Hudson Tunnel May Be Key Sticking Point in FY18 Negotiations

March 2, 2018

As noted elsewhere in this issue, the House and Senate Appropriations Committees are currently negotiating the fiscal 2018 omnibus appropriations bill using far more money than either panel ever thought they would have. The negotiators are awash with money. But while a rising tide lifts all boats, there are still problems with priorities.

Perhaps the biggest differences between the House and Senate versions of the transportation budget for 2018 initially approved by the appropriators last year revolve around the Gateway Program of rail projects in New York and New Jersey.

The Gateway Program is an umbrella term for a $30+ billion portfolio of rail projects in New York and New Jersey that was announced in early 2011 to increase passenger rail capacity for Amtrak and for local transit agencies. Since Hurricane Sandy flooded the existing rail tunnels between New York and New Jersey in October 2015, the part of Gateway that involves a new rail tunnel under the Hudson River has taken on new urgency, but that same urgency does not necessarily apply to the other projects in the Gateway Program.

Estimated Cost of the Gateway Program
Billions of dollars
Phase Project Cost
Phase 1 Portal North Bridge 1.6
Phase 1 Trans-Hudson Tunnel Construction 11.8
Phase 1 Rehab Existing Hudson Tunnel 1.8
Phase 1 Sawtooth Bridge Replacement 1.1
Phase 2 Moynihan/Penn Station Improvements 5.9
Phase 2 Portal South Bridge 1.9
Phase 2 Secaucus Junction Renovation 1.8
Phase 2 Secaucus Loop Construction 1.3
Phase 2 Newark-Secaucus Embankment 0.3
Subtotal, Projected Cost 27.4
Plus 10 percent estimated overage 2.7
Total Cost Estimate 30.2
Source: Multiple news accounts of Amtrak’s January 2016 presentation to USDOT, plus the official CIG cost estimates for Hudson Tunnel and Portal North Bridge in Dec. 2017.

Partial closure of the existing rail tunnels that were filled with corrosive salt water during Sandy would have a disastrous effect on the frequency of New Jersey Transit trains that use the existing tunnels (to say nothing of Amtrak trains on the Northeast Corridor), so this is a huge issue for the Garden State. Enter Rep. Rodney Frelinghuysen (R-NJ), the chairman of the House Appropriations Committee.

In the pending House version of the 2018 transportation appropriations legislation, Frelinghuysen managed to put $900 million towards programs that are primarily intended to benefit the Gateway program of projects, without actually violating the letter of the House GOP ban on earmarks.

$500 million was put in a newly authorized Federal Railroad Administration “federal-state partnership for state of good repair” rail grant program, with legislative instructions that “the Secretary shall first give preference to eligible projects for which the environmental impact statement required under the National Environmental Policy Act and design work is already complete at the time of the grant application review, or to projects that address major critical assets which have conditions that pose a substantial risk now or in the future to the reliability of train service.”

Then the House bill also put $400 million towards a new Federal Transit Administration grant program for projects that would be used by both mass transit services and Amtrak (there aren’t that many of those, and the Hudson Tunnel would be #1 with a bullet). So the House-Senate comparison looks like this:

House Senate
FRA Fed-State SOGR Partnership Grants 500 26
FTA §5309(q) Joint Amtrak-Transit Projects 400 0

And Gateway’s needs are not just about money – there are also statutory hurdles that must be addressed, either via the appropriations process, or some other legislation before the project can move forward.

A central issue here is conceptual – what counts towards the “non-federal” share of project cost?

The most recent “Locally Proposed Financial Plan” for the Hudson tunnel project on the FTA website (here) shows that the project sponsors want to credit $4.287 billion in hypothetical RRIF loans (which Gateway has not yet applied for) towards the non-federal share of the Hudson Tunnel project.

This raises a statutory problem. If the project sponsors had proposed TIFIA loans for the tunnel instead of RRIF loans, they would have been protected by section 603(b)(8) of title 23, United States Code:

“(8) Non-federal share.-The proceeds of a secured loan under the TIFIA program may be used for any non-Federal share of project costs required under this title or chapter 53 of title 49, if the loan is repayable from non-Federal funds.”

But the RRIF statute, which is in title 45 U.S.C. (railroads) and not title 23 (highways) or title 49 (transportation), has no similar provision, which puts USDOT on pretty firm legal ground when they say, as Transportation Secretary Chao did in a hearing at the Environment and Public Works Committee this week, that a RRIF loan can’t be counted towards the non-federal share of a mass transit project.

Pro-Gateway interests are seeking a change to the RRIF statute in the FY18 omnibus appropriations bill, but this kind of thing normally requires the permission of the authorizing committee chairmen, Bill Shuster (R-PA) from House Transportation and Infrastructure and John Thune (R-SD) from Senate Commerce, Science and Transportation. The change in law is not currently in either the House or Senate version of the FY18 DOT appropriations bill.

Another change in law may be necessary to allow these projects to move forward. The Gateway Development Corporation is a non-profit corporation chartered in New Jersey that has a board of trustees including New Jersey DOT, New York DOT, and Amtrak. But in order to get mass transit funding under 49 U.S.C. §5309, an applicant has to be a “State or local government authority,” and the GDC is not an authority. This means that money has to go through the Port Authority of New York and New Jersey, not GDC, unless that law is also changed.

And Amtrak’s FY 2019 budget request on pages 49-50 also suggests report language that Gateway sponsors want in either the 2018 or 2019 bill to let Gateway access funding more easily.


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