(The following article by Dunstan McNichol was posted on the Star-Ledger website on June 11.)
NEWARK, N.J. — Legitimate cost increases, not criminal acts, accounted for the soaring price tag on a 34-mile rail line linking Trenton and Camden, the state Attorney General’s Office reported yesterday.
The finding comes after an 18-month probe, part of which was conducted by two politically connected law firms hired by the state.
The $1.1 billion price tag for the South Jersey rail project, known as the River Line, drew fire from the administration of Gov. James E. McGreevey as an example of waste in state contracting under the preceding Republican administration.
From 1994, when it was proposed, to this year, when it opened, the cost of the rail line nearly tripled, from about $450 million to $1.1 billion. At the same time, projections of ridership dropped from 9,300 a day to 5,900. The line costs taxpayers $66 million a year, but is bringing in only $2 million in fare revenue.
In its announcement yesterday, the Attorney General’s Office said the surge in cost was due mainly to the fact that the original contract to build the line did not include almost $400 million in expenses for debt interest, real estate acquisition and the cost of collecting fares.
“None of those expenses,” the attorney general concluded, “can be considered cost overruns.”
The Rail Group, a consortium that includes Bechtel Corp. and Bombardier Transportation, won the contract to build and maintain the rail line for $604 million in 1998. But the attorney general concluded that contract omitted several costly elements of the job, including $268 million in projected interest costs on the bonds issued to pay for the project, $84 million in real estate costs and $40 million in fare collection costs.
The attorney general did not address elements of $100 million in cost overruns the state and Bechtel are contesting in court.
The Office of Government Integrity interviewed 10 people and examined hundreds of documents in the course of its investigation, yesterday’s statement said.
Attorney General Peter Harvey assigned the probe to the Office of Government Integrity in March 2003 after criticism arose over the earlier decision to hire two private law firms to conduct the review.
Those firms were Fischbein Badillo Wagner Harding, which includes former Gov. Jim Florio, and Arseneault Fassett and Mariano, whose partner, Jack Arseneault, is a close political ally of McGreevey’s.
Fischbein has been paid $112,537 for its work, and Arseneault’s firm has submitted bills totaling $71,528, which are still being reviewed.