NYC Rail Tunnel Tripped by Trump Rules That Others Were Spared

(Bloomberg) -- Gateway, the stalled New York City-area rail tunnel, has been called the most crucial infrastructure project in the nation. But President Donald Trump’s administration ranks the tunnel near the bottom of 37 rated projects vying for federal mass-transit grants and loans.

His Transportation Department says New Jersey and New York are relying too much on U.S. taxpayers and uncertain state money for the proposed $12.7 billion commuter link under the Hudson River. Similar issues haven’t hindered transit projects elsewhere, a review of federal project ratings shows.

While administration critics say it invoked new policies or refuted longstanding agency practice on local-spending commitments for Gateway, projects in other states weren’t downgraded when such commitments were scant, records show. That includes not considering federal loans as local share of funding for Gateway, even though local funds would repay them.

“This change in policy seems to be based on a desire to thwart the Gateway project, which is an essential project for the economy of New York City and the Northeast,” said Martin Klepper, who served for most of Trump’s first year in office as executive director of the DOT’s Build America Bureau, which coordinates federal funding and financing for such projects. He was appointed under former President Barack Obama.

Sticky Bridge

Under Trump, the DOT pushed one component of the Gateway project -- a $1.6 billion replacement of the malfunction-prone, swing-span Portal Bridge in New Jersey -- to among the four-lowest of 37 rated proposals in fiscal 2020, disqualifying it for funding from its Capital Investment Grant program, according to federal reports. The tunnel itself was already among the lowest-rated.

By comparison, a light-rail project in the Durham, North Carolina, area was rated as eligible for federal funding even before all local financing was approved. The deal collapsed anyway. Indiana got a high rating for commuter-rail money while local bonds have yet to be issued. In Phoenix, a light-rail expansion is on track for federal funding even as foes push a ballot question to cut the project’s local tax-revenue stream.

In a statement, the Federal Transit Administration said Gateway projects are being treated consistently with all other projects in the multi-phase program and are rated by professional career staff. Gateway planners haven’t completed all requirements for grants, and loans not yet sought are being handled like those for any other project, the agency said.

Gateway would supplement Amtrak’s sole New Jersey-New York crossing, the North River tunnel, which opened in 1910. The two-track link, beset by structural and power troubles since Hurricane Sandy flooding caused corrosion in 2012, is key to regional and New Jersey Transit commuter trains.

Planners want a second tunnel open before repairs or an emergency force the existing link to shut. That would upend the Manhattan commute and the Boston-to-Washington Northeast Corridor line used by 800,000 passengers a day.

Amtrak, a federal corporation, owns the tunnel, and advocates say its deterioration is a national worry because it connects a region that generates 20 percent of gross domestic product. A one-day disruption could cost $100 million in lost U.S. productivity, congestion and related transportation effects, according to the Northeast Corridor Commission’s 2018-2022 capital plan.

Funding Split

The Trump administration says Gateway sought an unprecedented $6.77 billion in transit grants for the tunnel, more than twice the total appropriated to the program by Congress last year. It dismissed New York and New Jersey’s claims of a 50-50 funding split with the federal government, announced in 2015 when Obama was in office.

“There is no such agreement,” K. Jane Williams, acting administrator of the Federal Transit Administration, wrote in a December 2017 letter to Robert Mujica Jr., New York state’s budget director. “We consider it unhelpful to reference a non-existent ‘agreement’ rather than directly address the responsibility for funding a local project where nine out of 10 passengers are local transit riders.”

The administration was kinder to North Carolina: It supported 50%, or $1.24 billion, of the Durham-Orange Light Rail project, according to a federal summary. That included a Capital Improvement Grant and a $457.7 million federal loan that counted toward the local contribution, because it was to be repaid by local revenues.

No Deal

U.S. Transportation Secretary Elaine Chao criticized Gateway for relying on federal loans. “For New York and New Jersey to consider funds, debt that we have given them, as part of their equity back to us, is something that we disagree with,” Chao said at a Senate committee hearing in March 2018.

Three months later, Portal Bridge planners secured New Jersey’s preliminary permission to borrow $600 million, double the state’s prior commitment. Still, the project’s rating remained at “medium-low.” The Transportation Department, in a statement, said the $600 million isn’t fully committed because money to repay the bonds would need to undergo a state-level “multi-step approval process.”

“The Federal Transit Administration made it clear when it initially downgraded our projects that it wanted more local ‘skin in the game,’ and that’s exactly what we gave them,” Steven Cohen, a Gateway Program Development Corp. trustee, said in a statement.

Gas Tax

The bridge’s preliminary construction, designs and permitting are done, and the state’s borrowing intention, based on gasoline-tax revenue, was “100% solid,” said Nancy Snyder, a spokeswoman for NJ Transit, the bridge’s lead local agency. The state will go to market only when it has a federal match.

“We’re not going to issue the bonds and sit on cash,” Kevin Corbett, NJ Transit’s executive director, said at a May 3 U.S. House Transportation and Infrastructure Committee roundtable in Manhattan. “As long as people are buying gas, there will be money to back those bonds.”

Durham, by comparison, relied on $170 million in local borrowing and scored a favorable rating even though three government entities had yet to approve the debt issuance. The project collapsed in February, after Duke University declined to sign a cooperative agreement, and North Carolina cut its own contribution.

“That was not an issue they raised with us,” Jeff Mann, president and chief executive officer of the Durham area’s GoTriangle transit agency, said of potential Trump administration objections to the bonds’ local-approval hurdles.

Commuter Woes

Spanning the Hackensack River in New Jersey, the Portal Bridge is 109 years old and must stop rail traffic to swing open for boats. When it fails to lock as designed, trains can back up along the Northeast Corridor’s 457 miles (735 kilometers).

U.S. Representative Peter DeFazio, chairman of the House Transportation and Infrastructure Committee, called Gateway “a nationally significant project” that he would include in a spending bill after Trump and Democratic congressional leaders on April 30 said they agreed in principle to dedicate as much as $2 trillion to U.S. public works.

“We’re almost out of time,” DeFazio, an Oregon Democrat, said at the Manhattan roundtable. “We’re one super storm or a couple of other problems away from massive, massive delays and disruption.”

Among the proposals that qualified for federal funding during the Trump and Obama administrations:

• In Lake County, Indiana, the $891 million West Lake Corridor commuter rail is being funded 49.4% by federal grants, according to a federal summary. Though it was rated “high’’ for local financing in fiscal 2020, that share includes bonds that won’t be issued without a full-funding agreement from the FTA, according to the Indiana Finance Authority.
• In San Diego, the federal government is covering almost 75 percent of the $2.17 billion Mid-Coast Corridor Transit light-rail line, including $1.04 billion in grants, and it has secured a $537.5 million federal loan.
• In suburban Maryland, an $874.6 million federal loan was announced in 2016 for the Purple Line light rail while Williams, the acting FTA administrator, was director of the Washington Area Transit Office in the Maryland Department of Transportation. In 2017, the Purple Line got a $900 million federal grant.
• Two Phoenix light-rail extensions scored 49.5% of their total combined $1.3 billion cost from the federal government. In August, though, voters will decide whether to kill 28 percent of their local support, a regional transportation tax, and shift that stream to repair roads.

Sponsors of the San Diego project and other deals met the grant requirements without federal loans, and they pursued financing after grants were awarded, the FTA said. Like the Purple Line project, Gateway planners are pursuing federal grants and loans concurrently but haven’t applied for the financing -- and all but 6% of the funding for the tunnel would come from federal sources, the agency said.

“Those are projects that those communities themselves have thus far chosen not to fund,” Deputy Transportation Secretary Jeffrey Rosen said in a March 11 call with reporters. “There is not yet any discernible path forward.”

Some suggest the president, a New York native, is exacting political payback: Gateway would service a region whose social-liberal lean -- it backed Democrat Hillary Clinton in 2016 -- makes it unpopular with Trump’s base. Others have also suggested Trump is trying to use Gateway as leverage for other priorities.

“Compared to other projects in the nation, the ratings that we’re getting are just arbitrary, capricious and political,” said U.S. Senator Bob Menendez, a Democrat from New Jersey.

--With assistance from Hannah Recht.

To contact the reporters on this story: Elise Young in Trenton at eyoung30@bloomberg.net;Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, ;Michael Shepard at mshepard7@bloomberg.net, Stacie Sherman

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