New Jersey Governor Cancels Hudson River Tunnel Project

Published October 28, 2010

New Jersey Governor Chris Christie (R) sent shockwaves through the transportation industry when he cancelled the under-construction ARC (Access to the Regional Core) rail tunnel under the Hudson River from New Jersey to New York (Manhattan).

Christie accepted the Access the Regional Core (ARC) Executive Committee’s recommendation to “pull the plug” on the expensive project because of cost overruns.

“I cannot place upon the citizens of the State of New Jersey an open-ended letter of credit,” Christie said in announcing his decision.

The project was to have cost $8.7 billion but could have escalated to $14 billion, according to the governor’s office. New Jersey taxpayers would have had to absorb all cost overruns.

About two weeks before announcing his final decision on October 27, Christie indicated he would kill the project when he said: “Considering the unprecedented fiscal and economic climate our State is facing, it is completely unthinkable to borrow more money and leave taxpayers responsible for billions in cost overruns. The ARC project costs far more than New Jersey taxpayers can afford, and the only prudent move is to end this project.”

However, at that time Christie left some wiggle room. He said he would consider “options to potentially salvage” the project based on options (not made public) offered by U.S. Transportation Secretary Ray LaHood.

Intense Reaction
Yet supporters of the tunnel project were unanimous in their condemnation of Christie’s move, from Paul Krugman of The New York Times to the Regional Plan Association.

New Jersey Senator Frank Lautenberg (D) referred to a meeting between LaHood and Christie and told reporters, “The Secretary was clear with Gov. Christie: If this tunnel doesn’t get built, the three billion dollars [of federal funding] will go to other states. We can’t allow that to happen.”

Here are a few of the issues that Christie and other state officials probably considered before reaching the final decision to end the tunnel project:

1. Need Was Exaggerated.
The new rail tunnel is to serve a purported increase in commuter rail ridership to Manhattan jobs. The project’s Final Environmental Impact Statement says midtown Manhattan’s employment will grow from a current 2.6 million by another 500,000 by 2030.

This is unlikely. Manhattan’s entire employment (not just Midtown) peaked at 2.4 million in 2008. One might expect the planners could have gotten something so simple correct. Manhattan employment remains below 2001 levels and never rose by more than 35,000 in any year, even at the peak of the last boom (annual figure, from 2001).

The consultants also are projecting a 1.6 million population increase west of the Hudson River (New Jersey suburbs along with the New York counties of Rockland and Orange) by 2030. However, these areas are more likely to grow by only 1.1 million, based upon official state projections (This figure is derived using New York 2030 projections and New Jersey 2025 projections, increased by the 2020-2025 growth rate to project 2030 population.)

The questionable population and employment projections that reveal the “need” for the new tunnel may have been grossly overstated.

2. Exporting Jobs to New York.
Why should New Jersey pay to build more capacity so that its people can work across the state line? In fact only a small share of New Jersey commuters travel to Manhattan for work. Even in the New Jersey counties that border New York, only 12 percent of commuters work in Manhattan. In the other New York counties in the metropolitan area, the figure drops to 5 percent.

New Jersey depends on New Jersey far more than it does New York. New Jersey has developed successful new office complexes in Jersey City, New Brunswick, along the I-287 Belt Route and elsewhere.

Perhaps New Jersey should seek to minimize work trip lengths and encourage the next 500,000 jobs to be created at home in the Garden State rather than in New York.
3. Costs Could Rise Even Higher.
The tunnel could easily climb in cost beyond the now-feared $14 billion. Boston’s Big Dig cost escalation continued almost to the project’s opening. (The Big Dig rerouted Interstate 93 and other major thoroughfares underground. With interest costs, it is projected to cost $22 billion. The initial estimates, adjusted for inflation, were $6 billion.)

4. Huge Cost of Environmental Benefits.
The reduction of greenhouse gas (GHG) emissions is raised as a benefit of the tunnel. But at what cost? Each of the 70,000 annual tons of greenhouse gas emissions removed would cost $16,000. The present market price for greenhouse gases is $20 per ton. New Jersey could accomplish the same objective for just $1.4 million annually.

Shot Across Bow
It might be better for New Jersey to have a $600 million tunnel to nowhere than a $14 billion, $20 billion, or $25 billion tunnel that may not really be needed.
Stopping the project could be a shot across the bow of an international vendor and consulting engineering community that has routinely low-balled costs only to jack them up later, confident that no project would be canceled once started.

Wendell Cox ([email protected]) is a visiting professor at the Conservatoire National des Arts et Metiers in Paris and the author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life. A version of this article first appeared at Used with permission.