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Gateway to Chaos

eye on the news

Gateway to Chaos

New York and New Jersey officials need to find cheaper, better ways to build crucial projects instead of expecting Washington to pay whatever price they ask. March 12, 2018
New York
Infrastructure and energy

President Trump’s growing doubts about federal funding for the Gateway tunnel rail link between New York and New Jersey have provoked cries of outrage from local officials and newspaper editorialists. Though Trump has publicly balked at the vast cost of the project (estimated at $30 billion), newspaper reports have suggested that his real motive for wanting to kill the tunnel is a vendetta against Senator Chuck Schumer. Editorials accuse Trump of reneging on a federal deal brokered by the Obama administration to pick up half the project’s costs—thus denying money for a project that some describe as vital not just to the region but also to the national economy. “I don’t think anyone should play politics with a project like this, plain and simple,” Schumer said.

Much of the local reaction to Trump’s doubts about funding Gateway is typical of the uncompromising, extravagant approach that New York and New Jersey take toward government. In a region notorious for spending three to four times more to build than what it costs elsewhere, local officials haven’t bothered to consider less expensive ways to improve rail access into New York City. Nor have they been willing to acknowledge their flagrant overspending and embrace reforms to cut costs, or investigated new ways of raising money to put less of a burden on taxpayers. Instead, they’ve simply handed the federal government a huge bill and shrieked in disapproval when a president and members of Congress balk at funding their grand designs. Whatever Trump’s motivation for wanting to kill federal funding for Gateway, local officials have given him plenty of reasons.

Not surprisingly, the rest of the country has taken notice about how wasteful, inefficient—and crafty—New York and New Jersey governments can be when it comes to infrastructure projects. Writing in the Wall Street Journal, North Carolina Republican congressman Ted Budd, author of an amendment to strip federal funding from Gateway, noted that when former New Jersey governor Chris Christie killed a previous version of the tunnel because it was too expensive, he nonetheless kept some federal money and used it on other projects as the state’s own transportation trust fund went broke. Meanwhile, Budd noted, New York’s primary rail agency, the Metropolitan Transportation Authority, spends seven times more on rail projects than comparable work in other cities. “Gateway has all the usual trappings of a rail-infrastructure boondoggle,” Budd wrote.

You don’t have to dig deep to see how the already-expensive Gateway project could become a financial nightmare. East Side Access, an MTA effort to tunnel under the East River so that its trains can enter Grand Central Terminal, began in 1998 at a $3 billion projected cost, was planned for completion by 2010. It won’t get done until 2022, at the earliest, and it’s going to cost nearly $12 billion, as Nicole Gelinas has reported. The project’s estimated price tag per mile is seven times higher than anywhere else in the world. The MTA “hasn’t just run over its allotted budget and projected timeline; it has obliterated them,” Gelinas wrote. Among the causes have been astonishing labor costs, including carpenters, insulators, and electricians making about $100 an hour, counting benefits. Union featherbedding has been a big problem; a 2010 investigation found at least 200 workers on the payroll for no job-related reason. A court agreement requiring that Amtrak and MTA union members work simultaneously on portions of the project has also spiked costs.

Staggering costs for infrastructure are standard across the region. The Second Avenue subway line in Manhattan—consisting of three new station stops— is the most expensive rail line ever built, at $2.5 billion per mile, the New York Times reported in December. The Port Authority of New York and New Jersey’s lower Manhattan Oculus transit hub for PATH trains running under the Hudson, originally tagged at $2 billion—in itself a fantastic price for what is essentially a glorified subway stop—cost $4 billion to complete, driving up bridge and tunnel tolls around the region to pay for the authority’s huge debt. As the Times noted, “the leaders entrusted to expand New York’s regional transit network have paid the highest construction costs in the world, spending billions of dollars that could have been used to fix existing subway tunnels, tracks, trains and signals.”

So many constituencies—from unions to politically connected companies and consultants—have their forks in the regional-infrastructure pie that reform is rarely part of the discussion. Instead, the strategy is to wait for a crisis to emerge and then propose the most expensive plan possible. The Gateway tunnel exemplifies this strategy. Christie nixed an earlier version of it in 2010 as costs escalated because the state was taking on much of the burden, even as it struggled with steep deficits. Then, when a series of maintenance problems in the current rail tunnel operated by Amtrak caused widespread delays of Long Island Rail Road and NJ Transit trains in 2015 and early 2016, officials from Amtrak, New York, and New Jersey came back with a bigger, more expensive plan to solve what was now a full-blown crisis. They got a pledge from the Obama administration to pick up half the estimated cost, though the states would be responsible for the inevitable overruns, which, if history is any guide, could double their cost on the project. The irony is that the project’s fantastic price tag may wind up making it impossible to finance—especially as the rest of the country resists supporting the region’s extravagances.

It’s not as if alternatives don’t exist. The New Jersey-based Lackawanna Coalition has been warning for years that unless the region’s leaders find a less expensive alternative to Gateway, we might wind up with nothing. They’ve proposed a slimmed-down version of Gateway that focuses on what’s essential to build and rehabilitate right away, with some money coming from prioritizing of spending on capital projects by NJ Transit. “The Gateway Project as presently conceived is an overpriced enterprise that would not improve mobility in the advertised manner,” the group says.

Worried about the impact of transit delays on commuters, a major business group, the Partnership for New York, is calling on officials to find new ways of financing these projects that don’t rely solely on taxpayer dollars. While the group wants the federal government and states to work together on infrastructure spending, it is also pushing for more use of public-private partnerships, in which government taps private investors—such as pension funds and sovereign wealth funds—to help finance major projects in return for a piece of the action. “New York is way behind other world cities and way behind much of the rest of the country” in the use of public-private partnerships, the Partnership’s CEO, Kathryn Wylde, said recently.

But these voices of reason are drowned out by the almost unanimous, bipartisan tendency of the New York and New Jersey political establishment to demand that Washington fund its projects at whatever price local officials ask. “The President should do the right thing and stop playing politics with our transportation network, which is the lifeblood of the Northeast region’s economy,” New York governor Andrew Cuomo has said. But if the region’s transportation network is so vital, why have Cuomo and other officials let it be used as a giant cash machine for well-connected political interests, at great cost to taxpayers?

Given recent history, it’s no mystery why the rest of the country isn’t rushing to catch this train.

Photo: Guven Polat/iStock

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