How federal inaction leaves Gateway tunnel plan in limbo

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Federal approval for a plan to upgrade the 108-year old rail tunnel linking Manhattan and New Jersey has been turned into a “political pawn” by the Trump administration, according to the head of the nonprofit entity overseeing the initiative.

Jerry Zaro, chairman of the Gateway Development Corporation, said Wednesday that while some progress has been made trying to jump-start the estimated $12.7 billion project, the wait continues for final federal approval of a required environmental impact statement.

The project would construct a new tunnel under the Hudson River and rehabilitate the existing tunnel.

Zaro said the GDC assembled an environmental impact statement in just 22 months compared to the four years it normally takes for a project of this scope, but since submitting last year has received no clarity from Washington.

“Gateway is a political pawn, plain and simple,” said Zaro during a forum hosted by New York University’s Rudin Center for Transportation Policy & Management. “It’s a political hostage of Washington, which now is sitting on and holding up our record of decision.”

The GDC was formed in 2016 as a non-profit corporation comprised of New York, New Jersey and Amtrak. Both states, Amtrak, and the Port Authority of New York and New Jersey agreed to a funding framework signed off by the Obama administration to pay for 50% of the tunnel if the federal government picked up the other half. The overall Gateway Development project also includes a new Portal North Bridge on the Northeast Corridor line in New Jersey.

“These are owned by Amtrak, which is a federal agency, so here we are helping the federal government on their assets,” said Zaro, who has worked in leadership posts in the administrations of the last eight New Jersey governors, including as a past chairman of the New Jersey Highway Authority. “We are simply asking for their return of the favor.”

President Trump met with New York Gov. Andrew Cuomo about the Gateway project in November, but did not budge in his stance of not providing federal assistance.

"FTA only received the draft EIS from FRA in December 2018, with the caveat that it was expected to require significant additional work," a Federal Transit Administration spokesperson said in an email. "The PANYNJ’s plan for the Hudson Tunnels Project still lacks workable local financing options, as it has requested an unprecedented $6.769 billion from the FTA’s CIG program alone -- approximately $700 million in annual payments. The remaining $6.748 billion in funding, as proposed, would be applied for through four Railroad and Rehabilitation and Improvement Financing (RRIF) loans from the U.S. Department of Transportation -- none of which have yet been applied for.

"In the fall of 2018, new information, including a proposed financial plan, was submitted for re-evaluation by the PANYNJ to FTA. The new information remains under review by FTA," the spokesperson wrote.

Despite frustration at a lack of cooperation from the White House, Zaro said the Democrats taking control of the U.S. House of Representatives this year provides some hope for a bipartisan infrastructure deal that could incorporate Gateway. The GDC is also making headway toward urging state legislatures in New York and New Jersey to form a public benefit corporation that can sponsor the project. The Federal Transit Administration previously determined that the Gateway Development as constituted is not eligible for federal capital improvement grants.

Steven Cohen, a GDC trustee, said at the NYU event entitled "Gateway in the Era of Trump: Tunnels Before Walls," that preliminary efforts toward a procurement process are underway with and should be off the ground in a few months, according to Cohen. Accounting giant Ernst & Young was hired by GDC to assist with the design of the procurement and determine the best way to organize the project.

“We are looking at this in ways we have never had to before in terms of what are the partnerships and how this really can be done,” said Cohen, a former chairman of the GDC who will soon be once again taking up the leadership post. “We are really looking at ways to strip down the cost and do this more effectively and efficiently.”

New Jersey agreed to assume the entire share of local costs for the Portal North Bridge project by issuing $600 million of state-appropriation-backed bonds last summer through the New Jersey Economic Development Authority. New Jersey officials are hoping the increased local share for the $1.6 billion project will increase the state’s chances for to receive an $811 million federal grant for it. In addition to the NJEDA borrowing, the state is also eyeing capital funding from the New Jersey Transportation Trust Fund and other existing local sources.

Zaro said he will be looking for additional local sources of funding as well as from the private sector in order to decrease the amount of federal funding needed. He stressed after the forum that while the project would be able to generate substantial money for a public-private partnership, the steep cost of federal loans likely makes this approach not feasible.

“There are very few projects in the world where these groups that owe a large amount of these investor money can place them,” said Zaro. “The problem is that for the cost of the P3 money and the return that they demand compared to the return we pay on federal loans is so great it could be four or five points now multiply that by five or six billion and it becomes unaffordable.”

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Infrastructure Transportation industry Port Authority of New York & New Jersey Amtrak State of New York State of New Jersey New Jersey Economic Development Authority New York New Jersey