New York Governor Andrew Cuomo is upset that the Trump administration doesn’t want to fund new tunnels under the Hudson River. Cuomo sent an angry letter to Trump earlier this week accusing the president of being prejudiced against New York and New Jersey because they didn’t vote for him. Cuomo claims the tunnels should be federally funded because “the Northeast is home to 17 percent of the entire population and contributes 20 percent to the national domestic product.”
But population and regional populations aren’t among the criteria Congress established for federal funding of transit infrastructure. Instead, one of the most important criteria that the Department of Transportation is required to use is whether the project is “supported by an acceptable degree of local financial commitment.” Based on the lack of local support, the Federal Transit Administration’s 2020 New Starts funding recommendations gave the project a “medium-low” rating, and under federal law, that makes it ineligible for funding. Not counting some small starts (such as the downtown Los Angeles streetcar), the only other project to get a medium-low rating was the Portal North Bridge, which is also part of the Hudson Gateway megaproject.
Cuomo argues that Trump has ignored “the financial commitments made by New York and New Jersey.” The FTA’s profile of the project reveals just what those commitments are.
First, the states are asking the federal government to put up $6.7 billion, or 49 percent of the projected $13.6 billion cost. Second, they want the federal government to make them a loan of $2.3 billion that will be “repaid with PANYNJ [Port Authority of New York and New Jersey] funds.” Third, they want another federal loan of $2.0 billion that will be “repaid with project revenues.” These two loans total to 32 percent of the projected costs.
Another billion dollars (7%) is supposed to come from “unspecified private capital sources” who will be “repaid with project revenues.” Further, $1.4 billion (10%) would come from “GDC funds” derived from “project revenues.” GDC is the Gateway Development Corporation, which consists of Amtrak, New Jersey Transit, the Port Authority, and the U.S. Department of Transportation. It currently earns no revenues of its own, so it will have a hard time paying $1.6 billion in construction costs. Finally, $178 million, or 1.3 percent of the total, would come from the Port Authority of New York and New Jersey.
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In short, New York and New Jersey are nobly committing themselves to cover 1.3 percent of the cost of the project, while they are relying on the federal government to fund a mere 81 percent. Of course, some of that 81 percent would be loans, but the states may not be obligated to repay those loans unless the project earns sufficient revenues to do so. The private capital sources who are supposed to put up 7 percent are almost purely imaginary, and even if they existed they would demand that they be repaid out of project revenues before the federal government. But before repaying anyone, these mythical project revenues are supposed to cover another 12 percent of the cost.
Pardon me if I sound naive, but what project revenues are we talking about? Amtrak, New Jersey Transit, and the Port Authority are all money-losing operations. Amtrak claims to make money in the Northeast Corridor, but that’s only because it ignores depreciation and the corridor’s $51 billion infrastructure backlog, only part of which is the Hudson Tunnels. New Jersey Transit trains don’t even earn enough fares to cover 60 percent of their operating costs, much less any to pay for maintenance or capital costs.
In other words, Cuomo is asking Trump to have federal taxpayers pay nearly all the up-front costs and to take nearly all the risks of this project. What if self-driving buses put New Jersey Transit and Amtrak out of business — or at least reduce their ridership enough that they have no surplus revenues to repay federal loans? What if many of the firms now located in Manhattan realize that the subway system is never going to be repaired and decide to move away? Who is going to pay for the inevitable cost overruns? New York and New Jersey are clearly trying to get these tunnels while putting up as little of their own money as possible.
The FTA has long had a policy that applicants for transit capital funds must put up half the cost in matching funds, and federal loans don’t count as matching funds. Following this policy, it rated the Hudson Tunnels “medium low.” Congress made the rules, so Cuomo is complaining to the wrong party when he writes Trump, as the Department of Transportation just followed Congressional direction when it gave the project a medium-low rating. If anything, the DOT was generous: the project really deserves a “low” rating.
Why do states at first brag about how much they contribute to GDP but beg for federal funding. It’s like saying you’re the worlds strongest man but skirt any request to lift something……….
If New York and New Jersey are so rich than somewhere there’s a source of funding that doesn’t require the two to look like beggars. The real reason NJ is so fixated on this issue is because their wealth is so NYC dependent and vice versa. Failure of this tunnel hurt New Jersey far more than New York? Failure of this tunnel might even boost New York real estate prices because all those people who live in NJ and commute to NYC would either have to quit their jobs or move into NY instead. On the opposite end of the spectrum NYC is dependent on NJ, Many warehouses, bakeries, electronic exchanges, etc. critical to day-to-day life in NYC are located West of the Hudson as is the main port serving NYC (Port of Elizabeth; the port in Brooklyn has since been converted to luxury condos and more of Manhattans waterfront become luxury housing.
Whats going on there is New Jersey runs the risk of becoming a relief valve for the economic activities of New York and that eventually, banking and financial jobs will transition from the Big Apple to Jwwerzy. The REAL STORY is that New York City is teetering the edge of fiscal oblivion. Financial experts predict that there are already signs the city is headed for financial disaster, as many individuals and businesses are leaving the city for lower tax areas and city government spending is at an all-time high. The last time the city came close to filing for bankruptcy was in 1975 when former President Gerald Ford refused to give the city a bailout package to settle its debt. Bringing up Trump is merely taking potshots; had Obama refused they’d take it with a smile. In the 70’s, NYC nearly went bankrupt because of a stagnant economy, high taxes, high living expenses and the mass exodus of the middle class to the suburbs. Now, with the middle class decimated and having fled the city all together, the only people in NYC are either the very rich and the poor to lower middle class. Now DeBalsio is squeezing the rich even more, driving them and their businesses out. Instead of curbing spending; de Blasio is adding $3 billion in spending to the current $89.2 billion budget, and spending money at a rate that is three times the rate of inflation.
Too bad for NYC that they account for most of the income taxes in the city now. All the precursors above are still present……taxes, high expenses and exodus of people with money. Nor will Cuomo come to the cities rescue, who is trying to address a $2.3 billion state budget deficit by using auditors to bill wealthy residents fleeing the state for lower-tax regions.
There is always a Day of Reckoning for Leftist policies. It looks like that day is near for New York City. I’m sure it’ll only be a matter of time before that horse toothed bartender with the economics degree will formulate a spectacular solution. Or just keep dreaming until everyone with money has fled.
@Lazyreader
I generally hear those states complain that they send more money to the federal government than they get back in domestic spending, especially when those states want federal money to help pay for projects then you have people act like those residents don’t pay federal taxes and say those “giver” states should just pay for it themselves.
https://www.politifact.com/new-york/statements/2018/nov/02/nathan-mcmurray/new-york-giver-state-federal-treasury/
Hmmm. Let’s parse this out. Cuomo believes that wealthier individuals should pay proportionately more taxes, regardless of the direct benefits they receive. But if you consider them collectively as a “state”, then he believes that wealthier people should pay taxes only in equal measure to the direct benefits they receive.
It’s an interesting philosophical juxtaposition . . .
This. With all those ‘project revenues’ rolling in it’s a surprise that they’re asking for any federal funding at all. And with a such a large amount of economic output, surely they can tax the local citizenry a bit to raise any other necessary revenues. After all, this is a productive and beneficial project, is it not?
Cuomo and DeBlasio seem to be sanguine about raising tolls (yet again) on drivers and their passengers crossing the Hudson into NYC in order to raise revenues. Why not do the same with train riders? “Fair share”, anyone? Equity?
@pokep
You do know that the state of New York is diverse and doesn’t just have wealthy residents?
Most federal spending is mandatory, Defense and Entitlements, the more welfare generations and old people the more federal cash tends to go in a given direction.
I’m all for defense cuts and welfare reform…… THere’s SHIT loads of things on the federal budget that can be eliminated and return the money to the taxpayer or BETTER YET pay off debts. With less money New York cant Whine about their contributions when more of the money is inhouse……if New York and JERZEE STILL cant fix the Hudson tunnels it’s not a case of “We don’t have the money” It’s the old fashioned case of Failure to handle finances. New York and Jersey are like many states, it doesn’t matter if they have more cash they’ll blow thru it lickity split.
The fact is the HUdson tunnels and the NYC subway as the antiplanner noted, the artificial influence that make New York so dense…It’s financially unsustainable density and sooner or later they’ll either restructure or scale down. New York City will be the first World Class city to depopulate at some point.
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Whats going on there is New Jersey runs the risk of becoming a relief valve for the economic activities of New York and that eventually, banking and financial jobs will transition from the Big Apple to Jwwerzy.
” ~Lazy Reader
Banking and financial jobs have been moving from NYC for generations. Here’s one from Joel Kotkin in 2013 on it.
https://www.forbes.com/sites/joelkotkin/2013/05/31/the-cities-taking-finance-jobs-from-wall-street/#43b3a56d5297
The largest traditional financial centers appear to be losing their edge. New York, home to by far the largest banking sector with 436,000 jobs, places a meager 52nd on our list of the cities winning the most new jobs in the sector. Big money may still be minted in Gotham, but jobs are not. Since 2007 financial employment in the Big Apple is down 7.4%.
The next four biggest financial centers are also doing poorly. San Francisco-San Mateo ranks 37th – remarkably poor given that San Francisco placed first overall on our 2013 list of The Best Cities For Jobs. Meanwhile Boston-Cambridge-Quincy ranks 44th (despite notching a strong 17th place ranking on our overall list), Los Angeles-Long Beach is 47th, and Chicago-Joliet-Naperville is 57th.
So what gives here? A key factor is cost-cutting. As firms look to move back office and some sales functions to less expensive locales, the traditional financial centers are losing out. Between 2007 and 2012, New York, Boston, Los Angeles, Chicago and San Francisco lost a combined 40,000 finance jobs.
In addition to lower rents in the cities that rank highly on our list, workers come cheaper, too: the average annual salary for securities industry jobs in St. Louis is $102,000, according to the Wall Street Journal, compared with $343,000 in New York.