Administration Casts Doubt on Financing for Hudson Rail Tunnel

(Bloomberg) -- The Trump administration on Friday cast doubt over whether it would help finance the $12.7 billion Gateway commuter rail tunnel under the Hudson River.

In a letter, K. Jane Williams, deputy administrator of the U.S. Federal Transit Administration, said that the federal government had never agreed to pay half of the project, with the two states contributing the rest. 

Federal officials and the states outlined a framework of a plan to share funding in November 2015 when costs were estimated much higher, at $20 billion. That plan was announced by New Jersey Governor Chris Christie, New York Governor Andrew Cuomo, and U.S. Senators Charles Schumer and Cory Booker.

“There is no such agreement,” Williams said in the letter to New York State Budget Director Robert Mujica, and officials at New Jersey Transit and the Port Authority of New York and New Jersey, who with Amtrak created the Gateway Program Development Corp. to manage the financing and construction of the project. 

“We consider it unhelpful to reference a non-existent ’agreement’ rather than directly address the responsibility for funding a local project where 9 out of 10 passengers are local transit riders. Your proposal also overlooks that 50 percent would be considerably higher than much existing precedent for past ‘mega projects.”’

The tunnel has been considered a top U.S. infrastructure priority and crucial to the New Jersey-New York regional economy. If the federal government backs out of financing the tunnel with loans and grants, as has been the historic precedent for such large projects, it would likely put the region in considerable economic peril, said Gateway Chairman Richard Bagger.

“There is no plan B,” he said last week during a Gateway board meeting. “It has to be a federal-local partnership and we are confident that it will be.”

The tunnel, which former President Barack Obama and Schumer each described as the most urgent American infrastructure need, would avert a potential threat to the region’s economy in the event the existing 100-year-old trans-Hudson tunnel became unusable. Even if funding comes through quickly, the earliest projected opening for a new tunnel is in 2025, and it’s not a sure thing that the existing North River tunnel will hold out. 

"There is no doubt the administration understands the economic significance of the Hudson Tunnel Project, and the urgency of moving this forward for the Boston-Washington corridor. We are confident that, as the White House advances an infrastructure proposal this year, federal funding for the most important transportation project in the United States will be addressed," Christie spokesman Brian Murray said in an email.

Three years ago, then-Amtrak Chief Executive Joe Boardman said the link had at most 20 years of service left. Age and corrosive salts deposited by flood waters from Hurricane Sandy in 2012 are deteriorating interior concrete and copper wiring.

If the current tunnel fails, hundreds of thousands of New Jersey commuters would be stranded from their jobs, causing a multi-billion dollar debacle for workers and the companies that employ them, said Kathryn Wylde, president of the Partnership for New York City, a civic association comprised of chief executives of some of the city’s largest companies. Members of the organization have told the Trump administration that the tunnel is the most important project for a region that contributes a large share of the U.S. economy’s gross national product, she said.

“We have been consistently assured and the members of our organization have raised this issue with the administration and they have assured us that this is a priority project and it’s going to get done,” Wylde said in a Dec. 18 interview. “We are confident that this is going to happen. We have been assured consistently that this is a priority for them. ”

Spokesmen for Cuomo, Christie, Booker, New Jersey Transit and Amtrak declined to discuss the letter publicly, referring all inquiries to Gateway Program Development Corp. spokesman Scott Ladd.

“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,” Ladd said in an email.

Christie canceled a Hudson River rail tunnel project in 2010 that had secured federal funding, and had already incurred federal and state expenses totaling hundreds of millions of dollars. He said at the time that he didn’t want to burden New Jersey taxpayers with cost overruns. 

That tunnel had been scheduled for completion in 2018.

--With assistance from Alan Levin

To contact the reporters on this story: Henry Goldman in New York at hgoldman@bloomberg.net, Elise Young in Trenton at eyoung30@bloomberg.net.

To contact the editors responsible for this story: Michael Shepard at mshepard7@bloomberg.net, John Harney, Michael B. Marois

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