New Jersey, Feds Agree on $95 Million Payment for Cancelled Tunnel

New Jersey has agreed to pay the federal government $95 million for a never-built transit tunnel under the Hudson River.  The U.S. Department of Transportation and Governor Chris Christie's administration have been engaged in a bitter dispute over $271 million that New Jersey had already spent on the tunnel when Governor Christie pulled the plug on the project a year ago, citing a fear of cost overruns on the $9 billion project.

Under the terms of the deal, New Jersey will also have to promise to direct $128 million in federal money to transit projects approved by the DOT.  That money was already allocated for New Jersey, but could, in theory, have gone to other projects.

Construction on the he so-called "Access to the Region's Core" — or ARC — began during the administration of Christie's predecessor, Governor Jon Corzine.   The tunnel, which would have been completed in five year's time, would have doubled transit capacity for commuter trains going from New Jersey to Manhattan. 

Christie had initially said he was in favor of the project, but, last fall, he changed his mind, saying he feared the project would go way over budget. 

This had been a marquee project for the DOT — the biggest transit expansion underway in the U.S.  Transportation Secretary Ray LaHood strenuously fought to save the project, traveling to Trenton and offering a number of sweeteners.

But Christie was unpersuaded. Workers began filling in the hole that had been dug last fall.

The bitterness over the tunnel's cancellation spilled over into a dispute about whether New Jersey would have to pay back funds it had already spent, with LaHood insisting that New Jersey pay back all the money, plus penalties and interest.  Christie's administration hired the influential lobbying firm, Patton Boggs, at a cost of about $1 million, to negotiate a deal.

Friday's settlement represents about a third of what the federal government initially said NJ owed. Governor Christie's office said the full amount would be covered by insurance on the project.

In a statement, Christie said, "The 5-year payment schedule on a $95 million settlement – which contains not one additional dollar of New Jersey taxpayer money – would be offset by more than $100 million in insurance premium refunds. This represents a fraction of the federal government’s initial claim and won’t cost New Jerseyans any additional money, which would otherwise go to infrastructure improvements."

Both Democratic New Jersey Senators, Frank Lautenberg and Robert Menendez, who have been vocal critics of the project's cancellation, praised Friday's decision, saying they didn't want New Jersey to have to pay nearly $300 million to the federal government for an unrealized project.

Tom Wright, executive director of the Regional Plan Association, which had worked on the ARC tunnel for 20 years, said, at the end of the day, he too approved of the decision.  "You don't want big projects to be canceled with no repercussions," he said.  "But at the end of the day you want that money for transit projects going forward."