(The following story by Larry Higgs appeared on the APP website on September 14, 2010.)
Newark, NJ — Two massive transportation projects in New York that are over budget and behind schedule have federal officials asking New Jersey to review financing of its second Hudson River rail tunnel project.
NJ Transit put the $8.7 billion tunnel project on a 30-day hold, while state and federal officials work to forecast contingency costs.
NJ Transit Executive Director James Weinstein put a temporary halt on awarding new contracts or making offers on land for 30 days, citing “other major tunneling projects in the region” as the reason for the review. The hiatus came after five months of review by the Federal Transportation Administration and NJ Transit officials to finalize the federal government’s contribution to the project, known as Access to the Region’s Core, Weinstein said in a statement.
“That review showed that ARC’s budget properly accounted for labor, materials, inflation and other costs,” Weinstein said. “However, the review also demonstrated that, based on experience with other major tunneling projects in the region, additional contingency factors could impact the project’s overall cost estimate.”
Those other projects are the Metropolitan Transportation Authority’s East Side Access project to bring Long Island Railroad trains to Grand Central Terminal and the Second Avenue subway, both of which are over budget and behind schedule. FTA Administrator Peter Rogoff warned MTA officials in a June 18 letter that “not a single penny of additional Federal New Starts dollars will be used to fund these delays and overruns.”
Eastside Access is $1.76 billion over budget and 52 months behind schedule, and the Second Avenue subway project will cost $930 million more than anticipated and delivered 44 months late, Rogoff wrote.
“The MTA has mega projects that are over budget and behind schedule, and it has a regional effect,” said Zoe Baldwin, a New Jersey advocate for the Tri-State Transportation Campaign. “It’s one of the reasons the federal officials are nervous about our ability to keep this project on time and on budget.”
In November 2008, federal officials requested NJ Transit budget an additional $1 billion in contingencies for the ARC tunnel to cover inflation and other possible increases, which brought it to the current $8.7 billion estimate.
NJ Transit officials said they welcome the review to assure that the ARC tunnel project will stay on track and called the 30-day hiatus a prudent thing to do.
“The governor has made it clear to me that this project must stay on time and on budget,” Weinstein said. “During the next 30 days we will work to meet that directive.”
Tri-State officials believe the federal government is concerned that New Jersey will be able to provide the remainder of its share of the tunnel funding from the nearly broke Transportation Trust Fund, Baldwin said. Without new revenue sources, that fund runs out of money to do anything except pay off past debt next year.
The $8.7 billion tunnel project costs is split among New Jersey, the Port Authority of New York and New Jersey, and the federal government.
The Port Authority has pledged $3 billion, the FTA committed $3 billion — which is under negotiation — and $1.25 billion is coming from the New Jersey Turnpike Authority, leaving $1.45 billion to be paid by the state and other federal sources such as stimulus funding.
“No one is against reviewing the project costs to make sure it’s on budget and on target,” Baldwin said. “The danger lies in this looming Transportation Trust Fund crisis.”