ARC Tunnel

The deep cavern in Manhattan is one of Governor Christie's gripes with the ARC Tunnel. (Via ARCTunnel.com)

Since New Jersey Gov. Chris Christie announced in mid-September that he would be suspending work on the trans-Hudson rail crossing we know as the ARC Tunnel, the staff of The Star-Ledger has been all over this story. They were the first to report on the suspension and have numerous sources within the Christie Administration keeping them abreast of the latest developments. Their latest piece — a glimpse inside the negotiations with the feds that resulted in a two-week reprieve for the project — might just be their best.

The gist of their piece is, as the headline suggests, the 36 hours that saved the ARC Tunnel. They track Christie’s decision to make the announcement to scrap the tunnel after he made a few key political appearances in Iowa and the timing of the announcement that conveniently coincided with testimony by Bret Schundler on a mistake that cost New Jersey hundreds of millions of federal education dollars. Christie, they say, was intent on scraping the ARC Tunnel as early as June but acted recently when it became politically prudent to do so. They write:

Christie — riding a wave of national popularity built on the combination of his government-cutting bona fides and his tough-guy-from-Jersey image — was already leaning toward killing the project as far back as June, say those close to him. Last month, in a decision that startled transportation advocates and Washington, Christie abruptly suspended the project after more than half a billion dollars had already been spent. But it was not until last week that he made the final decision to cancel.

The actual timing of the governor’s final decision caught many off guard — including those in Washington. And it came as the governor was suffering through a public flogging at the hands of one of his own — the man he had chosen to lead his push to reform education. Bret Schundler had been fired in August in a dispute over a failed $400 million federal grant.

Thursday morning, Schundler was telling the Senate under oath that the governor lost the federal funding because of a vendetta against the state’s leading teachers union. And as Schundler’s testimony was reaching toward its third hour in a Statehouse committee room, the governor’s office sent out a news alert, summoning reporters for an announcement. The topic was not specified, but it was quickly learned that Christie was killing the ARC tunnel.

Christie denied he timed his announcement to steal Schundler’s thunder, but political observers said it couldn’t have been mere coincidence since less than 24 hours earlier the governor had said he didn’t know when he would have enough information to make his decision.

At first, aides to Ray LaHood, the nation’s Secretary of Transportation, wanted to attack Christie for this short-sighted decision, but LaHood went with diplomacy instead. The government believes that Christie’s claims of $5 billion in cost overruns are both wrong and intentionally misleading, but the two were able to work together to reach a detente. The feds would address some of Christie’s legitimate gripes with the project — its need for a new station deep under 34th St. that doesn’t offer a quick and easy to connection to Amtrak — and Christie would be open to their suggestions.

Still, the problem remains one of costs. “We have to work on the money,” Christie said as his meeting with LaHood ended, and the costs are still an issue. The governor still has the tunnel is “not financially viable” and would prefer to use that money — and not higher gas taxes — to save the state’s sinking Transportation Trust Fund. In this instance, though, killing two birds with one stone would be committing mobility murder.

So now, we wait. In ten days, Christie and LaHood will come together to determine the fate of a project the region needs and, with it, billions of dollars and thousands of jobs. Still, I’m not going to hold my breath. This one feels a little less optimistic than it should.

When New Jersey Governor Chris Christie killed the ARC Tunnel project last week, the uproar was instantaneous. From the Washington, DC, to the halls of labor in the Garden State to the pages of newspapers across the region, Christie was condemned for this short-sighted decision that will cost New Jersey thousands of jobs, billions of dollars and better commuting options. The region will suffer; his state will suffer; workers will suffer. But what if he’s not wrong? What if he has sound reasons for questioning the viability of the project — and, in particular, its price tag — as it is now conceived?

From the basic need for better rail connections between New York and New Jersey to a profound feeling of American failure, the reactions to Christie’s decision ran the gamut this weekend. Charles Wowkanech, head of New Jersey’s AFL-CIO, summed up those thoughts as he urged his governor to reach a compromise with the feds. It’s not, he noted, a partisan issue, and the state can ill afford to lose the $600 million it has sunk into the tunnel already, let alone the promise of 45,000 construction jobs and $3 billion in federal aid. “Everyone agrees that we need a new rail tunnel under the Hudson,” Wowkanech said. “Doubling rail passenger capacity is necessary to make New Jersey and New York economically competitive, to reduce congestion on our highways and to improve the quality of the air we breathe.”

In The Times, two columnists tackled the tunnel. With more than his fair share of hyperbole, Paul Krugman spoke of great American failures: “So here’s how you should think about the decision to kill the tunnel: It’s a terrible thing in itself, but, beyond that, it’s a perfect symbol of how America has lost its way. By refusing to pay for essential investment, politicians are both perpetuating unemployment and sacrificing long-run growth. And why not? After all, this seems to be a winning electoral strategy. All vision of a better future seems to have been lost, replaced with a refusal to look beyond the narrowest, most shortsighted notion of self-interest.”

Bob Herbert offered up a more tempered assessment of Christie’s decision: “The railroad tunnel project, all set and ready to go, would have provided jobs for 6,000 construction workers, not to mention all the residual employment that accompanies such projects. What we’ll get instead, if it is not built, is the increased pollution and worsening traffic jams that result when tens of thousands of commuters who would have preferred to take the train are redirected to their automobiles…This is government policy at its pathetic worst.”

But on a purely economic level, Christie has inadvertently hit upon a problem with rail construction projects in New York City: The initial estimates appear to be woefully conservative, and the final tallies — billions higher than first projected — are leaving local governments with fewer and fewer choices. We don’t even have to look beyond the city limits of New York or the overarching topic of this blog to find a great example. When the MTA first firmed up plans for Phase 1 of the Second Ave. Subway, it’s price tag came in at $3.8 billion. Today, the federal government estimates a final cost of $4.98 billion. Someone will have to cover that extra $1.18 billion, and in a time when state and city funds are tight, if not non-existent, seeing projects through to completion has become a challenge.

These budgetary concerns aren’t limited to Second Ave. either. A look at recent MTA documents reveals that nearly every big-ticket station renovation — from South Ferry to Columbus Circle to Fulton St. — is over budget by a significant amount. In New Jersey, Christie had to pull the plug because his state simply can’t afford to cover cost overruns that could range from $2-$5 billion. He shouldn’t have canceled the project before consulting with the federal government and conducting a forensic analysis of the budget, but his decision seems reasonable from a fiscal perspective. After all, the logica goes, I can’t buy something for which I can’t afford to pay and neither can the state of New Jersey.

Later this year, MTA Inspector General Barry Kluger will be releasing a report that examines just why the MTA can’t control construction costs. Ahead of that report, Manhattan Borough President Scott Stringer has urged the MTA to, in his words, “streamline its construction management and revamp its protocols for developing budget and time estimates.” On a national level, he would like to see an infrastructure bank and peer reviews of cost estimates incorporated into the planning process for big-ticket items.

Writing for Crain’s New York today, Stringer hits upon Christie’s rationale but also why canceling ARC is akin to hiding from monsters. “Putting a halt to this project is the easy way out,” he says. “The much harder but correct path is to directly confront the problem of how to accurately estimate the costs of infrastructure megaprojects and offer solutions.” Today, no one has a good solution.

A rendering of the proposed 34th Street cavern at the eastern end of the ARC Tunnel. (Via ARCTunnel.com)

After Chris Christie officially killed the ARC Tunnel, Secretary of Transportation Ray LaHood requested a meeting with the New Jersey governor. This afternoon, the two parties announced a two-week reprieve for the ARC Tunnel plan as federal and New Jersey officials will meet to hash out potential alternatives for the badly-need trans-Hudson rail crossing.

“Governor Christie and I had a good discussion this afternoon, during which I presented a number of options for continuing the ARC tunnel project,” LaHood said. “We agreed to put together a small working group from the U.S. Department of Transportation and the office of NJ Transit Executive Director Jim Weinstein that will review these options and provide a report to Governor Christie within two weeks.”

Christie issued a more guarded statement, and Transportation Nation wonders if this is nothing more than a face-saving measure by LaHood. “The fact that the ARC project is not financially viable and is expected to dramatically exceed its current budget remains unchanged,” Christie said. “However, this afternoon Secretary LaHood presented several options to potentially salvage a trans Hudson tunnel project. At the Secretary’s request, I’ve agreed to have Executive Director of NJ Transit Jim Weinstein and members from his team work with U.S. Department of Transportation staff to study those options over the next two weeks.”

Advocates for the project took this news as a time to reiterate calls for a true review. All indications are that Christie’s office did not actually conduct a line-by-line examination of the project but simply reiterated cost projections that have not been vetted by either the federal government or New Jersey Transit officials. The state has already spent $200 million it cannot get back on this tunnel.

“While a two week extension still seems like a short period of time, we’re heartened to learn the project has been granted a temporary stay of execution,” Bob Yaro, president of the Regional Plan Association, said. “It is critical all parties stay at the table to find a reasonable solution – ARC is too important. We believe a modest gap exists and urge the State, Port Authority and FTA to close the remaining gap to this project back on track.”

These tunnels, the only way into or out of New York City for NJ Transit, aren't going to cut it. (Photo courtesy of NJ Transit)

For Gov. Chris Christie, pulling the plug on the ARC Tunnel was a matter of economics. According to ARC Executive Steering Committee estimates, the project will cost between $3-$5 billion more than anticipated, and without massive tax increase, New Jersey cannot pay for any potential cost overruns. “The ARC project costs far more than New Jersey taxpayers can afford and the only prudent move is to end this project,” he said this afternoon.

The information upon which Christie based his decision on the project came from a three-page memo put forth by the heads of the agencies overseeing the project. The memo — embedded after the jump and available here — discusses the rising costs of the project. Although no one conducted a line-by-line analysis of the budget, the FTA believes the final costs could be as much as $13.7 million, and New Jersey Transit anticipates overruns of at least $1.3 billion.

For a project that started out with a $4.3 billion price tag in late 2003, the ballooning costs forecasted its end. “The Committee fully recognizes the value and benefit of a cross Hudson transportation improvement would bring to New Jersey’s transportation system and the entire region,” the report says. “The Committee also understands that this action may result in the loss of $3 billion in discretionary federal New Starts money. Nonetheless, it is the judgment of the Committee that in the current economic climate, New Jersey and its project partners cannot afford this project and recommend its immediate and orderly shutdown.”

By closing up shop, Gov. Christie will see around $478 million flushed down the drain. The state believes it can recover some of this money already spent on construction, but the job losses today and in the future will sting. While Ray LaHood, the current Secretary of Transportation, plans to meet with Christie tomorrow, the immediate future for the ARC Tunnel looks bad.

Meanwhile, advocates for the project are dismayed. The Regional Plan Association slammed Christie for basing his decision off of unofficial cost estimates and fears that twenty years of progress on a badly-needed river crossing will go up in smoke. “The decision to cancel ARC is an enormous disappointment,” Bob Yaro, RPA president, said. “ARC was desperately needed by the residents of New Jersey who now face limited access to the most lucrative job market in the nation, less reliable commutes and more congested roadways at the Hudson River crossings for the next generation.”

Another RPA official noted that, despite the cost increases, New Jersey would see nearly unprecedented economic growth by completed this project. “With the 70,000 additional daily riders who would have used ARC, New Jersey would be more connected to New York City and the expanding global economy, companies and workers would continue locating in the Garden State, home construction would pick up, and the value of homes near transit stations would rise by an estimated $18 billion,” RPA Executive Director Tom Wright said. “All of this has been jeopardized by this decision.”

Yet, some advocates have highlighted the silver lining in Christie’s cloud. The ARC Tunnel, while badly needed, is not an ideal project. It doesn’t allow for Amtrak expansion and would require a new station cavern buried deep below 34th St. with no direct connection to Penn Station. The NJ ARP’s 2005 statement explores these issues further, and Christie’s decision to halt the project now could allow for these design flaws to be corrected in the future.

At some point not too far from now, the New York/New Jersey region will have to figure out how to improve rail crossings under the Hudson River. The ARC Tunnel, twenty years in the making, would have begun to solve our region’s transportation projects, and this setback, while major, shouldn’t mark the end of those efforts. Today is a sad day, but it shouldn’t be the end of this project by any means.

After the jump, read the memo from the ARC Executive Steering Committee torpedoing the project.

Despite a report yesterday that New Jersey Governor Chris Christie will soon pull the plug on the ARC Tunnel, sources close to the project tell me that word of the project’s demise may be premature. While saving the ARC Tunnel may be a longshot, those fighting for it say that Gov. Christie is not taking his decision lightly, and with the 30-day moratorium expiring on Sunday, advocacy groups are urging the governor to take the time to conduct a thorough review of the project.

Speaking on the record yesterday after the initial reports came out, Christie defended his administration’s due diligence. He said:

I have not made any decision I have not been given the information yet by my executive director of NJ Transit or my commissioner of transportation regarding what the real cost of the ARC tunnel going from New Jersey to New York is going to be, and until I get those real costs I can’t make a decision. But what I do know is this: I was alerted to the fact that there were potential for significant cost overruns. And New Jersey’s broke. And the federal government’s made it clear that New Jersey will be on the hook for any cost overruns on the project.

Well I gotta know what those cost overruns are gonna look like, and whether we’re going to have the money to pay for it or not. So that’s why I put a thirty day halt to construction said go back sharpen your pencils and come back to me. The thirty days runs up this week. When I get back to New Jersey tomorrow I’ll be meeting with my transportation commissioner and my New Jersey transit executive director and they’ll give me information and I’ll have to make a decision. But no I haven’t made any decisions yet at all.

Sources say that Christie understand the magnitude of this project. He knows that $600 million in contracts has already been awarded; he knows that the $3 billion in federal money will create thousands of jobs for a state struggling through a bad economy; he knows that the New York region will continue to grow and that rail access into and out of the city needs to expand. He knows that other municipalities are chomping at the bit for a crack of that $3 billion from the feds, and he also knows that his state cannot afford to spend money it doesn’t have.

Noting that he won’t get the support from the federal government or from the city of New York to cover potential cost overruns today, he said that the project’s future boils down to one of pure economics. “The criteria will be the reliability of the numbers that I’m provided and the back-up for that in terms of what the real cost of this project will be — and then making a cold-hearted analysis of whether the state of New Jersey can afford it,” he said.

While Sen. Frank Lautenberg suggested that the Port Authority cover overruns, Christie has noted that the Port Authority’s money comes from New Jersey. In other words, that idea seems to be a non-starter.

Currently, New Jersey Transit officials are conducting a line-by-line review of the ARC Tunnel’s budget and projected expenses in an effort to identify potential cost overruns and a true price tag. Thomas Wright and Juliette Michaelson at the RPA have urged Christie to extend this review. The project, they noted, originated in 1990 and should not be so lightly discarded. They write:

Both the TTF and ARC are critical to the future of the state, and options exist to see them both through. Gov. Christie could continue to negotiate with the construction unions, which have already indicated a willingness to make concessions on their contracts. The Port Authority, a bi-state agency with long-range planning expertise and a core competency in building infrastructure, could also take over the project and assume any potential cost overruns. A compromise could also be negotiated, whereby Gov. Christie reallocated the revenue from future Turnpike toll increases ($1.25 billion) to the TTF and transit users funded the gap with a new “ARC Surcharge” on their fares. Finally, instead of worrying about potential cost overruns that may or may not materialize — the contract bids that have come in so far are right on budget — we could move forward with the financing plan we have in place now, and worry about budget overruns if and when they materialize.

If Gov. Christie is serious about killing ARC, then he must do his due diligence and determine the price that New Jersey’s economy will be paying in terms of more delays and over-crowding on NJ TRANSIT trains, and the effect of poor transit service on individuals and businesses seeking to locate in New Jersey.

Thirty days may be long enough to kill ARC, but it is surely not enough time to devise a successful strategy to fund both the best-planned transit investment in the nation and the necessary maintenance of the state’s road system. Before killing ARC, we call on Gov. Christie to extend the review period to 90 days, giving himself and other state leaders a meaningful chance to keep New Jersey competitive and sustainable.

And so we wait on the future of a project that is entirely necessary for the region and seemingly on life support. It’s not too late for the ARC Tunnel to be saved, but the clock is ticking.

These tunnels, the only way into or out of New York City for NJ Transit, aren't going to cut it. (Photo courtesy of NJ Transit)

Via Andrea Bernstein at Transportation Nation:

Three sources familiar with the $8.7 billion tunnel under the Hudson river from NJ, say, barring an unexpected, last-minute change of heart from Governor Chris Christie, the ARC transit tunnel under the Hudson river is dead. The sources say Christie will likely announce this week that he’s restructuring NJ’s portion of the money to go to roads. The FTA and the Port Authority will recoup their $3 billion each, though the Port’s money will likely go into other regional projects.

The writing had been on the wall for this project since September 13 when New Jersey Gov. Chris Christie suspended work on it to “review costs.” The state’s leaders feared that the $8.7-billion price tag was too conservative and that the state would be forced to pony up money it didn’t have. At one point, Christie claimed that the project could cost $5 billion more than expected.

On September 16, as activists urged Christie to resume work on the project, I explored the governor’s wavering commitment to the much-needed transit project, and by September 21, it seemed clear that New Jersey would takes its tunnel investment and siphon it into its transit fund with a heavy emphasis on road spending. That’s exactly what appears to be happening.

As recently as yesterday, New Jersey officials confirmed that the ARC Tunnel money could go into New Jersey’s empty transportation coffers. “I don’t know,” Jim Simpson, Christie’s transportation commissioner, said in response to questions of the funds’ future, “but let’s look at the source of the money. You’ve got a billion dollars of federal money that comes to the New Jersey Department of Transportation that would normally be associated with highway projects. You’ve got that billion coming in—100 million a year—that is rededicated, flexed to ARC. So if ARC didn’t happen there’s a billion dollars for roads and bridges and things like that.”

The ARC money will most likely be funneled into New Jersey’s near-empty Transportation Trust Fund. While some of the money will go to rail — the past breakdown is available here — any New Jersey transit upgrades will pale in comparison with the potential future benefits to the region and state from the ARC Tunnel.

And so, there appears to be no future for this project. Michael Bloomberg said that, as this project has long been New Jersey’s baby, the city will not step in to fill the funding void. The Port Authority has expressed its support, but without New Jersey’s $3 billion contribution, the PA doesn’t have the money to keep it going. The Port Authority has not yet said how it will deploy the money it had committed to the ARC project.

While Transportation Nation called this a huge blow to a transit-oriented Obama Administration, the impact of this decision wille extend well beyond Washington. Despite the project’s flaws, the region needs to increase its rail capacity into and out of Manhattan. With Christie’s decision, the Trans-Hudson Express Tunnel will remain but a dream on paper, and the Access to the Region’s Core will not be improved. What a shame.

These tunnels, the only way into or out of New York City for NJ Transit, aren't going to cut it. (Photo courtesy of NJ Transit)

When news broke over the weekend that New Jersey was suspended work on the ARC tunnel for 30 days to review, New Jersey Transit’s Executive Director James Weinstein appeared as the public face of the shutdown. Yet, when a state opts to freeze its part of an $8.7-billion megaproject, someone else is clearly pulling the strings. Yesterday, Gov. Chris Christie admitted his role in the affair, and his comments have many fearing for the future of the project.

At a press conference this week, Christie claim to voice his conditional support for the tunnel, but his comments were clearly aimed at the immediate future of the ARC tunnel. “If I can’t pay for it, then we’ll have to consider other options,” he said, before levying a charge of politicking at the Corzine Administration. “It went from $5 billion to $8.7 billion in what was clearly a rush by the Corzine administration to have gold shovels and put them the ground and try to get Corzine re-elected. That obviously was less than successful, and I’m concerned that their evaluations of price of this project was as successful as his re-election campaign was.”

As ARC supporters rushed to defend the project, noting that it was in the planning stages years before Jon Corzine was New Jersey governor, the Tri-State Transportation Campaign dug up a letter from Gov. Christie. Written in April of 2010 and addressed to US Transportation Secretary Ray LaHood, Christie’s missive notes how the ARC tunnel is “critical for the transit riders of New Jersey and the region.”‘

I want to restate my commitment of those funds controlled bv the State of New Jersey, specifically funding from the New Jersey Turnpike Authority (NJTA), the Federal Highway Administration and the New Jersey Transportation Trust Fund (TTF). Also attached is a reconfirmation of the Port Authority of New York and New Jersey (PANYNJ) $3 billion commitment to the project…

With respect to the reauthorization of the TTF as it relates to the recapitalization of the transit system, the State of New Jersey has a long history of reauthorizing the TTF on time and I will not let the TTF expire on my watch.

Now that the TTF is running dry and Christie has pledged to keep taxes in New Jersey low, he’s running into quite the pickle. He could quash a badly-needed train tunnel or he could renege on his pledge to keep taxes down. Based on the region’s lackluster embrace of transit expansion plans, would it surprise me to see him embrace the ARC tunnel if it costs even $1 more than current projections? Yes, it would.

TSTC, meanwhile, again voiced its support for the project. Noting the planning criticism surrounding it (and responding in turn), Steven Higashide reports on a letter sent to Christie, co-signed by the heads of the TSTC, New Jersey Future and the RPA. “Stalling ARC,” the three warn, “will only lead to higher expenses later and could mean New Jersey would have to refund the federal government hundreds of millions of dollars and miss out on thousands of desperately needed, well-paying jobs.”

These are trying economic times for the country’s states as debt limits are maxed out and budgets are running in the red by no small amount. Yet, to see a project of this magnitude and importance shelved would be a blow to the area’s transportation infrastructure and the regions economy. Gov. Christie should swallow hard and continue to support the ARC tunnel no matter what this 30-day review says.

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Update (10:50 a.m.): Andrea Bernstein over at Transportation Nation wrote a similar overview of the state of the ARC project today. She compares Christie’s stance on the tunnel with his ideological entrenchment against the highway trust fund and doesn’t see a bright future for this project. “If he sticks with his ideological commitment — and he’s known for that — the ARC project,” she concludes, “is in deep, deep trouble.”

The Star-Ledger, in an editorial today, urges Christie to keep this project on pace. Comparing it to the New Jersey governor’s failed Race To The Top bid, the paper notes that this tunnel is “widely recognized as vital to the region’s economy” and highlights how the initial price estimate was a collaboration between a Bush official who now works for Christie and then-Gov. Corzine’s office. It isn’t, in other words, as cut-and-dry as Christie’s politicking makes it sound. “Throwing stones,” the paper says, “at Corzine is not the leadership we need. It’s a cop out.”