Biden Administration Increases Federal Share of Hudson Tunnel from 44% to 68%

Senator Chuck Schumer (D-NY) today announced that the Federal Railroad Administration will be making a $3.8 billion grant towards construction of the new Hudson River Tunnel, increasing the federal government’s share of the project from 44 percent to 68 percent, well above the 50-50 split that New York and New Jersey politicians consistently said since 2015 that they were seeking.

The $3.8 billion will come from the Federal-State Partnership for Intercity Passenger Rail program that was established and funded by the 2021 IIJA bipartisan infrastructure law. That law provided a total of $36 billion in advance appropriations, no more than two-thirds of which can be spent on Northeast Corridor projects. After set-asides, and with additional appropriations from Congress, a total of up to $22.4 billion is available for Northeast Corridor projects:

Total IIJA FSP Max. of 2/3 Minus Net NEC Plus Annual FSP TOTAL
Appropriation for NEC Oversight from IIJA Appropriation FOR NEC
FY22 7,200.0 4,800.0 -336.0 4,464.0 51.2 4,515.2
FY23 7,200.0 4,800.0 -336.0 4,464.0 51.2 4,515.2
FY24 7,200.0 4,800.0 -336.0 4,464.0 ??? 4,464.0
FY25 7,200.0 4,800.0 -336.0 4,464.0 ??? 4,464.0
FY26 7,200.0 4,800.0 -336.0 4,464.0 ??? 4,464.0
Total 36,000.0 24,000.0 -1,680.0 22,320.0 102.3 22,422.3

It would be unusual for USDOT to announce just one project without announcing the remainder of a slate of projects, so keep an eye out for more FSP project announcements from Capitol Hill in the coming days.

Per the October 2023 CIG Dashboard, the Hudson Tunnel project has a total capital cost of $15.65 billion and is applying for a Federal Transit Administration multi-year grant of $6.88 billion, or 44 percent of the project total. The remainder was to come from massive loans made by USDOT, through the RRIF railroad financing program, to New York, New Jersey, and the Gateway Development Corporation. The new $3.8 billion FSP grant, on top of the requested CIG grant, would increase the federal share of the project to 68.2 percent and would reduce the joint NY-NJ RRIF loan size by $3.8 billion.

This comes after former Governors Andrew Cuomo (D-NY) and Chris Christie (R-NJ) wrote a letter to President Obama in September 2015 promising that “If the federal government will provide grants to pay for half of the cost of the project, the Port Authority, New York and New Jersey will take responsibility for developing a funding plan for the other half, convening all relevant agencies, and utilizing the proposed federal low-interest loan, local funding sources, and other funding strategies necessary to complement the federal grant commitment.”

That letter led to a November 2015 sit-down meeting with the Transportation Secretary Foxx that led to an unusual joint announcement made by Schumer and the other three Senators again touting “a 50/50 cost share between the federal government (including Amtrak) and the State and local Governments (including the Port Authority).”

(Ed. Note: In early 2018, I filed a Freedom of Information Act request with USDOT to find out what actually happened at that meeting, since the Trump Administration had alleged that no agreement was actually reached. I am still waiting for my FOIA request to be completed.)

The Trump Administration, in addition to trying to kill the entire CIG program at first, changed the interpretation of the RRIF statute and claimed that the RRIF loans to NY-NJ were the same things as the federal grants, which would have made the federal share of the project unworkably high. Eventually, NY-NJ won the argument and got the RRIF loans classified as part of the non-federal share (so long as they were to be paid back with non-federal funds), so the federal-state split was back to 50-50.

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