USDOT Withdraws From Gateway Corporation

Saturday, July 1, 2017

Late yesterday afternoon, the  U.S. Department of Transportation notified the Gateway Program Development Corporation that USDOT is permanently withdrawing from the corporation’s Board of Trustees. The withdrawal puts official as well as symbolic distance between USDOT and the Gateway Corporation, a hybrid New York-New Jersey-Amtrak-USDOT entity established last year to develop a $24+ billion program of rail projects in New York and New Jersey.

The immediate prospects for funding of Gateway projects were already on shaky ground since the Trump Administration proposed in its 2018 budget to close down the federal mass transit grant program that Gateway program sponsors wanted to use for the first two major projects under the Gateway umbrella.

(For background, see this recent article in Eno Transportation Weekly, “What Is the Gateway Program?“)

The acting USDOT General Counsel sent a letter yesterday to the other members of the Gateway Corporation Board of Trustees announcing the withdrawal. (The other three members are representatives from New York, New Jersey and Amtrak.) The letter said “It is not DOT’s standard practice to serve in such a capacity on other local transportation projects, and DOT’s Trustee has had to recuse from several Board actions already. DOT therefore elects to permanently withdraw from the Corporation…”

(Ed. Note: This is not quite true – DOT representatives still serve as ex officio members of the Moynihan (a.k.a. Penn) Station Redevelopment Corporation Board of Directors, a local project in New York City, and the Union Station Redevelopment Corporation in D.C. Moynihan Station will also be requesting billions of dollars in federal funding in a later stage of the Gateway Program. But Congress specifically passed a law directing DOT representatives to serve on those project boards – see sec. 1211 of the 1998 TEA21 law. No such specific statutory authorization exists for DOT participation on the Gateway board – perhaps Congress could pass one?)

The conflict of interest referred to in the letter was on public display at the last meeting of the Board of Trustees one month ago, where Chao’s designee, Jim Ray, had to recuse himself from two of the three action items – a resolution authorizing the corporation to ask USDOT for a $284 million loan for the North Portal Bridge project and another resolution authorizing the corporation to begin talking to outside firms about building the Hudson Tunnel project (for which upwards of $4 billion in direct grants from USDOT will eventually be sought).

USDOT’s withdrawal from Gateway came on the day that the draft environmental impact statement for the Hudson River Tunnel project was supposed to be released, after a process that went far more quickly than the permitting for major new projects in dense urban areas usually moves. (This is thanks to extensive interagency cooperation begun under the Obama Administration and continued, at the technical level at least, by the Trump Administration.)

Transportation Secretary Elaine Chao brought up the unusual structure of the Gateway board at a hearing before the Senate and Environment and Public Works Committee in May, where, in response to questioning from Sen. Cory Booker (D-NJ), she said:

…the governing structure is quite complicated, as you well know.  The Department of Transportation has one seat in a quasi-governmental, local-state-Federal governing structure, in which the governors of both States, New York and New Jersey, are involved.

So the governing structure is something that is one that dictates all the parties involved need to work on this.

However, she also reassured Booker by telling him:

Please be assured that Gateway is an absolute priority in terms of our focus.  We understand what is happening there.  I have been a passenger myself, as mentioned, I have been delayed.  I know the New York area very well, the President is a New Yorker.  So this is a priority, and I look forward to working with you on it.

The project under the Gateway umbrella that is farthest enough along is the North Portal Bridge project in New Jersey, for which the final environmental impact statement was completed almost nine years ago. Project sponsors submitted it last fall for funding under the Federal Transit Administration’s Capital Investment Grant program, which gave the project an overall medium-high rating in February 2017. That project would require $811 million in federal discretionary appropriations through the CIG program over several years to pay 49 percent of the total project cost.

But President Trump’s fiscal 2018 budget calls for cutting CIG program funding down to the bare minimum level necessary to pay for projects approved by previous Administrations. The White House insists that its infrastructure legislation, possibly to be unveiled this fall, will propose a different program to fund big projects like many of those in the Gateway program.

Most of the New Jersey Congressional delegation did not want to wait that long, and wrote Chao a letter on May 30 stating that Congress was likely to include a lot more funding for CIG in the 2018 and future appropriations process than the Administration wants and asking her to “consider moving meritorious projects like the Hudson River Tunnels and the Portal Bridge North through the CIG pipeline…”

Which brings us back to the original question of an institutional conflict of interest. The New Jersey legislators asked Secretary Chao to approve eventual funding for projects through the competitive CIG grant program – but as long as Chao is a Board member of the Gateway Corporation, she would be in a position of being both sponsor and judge of the applications.

This article will be amended and expanded as events warrant.

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