Christie Ends New Jersey-Manhattan Commuter-Rail Tunnel Project

New Jersey Governor Chris Christie ended the largest U.S. mass-transportation project, saying the state couldn’t afford the potential cost overruns of a commuter- rail tunnel under the Hudson River to New York.

Christie, 48, a first-term Republican, said the decision is final, ending a review of ways to save the project that began more than two weeks ago at the request of U.S. Transportation Secretary Ray LaHood. The governor halted work Oct. 7, citing concern that the initial $8.7 billion price might rise as much as $5 billion.

“In the end my decision has not changed,” Christie told reporters in Trenton today. “I cannot place upon the citizens of New Jersey an open letter of credit. What proponents are asking me to do is hand over a blank check. I simply will not do that.”

The tunnel was designed to supplant a century-old link shared by New Jersey Transit and Amtrak, the U.S. intercity railroad. It would double the number of trains that New Jersey Transit, which has reached capacity during peak times, can run into Manhattan, according to the project website.

Christie said the decision followed an “honest and frank” discussion with LaHood. The state is interested in working with Amtrak, the nation’s passenger railroad, to build a tunnel on terms that are more favorable to New Jersey, he said.

New Jersey’s Share

The federal government and Port Authority of New York & New Jersey were each scheduled to pay $3 billion for the 8.8-mile (14-kilometer) Access to the Region’s Core tunnel, while New Jersey was slated to cover the remaining $2.7 billion. Christie said the arrangement exposed his state to any extra costs.

The state’s share grew to at least $3.5 billion, and the U.S. government didn’t offer guarantees on cost overruns, Christie told reporters. The U.S. did offer a combination of low-interest loans, he said.

LaHood’s agency also proposed funding options including increasing the federal share by $358 million, saving $700 million by scaling back the tunnel’s design and entering into a $1.85 billion public-private partnership to build the station on 34th Street in Manhattan where the tube would terminate, Christie said.

New Jersey will have to repay as much as $350 million that the federal government already gave the state for initial work, LaHood said in a statement. The project could be completed for about $9.8 billion with “aggressive cost control measures,” he said.

Transportation Fund

It’s unclear how the state will spend the $2.7 billion slated for the tunnel, Christie said. He said he hasn’t decided whether to redirect it to the state’s Transportation Trust Fund, which is poised to run out of money for new projects next year.

The governor has said he doesn’t want a repeat of Boston’s Big Dig, the most expensive public-works project in U.S. history. The work, which replaced an elevated highway with tunnels, was estimated to cost $5 billion when ground was broken. It tripled to $14.8 billion after overruns and structural problems.

According to documents released today by U.S. Senator Frank Lautenberg, a Democrat, the public-private proposal included a provision insulating the state from overages by transferring those costs to private contractors. LaHood also offered a $2.3 billion rail loan with maturities as long as 35 years, Lautenberg said.

LaHood said Oct. 22 the cost of building the tunnel ranged from $9.7 billion to as high as $12.7 billion. Those projections didn’t include the $775 million cost to build a second span of the Portal Bridge, which leads trains to the current tunnel.

Capacity Increase

The U.S. estimated an 83 percent chance that the tunnel’s price would be at or below the higher end of that range, Christie said today.

The Regional Plan Association, a New York-based advocacy group, had said the project would double the number of New Jerseyans within a 50-minute train ride of New York and boost property values. Neysa Pranger, a spokeswoman for the group, said the project was the largest funding commitment ever by the Federal Transit Administration.

State Assembly Transportation Committee Chairman John Wisniewski, a Democrat, called the decision “a monumental failure of leadership,” saying the project would have created 6,000 “immediate” jobs while reducing congestion. The move is a “brutal blow” to the state’s economy, Wisniewski said in a statement. The project broke ground last year.

Job Losses

New Jersey, the state with the second-highest per capita income, lost 20,200 nonfarm jobs in September, the state labor department said this month. The jobless rate fell to 9.4 percent from 9.6 percent in August, mostly because people left the labor force, the department said.

Christie said today that LaHood told him the state had lost its $3 billion in federal money and that the funds will likely go to other projects across the country.

Amtrak is “interested” in talks with New Jersey about constructing a new tunnel, though the agency was unaware of Christie’s statement, said Marc Magliari, a spokesman for the railroad. “We’re happy to have a conversation with them and we want to have it. There certainly is a capacity issue.”

To contact the reporter on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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