ARC Tunnel

The ARC Tunnel as she could have been.

It’s been a rough few weeks for New Jersey Transit and Garden State rail riders. Shortly after announcing yet another massive fare hike, the agency suffered through a week that saw rush hour delays pile up due to problems with Amtrak’s North Hudson tubes. After commuters suffered through problems on four of five days last week, the agency has already announced that it does not anticipate a problem-free Monday. Riders are being asked to find alternate ways into the city, and PATH, ferries and buses will cross-honor tickets.

It’s also been a rough few weeks for New Jersey Governor Chris Christie. With national polls placing him toward the bottom of the crowded field of GOP 2016 presidential hopefuls, Christie has engaged in something of a Hail Mary campaign to drum up any kind of enthusiasm for his run for the White House. At one point, he seemed like a clear front-runner before the Fort Lee traffic scandal and general voter anger toward his policy decisions grew louder and louder.

Faced with mounting frustration directed at him from his constituents over last week’s New Jersey Transit delays, Christie at first ducked the question before his aides helped him correctly level the blame at Amtrak. He then let loose a stunning display of political arrogance. He would, he claimed, build the ARC Tunnel if elected president. The Times’ Rick Rojas reported:

“If I am president of the United States, I call a meeting between the president, my secretary of transportation, the governor of New York and the governor of New Jersey and say, ‘Listen, if we are all in this even Steven, if we are all going to put in an equal share, then let’s go build these tunnels under the Hudson River,’ ” Mr. Christie said in an interview with the radio talk show host Larry Kudlow, which will be broadcast on Saturday on WABC-AM. “Then, everyone has an incentive to have the project run right, to run efficiently because everybody is on the hook.”

The governor’s comments — and his hypothetical phrasing — has attracted the attention of his critics, who say his statements emphasize how little he has done to help improve transportation. “This is not a hypothetical issue, this is a real issue, and he could be doing something about it,” said Martin Robins, the founding director of the Alan M. Voorhees Transportation Center at Rutgers University, who was the director of the tunnel project during the mid-1990s. “The question is, what has he done, what will he do in the next 18 months as the governor of New Jersey?”

In his interview comments, Christie reiterated his own long-held belief that, as he said, “New Jersey was going to be responsible for every nickel of cost overruns, which at the time was estimated to be three to five billion dollars.” He claims that he asked New York’s leaders for fiscal assistance and that they turned him down. He did not mention that the Feds had pegged the cost overruns at $1 billion; that both the feds and New York were willing to work out a deal; and that instead of reserving the money for a better-designed and fairly-funded rail tunnel, he instead sunk into a series of road projects throughout the state, leaving rail riders with nothing.

Time and again, Christie has tried to paint his ARC decision as something it wasn’t, and he even has supporters from the rail community who point to the design flaws in ARC as it was planned. The decision to send the tunnel to a dead end underneath Macy’s was the wrong one, but it wasn’t worth canceling the project and removing New Jersey’s money from a rail expansion project. Christie may have backed into a decision that was, in part, defensible, but he did it for none of the right reasons.

The Times’ editorial team wasn’t buying what Christie was selling. In a piece that unfortunately ran on Saturday and not during a more well-read day of the week, they laid the blame for trans-Hudson woes squarely on Christie’s shoulders. Their argument echoes mine:

Governor Christie originally said he stopped work on the new tunnel because it would cost his state too much money. Then, he got the Port Authority of New York and New Jersey to reroute $3 billion that had been allocated for the project. Instead of a tunnel to benefit the whole region, the money went to patch Mr. Christie’s roads and bridges.

Normally, state gasoline taxes provide much of the revenue for local transportation needs. But Mr. Christie, a Republican aiming for the White House, has not wanted to raise any taxes. This refusal and his use of the tunnel funds for other purposes have kept the chokehold on transit in the Northeast. And without sufficient tax revenue, New Jersey Transit has added debt and been forced to squeeze more money from its customers. This month, it announced fares would go up an average of 9 percent on Oct. 1.

Even Mr. Christie’s commissioner of transportation, Jamie Fox, has begun working hard to get a dedicated tax to fix the state’s roads, bridges and mass transit. The governor, perhaps recognizing that he has a transportation crisis on his hands, has simply said that when it comes to revenue, “everything is on the table.” If everything really is on the table, Mr. Christie should help legislators come up with a gas tax that starts to dig the state out of its transportation mess. At the same time, he should support Amtrak and others as they start over with new plans for a tunnel under the Hudson.

When he canceled ARC, Christie did it with an eye on the national stage. Ending an expensive government project bound to benefit the more liberal northeast played well with the Tea Party at a time when they were ascendant. But now aging infrastructure is in the news, and New Jerseyans know where to point their fingers over the current failures and future problems that await on the horizon. Instead of a rail tunnel in progress with a design that could have been improved five years ago, the region has nothing but problems — which is identical to Christie’s presidential hopes. It’s no coincidence that these two issues are going hand in hand, and if Christie the governor is serious about helping solve the trans-Hudson problems, he’s not out of office yet.

When New Jersey Gov. Chris Christie killed the flawed ARC Tunnel project in 2010, it came as a big surprise to people in the region and politicians in Washington, DC. With a major funding commitment from the feds, the project was among the largest public works in the nation, and despite its flaws, a trans-Hudson rail tunnel would have greatly improved access into and out of New York City.

Christie cut the cord over budget concerns. He claimed the project’s cost could double. He claimed New Jersey would have to foot the entire bill for overruns. Now, a new report issued by the Government Accountability Office [PDF] accuses Christie of exaggerating, if not outright lying, in his highly political battle over the ARC Tunnel. This was, alleges the GAO, all about politics and gas taxes.

Kate Zernicke of The Times has the scoop:

The report by the Government Accountability Office, to be released this week, found that while Mr. Christie said that state transportation officials had revised cost estimates for the tunnel to at least $11 billion and potentially more than $14 billion, the range of estimates had in fact remained unchanged in the two years before he announced in 2010 that he was shutting down the project. And state transportation officials, the report says, had said the cost would be no more than $10 billion.

Mr. Christie also misstated New Jersey’s share of the costs: he said the state would pay 70 percent of the project; the report found that New Jersey was paying 14.4 percent. And while the governor said that an agreement with the federal government would require the state to pay all cost overruns, the report found that there was no final agreement, and that the federal government had made several offers to share those costs.

Canceling the tunnel, then the largest public works project in the nation, helped shape Mr. Christie’s profile as a rising Republican star, an enforcer of fiscal discipline in a country drunk on debt. But the report is likely to revive criticism that his decision, which he said was about “hard choices” in tough economic times, was more about avoiding the need to raise the state’s gasoline tax, which would have violated a campaign promise. The governor subsequently steered $4 billion earmarked for the tunnel to the state’s near-bankrupt transportation trust fund, traditionally financed by the gasoline tax.

Somehow, Christie’s office claims that the GAO report backs up their position. After admitting that Christie fudged some numbers, spokesman Michael Drewniak defended the controversial decision. “The bottom line is that the GAO report simply bears out what we said in the fall of 2010 and say to this day: the ARC project was a very, very bad deal for New Jersey,” he said. It’s tough to make such a sweeping generalization when the final deal hadn’t been completed.

The Times has a bit more:

Mr. Christie further explained his decision by saying that the financing agreement with the federal government required him to declare that New Jersey would pay any costs above the $8.7 billion. That is the standard procedure for full-financing agreements, but the report found that there was no agreement when Mr. Christie canceled the project, and that the federal government, which was already paying 51 percent of the costs, had offered to help with any cost overruns, pledging additional money, low-interest railroad loans and public-private financing.

Before Mr. Christie declared the tunnel dead, his transportation advisers told state legislators that they had discussed taking money from the project to fill the transportation trust fund, which was almost empty. Since then, the governor has steered $4 billion in tunnel money to the trust fund, avoiding an increase in the state’s gasoline tax, the second lowest in the nation.

One of ARC’s earliest supporters, Martin Robins, now with the Alan M. Voorhees Transportation Center at Rutgers, slammed Christie. “In hindsight, it’s apparent that he had a highly important political objective: to cannibalize the project so he could find an alternate way of keeping the transportation trust fund program moving, and he went ahead and did it,” he said to The Times.

This is ultimately a lesson in national politics and local elections. Christie the Candidate vowed support for the ARC Tunnel, but then Christie the Governor gained national prominence in a political party searching for leaders. He canceled the ARC Tunnel near the height of the Tea Party movement as a statement on spending and taxes. He played fast and loose with numbers, and he stretched the truth. The New York/New Jersey region is worse off for it, and it may yet be decades longer, and billions of dollars more, before we see the need for a new trans-Hudson tunnel realized.

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.”

A schematic of the ARC Tunnel's Manhattan terminal. (Click to enlarge)

In a 52-page decision released on Friday, the Federal Transit Administration has determined that New Jersey must repay all of the $271 million the state had spent on the ARC Tunnel project before Gov. Chris Christie canceled the project this fall. Furthermore, if the state fails to pay the money soon, the FTA will begin to charge interest on amounts due at a steep rate. To fight this ruling, Gov. Christie, who has already spent close to $1 million on legal fees, could appeal the ruling in federal court.

Both The Record and The Times reported on the ruling this past weekend, and I’ve embedded the document along with a letter from Ray LaHood, the Secretary of Transportation, below. The ruling explores why New Jersey is legally obligated to return the funds and is appealable. The federal courts would have jurisdiction over the matter. Essentially, though, this move raises the stakes in the fight over what was to be the country’s largest public works project.

Patrick McGeehan from The Times had more:

In a letter to New Jersey’s senators and representatives in Congress, Ray LaHood, the transportation secretary, warned that his department had “many tools under the Debt Collection Act to recoup the lost federal taxpayer funds, including withholding future state funding from a wide variety of sources.” But “in consideration of the current economic challenges burdening New Jersey,” Mr. LaHood added, he hoped to “develop a workable payment schedule” and avoid having to resort to those collection methods.

Mr. LaHood should not expect to find a check in the mail any time soon. Mr. Christie, who was in Massachusetts on Friday to speak at Harvard University, declared in January that “we are not paying the money back.” Kevin Roberts, a spokesman for Mr. Christie, said the governor’s staff would “review the decision before determining next steps moving forward.” One option is to sue the department to try to stop it from seeking to collect, but Mr. Roberts would not say if a lawsuit was being considered.

In the meantime, interest on the debt will pile up quickly. The federal government currently charges interest at a rate of 1 percent a year, which in this case amounts to more than $50,000 a week.

According to LaHood’s letter to Senator Frank Lautenberg, the crux of the matter concerns Christie’s representations to the FTA in previous years. Despite rising cost estimates in early 2010, the Governor pledged full support for the ARC Tunnel in meetings with LaHood in February, March and April of last year. Six months later, the project was off, and LaHood could not convince Christie to change his mind, and LaHood took a hard line against Christie in the letter.

“Any notion that the potential for cost growth constituted new and emergent information when the Governor made his decision is simply not accurate,” he wrote.

For now, the FTA is still willing to work with New Jersey to make the repayment process as painless as possible, but Washington’s patience is limited. “In consideration of the current economic challenges burdening New Jersey and all other states, I am not pursuing these collection methods at this time in the hope that we and the state of New Jersey can develop a workable payment schedule,” the secretary said.

Despite taking a hard line, LaHood bemoaned the fate of the ARC Tunnel, and right now, its legacy is one of a legal fight that isn’t over yet. “The purpose of my efforts,” LaHood said of his meetings this past 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.”

After the jump, read the letter and FTA decision.