Christie’s Budget Strategies Questioned

New Jersey Gov. Chris Christie likes to portray himself as a fiscal conservative, but reporting by Kate Zernike in The New York Times (Oct. 30) questions this assessment, including Christie’s record on transportation issues.  In his election 4 years ago, Christie attacked his opponent, incumbent Jon Corzine, for using fiscal gimmicks to balance the budget.  However, according to Zernike’s article, Christie has used much the same tactics, including diverting money from such things as property-tax rebates, affordable housing, and funds for new energy sources to balance the budget instead.

On transportation, Christie made headlines when he cancelled a new rail tunnel under the Hudson, calling it a cost run-away; but he has issued more debt for transportation projects than any of his predecessors.  Meanwhile, New Jersey’s bond rating has sunk to one of the worst in the country, and the state’s own budget surplus has shrunk to its lowest percentage in a decade, in economic conditions in which state budget surpluses nationwide are growing.  The state’s transportation fund was depleted when Christie took office; he rejected calls to raise the state’s gasoline tax and instead asked the lame-duck Corzine administration to issue debt to replenish the fund.  When that tactic ran out of funds, he replenished the fund again with money that had been intended to build the trans-Hudson rail tunnel: $4 billion in bonds were issued, but to avoid future borrowing, Christie said he intended to increase the state’s contribution to the transportation fund.  Instead, he took the turnpike tolls intended for the transportation fund in 2013 and used them to help fill the gap in the state’s general budget, hit hard by less-than-anticipated revenue.

Christie intends to continue the policy of diverting the turnpike tolls to the general budget in 2014.  Hope, however, springs eternal: the state is now relying on online gambling, beginning in November, to bring in $180 million to help balance the budget.  However, the Office of Legislative Services says that it has been “unable to identify any independent source” to confirm such an estimate.

The complete article can be found at (limited access)

Legislature Reverses Course; Construction Freeze to End

On Monday, October 4, as Gov. Christie’s transportation project freeze went into effect, the NJ legislature’s Joint Budget Operating Committee held an emergency meeting on the crisis, and reversed course, voting reportedly 4–1 to authorize the bond issue.  Democrats had held that such a bond issue requires voters’ approval; the Christie administration said it was following an agreement reached with the outgoing Corzine administration last year to keep the projects going.  A reported 40,000 construction jobs were set to be terminated by the standoff.  Democrats also said they feared that the Governor’s 30-day hold on the ARC trans-Hudson rail tunnel was a prelude to the state’s diverting New Jersey’s portion of the tunnel funding to bail out the Transportation Trust Fund, which is nearly exhausted.  Commentators noted that the Democrats’ standing on principle might not be worth the loss of jobs.  Meanwhile, the administration promised to come up with a plan for the Trust Fund, but reiterated that a gas-tax increase was not in the cards; many see a gas-tax increase as the logical way to continue road and rail construction projects.  New Jersey has one of the lowest gasoline taxes in the nation. (Star-Ledger; Daily Record; WNYC)

The Lackawanna Coalition has become increasingly concerned that New Jersey cannot afford its share of the cost of the proposed ARC Project, as demonstrated by the current difficulties with the Transportation Trust Fund.  Coalition Chair David Peter Alan said, “If New Jersey can’t afford to continue construction on hundreds of highway projects and a few comparatively small transit projects, I don’t see how the state could afford billions of dollars for a deep-cavern tunnel to nowhere.”

WNYC Covers Construction Freeze

On Monday, October 4, as Gov. Christie’s transportation project freeze goes into effect and the  NJ legislature is set to hold emergency meetings on the crisis, WNYC’s Bob Hennelly reported on the situation.  He said that Democratic legislators’ concerns focus on the Governor’s $1.25 billion bond program to keep the projects going without approval from New Jersey voters, which they say should be required; also, the Democrats fear that New Jersey’s contribution to the ARC tunnel project will be reassigned by the governor to bail out the Transportation Trust Fund.  With 40,000 workers on highway and rail projects idled by the governor’s action, Hennelly noted, is the Democrats’ standing on principle going to be worth it?  Hennelly reported that the root problem is the state’s continuing failure to deal with the depleted Trust Fund situation with a real solution, “like a gas tax hike”.   The bottom line?  Hennelly said that with the projects halted, workers and their unions are putting pressure on both sides, and we shall see what happens.
The Lackawanna Coalition has become increasingly concerned that New Jersey cannot afford its share of the cost of the proposed ARC Project, as demonstrated by the current difficulties with the Transportation Trust Fund.  Coalition Chair David Peter Alan said, “If New Jersey can’t afford to continue construction on hundreds of highway projects and a few comparatively small transit projects, I don’t see how the state could afford billions of dollars for a deep-cavern tunnel to nowhere.”

Transportation Construction Gridlock Threatened

NJ Governor Chris Christie’s 30-day moratorium on the ARC trans-Hudson rail tunnel has led to a “high-stakes game of political chicken”, which now threatens to stop about 100 road and rail construction projects around the state, according to a front-page article in the Star-Ledger on Saturday, October 2.  The Governor halted the ARC project pending a review of New Jersey’s ability to pay for it; legislature Democrats, saying that the Administration continues to fail to provide details of any plan to replenish the nearly-broke Transportation Trust Fund, last week stalled a $1.25-billion bond issue needed to keep the projects going.  The Governor then threatened to halt the projects, effective Monday, October 4.
One solution to the trust fund problem would be an increased gas tax, but the Governor is adamantly opposed to it.  The article, by Mike Frassinelli and Lisa Fleisher, quotes NJ Transit executive director Jim Weinstein as saying that there have been discussions about diverting the ARC money to shore up the Trust Fund.  Labor unions reacted strongly to the Governor’s announced project freeze, saying that the construction workers would be immediately out of work in a time when construction industry joblessness is at an all-time high.  Democrats scheduled an emergency meeting for 10 a.m. Monday to reconsider the bond issue.

“Christie wise to say whoa to rail tunnel, terminal” says Record columnist

Bob Ingle, writing in the Daily Record, Sunday, Sept. 26, says Governor Christie’s decision to put the trans-Hudson ARC rail tunnel on hold is a wise move.  Ingle calls the plan “the rail line from Monstrosity by the Turnpike” (his term for the failed Xanadu complex) to Macy’s basement.  It would be the “third Hudson tunnel”, after the “one we now use and a second Amtrak is planning”.  At 180′ deep, the new terminal “is so deep that one escalator can’t handle it . . . how’d you like to be caught down there in an emergency?”  Ingle goes on to lambaste Assembly Transportation, Public Works, and Independent Authority Committee Chairman John Wisniewski, who “went on blabbering about how awful it was that Gov. Christie called the 30-day halt . . .cost overruns could reach an estimated $2 billion to $5 billion . . . Who thinks it will be limited to just $5 billion?”

Ingle quotes NJ Association of Railroad Passengers’ Phillip Craig that the ARC project is “a compromised mediocre project that will not meet” the region’s train needs, and “is not affordable given the state’s . . . financial condition”.  Ingle says Craig went on to state that the claim that reexamining the ARC project might jeopardize Federal funding is “no more than a transparent scare tactic designed to protect the status quo”.  Craig recommends the project be “right-sized”, terminating the new line in Penn Station and reducing costs while preserving New Jersey jobs.  Ingle concludes that there are five transportation projects on the New York side, and ARC is “the only one that doesn’t tie in with the other four . . . Christie should bring together representatives of all five projects” to get the best deal for taxpayers’ money.  Ingle says the savings should allow us to “replenish the Transportation Trust Fund without a tax hike”.

Can the Transportation Trust Fund Be Saved?

New Jersey’s Transportation Trust Fund pays for highway projects and some capital projects for New Jersey Transit.  By the end of next June, the TTF will run out of mony.  Assemblyman Joseph Cryan has proposed raising the user fee on motor fuels (it is not a tax) by 8¢ per year for the next 3 years, with the amount indexed to inflation after that, to maintain a funding source for the TTF.  The Lackawanna Coalition has endorsed the Cryan proposal, but on condition that the money not be used for borrowing.  Gov. Christie opposes any increase in user fees on motor fuels, and an alternate proposal would take money that would otherwise be used for the Access to the Region’s Core (ARC) Project and use it to fund the TTF.

Use It or Lose It?

From our September/October 2010 Railgram newsletter 

How the ARC Project Can Be “Right-sized” into the Moynihan/Penn Station First Alternative

Can the currently planned Access to the Region’s Core (ARC) project, which would build a dead-end deep-cavern terminal 20 stories (181’) beneath 34th Street in Manhattan, be right-sized into rail advocates’ Moynihan/Penn Station First alternative, which brings the new ARC trans-Hudson tunnels into an expanded and improved existing Penn Station without fear of losing up to $3 billion in federal New Starts Program funds?  The unequivocal answer is Yes!  In fact, the only way to guarantee receiving these funds is to change the ARC project to this lower-cost alternative.

One of my advocate colleagues told me of a conversation he had with a local New Jersey official who said he believes NJ Transit should build the proposed deep-cavern terminal, “because there is money available for it, and building the project as proposed would be better than losing the potential funding.”  I was asked to refute that argument, and this op-ed is my answer.

First, there is not enough money for the ARC project at its current $10.4 billion total price tag (which includes the cost of the Portal Bridge Project): the state’s depleted capital funding coffers have even made it impossible to guarantee to the satisfaction of the federal government that the New Jersey share of the ARC project—$4 billion—will be available when needed.  To date, the state has not been given a guarantee of receiving New Starts funds, called a Full Funding Grant Agreement.

If the state were able to get a federal guarantee of funds and moved forward with the current ARC project based on the “Use it, or Lose it” philosophy of government spending, New Jersey would quickly find itself in the position New York State finds itself in today with the similarly sized East Side Access project for the Long Island Rail Road: forced to fund a mega-project at the expense of a multitude of other capital projects—stealing from Peter’s, Jane’s and who knows who else’s worthy projects to pay for Paul’s single megaproject.

This “crowding-out” process is already underway, with $147 million of the $600 million in Transportation Trust Fund dollars appropriated for NJT capital projects in the current State budget committed to ARC and its sister Portal Bridge project, despite past assurances that the ARC project would be funded “. . . without a single Trust Fund dollar.”  There can be no doubt that other transit capital projects were deferred or cancelled to provide this $147 million.

Second, the best way to guarantee receiving federal funds is bring the cost of the project down to a price New Jersey can demonstrate that it can afford.  That is exactly what the Moynihan/Penn Station First alternative accomplishes, reducing the total cost and local share of the project by $3 billion or more.  That brings the local share down to $1 billion, less than the $1.25 billion in funds from the issuance of New Jersey Turnpike Authority bonds committed to the project.

Obtaining a federal guarantee of New Starts funding would no longer be blocked by New Jersey’s inability to guarantee its share, and the “crowding out” problem is eliminated.

To repeat my initial statement for emphasis, “The only way to guarantee receiving up to $3 billion in federal New Starts Program funds for the ARC project is to change from the current $10.4 billion dead-end deep-cavern plan to the $3 billion cheaper rail advocates’ Moynihan/Penn Station First expanded/improved existing Penn Station alternative.”

Joseph M. Clift is Chair of the Technical Committee of the Lackawanna Coalition and served as Diector of Planning for the Long Island Rail Road.