The Trump Administration may be backing away from an Obama-era White House agreement to finance half of the Gateway Tunnel project connecting New York and New Jersey by rail, calling into question the future of an endeavor that local leaders say is a crucial infrastructure priority.

The Federal and New York governments traded letters last week after the U.S. Department of Transportation’s Federal Transit Administration raised “serious concerns” about the updated plan of finance for the $12.7 billion project, which would allow the advancement of a long-stalled dual-track rail tunnel under the Hudson River. The project is considered crucial for the entire Northeast region and has had the backing of New York Gov. Andrew Cuomo and New Jersey Gov. Chris Christie. A year ago then president-elect Trump also placed the Gateway project at the top of a list of 50 “Emergency and National Security Projects."

Of the projects on Trump’s emergency projects list, 13 were listed as “seeking federal” financial assistance, including some with price tags in the billions of dollars, which would make them potentially heavy lifts if they were to go forward with less robust Federal backing.

The Gateway tunnel project is a huge undertaking that stakeholders say is a must for the entire Northeast region.
The Gateway tunnel project is a huge undertaking that stakeholders say is a must for the entire Northeast region.

While the Cuomo and Christie administrations have hailed their successful efforts to line up state and local financing, the Federal commitment they expected hasn't materialized. Under the commitments announced last month, New York State will budget over a 35-year period to pay debt service on a $1.75 billion fixed-interest loan under the U.S. Department of Transportation’s Railroad Rehabilitation & Improvement Financing program. New Jersey Transit will commit $1.9 billion, while the Port Authority of New York and New Jersey will also chip in $1.9 billion for a combined total of $5.55 billion.

FTA deputy administrator K. Jane Williams told New York budget director Robert Mujica in a Dec. 29 letter that the Federal government has serious concerns with the plan of finance, and does not consider there to be any existing agreement to foot the other half of the bill. That 2015 “framework agreement” was reached under the Obama administration.

“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,” Williams wrote, also raising concerns that the plan appears to be “100% reliant on Federal financial assistance” because it utilizes Federal loan programs.

Williams also said that she was under the impression that the plan no longer includes the rehabilitation of existing tunnels, which she said was “the impetus for the project.”

Mujica responded with his own letter, telling Williams that the Federal viewpoint is mistaken and that to step away from the Obama White House’s agreement would represent a serious breach of faith. Trump campaigned on a trillion-dollar infrastructure investment and according to New York and New Jersey discussed the “50:50 agreement” with Cuomo, Christie, and members of New York and New Jersey legislative delegations as recently as August. Mujica also noted the national importance of the project in his letter., and said that Williams is mistaken to believe that the rehabilitation of the older tunnels is no longer included in the project scope.

“The USDOT stepping away from the 50:50 framework now would represent stepping away from a previously agreed upon path and the entire basis for getting this critical national infrastructure project done,” he wrote.

“The fact that these funding commitments would utilize Federal loan programs should in no way be misinterpreted as "Federal assistance" or "Federal dependency," Mujica added. “Doing so would go against decades of precedent when it comes to funding infrastructure projects of this scale and importance. The people of the bi-state region are paying for the commitment and the very economy of the Northeast depends on it.”

Williams told Mujica that Congress would be debating infrastructure finance in the coming weeks, and that the FTA would be in touch with Gateway sponsors with additional questions and concerns.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.