Home ARC Tunnel A day of reckoning for the ARC Tunnel

A day of reckoning for the ARC Tunnel

by Benjamin Kabak

Time flies when you’re trying to save a tunnel.

Six weeks ago, New Jersey Gov. Chris Christie announced plans to halt work on the ARC Tunnel to assess its costs. He claimed, without providing much evidence, that cost overruns could be as great as $5 billion and that the State of New Jersey could not continue with the project under those budgetary assumptions. Two weeks ago, he canceled the project due to this same claim after state officials conducted a bare-bones analysis of this project. When Ray Lahood, President Obama’s Secretary of Transportation, stepped in, Christie agreed to conduct a two-week review, but just a few days ago, it sounded as though the tunnel would be scraped for good this week.

Now that the day of reckoning for the ARC Tunnel has arrived, the drama is far from over. New Jersey politicians are parrying with the governor over his fuzzy math, and FTA sources have seemingly leaked their strategy to the media. Both the state and federal officials claim that Christie’s claims of $5 billion in cost overruns are simply a figment of his imagination.

Item #1: NJ State Assembly Transportation Chair John Wisniewski requested a series of documents from the Governor and found no evidence of current cost overruns. “The documents provided by the governor’s own administration fail to provide any justification for the governor’s claim of billions in cost overruns on the tunnel project,” Wisniewski said in a statement yesterday. “That claim seems as though it was simply pulled out of thin air by the governor. The governor is risking New Jersey’s economic future with numbers that, at least according to these documents, have no basis in reality.”

Item #2: The federal estimates that Christie claims project a $5 billion increase in the cost of the ARC Tunnel actually show only a $1 billion increase, and the feds are willing to work with Christie to reach a compromise on the funding. The Star-Ledger elaborated:

Among the added incentives LaHood may offer to keep the nation’s largest public works project alive are federal high-speed rail grants and cost-sharing with Amtrak to expand rail capacity, said those close to the project. They asked not to be named because they are not at liberty to discuss the talks publicly…

Those close to the project said it was during the meeting two weeks ago that LaHood told the governor the low estimate for the project was $9.7 billion. Part of the reason for the differing numbers is that Christie’s figures include $800 million to build two tracks along a new bridge over the Hackensack River just south of the existing Portal Bridge between Kearny and Secaucus. The 100-year-old bridge is in disrepair and is so low it is often opened to allow commercial boats underneath, leading to delays.

Federal officials have counted the tunnel and Portal Bridge projects as separate entities, while Christie has maintained they are joined at the hip and should be counted in the same cost estimate. Including the Portal Bridge, the estimate LaHood gave Christie was $10.6 billion to $13.5 billion, said a third person familiar with the talks. The governor has continued to use the higher cost projections in his public criticism of the project.

Although federal transportation officials have seethed over Christie’s use of the higher projections even after his meeting with LaHood, they had kept the $9.7 billion figure a closely guarded secret because of the transportation secretary’s belief he could conciliate with Christie.

It’s clear by now that Christie simply wants to kill the project so he can beef up the state’s depleted Transportation Trust Fund. What the numbers actually say is of little concern to the New Jersey governor.

In reality, Christie could point to the ARC Tunnel’s cost projections. Take a look:

Originally, the conceptual-level construction cost estimate came in at $4.3 billion, but that number, state officials said a few weeks ago, should be discarded. It doesn’t include real estate costs, escalation of contingency planning. In 2007, though, the project was pegged at $7.4 billion, but by January 2009, at the urging of the FTA, the ARC Tunnel’s price tag rose to $8.7 billion. It has, despite the right-most column in this chart, remained there for the last two years, and even if the feds believe it could cost $9.7 billion, that increase is a modest one compared Christie’s claims of a $5 billion overrun.

Unfortunately, these revelations, clearly leaked on purpose by the FTA on the eve of its meeting with Christie, are a last-gasp effort to shame the governor into reversing his decision. It’s a risky political gambit, and one that won’t work. As he’s shown time and again, Christie will stick to his guns, for better or worse, once he makes a decision, and he doesn’t appear willing to move forward with ARC.

So if this is the end, what next? The project itself suffered from some design flaws, but there is little doubt that this new Hudson River rail crossing is a must for economic, transportation and sustainability purposes. It’s taken 20 years of planning to get to the point where contracts have been awarded and work begun, and Christie could wipe out that progress with one word tomorrow. The region will come to regret it.

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25 comments

Ray October 22, 2010 - 6:36 am

Is it really hard? Replace the portal bridge, build the Main/Bergen/Pascack connection to the NEC, add one tunnel directly to Penn, extend third rail to EWR and catenary to Jamaica. Through run at NYP.

Given budget crises in both states, the time has come for Christie/Paterson to form a joint regional rail operating co (Port Athority controlled) resulting in a single regional rail entity. Cut all the duplicative administrative and operating expenses!

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Marc Shepherd October 22, 2010 - 8:28 am

What you have just described is operationally impossible . . . so yeah, it is harder than that. Penn is saturated, and without additional platform space the additional tunnel would have nowhere to go.

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Kid Twist October 22, 2010 - 12:15 pm

Penn Station is saturated because it’s being used as a terminal. There should be plenty of capacity if trains are through-run and don’t have to dwell/change ends there.

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Marc Shepherd October 22, 2010 - 12:26 pm

Penn Station is not being used as a terminal. Trains that don’t need to turn are sent to Sunnyside if coming from the west) or the West Side Yards (if coming from the east).

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Alon Levy October 22, 2010 - 2:16 pm

For passengers, it is a terminal. This means that the tens of thousands of people who live in Jersey and work in Queens need to alight at Penn (or, more likely, drive through Staten Island and Brooklyn).

Antonio October 22, 2010 - 7:36 am

And we wont come to regret Cuomo being Governor? Please…let’s quit with the hyperbole.

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Scott E October 22, 2010 - 8:13 am

I’m not familiar enough with political law in New Jersey, but is Christie really empowered to kill the project singlehandedly, or does it need some sort of vote of the state legislature? And if he can kill it, would we expect to see lawsuits following the decision in attempt to overturn it?

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Jean-Francois P October 22, 2010 - 10:11 am

Yes, very good question. Can he do it alone ?
And nobody talks about the already awarded contracts. Companies will ask for compensations for the breach of these contracts. And with already a bill of $500 million (design and construction works engaged), these compensations could raise it to almost $1 billion. And of course, $1 billion with no tunnel !!! Which taxe payer would like to see his governor spend $1 billion for nothing ? Can NJ afford that ?

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Marc Shepherd October 22, 2010 - 8:25 am

It is hard to deny that Christie has a point. Even by the Feds’ current estimate, the project is $1 billion over the latest budget ($9.7B, rather than $8.7), which has already gone up several times. Only a fool would believe that there will be no further overruns.

I mean, why is New Jersey on the hook if the project goes over budget? Because it almost certainly will.

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Avi October 22, 2010 - 9:05 am

Because NJ is in charge of construction, and it would be insane for a 3rd party to guarantee cost overruns when they’re not in a position to control overruns.

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Marc Shepherd October 22, 2010 - 9:21 am

But NJ is in a position to control them either.

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Chris October 22, 2010 - 9:46 am

People guarantee things they are not in a position to control all the time (insurers, investors, etc.). It’s not insane if they are genuinely comfortable with the cost projection. For instance, the Feds could agree to cover any cost overruns with the caveat that if the project came in under budget, their contribution would be reduced first. If their average expected cost is truly accurate, this deal would be expected to cost the Feds $0 as their profits in the good case would offset their losses in the bad case; they would just be absorbing the risk, and the cost of risk is very low for the federal government, especially in today’s zero-rate environment.

The reality is the Feds perfectly well know their estimate is too low. Accurate cost projections wouldn’t support the department’s mission of building as many public works projects as possible; therefore, accurate cost projections are not produced.

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Al D October 22, 2010 - 9:32 am

It is economic suicide. In times of depression and recession, you need the government to spend money to help keep certain industries afloat, such as construction, with the added benefit that, once the economy turns around, thre is now all this extra capacity to expand and grow.

Our problem is that we were deficit spending in the good times, and now we have to pay for it in the bad times! Clinton had a surplus, and Mayor Bloomberg has managed the city’s finances well.

Christie, the former prosecutor, needs to stop arguing his case based on a number that does not exist today and may never exist, and start being the chief executive of NJ. I don’t seem him killing the NJ Tpke expansion, which by the way, benefits less his constituents and more all the out of staters passing through!

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John October 22, 2010 - 10:35 am

If you look at the logistics of what is to be built, though, the vast majority of the construction work will be done in New York, not in New Jersey. So from a project/jobs creation standpoint, Christie wouldn’t get a big ancillary bump on in-state return on the state’s financial commitment if 75 percent the workers and materials are over in Manhattan digging out and putting in place the new ARC station on 34th Street (i.e., the benefits to the state after ARC is completed would far outweigh any benefits New Jersey would get while the construction was going on).

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Larry Littlefield October 22, 2010 - 10:00 am

“So if this is the end, what next?”

Hopefully an all out effort by New York City and State to convince people who work in Manhattan to live in New York. That’s the message here. Don’t buy a house in New Jersey; choose New York.

The message from New Jersey is that more people linked to New York are moving to New Jersey than they are prepared to accomodate. That message needs to be spread. Perhaps a letter to everyone from NJ who pays taxes in NY, and marketing to those who have not yet moved there.

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GDB October 22, 2010 - 11:01 am

Ok everybody lets get serious. Who believes these nonsense estimates? Since when did the government EVER estimate ANYTHING correctly? The Big Dig was supposed to cost 8 billion and Massachusetts is on the hook till 2038 to pay off that one. This tunnel isn’t going to cost 8 billion it’s going to be more like 24 or 25 billion when it’s done. AND EVERYONE KNOWS IT. So lets quit jerking each other around and get honest about what this stuff costs so that we can move forward with the process of figuring out how to pay for it.

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Benjamin Kabak October 22, 2010 - 11:07 am

This tunnel isn’t going to cost 8 billion it’s going to be more like 24 or 25 billion when it’s done.

I don’t think so. It’s probably not going to cost only $8.7 billion, but if we’re building a two-track tunnel under water — and not the city of Boston — and it costs $25 billion as you claim, we’re doing something very very wrong. Do you have any proof besides “Oh look the Big Dig” for this assertion?

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Rob October 22, 2010 - 3:02 pm

Over half the cost overrun for the Big Dig was for mitigation. They went as far to buy special sound-proof drapes for residents near the construction sites. Many of the construction techniques used for the Big Dig had not been attempted before (e.g. bracing the existing elevated structure over the tunnel cut). The cost of sending a TBM through 9 miles of bedrock should be a bit more predictable.

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Douglas John Bowen October 22, 2010 - 11:23 am

Mr. Kabak is to be commended for allowing that ARC has its flaws–to those of us trying to “right-size” this project for close to a decade, that’s progress! But the graphic posted up top still advances one canard: that ARC will “double” trans-Hudson capacity. Not even New Jersey Transit claims this is so (on a good day, at least).

For those of us criticizing ARC in its current form, yet believing a better ARC is needed, Mr. Kabak’s observations re: money are mostly on or near the mark. The issue, for us, isn’t just how much a project will cost, but what we get from that expenditure (or investment, if one will). Overruns are a part of history, and not just limited to big, bad government. But if we spend more than we expect to achieve less than originally calculated, the worth of the project is open to debate.

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jim October 22, 2010 - 3:11 pm

Gov. Christie has delayed his decision. He’s going to take the weekend to think about it. That suggests it isn’t an up/down decision. The leaks that have been coming out seem to support that. It looks to me from the leaks that there are four options that have been discussed: (1) build it in its current form, for about $9.7B with a sweetener from LaHood of some HSIPR money; (2) reduce the scope in line with NJT’s suggestion (leaked by Sen. Lautenberg) — single level deep station, no Secaucus loop, no Kearny yard, less rolling stock — which drops the price tag by about $1.5B; (3) cost sharing with Amtrak, which seems to imply some scope modification to make it useful to Amtrak, but no-one’s specified what those are; (4) cancel the project.

In fairness to Gov. Christie, just because the project is currently within budget doesn’t mean it won’t have cost overruns — construction has barely started. Given that his transportation cupboard is bare, his reluctance to take on an open-ended commitment is understandable. It’s not clear to me that anyone’s done a risk analysis; certainly I haven’t seen one discussed. Boring the Bergen and Hudson tunnels is probably fairly safe. There have been several tunnels under the Hudson and we probably have a fair idea of the geology. The Manhattan tunnel and the deep station may not be as safe. MTA did probes along 11th Ave for the 7 line extension, but away from that line there may be all sorts of gotchas awaiting.

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ChrisC October 22, 2010 - 3:32 pm

>>Given budget crises in both states, the time has come for Christie/Paterson to form a joint regional rail operating co (Port Athority controlled) resulting in a single regional rail entity. Cut all the duplicative administrative and operating expenses!<<

I second that motion good sir. At the very least, NJ Rail and LIRR should be combined, even if M North is kept separate.

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LaHood: ARC overruns range from $1-$4 billion :: Second Ave. Sagas October 22, 2010 - 5:28 pm

[…] might yet be the ARC Tunnel’s day of reckoning. According to unsourced reports out of New Jersey, Gov. Chris Christie will at least take the […]

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Mark R. Brown October 23, 2010 - 11:39 am

Amazing how transit projects become objects of political whims while for 50 years highways were sanctified and (usually) untouchable.

NYC/NJ has one of the highest rates of extreme commuting (>90 min each way). A project like this is overdue and will be imperative as the NYC region continues to grow. An additional rail line to NYC will expand the commuting shed and desirability of NJ suburbs – which means new development and property and sales tax revenue from people who work in NYC but who can’t afford the rent there.

Politicians see only one thing. The next election.

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Déjà vu: Christie to kill ARC Tunnel again again :: Second Ave. Sagas October 27, 2010 - 1:19 am

[…] to the project, he promised a two-week review, but the writing was on the wall. On Friday, the federal cost projections, showing potential overruns of up to $4 billion, leaked, and the project’s fate was all but […]

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Why TEA Is Bigger Than DADT « Straßgefühl October 27, 2010 - 2:13 pm

[…] Before people vote next week, I’d like to remind them that Chris Christie just killed the ARC project for the second time in two weeks. […]

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