A 271 Million Dollar Non-Tunnel for New Jersey

by Jacob Davies

A quick one, via Atrios:

NJ Transit owes the federal government at least $271 million for the Hudson River rail tunnel that Gov. Chris Christie scrapped last month, a federal official says.

The $8.7 billion project to construct a rail tunnel between New Jersey and New York was 15 years in the making when Christie pulled the plug on Oct. 27, citing potential cost overruns.

The Federal Transit Administration on Monday sent the railroad the bill for the so-called Access to the Region's Core project.

"NJT must immediately repay all the Federal financial assistance expended for ARC under the (work agreement) which is currently estimated to be $271.091 million, plus reasonable interest and penalty charges that will be determined by FTA," regional administrator Brigid Hynes-Cherin wrote in the letter to James Weinstein, executive director of NJ Transit.

I'm not sure if Christie believes that the existing transport infrastructure that his state depends on was put in place by the Railway Fairy or what, but he just cost his state a quarter of a billion dollars for ... nothing at all. That's Leadership!

Comments

[Ugh]

What kind of planning process allows the plug to be pulled on an $8.7 billion, 15-year, multi-state and federal project by a single a$$hole like Christie? Did he have to go through any kind of official process at all that required someone else's signoff or something? Or was it just a "Watch me demonstrate my budget cutting bona fides AND piss off the liberals!" process?

[hairshirthedonist]

I wondered the same thing, Ugh. How is it that the governor can simply stop this of his own accord at this point? That doesn't even consider how monumentally stupid it was for him to do it, even though, apparently, he could. His act is pissing off more than just liberals. There are going to be a lot of pissed off commuters and laid-off workers because of this. Let's kill thousands of jobs during a huge recession while creating unnecessary pollution and stifling the state economy for decades upon decades. Way to go, Gov. Genius.

[Eric Martin]

But here's the kicker: NY is stepping in to gobble up the federal transportation dollars freed up by Christie's idiocy.

Probably going to use it for the 2nd Ave Subway, which would greatly improve accessibility in Manhattan.

Sucks for you Jersey, but I voted for Gillibrand/Cuomo, you voted for Christie. Live with it.

[hairshirthedonist]

Sucks for you Jersey, but I voted for Gillibrand/Cuomo, you voted for Christie. Live with it.

I didn't. (So there.)

[Ugh]

Let's kill thousands of jobs during a huge recession while creating unnecessary pollution and stifling the state economy for decades upon decades.

Well sure, but that pales in comparison to what he gets to say while running for the GOP nomination for President in 2011-12, "I saved the taxpayers of New Jersey hundreds of millions of dollars by stopping an unnecessary and duplicative boondoggle of an underwater tunnel that was going to incur cost overruns int he billions of dollars!"

[Eric Martin]

I didn't. (So there.)

You are exempt from my schadenfreude/contempt ;)

[Hogan]

And our governor-elect in PA says Christie is his role model. I wish they'd bring back laudanum.

[Slartibartfast]

Here's a less quick explanation of why Christie did this, from Christie.

In the interest of more discussion fodder, I mean.

[Jay C]

Well, the more money they shovel at the Second Avenue Subway, the happier I'll be since I'm moving over to 2 Av in a couple of months, and anything that gets the job done quicker and doesn't come out of MY pocket is just fine by me.

Sucks for Jersey commuters, though - why Christie things a new tunnel is "duplicative" is beyond me - the present one is like, what, a hundred years old?? Oh well, he's a Repub; 'nuf said....

Anyway, what IS it about Republicans and trains? in both Ohio and Wisconsin, incoming GOP governors haven't even waited to take office before announcing their killing of high-speed rail projects. Paid for, mainly, by the Federal Govt.

[Solomon Kleinsmith]

So you would have preferred he went along with the project, and the billions in overlays it was projected to entail? Where was that money supposed to come from, when New Jersey voters have been clear that they aren't willing to have their taxes raised? The magical pot of debt that you apparently think never needs to be paid back maybe?

You can't have both. If the New Jersey public says it doesn't want more taxes, it cant also have another huge infrastructure project.

Solomon Kleinsmith
Rise of the Center

[Eric Martin]

Welll Solomon, where are Jerseyites going to get the $271 million that they have to pay back from?

And going forward this will cost Jersey more in terms of hindering traffic to and from NYC, which is a big part of NJ's tax base: commuters.

Penny wise, pound foolish. Perfect example.

[hairshirthedonist]

If the New Jersey public says it doesn't want more taxes, it cant also have another huge infrastructure project.

Mob rule it is, then. Why exercise judgment and forethought as an elected official?

[Ugh]

Pay no attention to when Gov. Christie thinks cost overruns are just fine

[Slartibartfast]

Pay no attention to when Gov. Christie thinks cost overruns are just fine

Sure: a couple of thousand dollar is exactly the same as a billion dollars.

Not excusing Christie's travel habits, but there's some difference in scale, there.

[Nate]

Solomon Kleinsmith: This is exactly the sort of long term infrastructure project that will provide benefits for decades at least that taking on debt is perfectly valid for. Or do you not thinkg that taking out a mortgage to buy a house, or a car loan to buy a car is a productive use of money?

Debt is NOT for things like say, giving money to rich people, pointless wars, and so on.

[russell]

If the New Jersey public says it doesn't want more taxes, it cant also have another huge infrastructure project.

That seems like a pretty good synopsis of the situation.

Not factored into the equation is the value of *having* the the infrastructure project. To the NJ public, and lots of other folks as well.

But yeah, if you absolutely do not want to spend more money, you can't have more stuff.

[Jacob Davies]

The project had dedicated toll funding that was going to pay for it. Except now it'll have to be used to pay back the $271 million that's now a total loss. I guess those drivers can enjoy that thought while they're stuck in traffic.

This was mindless, destructive dick-waving of the worst sort. There is absolutely no sense to the decision; the only purpose it serves is Christie's ego.

[Brett Bellmore]

"Welll Solomon, where are Jerseyites going to get the $271 million that they have to pay back from?"

From wherever they were going to get the several billion dollars they'd have had to spend to finish it, only now they have to find quite a bit less? If you're digging a hole, stopping digging leaves you at the bottom of a hole, sure, but that doesn't mean it's not better thank keeping digging...

[Eric Martin]

Brett: They were going to get the money for the tunnel from toll revenue...on the tunnel, but the initial outlays were paid for with increased toll revenue on existing roads/entry ways.

Now, all they have are the increased tolls on existing thruways, but no toll revenue from the tunnel that won't be built.

Seems rather counterproductive.

[debbie]

NY is stepping in to gobble up the federal transportation dollars freed up by Christie's idiocy.

They also want Ohio's money that Kasich says he will refuse. However, today, Kasich sent a letter to DC, asking if the money could be used for other infrastructure projects, and if not, could it then be used to pay down Ohio's debt. What a joke he's turned out to be, and he's not even in office yet!

[Brett Bellmore]

Ayup. We've got the local connector, supposedly to be paid for by toll revenues. Somehow didn't work out that way. Just because somebody thinks, at some time, that a project's tolls will pay for itself, doesn't mean it's true.

It's not stupid to decide a project isn't going to be worth it, and stop throwing good money after bad. Maybe Cristie is wrong in that judgment, maybe he's right, but what it's done is not catagorically stupid, only contingently so, and that's a judgment which can only be made after a detailed analysis.

[Jacob Davies]

Brett: that's a judgment which can only be made after a detailed analysis

Good point, I'm sure that prior to Christie's arrival nobody had stopped to consider whether this tunnel made any sort of sense.

It was only the "detailed analysis" that Christie brought to bear that let him determine that it wasn't going to be worth it.

Seriously, how did you manage to type that without its absurdity leaping out and sending you flying from the keyboard? The "detailed analysis" is what all the people in two state governments and the Federal government did when they decided to fund this project. That doesn't guarantee it's going to be worth it, but I'm generally going to put my trust in the Department of Transportation and the legislatures of two states over the uninformed, politically-motivated off-the-cuff opinions of some Republican politician.

[Free Lunch]

Even Christie has said that they need improved transit capability to NYC. His concern was that NJ would be on the hook for cost overruns (which makes sense since New Jersey controls the project). He complained, after he pulled the plug, that NYS and NYC weren't paying anything for this marvelous opportunity to get more taxes from NJ workers. He seems certain that there would be overruns (see name of state responsible for managing the project). We hardly need mention that the not-very Old Meadowlands Stadium is not yet paid for, but has been leveled.

In a rational country, MTA, PANYNJ, TBTA(?) and NJT (am I missing any NYC transit? CT?) would all be part of one sensibly-run transportation authority, but this is the United States, so we just limp along from crisis to crisis and tell each other that this is the best of all best possible countries.

[Slartibartfast]

One of Christie's stated concerns was that a piece of construction (south portal bridge) that was absolutely required wasn't part of the original estimate. To the tune of almost $800 million.

True, or not true? LaHood's explanation regarding how New Jersey can avoid footing any and all overruns sounds like absolute gobbledegook to me. Can anyone explain his explanation of how NJ won't shoulder any and all overruns?

Thanks in advance.

[Carleton Wu]

I haven't looked that carefully, but I haven't seen anyone yet saying that NJ doesn't need better links to NYC.
And, I havent heard anyone suggest that this transportation plan was particularly insane.

So what I've got is: a plan to address an existing need, which may not have been perfect but wasn't crazy, paid for in part by other people. Canceled, at significant cost.

And again, as far as I parse it, Christie's objection appears to be (at least primarily) that NJ was on the hook for any cost overruns. Which is the case for every single project that NJ undertakes by itself, including any other attempts to rectify the existing problem.
Christie certainly doesn't raise any specific issues about the project itself, either the plan or anything about the implementation.

One of Christie's stated concerns was that a piece of construction (south portal bridge) that was absolutely required wasn't part of the original estimate.

Well, it's not part of the project itself (ie not funded by NY or the Feds) as I understand it, but it's a required piece for the project to work. Christie seems to imply that it was not budgeted for at all, but given that he doesn't say this outright I suspect he's manufacturing some outrage from a non-issue.
I can certainly imagine NYC, NYS, NJ, and the Feds negotiating to where NJ paid for something like the portal bridge out of it's own pocket. Doesn't seem unreasonable when they're already chipping in quite a lot on a project that benefits NJ more than anyone else.
But that's all just speculation.

[Ugh]

Slarti:Sure: a couple of thousand dollar is exactly the same as a billion dollars.

Not excusing Christie's travel habits, but there's some difference in scale, there.

Well there is also the added element that it was a couple extra thousand dollars spent on Christie himself, the "fiscal conservative," who apparently "provided insufficient, inaccurate, or no justification for 14 of 23 trips (61 percent) that exceeded the government rate."

It also seems to me that you can learn alot about a person by observing how he acts when he thinks no one is looking.

[Slartibartfast]

but given that he doesn't say this outright I suspect he's manufacturing some outrage from a non-issue

From the transcript I linked, upthread:

"Why the Corzine Administration excluded the portal bridge south from the whole scope of this pricing of this job is something that, you know, you'll have to ask the Corzine Administration, I don't know."

This sounds like he's saying that it was not budgeted for at all. Given the disconnect between what politicians say and what's actually so, though, I can't tell whether that's the case.

[russell]

Now, all they have are the increased tolls on existing thruways, but no toll revenue from the tunnel that won't be built.

And no tunnel.

From here:

44,000 jobs that might have been created, 22,000 cars left on the highway and an unrealized $30,000 bonus in real estate value for every New Jersey home located near a train stop

and:

Already, a bridge, a system of ferry boats, two tunnels for cars and two for trains connect New Jersey and Manhattan, carrying 360,000 New York-bound commuters during the morning rush.

Experts say that all those modes of transport now accommodate about as many people as they can. With an additional tunnel, there could be twice as many passengers on the NJT trains

For 360K people, daily life is going suck just a little bit more. Each and every day.

It'll be that much less practical for people living in NJ to work in NYC. You know, where the jobs and money are.

It's Christie's call, but it's far from clear to me that this was anything like a smart move.

Costs come in many forms.

However, today, Kasich sent a letter to DC, asking if the money could be used for other infrastructure projects, and if not, could it then be used to pay down Ohio's debt.

To which DC replied, "No".

[Slartibartfast]

It's Christie's call, but it's far from clear to me that this was anything like a smart move.

I don't have enough information to assess whether it's a smart move or not. It depends on cost-effectiveness, doesn't it? I mean, if this had been a question of $20b instead of maybe $2b, would this discussion still be taking place?

If New Jersey were, for instance, already $50b in debt, do you think people would be so upset about this?

If New Jersey had, for instance, a problem with underfunded pensions, do you suppose that maybe that might be a factor when deciding whether to incur even more debt on behalf of the state?

Something to think about, maybe.

[Solomon Kleinsmith]

You apparently didn't listen to what I said...

I'm personally all for infrastructure investment, and I'd be willing to pay more for it, but the people of New Jersey have said they don't want more taxes right now, so the Governor didn't really have a choice but to pick the cheapest option.

This is an if-then statement. If New Jersey wants this, then they have to raise taxes. There is no magic pot of money to pay for it sitting around somewhere.

All this prevarication is garbage... its okay to just add a few more billion because the state is already 50 big ones in the hole... are you kidding me? hahaha

A smart person who is heavily in debt stays frugal and pays down that debt... they don't add more to it.

Solomon Kleinsmith
Rise of the Center

[russell]

I don't have enough information to assess whether it's a smart move or not. It depends on cost-effectiveness, doesn't it?

Yes, it does. And I don't have enough information to make the call, either.

Not my job.

Just pointing out that there are numbers on the table other than "cost of tunnel".

Also something to think about.

Jersey's one of the highest-income states in the country. Maybe highest, it's probably either them or CT.

High incomes mean high standard of living, good revenue base for states, counties, and towns, nice robust economy.

Those folks don't make that dough working in Piscataway.

Nothing wrong with Piscataway, but I think you will take my point.

[hairshirthedonist]

For what it's worth, there's this from here (PDF).

Hedonic price modeling of 45,000 home sales within two miles of train stations shows that three improvements to the NJ TRANSIT rail system – Midtown Direct Service on the Morris & Essex Line, the Montclair Connection for the Montclair-Boonton Line and Secaucus Junction for the Pascack Valley and Main/Bergen/Port Jervis Lines – increased the value of nearby homes by an average of nearly $23,000 per home (in 2009 dollars).

Homes within walking distance of train stations gained the most value – up to $34,000. Value appreciations were less significant farther from stations. Cumulatively, these three projects boosted home values by $11 billion. This represents $250 million a year in new property tax revenue for municipalities.

A detailed comparison of the trip time reductions provided by these three projects with the trip time reductions expected from ARC reveals that ARC could raise home values by an average of $19,000 per home, and up to $29,000 for homes within one half mile of stations.

Cumulatively, ARC could boost home values by $18 billion, and generate $375 million a year in new property tax revenue for municipalities. This is significant as growing tax bases relieve pressure for municipalities to increase tax rates.

Solomon, there is nothing in New Jersey law requiring the governor to do stupid things because of perceived public opinion. He had a choice, despite your assertions.

[Slartibartfast]

And I don't have enough information to make the call, either.

Not my job.

Sorry, I thought you were offering criticism of Gov. Christie for not stopping the program; that (to me) involves some level of judgement regarding whether that program was a good idea to begin with.

nice robust economy

...that's currently overspending its revenues by about 40%.

[Hogan]

nice robust economy

...that's currently overspending its revenues by about 40%.

Economy =/= government.

[Turbulence]

If New Jersey were, for instance, already $50b in debt, do you think people would be so upset about this?

Why are you talking about "people"? "People" did not make the decision; the governor did. Is there any evidence that there is some great groundswell of public support for killing the project?

In any event, killing off the project seems like it will hurt future revenues. The project mostly benefits people who work in NYC and live in NJ. If you make it harder or more expensive or more time consuming for people living in NJ to commute to NYC, then you'll get fewer of them: people will choose to live in NY or CT. And that will, in turn, crimp the tax base going forward.

I grew up in a commuter town in NJ where many people took NJ Transit into NYC every day. As commuting into NYC from NJ becomes more difficult, people are going to start thinking about living elsewhere, like places where they won't be paying taxes to NJ. Given that a lot of commuters are fairly well paid professionals, the tax hit associated with such a move could be very large.

[Slartibartfast]

Why are you talking about "people"?

Q: Who's upset? The governor doesn't appear to be.

A: Lots of people who don't like Gov. Christie.

In any event, killing off the project seems like it will hurt future revenues.

As it will, likewise, improve future debt obligations. You're making the judgement without doing the requisite analysis, I think. Me, I'm still agnostic. Show me the analysis that says this was a dumb decision and I just might agree with you.

If you make it harder or more expensive or more time consuming for people living in NJ to commute to NYC

No one's doing that. What's being done is to let the current state of affairs continue and, probably, continue to decline.

[Nate]

Well, if you're going to do a full analysis, you need to consider opportunity costs. For example, will New Jersey need another tunnel to NYC in the future? Well, barring some kind of catastrophe where New Jersey doesn't have population growth or people working in NYC, yes. So, by canceling this now, will it be cheaper in the future? Almost certainly not. Will New Jersey be able to get more funding from the federal government, NYC, or New York State? Maybe, but I wouldn't count on much better conditions. Will New Jersey have more revenue or less debt in the future? Probably, but will that be outweighed by the extra costs later, and the higher interest rates on bonds etc? Also, will that revenue growth go into paying down debt, or will it be used to finance tax cuts for already wealthy people?

From my perspective, this looks like something that needs to be built, now or in the future, and stopping now and building it later doesn't seem to offer any advantages.

Makes great fodder for Gov. Christie's compatriots who like to run on "See! Government can't do anything right! Elect us and we'll prove it!" though.

[Uncle Kvetch]

the people of New Jersey have said they don't want more taxes right now

Oh, well that's settled then. We'll just wait a couple of years until the people of New Jersey vote in the "Raise My Taxes" Party. It's inevitable.

[Carleton Wu]

This sounds like he's saying that it was not budgeted for at all. Given the disconnect between what politicians say and what's actually so, though, I can't tell whether that's the case.

It's inferential, but if this were the case Id expect him to say so, rather than suggesting it without saying it outright. This makes me suspect that he's manufacturing the issue. I admit, I honestly don't care enough to dig into it, so I could be wrong.

I don't have enough information to assess whether it's a smart move or not. It depends on cost-effectiveness, doesn't it?

Id feel better about that position if Christie were using it to defend his decision. Again, it's inferential, but if there were a reasonable analysis that made this a bad way to spend money, Id expect him to avail himself of that.

[dr ngo]

I know from nothing about this particular project, but there is one passing statement that should not go unchallenged. From Solomon:

"A smart person who is heavily in debt stays frugal and pays down that debt... they don't add more to it."

Not necessarily. (Although often this is indeed wise; I speak to the exception, not the general rule.)

Assume - and this is not an outrageous assumption, given the state of the economy - that you are unemployed and in debt. You have a decent chance to get a job at some distance from your home, BUT you need a car to get to it, and you'd have to borrow to get one.

It would be penny-wise and pound-foolish to forego this particular opportunity to get out of the hole you are in because of some ritualistic commitment to "frugality," even though the banking community would have you believe otherwise. Common sense should tell you that taking on *this* increased debt should greatly enhance your chances of reducing your debt burden in general.

Whether the NJ tunnel is in fact comparable to this decision is left to the reader.

But it is certainly not something to be dismissed out of hand on the grounds of frugality, much less the spurious assertion that "the people of New Jersey have said they don't want more taxes right now, so the Governor didn't really have a choice."

Really? There was a *binding referendum* on all taxes in New Jersey, and I missed it? Shoot.

[Carleton Wu]

This is an if-then statement. If New Jersey wants this, then they have to raise taxes. There is no magic pot of money to pay for it sitting around somewhere.

The public often has conflicting priorities. Wanting to eg raise taxes, cut the deficit, increase spending, etc simultaneously. It's disingenuous to take one of those positions and infer a coherent fiscal message from it.

Fwiw, here is a poll of NJ residents supporting Christie's decision, though it was pretty close.

Finally, if I understand the situation correctly *if* there were no cost overruns then the project was already completely funded. So it wasn't a question of having to raise more money via taxes or bonds etc.

All this prevarication is garbage... its okay to just add a few more billion because the state is already 50 big ones in the hole... are you kidding me?

I don't think that's what Slarti was saying, actually. And you need to take it down a notch, especially if you're not going to bother reading carefully enough to understand what's being said.

[bc]

Slarti's agnostic position resonates with me, as much as the real estate and jobs data seem to indicate it would be a long-term positive move. I don't get why N.J. was saddled with all the cost overruns.

And why not assume that this is a negotiation position? I know he said it's "over," but doesn't that mean on the current terms? Seems to me that N.Y. has a huge vested interest as well, not to mention the feds. $271M is peanuts compared to the cost overruns.

And I'd like to see the analysis Slarti calls for and Christie apparently had before making the decision. It doesn't sound like it was an easy decision at all.

[Jacob Davies]

Hypothetical cost overruns, we should note. And there's no reason that the same ridiculous "I'm taking my toys and going home" negotiating strategy couldn't have been used in the event of overruns in the future, if being monstrously irresponsible is to be considered acceptable now.

This was an excuse for a Republican who probably fancies himself President one day to throw his weight around to impress Republicans in other states, never mind the costs to the state he's supposed to be running.

Does NJ have recalls? If ever there was a case for it, this'd be it.

For all that Republicans claim business expertise, they sure seem ignorant of how the actual economy works. In a state like NJ where the links to NYC are the most valuable asset they have (not to be down on NJ, where I've never been), you would think they could at least appreciate that if you want continued growth in your state you might occasionally have to pony up for some more transit links.

We need a punchier tag than "Government by Being the Biggest A**hole You Can Be" for the modern Republican Party, but that's all this is.

[hairshirthedonist]

And I'd like to see the analysis Slarti calls for and Christie apparently had before making the decision.

What do you see that makes you say that this analysis' existence is apparent, bc?

[Carleton Wu]

Does NJ have recalls? If ever there was a case for it, this'd be it.

While I suspect it was a short-sighted decision, it wasn't particularly unpopular in NJ. Although I also agree with the earlier sentiment that we should expect our elected officials to lead and inform rather than just conform.

On the third hand, it's nice to see a Republican *actually* cut something with significant costs (and significant benefits) in their new-found love of fiscal balance. As opposed to letting the far-right guys earn TP cred for extreme proposals (cutting government wages, slashing Medicare) that will never actually get enacted.

[bc]

Hairshirthedonist: Christie's own words saying he and his staff prepared for the Sunday meeting with the feds. Yes, it is an assumption of mine that in preparation for the meeting there was actually an analysis. But Christie talks about the various options that were brought to the table.

Jacob Davies: Hypothetical cost overruns, we should note . . .

Ha ha. Riiiiiiiiight. Do you have info that contradicts Christie's assertion that there was a 90% likelihood that the LOW END of the overruns estimate was going to be exceeded? Common sense says that every government project will have cost overruns. And overruns on those overruns. How did the big dig end up? Something like 10B more than the original estimate of 4-5 or something like that.

And you say "The project had dedicated toll funding that was going to pay for it." I don't see that. Cite? From what I see, $1.25B was coming from the N.J. Transportation Trust Fund and generated by tolls. Some was coming from another fed source (CMAQ). And the trust fund is going broke due to both Dem and Repub administrations of the past. Apparently existing tolls will simply pay debt for the next 30 years.

The whole issue from Christie was a) why commit to a blank check; and b) how to pay for cost overruns even if quantified. He says only Fed and port authority funding of $378M was ponied up for cost overruns, still leaving N.J. alone with as much as over $4B to deal with.

I guess the question I have is how is N.J. to pay for the inevitable (IMHO) cost overruns? Maybe the increased property prices would cover those. I don't know. I do know Christie doesn't want to raise tolls, impose more tolls, or raise the gas tax.

[Jacob Davies]

Yes, there will be overruns. My point is that since they're hypothetical it's rather hard to know how large they might be, and easy to pick scary sounding numbers.

But even a four billion dollar overrun would represent less than 1% of one year of New Jersey's GSP.

You seriously think that a tunnel that will last 100 years isn't going to pay that back?

I didn't like the massive cost overruns on the east-span replacement of the SF-Oakland Bay Bridge, but that doesn't mean it isn't worth doing. Doing big things is expensive. Not doing them is even more expensive.

[Carleton Wu]

Common sense says that every government project will have cost overruns. And overruns on those overruns.

Common sense really says that, huh? My experience is that many things in the business world suffer from overruns- it's much more likely to encounter unforeseen obstacles than to encounter unforeseen savings.
Is government particularly vulnerable to that? I dunno, government is often behind big, risky projects.

The whole issue from Christie was a) why commit to a blank check

The thing about that reasoning is that it applies to every non-joint project that NJ undertakes. And, really, every joint project where the overruns are shared. There is always a risk that there will be unforeseen costs, and that NJ might have to bear all or part of those.

So the existence of possible unforeseen costs isn't in and of itself a rationale for stopping the project. As you suggest, perhaps this is merely a bargaining position (although I suspect it's one that won't get any traction). Perhaps it's a desire to campaign in the future on cutting big government or saving money. Perhaps Christie genuinely thinks that this particular project is a bad idea- although he would do well to articulate the specific a bit better than he did- as far as I can tell from his statement, there isn't anything wrong with the plan per se.

My guess is the middle one: I wouldnt at all be surprised to see Christie campaigning on how he said "thanks but no thanks" to that Tunnel To Nowhere. At least he'll be telling the truth about it.

[hairshirthedonist]

At least he'll be telling the truth about it.

Well, except for the part about the tunnel going to nowhere. I've seen people calling it that, btw. What a joke.

[Hogan]

I wouldnt at all be surprised to see Christie campaigning on how he said "thanks but no thanks" to that Tunnel To Nowhere.

I don't know, I think that's a pretty nasty thing for the governor to say about New Jersey.

[Ugh]

NYC: Home of Non-Real Americans.
Anything Composed of Non-Real Americans: Nowhere.

[Carleton Wu]

Ah, I didnt know anyone had actually used "Tunnel To Nowhere" seriously; I just meant it as a jab at Palin's famous fib.
That is, I suspect this might be a short-sighted decision, but at least Christie is actually saying "thanks but no thanks" to the federal money and to actual infrastructure. And given the choice between Republicans who campaign on cutting taxes and spending but only cut taxes and Republicans who actually cut important spending, Ill take the latter. I wouldn't *vote* for the latter, but at least I wouldn't throw up in my mouth when I think of them, wrapped in the flag, singing the Star-Spangled Banner off-key.

[Ugh]

but at least I wouldn't throw up in my mouth when I think of them, wrapped in the flag, singing the Star-Spangled Banner off-key.

Don't forget the carrying the cross part.

[hairshirthedonist]

Here's an example from a random blog I found on Google - WyBlog Greetings from the Peoples Republic of New Jersey!

Sunday, 12 September 2010

The Tunnel to Nowhere is over budget and on hold

The $8.7 billion boondoggle NJ Transit rail tunnel to the bowels of midtown Manhattan is over budget. At least a billion dollars over budget. But in what has to be an unprecedented move on the part of pork-barrelling politicans, the project is now on hold while officials determine how to rein in the cost overruns.

(...)

[Marty]

"The thing about that reasoning is that it applies to every non-joint project that NJ undertakes. And, really, every joint project where the overruns are shared. There is always a risk that there will be unforeseen costs, and that NJ might have to bear all or part of those."

However, when your project is already projected to be 2/3 over budget then there are lots of reasonable people who might say let's rethink this.

Most large projects are bid with a 20-25% contingency, so, at 5B over, it is really already approaching 100% overrrun and you haven't spent the first billion yet.

I know large companies that have cancelled pretty important projects for less.

[bc]

Perhaps Christie genuinely thinks that this particular project is a bad idea- although he would do well to articulate the specific a bit better than he did- as far as I can tell from his statement, there isn't anything wrong with the plan per se.

He said the project had merit and it was a really hard decision:

But when you become Governor and you start to be presented with the information I was presented with, you're presented now with a choice of a project that I do think is a worthwhile project, but that we simply cannot afford . . .

And so I do this with no sense of happiness at all but I do this with an absolute sense of resolve and commitment to the promises that I made to the people of the state . . .

And he said he comes away a "huge fan" of Secretary LaHood.

Personal side: I love trains. I think tunnels are cool and my kids and I hold our breath whenever we go through one (this tunnel would pose a problem). I want a bridge over the Bering Straight so we can connect the Americas with anywhere in the world via train. I realize passenger trains aren't always a good economic choice, but they are 30x safer than cars. And high speed rail lets you go 220 on the ground. Really cool (although I've only been up to 175).

So I'd probably push for the train more than Christie. But that's me without all the facts.

And what Marty said.

[liberal japonicus]

Given Christie's work on the education grants, I tend not to give him the benefit of the doubt. But I don't live in NJ, I live in a country that had intercity high speed rail since the mid 60's :^p

[mike]

The likely reason Christie canceled the tunnel is that NJ's transportation fund(the one that pays for highway maintenance and such) is going to run out of money this year. Since Christie has pledged not to raise taxes or tolls this was the only realistic way he had to fund it. NJ's investment was ~$3B, subtract out the $300 NJ now owes the Feds, I think another $300 roughly in shutdown costs, and he's got $2.0B to $2.4B depending on exact numbers to keep the Transportation fund solvent through the next election. Nothing spells responsible management quite like neglecting capital expenditures to goose short term results...and this is hardly the only area where Christie has taken this approach.

[CharlesWT]

"I want a bridge over the Bering Straight so we can connect the Americas with anywhere in the world via train."

Russia plans $65bn tunnel to America

[Jay C]

@ Jacob Davies:

"...you would think they could at least appreciate that if you want continued growth in your state you might occasionally have to pony up for some more transit links."

And, in the case of New Jersey, you'd be wrong. Most of the family and friends we have in NJ (with one exception) gripe bitterly about their taxes, on every State and local level - and don't forget those services provided to the public by sub-State-level entities have to paid for by taxes, too - LOCALLY "authorized" (or more usually, not)

New Jersey is also, to a large extent, a Rust Belt State: its former manufacturing sector is long gone, and the population now is mostly typical-American-suburban: a breed doggedly resistant to paying absolutely one penny more than they have to: aided and abetted, of course, by generations of Republican economic malarkey.

PS: the exceptions are cousins: professional (lawyer & scientist) who live in one of the more affluent communities. Maybe it's related to the fact that the town claims that 30% of its entire population hold graduate degrees; but they say they never complain (much) about their taxes, because the town goes out its way to involve the citizenry in the decision-making process. Where most localities, if unchallenged will revert to "mushroom mode".....

[Marty]

OT: These pictures of the abandoned NY City Hall Subway Station are very cool.

[Jacob Davies]

bc: I realize passenger trains aren't always a good economic choice

If there's anywhere on the planet they make economic sense, it's in the New York metro area...

I think we tend to underestimate the economic value of transit infrastructure because so much of it was built before the era of car commuting; when car commuting became a practical thing for the masses, transit wound up with a lot of slack which it then took a few decades to use up. Suburbanization helped. Now that urban roads are at capacity, we need to look again at major investments in transit infrastructure if we want our dense cities to continue to grow, which we do I think, because dense cities are very efficient and economically productive and culturally important and all that stuff.

Good thing investment is in fashion lately, isn't it?

Sigh.

[Gary Farber]

"A smart person who is heavily in debt stays frugal and pays down that debt... they don't add more to it."

Smart people know that comparing personal family budgeting to a the budget of a national government which contains a Treasury Department, the mints, and the Federal reserve, is not something any remotely smart person would do, because smart people don't make comparisons as off-base and clichedly stupid as that, because they've read Keynes and have read a book or two on economics, and the history of the economics of busts and booms in American history, and how governments can deal with them, and have, including during the Great Depression.

And therefore know that family budgetting and national economic strategies have nothing in common other than a need to have a budget.

Unless your family has its own nation state and currency, in which case I apologize, and you're making an apt comparison.

[Marty]

"if we want our dense cities to continue to grow, which we do I think, because dense cities are very efficient and economically productive and culturally important and all that stuff."

Which many people don't believe we should do.

[russell]

Which many people don't believe we should do.

This raises the very interesting question of how much "we", meaning the public we, try to manage stuff like this.

If ten million people want to live in the NYC metro area, do we let them do so, and try to scale up the infrastructure to support that?

Do we say "that's a bad idea" and actively try to discourage it?

Do we say "do what you want, but you're on your own" and provide no non-local public support?

How does that translate to settings other than big cities? To places, frex, that are very dry, or very cold, or very hot, or very remote, or prone to bad weather or other natural disturbance?

[Marty]

Russell,

It is an interesting question, do people want to work in NY? Would they rather have a job in Camden? Is adding another lane or rail line into NYC just encouraging more concentration of employment opportunity? Would tax breaks to move some of those jobs into NJ be a better investment?

The criticism of not building the rail seems to accept the underlying assumption that encouraging people to get to NYC for work is the optimum use of those dollars.

[Morat20]

The criticism of not building the rail seems to accept the underlying assumption that encouraging people to get to NYC for work is the optimum use of those dollars.

Offhand conservatives, who tend to defy the rural life and those who live in 'flyover country' should probably avoid thinking like that.

Insofar as, well, it's those city centers that tend to pay for those rural farmers and flyover residents to have things like water, postal services, and electricity.

NYC is growing and needs more transit links. If we're going to stop and decide whether letting NYC grow easier by adding those links, we should also stop and see if we really want to continue subsidizing suburban sprawl, and frankly all that empty space with just a handful of hardwork real Americans.

[hairshirthedonist]

It is an interesting question, do people want to work in NY? Would they rather have a job in Camden? Is adding another lane or rail line into NYC just encouraging more concentration of employment opportunity? Would tax breaks to move some of those jobs into NJ be a better investment?

This is the sort of zero-sum thinking that leads to poor economic analysis. That, and the tunnel was supposed to work in both directions. Let's consider the idea that there would be more jobs in both NJ and NYC with the tunnel than without. (I work in Camden, btw.)

[Slartibartfast]

who tend to defy the rural life

defy? deify? Enquiring minds, etc.

[Nate]

The criticism of not building the rail seems to accept the underlying assumption that encouraging people to get to NYC for work is the optimum use of those dollars.

Train tunnels are two way. Also, I suspect there's a few reasons other than employment that people in New Jersey may wish to travel to NYC.

[Marty]

"Also, I suspect there's a few reasons other than employment that people in New Jersey may wish to travel to NYC."

None of which would justify the expense of the tunnel.

This is the sort of zero-sum thinking that leads to poor economic analysis. That, and the tunnel was supposed to work in both directions. Let's consider the idea that there would be more jobs in both NJ and NYC with the tunnel than without. (I work in Camden, btw.)

And I am sure there is a study that says this somewhere.

I don't object to the tunnel or more jobs in NYC. But the Governor of NJ has options in building jobs for people in his state and most of the comments assume that getting more people to NY is the goal. Like here:

Offhand conservatives, who tend to defy the rural life and those who live in 'flyover country' should probably avoid thinking like that.

Insofar as, well, it's those city centers that tend to pay for those rural farmers and flyover residents to have things like water, postal services, and electricity.

NYC is growing and needs more transit links. If we're going to stop and decide whether letting NYC grow easier by adding those links, we should also stop and see if we really want to continue subsidizing suburban sprawl, and frankly all that empty space with just a handful of hardwork real Americans.

If NYC is growing and needs more transit links then maybe the NY Governor should grab that money and build a tunnel to NJ?

[russell]

It is an interesting question, do people want to work in NY? Would they rather have a job in Camden?

Some probably do, some probably don't. At the moment, it appears that more do want to work in NYC than can conveniently do so.

It's true that one solution is to spread the opportunities for employment around a little more. That will take other kinds of infrastructure. There's a reason so much of the work is in NYC now.

At the moment, enough folks are voting with their feet to work in NYC that the existing means for getting them there are overstretched.

To what degree do we want to enable them to continue doing what they're already doing?

To what degree do we want to "engineer" their choices in another direction?

Whichever end of the tube we push the toothpaste to, we're making a deliberate choice.

The other option is simply to do nothing, in which case events will play out in whatever way they happen to, without any particular direction coming from the public sector.

Sometimes that works, sometimes it doesn't. Mostly it works for some folks and not for others. Also, mostly it just moves the underlying situation someplace else.

For reference, please see "Phoenix AZ".

[Dianne]

The criticism of not building the rail seems to accept the underlying assumption that encouraging people to get to NYC for work is the optimum use of those dollars.

Excuse me? I live in NYC and work in NJ. I end up paying income taxes to both states. Of course, the NJ legislature is considering a bill that would require everyone working in the NJ state hospital system to live in NJ. If it passes, more of us will be looking for new jobs than new places to live.

[Nate]

"None of which would justify the expense of the tunnel."

So your approach is to try and pick apart the justifications for the tunnel into several different ones, and say that none of those individually justifies the tunnel, even though in sum, they very well could? (e.g. jobs, recreation trips, easier cargo transit, reduced congestion, increased property values, etc...)

That's no way to run a railroad.

[Dianne]

Totally anecdotally, I suspect that the problem with Christie is a disconnect between his belief about why he was elected and the real reason why he was elected. The real reason he was elected is that he was not Corzine. But he thinks he was elected because everyone loved his agenda. So he tries to act on his no taxes, no services agenda and is shocked, just shocked when people don't agree with his every last little act. Not to mention when his acts have consequences that he didn't forsee...like having to pay back the feds when he fails to keep his contracts with them.

[Marty]

"This is the sort of zero-sum thinking that leads to poor economic analysis."

I sort of ignored this, but it is not accurate. Deciding how to spend 14b is not a zero sum game. You can spend it for A, B or not at all and each has outcomes. At the end you have, at least, 14b or zero.

Then you decide if you can spend less, more or the same for a preferred outcome. I'm not sure how saying Christie has options on how, and whether, to spend the money becomes a zero sum game.

[Carleton Wu]

So he tries to act on his no taxes, no services agenda and is shocked, just shocked when people don't agree with his every last little act.

Once again, this move is supported by a thin majority of voters (in the one poll Ive seen). Not to say it was wise or that the same people might change their minds later, but it's not the case that he's defying public opinion to make this move.

But the Governor of NJ has options in building jobs for people in his state and most of the comments assume that getting more people to NY is the goal.

The thing is, as people have been pointing out, many of the people who would use the tunnel *already* work in NYC. Im sure that convenience might shift the numbers, but it's not the case that the tunnel is being built with the hopes of generating those jobs.
So it's a question of whether their current transport is sufficient (and will continue to be sufficient in the future). Just as so much of our government-provided or -subsidized rural infrastructure projects (power, postal service, phones, etc) wasn't based on *moving* people to rural areas, but providing services to people already there.

In my view, big long-term infrastructure projects usually work out pretty well, even if they're over budget. The tunnel, if built, could easily be serving the NY-NJ area a century or two from now; that's a long time to pay off any investment, even with significant cost overruns. I don't think there are many projects like this that we'd look at in retrospect 20-30 years on and call bad investments.

If anything, I think we need more money spend on such projects; that's not an argument for this project in particular, I doubt I want to dig into the details to that extent.

[Marty]

"I don't think there are many projects like this that we'd look at in retrospect 20-30 years on and call bad investments."

Well, not 20 or 30 years, but lots of people wonder what Mass got for the Big Dig except debt.

[Jacob Davies]

Even if the cost to NJ rose to be $8bn or $10bn it would still be a reasonable price.

$10bn just isn't that much money. It's 2% of one year of New Jersey's GSP, and it doesn't have to be paid back all at once (and borrowing it right now is incredibly cheap). It would only have to boost NJ's economic growth rate by a tiny fraction of a percent to generate enough revenue to pay for itself - because it would boost growth for a hundred years after being built - and all the analysis says that it would do so.

I really don't know what is wrong with people. I find myself saying that a lot lately, though.

[Eric Martin]

Not only boost economic growth, but increase toll-based revenue due to increased traffic from AND to New Jersey.

As in, more New Yorkers headed to the Garden State for some RR, spending money, incurring tolls, etc.

[Marty]

"$10bn just isn't that much money."

And there is the problem, 10B is a lot of money

[Carleton Wu]

I'm not sure how saying Christie has options on how, and whether, to spend the money becomes a zero sum game.

I think the point was that a transport link enriches both ends of the link- subsidizing moving jobs to NJ or attracting jobs that otherwise would've gone to NYC is pretty much zero-sum.

[Dianne]

As in, more New Yorkers headed to the Garden State for some RR, spending money, incurring tolls, etc.

Whereas canceling the project, which puts NY out, encourages New Yorkers to think, "Stupid Jerseyites'll do anything for a quick tax break. Let's head to Connecticut for vacation instead." Not that people won't forget in a couple of years, but if they have trouble getting to NJ they may remember all the nice parts of CT and upstate and solve the problem of excess tunnel traffic by just not spending much time in NJ.

[Slartibartfast]

$10bn just isn't that much money.

You're kidding, right? It's something like 40% of NJ's annual revenues, these days.

Even if the cost to NJ rose to be $8bn or $10bn it would still be a reasonable price.

What's your threshold of unreasonability, and why do you think that your threshold should hold in this particular situation?

[Marty]

"Let's head to Connecticut for vacation instead."

Yeah, because the traffic in CT is so much better.

[Dianne]

Yeah, because the traffic in CT is so much better.

Actually, the access to upstate and then to CT is somewhat better, at least in my limited experience. True, the roads are scarier once you're there since they're all 100 year old highways whose routes seem to be based on old cow trails, but getting out of NYC via the Bronx is easier than via any tunnel to NJ.

[Jacob Davies]

Slartibartfast: What's your threshold of unreasonability, and why do you think that your threshold should hold in this particular situation?

My threshold would be based on the economic benefits that a project like this would be likely to bring. I have only the most glancing exposure to the numbers, but enough to say that $10bn is not unreasonable (you'd have to believe that the boost to state GSP would be virtually non-existent for $10bn to seem unreasonably large). The payback on a project like this is almost certainly an order of magnitude or more larger than the cost just in tax revenue (in NPV), not to mention the value that accrues to private property owners and the surplus utility that accrues for free to people who don't have to wait in traffic or on a train for as long.

As for "why my threshold should hold", come on. I'm offering my opinion, I'm not demanding to personally be allowed to set transit policy for the state of New Jersey.

There are projects I don't think are a very good idea. There's a BART connector to Oakland Airport which would be very convenient for me but is disastrously overpriced. I don't think they should build it. I don't think they should have built a fancy new east span for the Bay Bridge, they should have just retrofitted the cantilever/truss structure or replaced it with a simple causeway.

But big rail projects are expensive and it's stupid to pretend you can either do without them or do them at substantially lower cost. Yes, the process for contracting big projects in this country is pretty broken all over, since contractors clearly find it easy to underbid and then jack up the costs after work starts. That doesn't necessarily mean it's possible to do it significantly more cheaply, though.

[Slartibartfast]

As for "why my threshold should hold", come on. I'm offering my opinion.

Just as I'm offering mine, Jacob. You seem to think you know better than the governor of New Jersey; I'm simply asking you to expound a little on why you think your opinion is better than his.

If you don't have a good answer, that in itself is an answer to the question, although a less satisfying one.

[hairshirthedonist]

You seem to think you know better than the governor of New Jersey; I'm simply asking you to expound a little on why you think your opinion is better than his.

From what I've seen Jacob has given more of an argument for his position than Christie has for his. I think the governor should expound on his opinion beyond, "We can't afford it." It's a cost analysis, with no benefit analysis. Jacob is incorporating cost into his argument, rather than simply considering the benefits alone.

What makes you think the governor's opinion is better than Jacobs, Slart? (And why do you think your opinion of Jacob's opinion versus the governor's is better than mine, if we want to take this thing further along? Maybe we can reach infinite meta.)

[Slartibartfast]

What makes you think the governor's opinion is better than Jacobs, Slart?

What makes you think that I think that?

;p

[hairshirthedonist]

I'm a mind reader, of course. That's why I participate in blog discussions. I don't think you think that. I know you think that. And I know what I think. And I think that what I know that I think is true, which means that I think I know what I know. So I think I know that I know that you think that, which is even better than thinking that I know that I think that you think that.

[russell]

You're scaring me, dude.

[Carleton Wu]

What's your threshold of unreasonability, and why do you think that your threshold should hold in this particular situation?

Well, I like the first part of the question better than the second: yeah, we can no more toss potential benefit out of the window than we can potential cost.
But big projects like this cost billions, and they usually look good in retrospect (nb afaict the better results come from megaprojects that meet existing demand rather than ones that speculate about releasing pent-up demand- which argues in favor of this project). Im not arguing that this would *necessarily* look good in retrospect, but for NJ even if it does go to 10b, with over 7b coming from the Port Authority and various Federal programs it'd still be a very good deal, it seems. So if it overruns considerably and costs NJ 4b or so, it still looks like a pretty good deal for them.
Plus, there's the considerable time and money already sunk into this- it's been going forward since 1995. All that sunk time and money is lost, and if NJ hopes to mitigate the overloaded mass transit network to NYC it will now be decades before another proposal can be drawn up, evaluated, implemented, etc.

All those factors (need, other funding, maturity of project) argue to me for NJ going forward. Unless they've got some alternative plan, or some intel that the project is going to run to 20b, or that it's been terribly designed and will not produce the desired results.

Now Slarti, I admit those are all rules of thumb judgments rather than cost- or benefit-based analysis. But I find it pretty compelling, especially in light of the governor's failure to produce a rationale other than "this costs a lot of money", something that didn't lead to the canceling of the project although it was certainly known since 1995.

[russell]

Plan B: take the 7 from 34th to Secaucus. Or, you know, vice versa.

Cheaper, accomplishes the same goal, puts some NYC money in the deal, you get some of the infrastructure "for free", which is to say, it's already built.

Hope Christie goes for it. It is a royal PITA to commute in NYC, another train from Jersey to Manhattan would be very helpful.

[Slartibartfast]

Thanks for that, russell. I'm eager to see how that turns out.