Feds declare agreement to share massive project’s costs with NY and NJ “nonexistent”
President Donald Trump dropped his own New Year’s ball—in the form of a wrecking ball—with a late Friday afternoon announcement that effectively wipes out plans for perhaps the nation’s most crucial infrastructure project.
The president officially scrapped his predecessor’s proposal to have the federal government underwrite half the cost of a multibillion-dollar Amtrak tunnel connecting New Jersey to Penn Station, the busiest transit hub in the U.S. The lone existing tunnel is rapidly deteriorating, threatening to sever Amtrak’s popular Northeast Corridor route and to divert tens of thousands of New Jerseyans from their daily Manhattan commutes via NJ Transit.
The administration released the news on the cusp of a holiday weekend in a letter from a top Federal Transit Administration official to Gov. Andrew Cuomo and his New Jersey counterpart Chris Christie, who had agreed with the Obama administration to split the project’s costs 50-50.
President Barack Obama’s Department of Transportation, which encompasses the FTA, had consented to that framework with Christie, Cuomo, now-Senate Minority Leader Charles Schumer and New Jersey Sen. Corey Booker in 2015.
Friday’s letter, in response to an updated proposal by the two states to fund their half of the plan with federal loans, declared the deal null and void.
“Your letter also references a nonexistent ’50-50′ agreement between USDOT, New York and New Jersey. There is no such agreement,” wrote FTA Deputy Administrator K. Jane Williams. “We consider it unhelpful to reference a nonexistent ‘agreement’ rather than directly address the responsibility for funding a local project where nine out of 10 passengers are local transit riders.”
When Crain’s inquired if that meant DOT regards the 2015 plan as not having standing, a spokesperson replied, simply, “correct.”
The news left advocates for Gateway apoplectic.
“Let’s not be surprised by the timing of this letter,” said Tom Wright, president of the Regional Plan Association. “Today is the last day to slip this in with no one noticing. The Trump administration is content to kick the can down the road on Gateway.”
The letter marks the latest blow to the project, which includes the new tube under the Hudson River, repairs to the atrophied existing dual-tunnel conduit and the reconstruction of New Jersey’s troubled Portal Bridge. The Trump administration undermined the endeavor earlier this month by mocking the New York–New Jersey proposal to have the Gateway Development Corp. borrow money through the federal Railroad Rehabilitation & Improvement Financing program, even though the states would repay the loan.
Williams’ letter Friday echoed USDOT’s earlier assertion that this proposal has Washington funding the majority of the project—a declaration that stunned many observers, who noted that states frequently finance major infrastructure undertakings by borrowing money from the federal government.
Sources have previously suggested to Crain’s that the president’s handling of the project has political overtones, as its greatest champion has been Schumer, the most powerful Democrat in Washington.
Trump has repeatedly hyped an infrastructure plan that he has promised to release in the New Year. Such a plan would require a large number of votes from Schumer’s conference in order to pass the Senate. Folding Gateway into a Trump infrastructure bill would pressure Schumer to deliver those votes. Elaine Chao, Trump’s transportation secretary, is the wife of Senate Majority Leader Mitch McConnell, which could increase the White House’s leverage.
“The best-case scenario now is that discreet pieces of the project move forward individually, like the remaining portion of the tunnel box under the Hudson Yards and the new Portal Bridge,” Wright said. “And meanwhile, commuting under the Hudson River will continue to become more difficult and that will increase the pressure on Congress to act.”
A spokesman for the multi-agency development corporation formed to execute the project downplayed Friday’s letter.
“There is no more urgent infrastructure project than Gateway, and posturing aside, we are confident that the Trump administration will engage with us as the president turns to infrastructure in 2018,” the spokesman said in a statement.
Although the Trump administration has taken to calling Gateway a “local” project, it is considered integral to the future of a regional economy that provides a hefty chunk of the nation’s gross domestic product and sends hundreds of billions of tax dollars to Washington each year.
New York business leaders have emphasized the project’s importance, but the dismissive federal response has underscored just how little sway they have with the Trump administration.
Ironically, the area of strongest agreement between Democrats and Trump has been the need for infrastructure improvements, and the president has touted a forthcoming $1 trillion plan. However, he is counting on nonfederal sources including private investors to contribute 80% of the money. That is likely to be a source of tension with Democrats.
Public-private partnerships have built transportation projects around the world but not on a large scale in the U.S. They typically rely on user fees to repay investors.
An earlier effort to build a second train tunnel under the Hudson River, known as the ARC project, was terminated in 2010 by Christie, who now finds himself on the receiving end of such a rejection. Federal funds set aside for ARC were then redirected to projects in other states.
On Saturday a senior administration official told Crain’s that the Department of Transportation regards the framework deal between the Obama administration and the states as a nonbinding, politically motivated public relations maneuver by then–Transportation Secretary Anthony Foxx.
The official asserted that the federal government had no right to announce its commitment to any financing plan because the states had not submitted a formal application for funding. The official said the department recognizes the project’s importance and is open to an arrangement for underwriting it that does not count a federal loan repaid by the states toward the local contribution.
The official also highlighted such multibillion-dollar projects now underway as the Honolulu Light Rail and the Maryland Purple Line, for which federal loans made up only a small proportion of the capital investment.
Those projects, however, do not serve regions as integral to the U.S. economy as the Hudson River tunnel. Nor do they serve more than one state. And the $9.5 billion Honolulu undertaking, which as of August had received $800 million of a $1.5 billion federal funding package, has run into serious problems including a nearly $3 billion deficit. Experts question the benefit it would have for Honolulu, let alone the nation, should Hawaii manage to finish it.
Maryland’s $2.4 billion Purple Line, for which a $900 million federal grant was approved, is a state project and much smaller than Gateway, which could end up costing 10 times as much. The Maryland project also received an $875 million federal loan.