Home ARC Tunnel The rising costs of disputing ARC dollars

The rising costs of disputing ARC dollars

by Benjamin Kabak

The fight for ARC dollars has long outlasted the project.

It’s been nearly nine months since the ARC Tunnel met its untimely demise, and still New Jersey and the Feds are fighting over the money. Gov. Chris Christie wants to keep the earmarked dollars and apply them to the state’s other underfunded transportation projects while the Feds, unhappy that the Garden State unilaterally pulled the plug on the largest public works project in the country, just want the dollars back.

The legal fight, which isn’t over yet, is starting to cost the state, and while the numbers are ticking ever upward, there is a rationale behind the battle. In a fairly nuanced piece from The Star-Ledger, Salvador Rizzo looks at the economics behind the legal challenges. Of the costs, he writes:

Gov. Chris Christie’s fight with the federal government over abandoning a train tunnel under the Hudson has already cost New Jerseyans more than $1 million in legal fees and interest, records show.

For a month, Christie has been vowing to appeal a decision from the Obama administration ordering the state to repay $271 million for abruptly pulling out of what was the largest public works project in the country.

In the meantime, interest on New Jersey’s debt is adding up at the rate of $225,000 a month. In addition, bills from Patton Boggs, the Washington law firm hired by Christie in December to fight his battle, have averaged another $300,000 a month, invoices obtained by The Star-Ledger show. The interest on the $271 million, which began accruing on April 29, could be frozen by a federal judge once an appeal is filed, but neither the governor nor Patton Boggs has said when the case will be brought to court.

New Jersey’s transit advocates aren’t quite sure what to say about the expenses and mounting interest. “Christie is not arguing about dollars and cents. He’s saying they don’t owe anything, and he’s on unsound ground,” ARC advocate Martin Robins said. “I suggest we should be talking in terms of collaboration and reduction in the debt that he owes and that he caused by the stomping of this project.”

Yet, even if there’s a small chance — say ten percent — that New Jersey could keep the money, it’s a fight worth pursuing for some time. As with the MTA’s dispute over the TWU raises, if New Jersey believes it has a fighting chance, it could spend dollars on lawyers up to the point of recovery. So if there’s a 10 percent chance of keeping the entire $271 million, legal economics would dictate expenses of $27.1 million.

In fact, some advocates think the state may be able to keep some of the money. As the former head of the Tri-State Transportation Campaign said to The Star-Ledger, attorneys from Patton Boggs are making “some persuasive arguments.” Some — but not all — of the stimulus money going into the tunnel project had been awarded before the ARC-specific grants were signed, and Christie might be able to keep those funds.

Ultimately, though, this still feels like wrangling over a missed opportunity, and as one former Port Authority official said, Christie was awfully quick to cut bait. “Only the governor felt that the entire burden would have fallen on the state of New Jersey,” David Widawsky, the PA’s one-time lead on the ARC Tunnel, said. “Over the course of the many years of construction ahead, these kinds of things could have been worked out.”

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Cameron June 3, 2011 - 10:41 am

I hope the federal government gets ALL their money back from NJ. It’s still unbelievable that Gov Christie would do such a terrible thing like cut back money from a project as important as this. In fact, I hope the Gov’t takes away more money from NJ just the ARC project.

Cameron June 3, 2011 - 10:43 am

I meant to say as a result of what happened to the ARC tunnel.

Anonymous June 3, 2011 - 11:46 am

This is Gov. Christie’s plan:

1) Drag out lawsuit until 2013.
2) Lose re-election.
3) New governor settles with federal government and pays money back in full. Debt blamed on the new governor.

Christopher Stephens June 3, 2011 - 7:40 pm

alternative step 3):

3)New governor is a Democrat, and a Democrat in the White House decides to forgive the debt.

Remember that part of the problem with ARC was that the Obama administration pulled the trigger on it prematurely in order to give Governor Corzine a (failed) boost in the polls.

The lesson I hope we can all agree on is that it’s a bad idea to play partisan politics with major transportation infrastructure projects.

Nyland8 September 14, 2011 - 10:00 am

Your revisionist history doesn’t bear up under even the slightest scrutiny.

lawhawk June 3, 2011 - 12:57 pm

Interesting that some of the transit advocates cited claim that the overages and accounting of overruns could have been addressed as the project got underway- but that ignores the central aspect of Christie’s argument – that the cost overruns were already in the $1 billion+ range, and could go as high as $5 billion. Who exactly among those involved in the project have that kind of money to spend on overruns?

It’s not the PANY. It’s not NYC. It’s not NYS. The feds, who could have kept this project going by accepting the risk of carrying the overruns instead heaped it on NJ and NJ Transit to assume the risk on the overages even as everyone involved acknowledged that NJT has done a poor job in that regard thus far (and the PANY hasn’t done much better with its own PATH transit hub downtown). Heck, the cost overruns on the PATH terminal already incurred would easily cover the low end of the ARC overages estimates.

Infrastructure improvements are costly, and there are often unforeseen complications, especially when working on underground projects, but this project’s financing was saddling NJ with far too much of the risk and debt while others, including the feds and NY/NYC didn’t have those costs.

Now, we’ve got a new tunnel project that will roughly run along the same ROW through the NJ portion and terminate in a slightly different portion of NYC. That project will be a whole lot better than the ARC tunnel as the risks are being apportioned far more equitably among the parties involved.

As for seeing benefits as a North Jersey resident, I don’t expect ’em. Why? Because NJ Transit couldn’t afford to run its schedule as in effect last year so it continued cutting service. It doesn’t have sufficient operational funds to expand service to Manhattan from Northern NJ unless it’s going to significantly decrease service to Hoboken, which means a more difficult commute for those working within Bergen/Essex/Passaic county or those who use PATH/ferries to Lower Manhattan or PATH to 33rd street.

At the same time, can someone ask me why the Portal Bridge is still being tied up in all this when it’s a separate project that should be going ahead as shovel ready regardless of which tunnel project is ultimately done? There’s no argument by anyone involved at NJT, Amtrak, or NJ that this needs to be done, and yet the bridge keeps getting closer to falling apart and it will be a few years before the replacement is operational.

pete June 3, 2011 - 1:15 pm

Theres no point in building anything in the Northeast. The Mob, Unions, and OSHA guarantee the only new tunnels you’ll see will be in China or the Sunbelt. With todays construction costs, it forbids construction. Cost overruns are just the way to win the “lower bidder wins by law” rule, or when there is only one “partnership” GC that bids on the project that splits the money with all the GCs in the area, then makes up for it with cost overruns. How many decades for the second avenue subway? How quick was the IRT built? How many decades for water tunnel 3? If the US Military operated as slow as construction in the north east, we’d all be speaking German right now.

pete June 3, 2011 - 1:17 pm

Its faster to build a 40, 50, 60 story condo tower in NYC, than for the MTA to install ADA elevators (blue plywood goes up, to elevator door opens when I press the button).

Steve June 3, 2011 - 1:26 pm

What new tunnels do you see in the sun belt?

Bolwerk June 3, 2011 - 1:47 pm

I don’t know about tunnels, but Dallas seems to have managed to build a workable light rail network at a reasonable price. However, other political problems still apply: land use regulations don’t favor transit. Usage is low, but perhaps will grow in time.

Donald June 3, 2011 - 7:54 pm

Light rail is much different than a suwbway line. Light rail is nothing more than a bus on tracks.

Alon Levy June 4, 2011 - 3:35 am

No, Dallas’s LRT is actually a good example of how not to do it. The cost per km sounds reasonable because implicitly you’re comparing it to on-street lines like in Houston; in reality, the scale of the operation is more like commuter rail, but the cost is much higher, raising the cost per rider through the roof. It’s not even good commuter rail – the stations are parking lots, and the ridership per mile is among the lowest of US light rail systems.

Bolwerk June 3, 2011 - 1:46 pm

Bah, unions aren’t the problem here. Not significantly anyway. Places as different as Germany, France, Switzerland, and China still have unions, and can get things done on time and, at least in Europe’s case, usually on budget. As for the sunbelt, it builds things sometimes, but largely either directly or indirectly on the northeast’s and west coast’s dimes. There is nothing to praise about its organization, except its Congresscritters manage to steal our money and then treat us how a dog treats a post.

Bolwerk June 3, 2011 - 1:50 pm

Oh, and generally our projects cost 5-10 times more than one in Europe.

Alon Levy June 4, 2011 - 3:48 am

It’s wrong to pin your hopes on the Sunbelt. High construction costs are a general problem in the US, and affect the entire country. Atlanta’s proposed above-ground MARTA extension is if I remember correctly $100 million per km, which is toward the lower end of fully-underground subways in Europe, and is comparable only to the most complex elevated projects in Japan. Los Angeles got a good start with the Blue Line, but the Subway to the Sea is more expensive than it should be (though not nearly by the same factor as SAS) and the Gold Line and its extensions are a disaster. Portland, which is Sunbelt by growth rate and history if not by climate or politics, wants to build a light rail extension for $110-120 million/km.

The sad fact is that although New York has the highest construction costs, it also offers hope for high ridership to mitigate the sticker shock. At $25,000 per projected weekday rider, Second Avenue Subway is that most cost-effective rail project under construction in the US today.

John-2 June 3, 2011 - 1:50 pm

Doubtful that Christie and the feds ever get their dispute ironed out on this one. The options are either New Jersey gets a new governor (Democrat) in 2013 who then does a deal with the feds, or Washington gets a new president (Republican) in 2012, who then has their Transportation Secretary do a deal with Christie (and in either one, working out some sort of way to end the funding dispute via some sort of state-federal funding deal on the Amtrak Gateway option would be the most likely way to go).

Alon Levy June 4, 2011 - 4:21 am

A million dollars a month is chump change compared to the cost overruns on megaprojects, even well-executed ones.

Nyland8 September 14, 2011 - 10:21 am

While I’m not a fan of Governor Christy, and I abhor his pulling the plug on the ARC project, the fact is that there are more elegant solutions to New Jersey Transit’s problems of dumping more than a quarter million inhabitants into Manhattan every day, and reabsorbing them every night. The old paradigm of funneling everyone into a single underground hub, just for the purpose of then redistributing them throughout the city’s bus and subway system, is neither practical nor workable in the way that it was nearly 100 years ago.

For the cost of building the equivalent of Trump Tower under Macy’s, the MTA could extend 4 subway lines into New Jersey at different locations, utilizing already existing NJTransit stations – and the result, from a commuters standpoint, would be better. Add to that vision the subsuming of the PATH system into the MTA, and you have a decentralized mass-transit solution worthy of the 21st century.


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