Updated (2:00 p.m.): As I reported this morning, New Jersey Gov. Chris Christie has indeed killed the ARC Tunnel. His office sent out a statement on the decision to cancel the ARC Tunnel a few minutes ago. Captioned “Christie Administration enforces budget discipline and protects New Jersey taxpayer dollars,” the release says that “New Jersey can’t afford ARC project and shutdown continues.” It reads:

Today, Governor Chris Christie accepted the recommendation of NJ Transit Executive Director Jim Weinstein to continue the orderly and expeditious shutdown of the ARC Project. Despite intense negotiations with federal and state participants, no agreement was reached on terms that would assure New Jersey’s taxpayers would not pay more than $2.7 billion for a completed Trans Hudson Express ARC project.

Federal cost estimates range from $9.8 billion to $12.7 billion. In addition this range does not include $775 million that New Jersey would be required to spend to build the Portal Bridge South, an integral part the ARC project.

On October 8, 2010, Governor agreed to an additional two week review of the ARC project at the request of US DOT Secretary Ray LaHood.

A memorandum from the ARC Project Executive Committee is attached to this release.

The memo — embedded below — from James Weinstein, New Jersey Transit’s executive director explains the negotiations between the state and the feds and the final decision to cancel the project. “At a time when New Jersey’s economy is under extreme stress and the financial strength of the state is at a low point, the taxpayers are in no position to bear the open-ended cost for this project that would be required to obtain a Full Funding Grant Agreement from the FTA,” Weinstein wrote.

The document does highlight though how the feds tried to keep a handle on the costs, but it’s hard to say if New Jersey heard them out in good faith. Included among the proposals were plans to build the ARC Tunnel in phases to reduce the scope and lower the near-term costs; finance the program through Federal Railroad Rehabilitation & Improvement Financing loans; secure a public private partnership; or change the location of the terminal in Manhattan. “Simply,” Weinstein wrote, these proposals “would not hold New Jersey taxpayers harmless from cost increases and overruns that have already emerged and may continue to emerge as the project is constructed.”

In a statement, the Regional Plan Association criticized Christie’s move. “Unfortunately it does not appear as though the Governor gave responsible or serious consideration to any proposals to phase the project, reduce project costs, introduce private funding or accept additional funds from the federal government to help cover overruns, including options that would defer any additional cost to the state until after the project was generating substantial economic and tax benefits,” the organization said. “This lends lending credence to the argument that the State wants to divert already-committed ARC monies to other one-shot uses to plug the ailing Transportation Trust Fund, which runs out of funding in mid-2011.”

New Jersey Future offered up a similar take. “The ARC tunnel project is the best solution to the need for new capacity on New Jersey’s rail network under the Hudson River,” Executive Director Peter Kasabach said. “It was the result of 20 years of planning, designing and negotiations, and represented an unprecedented commitment of funds by the federal government. While fiscal prudence is imperative in these lean times, killing the tunnel is not prudent, fiscally or otherwise. The capacity constraints faced by New Jersey Transit are real and will need to be addressed – and when they are, New Jersey will likely pay a price far heavier than the ARC tunnel.”

This is an unfortunately short-sighted decision by Christie, who plans to use some of the money earmarked for ARC to replenish the state’s Transportation Trust Fund. The tunnel would have generated significant property value — and thus real estate tax — increases that could have been used to pay off the debt accrued by building the tunnel. Furthermore, the state is sacrificing $500 million already spent on the project and $6 billion in guaranteed funding from the Port Authority and the feds. Countless jobs won’t be created.

Still, New Jersey Transit vows to forge ahead with the state’s rail capacity crisis. It says it will “pursue[] alternate, affordable solutions to the trans-Hudson transportation challenge.” While Yonah Freemark at The Transport Politic already has some ideas for the Garden State, how long will we wait until the state can find a project that is well-designed, and cost-efficient while doubling capacity as the ARC did?

10.26.10 Memo

Despite an obvious need, New Jersey Gov. Chris Christie is set to pull the plug on the ARC Tunnel. (Image via Infrastructurist.

For New Jersey Gov. Chris Christie, the future of the ARC Tunnel is all about money. He fears the project will come in well overbudget; he wants more guaranteed federal money for this massive infrastructure investment; and he’s not going to let it go forward until he gets his dollars. Later today, according to numerous reports, Christie will announce that he and the feds are at a funding impasse, and he will again kill the project.

“It’s all about the money,” Christie said yesterday, and the past two week’s politicking is a sure sign of that. Christie first called the project into question in early September when he ordered a review of the budget. After not quite reviewing the budget but simply pondering federal projections, Christie canceled the tunnel on Oct. 7. Under pressure from the feds, who had already committed $3 billion 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 sealed.

According to The Star-Ledger, the feds know it’s all about the money. Sources close to the governor allege that Ray LaHood and his staff “offered to improve the financing terms but committed no new money.” Without the additional funds, Christie could not commit a financially-troubled state to the build. Barring a last-minute reprieve, ARC, the country’s biggest public-works project, will die.

The New Jersey-based paper has a bit more on the decision:

Washington transportation planners have been “aggressive” in trying to convince the governor to reinstate the tunnel project and have offered alternate financing and the possibility of scaling back parts of the mammoth trans-Hudson undertaking, the officials said. But Christie has been emphatic that he wants more money from other sources — like the federal government — and, without that, he would have no reason to change his original plan.

U.S. Sen. Frank Lautenberg (D-N.J.) released a statement blasting the governor’s decision: “The federal government, at my urging, presented Gov. Christie with a number of financing options that would limit and even eliminate New Jersey’s responsibility to pay for cost overruns on the ARC Tunnel. The federal government demonstrated its strong commitment to building this tunnel, but it was clear from the beginning that Gov. Christie planned to kill this project no matter what.”

Money, money, money. It’s a common theme here. Someone wants money, and the same someone doesn’t have money. That someone also needs to find money to restore his state’s broke Transportation Trust Fund, and what better way to do so than by canceling a giant tunnel out of New Jersey that has garnered only lukewarm support from many of the Garden State’s transit advocates? And so the ARC will die, and twenty years of planning will be flushed down the drain.

There are, of course, many solutions Christie could have pursued. He could have worked with the feds to cut down on the costs of the project. He could have started building it and, if he’s still the governor when the time comes, simply ordered to stop when the money ran out. At that point, the state would have more leverage to negotiate with the feds over completion funds. He could have figured out a way to, as the feds seemed to have offered, bond more money out of it. After all, a new tunnel that increases capacity is the perfect bond project because it will generate massive amounts of revenue that will go toward bond payments six or seven years down the line. He did not.

So New York’s economy and New Jersey’s economy loses out. The meager tunnel underneath the Hudson River in use by New Jersey Transit trains will remain the sole access point to the city, and trains will remain crowded. Too many cars will try to drive in from Jersey, and commuters who have seen train crowds more than double over the last 12 years will find space and comfort at a premium.

Who knows when a project of this scope will next get off the drawing board? The next iteration of the ARC Tunnel should address the concerns of those who worry about the deep cavern and the lack of integration with Amtrak. The next iteration of the ARC Tunnel will also require even more money than this one. Even as the project promises to improve commute times and increase property values, it will die the death of cost overruns. After all, it’s all about the money, and the money just isn’t there.