1 billion in 2017. The last increase was based on the estimated cost for both the new tunnel and rehabilitated old tunnel portions of the overall project which grew from $8.7 billion to $12.9 billion. Don’t be surprised when the project cost goes up by billions more in coming years.
The project has been in the Federal Transit Administration New Starts Program Development Phase since June 2016. This is just the first step of a long multiyear three-step process. It will take several more years to complete this process before funding from Washington under the federal New Starts program could become available (perhaps some time between 2019 and 2021). This would be in the form of a legal Full Funding Grant Agreement between Washington and the Gateway Development Corporation serving as project sponsor.
The Gateway Development Corporation continues looking for private developers to help pay for the $29.1 billion new Gateway Tunnel as part of a joint public/private partnership. It suggests that the proposed three-way federal/New Jersey/New York $29.1 billion funding package remains unresolved. Two years later it is still not real. The Port Authority allocation of $2.7 billion within the approved $32 billion 2017 – 2026 ten-year capital plan to help finance the Gateway Tunnel was just initial seed money. Most of these dollars were originally assumed to be used toward debt service payments against a possible future federal Railroad Rehabilitation and Improvement Financing loan to the Gateway Development Corporation for this project. It has yet to be approved and will have to be paid back. Without real hard cash financial resources from not only Washington ($14.6 billion), but also New York ($7.3 billion) and New Jersey ($7.3 billion), how will the Gateway Tunnel be paid for? A project can’t be financed by just borrowing alone.
The Gateway Tunnel project continues to mimic the ongoing Metropolitan Transportation Authority Long Island Rail Road Eastside Access to Grand Central Terminal project. In 2001, the initial estimated cost was $3.5 billion with a completion date of 2011. In 2017, sixteen years later (based upon the 2016 MTA Federal Transit Administration amended Full Funding Grant Agreement) currently at $10.8 billion, could grow up to $12 billion with completion in 2023. Gateway is following the same historic path. Will it become our New York version of the infamous Boston “Big Dig” end up costing $40, $50 or even $60 billion and completed by 2038? Time will tell.
Christie, Cuomo and the Gateway Development Corporation continue to remind me of the character Wimpy, who famously said, “I’ll gladly pay you Tuesday for a hamburger today.” Tuesday may never come for commuters and taxpayers who use New Jersey Transit and Amtrak and need a new Hudson River Tunnel to be completed within their lifetime.
Larry Penner is a transportation historian and advocate who previously worked 31 years for the US Department of Transportation Federal Transit Administration Region 2 NY Office.