ARC tunnel project overruns would have been New Jersey’s responsibility alone, senator says

Backed by billions of dollars from federal and state sources, the canceled Hudson River rail tunnel project had been praised by supporters for its potential to ease congestion and create thousands of jobs.

But had the project exceeded its estimated budget, New Jersey alone would have had to cover the additional bills, state Sen. Jennifer Beck says.

About 18 months after Gov. Chris Christie terminated the Access to the Region’s Core project — better known as the ARC project — the proposal returned to the headlines last week with the release of an report on the project’s history.

In an April 11 interview on NJToday, Beck (R-Monmouth) pointed out how federal officials estimated the cost of the project, which would have linked Secaucus to a new rail station deep under West 34th Street in Manhattan, could climb to between $10 billion and $13 billion.

"The project was originally estimated to be $8.7 billion, and New Jersey alone was on the hook for all overruns," she said.

PolitiFact New Jersey discovered Beck is right. Based on a federal rule for such projects, New Jersey would have been responsible for cost increases beyond the $8.7 billion budget, a spokesman for the U.S. Department of Transportation said.

Beck said it didn’t seem equitable that New York officials wouldn’t contribute anything.

"It didn’t make sense," Beck told us. "It really is a regional project."

Let’s review some of the history behind the ARC project.

With NJ Transit as the lead agency, New Jersey was to contribute $2.7 billion toward the $8.7 billion project cost. The Port Authority of New York and New Jersey was to contribute $3 billion, with the remaining $3 billion coming from a federal transit program.

But in their latest estimate before the project was canceled, federal officials said the cost could increase to between about $9.8 billion and roughly $12.4 billion.

After Christie first announced plans to cancel the project, federal officials presented a few options to fund the remaining costs, including federal loans and a public-private partnership to secure additional funding.

But on Oct. 27, 2010, Christie went ahead with terminating what was the largest planned public works project in the nation, citing potential cost increases and the state’s fiscal climate.

Due to the project’s cancellation, there was no final agreement on the responsibility for cost growth, according to a recent investigative report from the U.S. Government Accountability Office.

Still, New Jersey would have been responsible for cost increases beyond the $8.7 billion, DOT spokesman Justin Nisly told us. Nisly said in an e-mail that "it is important to note that we were actively working with NJ Transit to mitigate any potential costs when they decided to walk away from the project."

According to Nisly, the basis for that responsibility is a 2006 federal rule that includes the following phrase: "Once the project is approved into final design, any increase in project costs will be borne by the sponsoring agency and its non-section 5309 New Starts funding partners."

That rule goes on to say that "any cost increase later in project development is the sole responsibility of the project sponsor."

Our ruling

In an April 11 interview on NJToday, Beck claimed that beyond the $8.7 billion budget for the ARC project, "New Jersey alone was on the hook for all overruns."

Based on a federal rule governing such projects, the senator’s claim is accurate. As a DOT spokesman confirmed, New Jersey would have been responsible for cost increases beyond the $8.7 billion budget.

We rate the statement True.

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