Christie Rejects Paying U.S. $271 Million for Tunnel

Wednesday, 26 Jan 2011 06:29 PM

(Adds comment from U.S. agency in eighth paragraph.)

Jan. 26 (Bloomberg) -- New Jersey Governor Chris Christie’s administration rejected a demand from the federal government that the state repay $271 million of U.S. funds spent on a commuter-rail tunnel he canceled.

Repayment isn’t required because the project couldn’t proceed for reasons beyond the state’s control, New Jersey Transit said in response to the U.S. demand, made in November. In addition, the Federal Transit Administration is seeking “far more” than was advanced under the New Starts transit-funding program, the state said.

“There is no legal basis to require NJT to repay any of the funds in question,” New Jersey Transit’s lawyers said in documents sent to federal officials yesterday. “Repaying any amount would be deeply counterproductive and harmful to the citizens and taxpayers” in the state, they said.

Christie, a first-term Republican, killed the 8.8-mile (14- kilometer) $8.7 billion tunnel under the Hudson River on Oct. 27 because he said the state couldn’t afford $5 billion in potential extra costs. The tunnel was projected to double commuter capacity between New Jersey and Manhattan.

The federal government and Port Authority of New York and New Jersey were scheduled to pay $3 billion each for the Access to the Region’s Core tunnel. New Jersey was to cover the remaining $2.7 billion plus any additional expenses.

Cost Overruns

“Governor Christie canceled the project due to multibillion dollar cost-overrun projections for a project that previously had an agreed-upon price tag of $8.7 billion,” Michael Drewniak, a Christie spokesman, said today in an e-mail. “Billions in those cost overruns would have been borne by New Jersey, something unforeseen and entirely out of the state’s control, and a burden Governor Christie was not willing to place exclusively on New Jersey and its taxpayers.”

A section of U.S. law governing the transit administration dictates that if a recipient of federal money cancels a project for a reason within its control, it must reimburse the agency for all payments made toward the project plus interest, according to the state documents.

“The FTA is currently reviewing New Jersey Transit’s response and will make a decision that is in accordance with the law,” said Olivia Alair, a U.S. Transportation Department spokeswoman in Washington.

Lawyers Hired

Christie’s administration hired Washington-based law firm Patton Boggs LLC in December to contest the repayment demand. Of the $271 million, only $51.5 million represents New Starts funds, according to the state’s response.

Though the project was canceled, “the challenge of meeting growing ridership demand still exists,” state lawyers said.

Work that was completed on the tunnel project before it was killed “will be of substantial value to any project in this central and vital transportation corridor,” the lawyers said. They cited the possible extension of New York City’s No. 7 subway line under the Hudson to New Jersey as an example.

--With assistance from Angela Greiling Keane in Washington. Editors: Jerry Hart, Ted Bunker.

To contact the reporter on this story: Stacie Servetah in Trenton, New Jersey, at sbabula@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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