WASHINGTON – The Gateway Tunnel project may not qualify for a federal grant because the federally guaranteed loans the project has already received do not count toward New York's and New Jersey's funding commitment for the project.

The problem with the financing for the project, which would connect the two states under the Hudson River, was discussed at a hearing held Thursday by the Senate Environment and Public Works Committee on President Trump’s infrastructure plan.

U.S. Transportation Secretary Elaine Chao
U.S. Transportation Secretary Elaine Chao Bloomberg News

U.S. Department of Transportation Secretary Elaine Chao told Sen. Kirsten Gillibrand, D-N.Y., that because of the federal loan guarantees, the states were found to have committed only 5% to the project rather than the 50% share they claimed.

the project received a rating of only “medium-low” last month when the Federal Transit Administration released its annual list of projects needing federal funding under the Capital Investment Program, according to Chao.

Gillibrand had asked Chao why Gateway received such a low rating. Medium-low is the second lowest on a five point scale for projects.

“This means the project is not eligible to move forward to the next stage of obtaining federal New Starts grants,” Gillibrand said.

Chao said career employees within her department calculated only a 5% local funding commitment because the two states are relying on federal loan guarantees.

“For New York and New Jersey to consider [as] funds, debt that we have given to them as part of their equity back to us, is something we disagree with,” Chao explained.

Gillibrand responded by asking why repayment of those loans shouldn’t be treated as the states having “skin in the game.”

Chao said a mortgage shouldn’t be considered as equity.

“But we are paying for it,” Gillibrand countered.

The two states and the Port Authority of New York and New Jersey have committed $5.55 billion for the $11 billion tunnel project, counting the federal loan guarantees.

New York State’s $1.75 billion share of the $5.55 billion would come from paying 35 years of debt service on a DOT Railroad Rehabilitation & Improvement Financing loan.

New Jersey would pay $1.9 billion and the Port Authority of New York and New Jersey would pay another $1.9 billion.

Chao and Gillibrand ended their back and forth by agreeing to have their respective staffs meet privately to continue the discussion.

Chao also agreed to a request from Sen. Corey Booker, D-N.J., to meet with him and Sen. Chuck Schumer, D-N.Y. about Gateway and to tour the existing tunnels under the Hudson River that the two states want to replace.

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