We are going to give you a bit of a refresh about the Gateway Project, which was supposed to ensure that a new rail tunnel is built under the Hudson River. It’s Amtrak’s busiest and most profitable stretch of track that connects New York City and New Jersey. Putting it in gentle terms, it’s a hot mess of corrosion ever since Superstorm Sandy flooded the tracks and wiring with salt water.
To understand the importance of this project, one needs to know that the existing tunnel moves 80,000 people a day. It is the only rail link between the city and all points south. That’s a lot of people and a lot of homes where people need to get to and from each day.
After the Amtrak Train crash in Washington that killed three people, Trump touted his infrastructure plan. However, more recently, the Trump administration firmly said it was not on board with an Obama-era agreement to split the cost of repairs with the State. “There is no such agreement,” Deputy Administrator K. Jane Williams wrote to project planners in a letter published by Crain’s New York Business.
This might force New York and New Jersey to reimagine the project and have it funded with a public-private partnership, which would replace federal grants with money from private investors. Federal funding would be capped at 20 percent of the project cost. Unfortunately, some say this will drive up the costs of what is one of the most expensive rail projects on earth. It also adds delays to an improvement schedule. (Who has time for that?!)
If you commute, or know anyone that does, you’ll realize along with the experts, that repairing the tunnel is a must. To get there, we must suffer with a 75 percent cut in service. That would most likely be felt by the city’s economy and perhaps even on a national level.
Superstorm Sandy wasn’t the first time talks of major repairs were discussed. Way back in 2009, there was a tunnel project funded with stimulus money, but then New Jersey Gov. Chris Christie canceled it. He sent that money to road repairs. Later, in 2015, Christie and New York Gov. Andrew Cuomo reached an agreement with the Obama DOT head Anthony Foxx. The agreement was to share the cost of the new tunnel, with the federal government paying 50 percent.
This past July, the signs of trouble began. The U.S. DOT representative resigned from the board of the Gateway Program Development Corporation. That signaled that Gateway would receive no special treatment in Washington.
Later, the DOT recommended a low-interest federal loan. It would be similar to the one that came from the RRIF (Railroad Rehabilitation & Improvement Financing) program. So there you have a beginner’s lesson in funding vs. financing.
The timing of all this could not be worse. There is a significant problem with institutionalized corruption in the city’s public works projects. Brian Rosenthal, from The New York Post, published a story that shows why projects undertaken by Cuomo’s Metropolitan Transportation Authority can cost seven times as much as similar endeavors in other global cities. OUCH!
Although Gateway is not an MTA project, there are many similarities including the need to work with: consultants, contractors, and labor groups. When it comes to budgets, the tunnel has already nearly doubled from initial estimates, to $12.7 billion. For many, that supports the message that it’s time for a public-private partnership.
That bad timing is not just for New Jersey folks. Those commuters still don’t know how everything will be paid for which is estimated to be as much as $30 billion. There is a direct correlation: the more the project financing is altered to depend on user fees (in this case, ticket prices on Amtrak and New Jersey Transit), the higher the cost to New Jersey residents.
Those who invest in infrastructure see an opportunity. 1) The project is essential 2) there is a dedicating funding stream in the form of ticket prices and 3) there is almost no risk of it being underused.
Private funding will also inflate the project’s cost. Equity investors expect a good return, actually, they expect a better return than bond investors. And as with other types of loans, it’s not about the loan itself – it’s paying the money back.
As many commuters will attest, we all need more patience. (And more money.)