Tuesday, November 30, 2010

Feds Come Calling On New Jersey For ARC Tunnel Money State Doesn't Have

This is a rather rich and ironic situation. New Jersey Governor Chris Christie killed the ARC tunnel project because of anticipated cost overruns in excess of $1 billion (and which could have been as much as $5 billion) because the state couldn't afford the overruns. The federal government attempted to salvage the project by telling New Jersey that it could further mortgage its future and take on still more debt rather than the federal governmnet assuming the risk of overruns itself - or calling on New York to kick in funding for the project.

So, the project died and certain expenditures already spent are now being claimed by the feds for reimbursement. The feds want $271 million back from New Jersey and have given the state a Sopranos-style deadline to make the payment.

New Jersey doesn't have $271 million to reimburse the feds. Its budget is already maxed out and stressed to the limits but the feds don't care one bit about New Jersey taxpayers. New Jersey taxpayers were going to be on the hook for overruns. So, the feds would rather see the state hike taxes further to pay off the initial sunk costs - like real estate acquisitions, planning, and other expenses.

Moreover, if work was already done then the money can go towards any future project that may end up utilizing the planning and acquisitions. Certain funds weren't spent, so were excluded from the calculation that New Jersey owes $271 million. The federal government can much easier write off the costs than the state - it was stimulus for the construction firms that handled the initial phases of preparing a tunnel right of way for inevitable use down the line.

Instead, this is the federal government's passive-aggressive way of trying to get back at Gov. Christie and his fiscal prudence in killing a project that was going to be a massive hit for New Jersey taxpayers who are already the most heavily burdened in the nation.

New Jersey's congressional delegation doesn't seem to be in a hurry to deal with this matter either - hoping that the situation causes political discomfort to the Governor. Instead of making sure that the money goes to a better alternative - the 7 line expansion that would be able to utilize much of the infrastructure and same right of way and at a fraction of the cost, they're hoping to make a mess of the state budget because Sen. Lautenberg and Gov. Christie don't get along.

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