Schumer Will Seek To Force Gateway Funding in Next “Must-Pass” Spending Bill

March 8, 2019

This week, Senate Majority Leader Chuck Schumer (D-NY) told an Association for Better New York breakfast meeting that he wants to attach legislation forcing the federal government to start funding a $13.6 billion project to build new passenger rail tunnels under the Hudson River to the next “must-pass” spending bill. But it’s hard to see Schumer getting what he wants without either violating Congress’s ban on earmarks, or else fundamentally restructuring the mass transit Capital Investment Grant program.

Important caveat #1: there is no “Gateway Project.” There is a Gateway Program that consists of a number of different passenger rail projects in New York and New Jersey. The most expensive (and time-sensitive) project under the Gateway Program is boring a new twin tunnel under the Hudson River, but other projects include the Portal North Bridge Replacement, the Portal South Bridge Replacement, the Sawtooth Bridge Replacement, four-tracking the NEC between Newark and the tunnel, adding a train loop in Secaucus-Bergen, and a significant expansion of Penn Station, all of which together are expected to cost over $30 billion.

The only two Gateway projects that could conceivably be ready to break ground within the next couple of years are the Hudson River Tunnel and the Portal North Bridge, which together want $7.6 billion in federal grants and $4.6 billion in federal loans from the U.S. Department of Transportation:

Portal Hudson
Millions of dollars. North River
Bridge Tunnel Total
Federal Grants
§5309 Cap. Invest. Grants $772.0 49% $6,718.2 49% $7,490.2 49%
Transfer of Highway CMAQ $118.9 8% $0.0 0% $118.9 1%
Subtotal, Federal Grants $890.9 57% $6,718.2 49% $7,609.1 50%
Federal Loans
TIFIA Loan $284.0 18% $0.0 0% $284.0 2%
RRIF Loan $0.0 0% $4,287.5 32% $4,287.5 28%
Subtotal, Federal Loans $284.0 18% $4,287.5 32% $4,571.5 30%
State/Local Funds
New Jersey EDA Bonds $336.6 22% $0.0 0% $336.6 2%
New Jersey Tax Revenues $29.7 2% $0.0 0% $29.7 0%
Port Authority Revenues $21.6 1% $178.1 1% $199.6 1%
GDC Funds from Project Revenues $0.0 0% $1,415.8 10% $1,415.8 9%
Unspecified Private Capital $0.0 0% $1,000.0 7% $1,000.0 7%
Subtotal, State/Local Funds $387.8 25% $2,593.9 19% $2,981.7 20%
TOTAL PROJECT COST $1,562.7 100% $13,599.5 100% $15,162.3 100%

Senator Schumer did not publish his remarks at the breakfast, and there is no video, but according to articles in POLITICO and in NY area newspapers, he said on March 4 that “I’m announcing today that if the Department of Transportation continues to withhold the New Starts grants for Portal [bridge] and the Record of Decision for the Hudson tunnels, then I will push legislation … that will allow local partners to advance the federal share for shovel-ready projects today by requiring they be reimbursed once the federal funding grant is in place.”

Schumer’s proposal has not yet been fleshed out, but the first part of what he says he wants sounds a lot like a commonly used procedure called a Letter of No Prejudice (LONP) sent by the Federal Transit Administration to the local project sponsor. LONP’s are not specifically authorized anywhere in law but are described by FTA in each year’s funding apportionment notice. The FY18 notice says “LONP authority allows an applicant to incur costs on a project utilizing non-Federal resources, with the understanding that the costs incurred subsequent to the issuance of the LONP may be reimbursable as eligible expenses or eligible for credit toward the local match should FTA approve the project at a later date…Receipt of Federal funding under any program is not implied or guaranteed by an LONP.”

Los Angeles recently received a LONP for the third section of the Westside Purple Line extension, in anticipation of an eventual full funding grant agreement for that project.

But there is nothing in law requiring FTA to issue LONP’s to specific projects, and it is unclear from Schumer’s statement if he wants New Jersey and New York to get a LONP before going ahead with these projects or else roll the dice and break ground without a LONP. (Breaking ground might not be possible for the tunnel so long as the environmental clearance is stuck at FRA, but it would be possible for Portal North.) However, note the caveats in the apportionment notice about how “Federal funding under any program is not implied or guaranteed by a LONP.” Such a move by New York and New Jersey would be risky so long as the Trump Administration is in office (at a minimum).

It’s worth remembering (see timeline here) that the main reason the Gateway Program exists is because, in October 2010, New Jersey Governor Chris Christie (R) killed the ARC tunnel under the Hudson River that was being sponsored by New Jersey Transit. Some construction had already begun, and New Jersey had already begun to obligate federal money for the project under an Early Systems Work Agreement (ESWA), which is the next step above a LONP and which allows project sponsors to obligate federal dollars. Christie’s canceled the project but asked to keep the money, and USDOT under President Obama took legal action to claw much of the spent money back from the state.

It was the cancelation of the ARC tunnel that led Amtrak (and Sen. Frank Lautenberg (D-NJ)) to hastily put together the Gateway Program, of which a new tunnel (which would link to Penn Station, unlike the ARC tunnel) would be the centerpiece.

As the sidebar below demonstrates, there are numerous instances where the Secretary of Transportation has to exercise her discretion in favor of one of the Gateway projects before they can get money under the CIG program. The only alternative is for Congress to do what it has done in the past when an Administration was hesitant to approve a specific program. For example, here’s section 325 of the FY 1982 DOT Appropriations Act: “Notwithstanding any other provision of law, the Secretary shall, with regard to the Urban Discretionary Grant Program of the Urban Mass Transportation Administration, promptly issue a letter of intent for the Dade County, Florida, Circulator System for $63,642,666…” Or section 3031 of the 1991 ISTEA act: “Not later than 90 days after the date of the enactment of this Act, the Secretary shall negotiate and enter into a full funding grant agreement under section 3 of the Federal Transit Act for those elements of the New Jersey Urban Core Project which can be fully funded in fiscal years 1992 through 1997…”

But ordering FTA to give grant agreements to specific projects violates the earmark ban which House and Senate leaders just this week decided to extend through the FY 2019 appropriations process. If Schumer can’t think of another way to force USDOT to issue a grant agreement for Portal North or the tunnels, then it is hard to see the Senate, in the face of a likely veto threat from the President, voting to violate the earmark ban just for Schumer’s big NY-NJ project while leaving the other 48 states (and their 96 Senators) without any earmarks indefinitely.

How to Get a Project Funded Under the CIG Program

  1. Receive Final EIS Record of Decision.
  2. Advance from CIG Project Development stage to CIG Engineering Phase
  3. Proceed from CIG Engineering Phase to getting a CIG Full Funding Grant Agreement

Under the law (49 U.S.C. §5309(d)(2)), a New Starts CIG project can only proceed from Project Development to Engineering if the following things happen:

  1. Activities “required under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), as demonstrated by a record of decision with respect to the project, a finding that the project has no significant impact, or a determination that the project is categorically excluded” must be complete.
  2. The Secretary must determine that the project “is selected as the locally preferred alternative at the completion of the process required under the National Environmental Policy Act of 1969.”
  3. The Secretary must determine that the project “is adopted into the metropolitan transportation plan required under section 5303.”
  4. The Secretary must determine that the project “is justified based on a comprehensive review of the project’s mobility improvements, the project’s environmental benefits, congestion relief associated with the project, economic development effects associated with the project, policies and land use patterns of the project that support public transportation, and the project’s cost-effectiveness as measured by cost per rider.” Furthermore, when making this determination, the Secretary must “evaluate, analyze, and consider- (i) the reliability of the forecasting methods used to estimate costs and utilization made by the recipient and the contractors to the recipient; and (ii) population density and current public transportation ridership in the transportation corridor.”
  5. The Secretary must determine that the project ” is supported by an acceptable degree of local financial commitment (including evidence of stable and dependable financing sources).” This is further clarified in §5309(f) which requires, among other things, that “the proposed project plan provides for the availability of contingency amounts that the Secretary determines to be reasonable to cover unanticipated cost increases or funding shortfalls,” that “each proposed local source of capital and operating financing is stable, reliable, and available within the proposed project timetable,” and that the Secretary shall also consider forecasting reliability, grant commitments, dedicated revenues, total debt obligations, private contributions, and “the extent to which the project has a local financial commitment that exceeds the required non-Government share of the cost of the project.”
  6. The Secretary must determine (under §5309(g)) that ” there is a reasonable likelihood that the project will continue to meet the requirements” of section 5309.

Under the Trump Administration, the Federal Railroad Administration does indeed appear to be slow-walking the EIS ROD for the tunnel, as Senator Schumer alleged. (Makes you wonder why FRA would be in charge of the environmental process given that NY/NJ want this to be funded as a mass transit project under FTA, but whatever.) This would probably carry along with it the Secretary’s determinations under items 2 (locally preferred alternative) and 3 (in the metropolitan plan). But even if the ROD were issued tomorrow, there are still plenty of grounds for indefinite delay under the requirements that the Secretary certify items 4, 5 and 6 above.

Other parts of section 5309 attempt to put these determinations into a quantifiable process with a five-point weighting system (low, medium-low, medium, medium-high, high) for project justification, project financial plan, local financial commitment, and overall project rating. Last year’s rating (Nov. 2017) gives the tunnel project an overall medium-low rating and, though we may get a new rating next week, it may not change.

The Portal North Bridge already has its ROD and is in Engineering, but DOT (under Trump) has also rated its finances low enough that it is not eligible to get a grant agreement.

And, again, remember that the tunnel project is not just dependent on a $6.7 billion direct federal appropriation from the CIG program – it also needs $4.3 billion federal loans from the RRIF program. And the Secretary’s statutory discretion on whether or not to give out RRIF loans is far greater than her statutory discretion under the CIG program. Likewise, the Portal North Bridge project is dependent on Sec. Chao seeing her way to giving it a $284 million TIFIA loan in addition to a $772 million CIG grant.

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