Blind to the Future

infrastructure

Blind to the Future

Chris Christie and the Republican default on public investment. 

February 1, 2015

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This article appears in the Winter 2015 issue of The American Prospect magazine. Subscribe here.

Some day not long from now, if you are traveling by rail in the Northeast, you may be stuck in a train waiting to enter a tunnel under the Hudson River between New York and New Jersey. Perhaps your grumbling seatmate curses Amtrak, New Jersey Transit, or politicians generally. But one leader in particular will deserve to be singled out on such occasions: Chris Christie, who, as governor of New Jersey in 2010, blocked a joint federal-state project to build a new passenger rail tunnel.

Today, few outside the New York metropolitan area know much about Governor Christie’s decision to veto the Access to the Region’s Core plan (ARC), a $9.8 billion project in the works for nearly 20 years that would have doubled cross-Hudson rail capacity, with a projected 2018 completion date. Christie gained notoriety for one Hudson River tie-up in September 2013, when his aides and allies closed traffic lanes at the George Washington Bridge as political retribution against a local Democratic official. But compared to “Bridgegate,” as that twisted tale came to be known, Christie’s veto of the new rail tunnel is a far more serious scandal. For the sake of short-term political gain, Christie sacrificed the long-term interests of his state and the nation. The story of the blocked tunnel is also evidence of a wider problem: Republican leaders’ refusal to deal with failing infrastructure for fear of raising taxes and antagonizing anti-tax groups on the right.

Transportation authorities have long agreed on the need for new rail tunnels under the Hudson River. Built more than 100 years ago, the two existing tunnels are inadequate to handle projected ridership growth and have suffered serious deterioration. Tunnel traffic already operates at 95 percent capacity during morning rush hour, with a train entering Midtown Manhattan from New Jersey every two minutes. As a result, the tunnels are the biggest choke point along the Northeast Corridor between Boston and Washington, D.C., limiting the potential for passenger rail to expand as the region’s population grows and congestion on the highways increases.

The tunnels’ age and deterioration also pose significant risks of disrupted travel in the near future. In October, Amtrak reported that the seawater that poured into the tunnels during Hurricane Sandy contained chlorides and sulfates that significantly damaged the concrete bench walls, the wiring in the signal, electrical, and mechanical systems, and the tracks themselves. Closing just one of the tunnels for repairs, however, would reduce tunnel traffic by a stunning 75 percent, since the remaining tunnel would have to accommodate trains running in both directions. No one knows for sure when that might become necessary.

Rail transportation between New Jersey and New York is vital to the economy of both states as well as the nation, not to mention the 160,000 passengers who ride trains through the tunnels every day, mostly to and from work. But in October 2010, without offering any alternative plan, Christie killed the ARC tunnel and used the $1.25 billion in state funds previously set aside for the project to plug a hole in his budget and avoid a tax increase. It was a move that served Christie’s presidential ambitions—as long as the public doesn’t understand just what he did and why it ought to disqualify him from national leadership.

The ARC of the Past

Construction of the ARC tunnel had already begun when Christie was elected governor in November 2009. The groundbreaking five months earlier was a rare moment of elation for transit advocates and policymakers who had been pushing for the project for nearly two decades. At the groundbreaking ceremony, Peter Rogoff, who had just been confirmed to lead the Federal Transit Administration (FTA), contrasted ARC with projects that previously had been “either debated to death or simply ignored.”

The new ARC tunnel would allow an additional 25 trains an hour to enter New York City and was projected to increase daily passenger trips between New Jersey and New York to 254,000. The tunnel’s economic benefits had long been documented. According to the Government Accountability Office, the project would have generated 44,000 permanent jobs as well as 5,700 construction jobs. Easy access to New York City, the region’s commercial hub, is critical to New Jersey’s economic growth. The Regional Plan Association, an urban research and advocacy organization for the New York metropolitan area, estimated that increased rail capacity would raise the value of homes within two miles of New Jersey train stations by a total of $18 billion, reducing pressure to raise property tax rates.

The costs of the ARC tunnel were to be split three ways. The federal government and the Port Authority of New York and New Jersey would each contribute $3 billion. (Jointly controlled by the two states, the Port Authority is a self-sustaining public authority, with revenues from its bridges, tunnels, airports, and marine terminals.) New Jersey would pay $2.7 billion since the tunnels were largely for New Jersey Transit riders and the state would reap sizable economic benefits. The federal contribution marked the largest funding commitment ever pledged for a transit project in the nation’s history.

When he became governor, Christie faced a choice. On the campaign trail, he had supported the ARC project and pledged to reduce taxes. But as governor, he would be unable to do both.

New Jersey’s dedicated Transportation Trust Fund was broke. The fund was designed in 1984 to finance roads, bridges, and other infrastructure projects by floating bonds that would be paid off with the proceeds of the state’s gasoline tax, tolls, and other earmarked revenue. But in 2010, New Jersey’s gas tax hadn’t been increased since the 1980s. At 14.5 cents per gallon, it was (and is) by far the lowest in the region. Pennsylvania’s gas tax, in contrast, is 41.8 cents per gallon, while New York’s is 50.5 cents. In 2009, New Jersey’s gas tax was 47th in a ranking from highest to lowest among the 50 states. (It is now 49th.)

Many had expected New Jersey to raise its gas tax to meet its obligations for the ARC tunnel and other transportation investments. But Christie was emphatically opposed. In January 2011, after killing the ARC tunnel, he declared, “With rising gas prices right before us, the idea of raising taxes in this economy is something that this administration simply will not do under any circumstances.”

At the time he killed the tunnel, Christie claimed that the project would force New Jerseyans to pay $2 billion to $5 billion in cost overruns. According to a 2012 study by the Government Accountability Office (GAO), however, the projected range of costs for the ARC project was effectively unchanged between the time Christie took office and when he canceled it. Federal and state officials had long said that costs might run from $9.5 billion to $12.4 billion. If costs did rise toward the higher figure, the GAO report concluded, there was no evidence that New Jersey would have to shoulder those overruns alone.

Despite bipartisan support for the tunnel, some criticized the design, which would take New Jersey Transit riders to a new station under Macy’s department store in Herald Square, a short walk from midtown's Pennsylvania Station, the NJT trains' current destination. The plan had been a compromise negotiated with state and city officials in New York.

After Christie announced the cancellation, state and federal officials pressured him to reconsider, but he allowed only two weeks for further discussions. Federal representatives made several trips to New Jersey to try to work out a solution. Both New Jersey Transit and the FTA proposed ways to save the project, including trims to the project’s scope and alternative financing measures such as public-private partnerships. But Christie wouldn’t budge.

“Christie’s behavior was so rash, so hurried, and he was so unwilling to listen to other points of view, even from his own transit agency,” says Martin Robins, the initial ARC project director and director emeritus at the Alan M. Voorhees Transportation Center of Rutgers University.

Perhaps Christie was unwilling to listen because killing the ARC project had an additional advantage besides avoiding a gas tax increase. It also enabled him to redirect more than $3 billion that had already been put aside for the tunnel.

Diverting the Tunnel Money

In a commuter state like New Jersey, transportation spending is a hot political issue. Christie’s Democratic predecessor, Jon Corzine, had set off a political firestorm in 2008 when he tried to pass a plan that would have used dramatic increases in highway tolls over a 12-year period to cut the state’s $32 billion debt in half and pay for transportation improvements. Although the plan was defeated, Corzine did succeed in doubling tolls on the New Jersey Turnpike. While the revenue wasn’t enough to resolve the state’s long-term fiscal problems, it included $1.25 billion earmarked for the future ARC tunnel.

(AP Photo/Mel Evans)

A rusty metal wall seals up work on the ARC tunnel. Construction had already begun when Governor Christie killed the project in 2010.

Christie took that money as well as $1.8 billion from the Port Authority’s ARC capital fund and used the more than $3 billion in total to pay for road and bridge projects in the state. Critics insisted that Christie did not have the legal authority to redirect those Port Authority funds to state infrastructure repairs, but he did so anyway. (The Securities and Exchange Commission and the Manhattan District Attorney are currently investigating the legality of the diversion.)

Christie’s use of the funds was part of a larger pattern regarding the Port Authority. He crammed more than 60 political appointees into what had long been a highly professional, independent agency. It was through those appointees that lanes on the George Washington Bridge were closed in 2013 to send a message to a local official who refused to endorse Christie for re-election.

Under the Port Authority’s rules, a governor of New York could have refused to go along with the diversion of the tunnel money. But Christie’s move came just as Andrew Cuomo was elected governor. “By January 2011,” Robins said, “the first thing on Cuomo’s desk was Christie’s demand to the Port Authority that $1.8 billion be given to New Jersey for highway projects, and [Cuomo] approved it.” The ARC tunnel was generally considered a New Jersey project, and Cuomo may have wanted Christie’s cooperation with projects such as rebuilding the World Trade Center in New York.

But the diversion of the tunnel funds meant that besides forfeiting $3 billion in federal money, New Jersey would no longer have Port Authority funds or its own capital set aside for a future tunnel. As the editorial board of the Newark Star-Ledger—New Jersey’s largest-circulation newspaper—put it this past August:

If this were about fiscal responsibility, New Jersey’s tunnel money would have been set aside until a better project came along. Instead, commuters and taxpayers are left with no tunnel, and no tunnel fund—and no solid prospects for building either one.

The implications of Christie’s decision go well beyond New Jersey because passenger rail development along the Northeast Corridor depends on expanding the Hudson River tunnels. Peter C. Goldmark Jr., who served as executive director of the Port Authority from 1977 to 1985, points out that except for the interstate highway system, America’s transportation infrastructure lacks a “systemic” owner. “Each piece of an artery like the Northeast Corridor needs the political and often financial support of the states,” says Goldmark. “So any single governor has a huge ability to slow down or shut down a ‘piece’ of what is really a system.”

“ARC was a carefully crafted project over two decades, two governors, and two mayors,” observes Richard Leone, who was chairman of the Port Authority from 1990 to 1994. “It’s tough to get a package approved by the state, and then approved in Washington, and whether right or wrong, [Christie] should have had to make a case that it was really worth abandoning, or that he had a better use for the funds. [The money] was essentially used to fill potholes in the budgets.”

And to help propel Christie’s rise onto the national stage.

The National Politics of Public Investment

Cancelling the ARC tunnel had national political ramifications. The federal funds for the project came partly from the stimulus program that President Barack Obama and congressional Democrats had passed in response to the Great Recession. “The Obama administration really wanted [the ARC project] to go on,” a senior New York transportation official recalls. “It was the definition of ‘shovel ready,’ so basically the poster project of the American Recovery and Reinvestment Act.”

Christie’s cancellation of ARC earned him points with the Republican Party and conservative anti-tax groups. “I refuse to compromise my principles,” Christie boasted to prominent Republicans at a conference hosted by the George W. Bush Institute in 2012. “No matter how much the administration yells and screams, you have to say no. You have to look them right in the eye, no matter how much they try to vilify you for it, and you have to say no.”

Mike Proto, the New Jersey communications director for Americans for Prosperity, the Koch-funded anti-tax group, says that Christie’s decision to kill the ARC project “was one of the best he’s made.”

The political advantages for Christie from cancelling the ARC tunnel reflect a deeper malady: the role of anti-tax conservatives in blocking public investment to meet future needs or even to maintain vital systems in good repair.

Today, the basic elements of America’s transportation infrastructure—roads, tunnels, bridges, and passenger rail lines—are in abysmal shape. According to the American Society of Civil Engineers’ 2013 Report Card, one in nine of the nation’s 607,000 bridges are “structurally deficient.” The Federal Highway Administration estimates that annual investments of $20.5 billion would be needed to eliminate the nation’s bridge backlog by 2028—$8 billion more per year than is currently spent.

(AP Photo/Mary Altaffer)

From the Hudson River side of Manhattan, the Northeast Corridor tracks run under the James A. Farley Post Office building to New York City's Pennyslvania Station, the busiest train station in the United States. Under the proposed Gateway plan, the Farley Post Office would become part of a renovated Moynihan-Penn Station.

Infrastructure spending as a percentage of GDP, according to the Congressional Budget Office, has dropped from 3 percent prior to the 1980s to less than 2 percent today. In addition, average state gas taxes, the most important source of state transportation funding, have not kept up with inflation. The Institute on Taxation and Economic Policy, a nonpartisan state and federal tax policy think tank, found that, on average, a state’s gas tax rate has effectively fallen by 20 percent since the last time it was increased. 

Stagnant earnings for working-class and middle-income Americans have also undermined support for public spending and have created an opportunity for anti-tax groups to gain a greater following. Yet Americans were poorer during the 1930s than they are today, and the country still undertook public works on a massive scale. In fact, as the economic historian Alexander Field argues in his book A Great Leap Forward: 1930s Depression and U.S. Economic Growth, the infrastructure investments during that period had an enormous payoff in higher growth in subsequent decades.

Public investment has a long history in the United States, dating back to New York State’s construction of the Erie Canal (opened in 1825), federal land grants to support the transcontinental railroad (a project of the Republican Party in the 1860s), and federal financing of the interstate highway system (created under a Republican president, Dwight Eisenhower, in the 1950s). Until relatively recently, public investment in transportation has been an area of bipartisan agreement. Especially in the Northeast, many Republican officials in the tradition of former New York Governor Nelson Rockefeller joined Democrats in supporting the development of infrastructure, including public transit. 

Nationally, however, the Republican Party of the 1860s, the 1950s, or even the 1980s is not the Republican Party of today. Since the 1994 Republican “revolution” under Newt Gingrich, many areas of policy that were previously bipartisan have become polarized, and one of those is transportation. With fewer Rockefeller Republicans and more Tea Party types, the efforts of transportation advocates to find Republican allies have become more difficult.

In September 2010, Republicans lined up against Obama’s $50 billion transportation stimulus package. Then the 2010 midterms brought a wave of Tea Party Republicans to Congress and state governments. Newly elected Republican governors in Wisconsin (Scott Walker), Ohio (John Kasich), and Florida (Rick Scott) positioned themselves against federally funded passenger rail projects, which they denounced as wasteful initiatives that would drain state budgets. All three governors proudly rejected millions of dollars in federal grants for rail projects that had been previously awarded to their states.

The shift of the Republican Party’s center of gravity from the Northeast to the South has also affected the party’s views of transportation. Public transit—passenger rail in particular—is far less developed in the South and has less support there than in the Northeast and urban centers in the Midwest.

As a result, Republicans have grown more opposed to projects like the ARC tunnel, which would help increase passenger-rail capacity in the Northeast. In 2012, House Republicans introduced a transportation bill (including cuts in Amtrak subsidies and increases in truck-weight limits) that Ray LaHood, secretary of transportation during Obama’s first term, called “the worst transportation bill I’ve ever seen during 35 years of public service.” LaHood himself had been a seven-term Republican congressman from Illinois before he agreed to serve in Obama’s cabinet.

The increased opposition to public transit in the Republican Party is the context for understanding Christie’s cancellation of ARC. Although his decision broke with the long tradition of Northeast Republicans, he was positioning himself well within the mainstream of today’s national Republican Party.

Derailing Passenger Rail

The partisan politics of transportation show up in differing policies and attitudes toward public transit and the automobile. Consider what happened to transportation costs and spending in New Jersey when the Corzine administration gave way to Christie's. Corzine had raised highway tolls (and would have raised them more) to finance transportation projects, including the ARC tunnel. Together with Cuomo, Christie did approve an increase in tolls for vehicles on cross-Hudson bridges and tunnels. But he canceled ARC, used the bulk of the money for roads, and pledged not to raise the gas tax. Three months after Christie assumed office, New Jersey Transit raised its fares by 25 percent.

Nationally, passenger rail has recently undergone significant growth after a long period of decline that came with the rise of the auto and air travel. Between 1946 and 1964, the annual number of rail passengers dropped from 770 million to 298 million. By 1965, according to the GAO, only 10,000 rail passenger cars were left in operation, 85 percent fewer than in 1929. But that trend has reversed. Amtrak has now been carrying record numbers of passengers; ridership grew by 55 percent from 1997 to 2012.

Yet passenger rail still faces an obstacle in public opinion. Many people, particularly conservatives, have a double standard in judging subsidies for rail versus subsidies for roads. Americans are socialists when it comes to financing roads. Government is just expected to build them and make them free for people to drive on. Most streets and highways don’t even have tolls. Yet year after year, Amtrak gets criticized for needing substantial federal subsidies to maintain expensive—and obligatory—long-distance routes.

“We spend an awful lot of money building and maintaining a system for people to travel on with cars and trucks … but mass transit is always seen as this expensive add-on,” says Leone.

“We tell ourselves this little myth that our gas taxes fund everything,” says Phillip Longman, a policy expert at the New America Foundation. Indeed, as the Tax Foundation, a tax policy research group, found, gas taxes and tolls cover only a third of all state and local road spending.

Getting Rail Back on Track

In the wake of Christie’s decision to cancel the ARC tunnel, the challenges facing passenger rail in the Northeast are steep. As Amtrak officials point out, even if the ARC tunnel had been built to handle commuter rail between New Jersey and New York, Amtrak would have still needed additional capacity under the Hudson River to accommodate the burgeoning travel demand along the Northeast Corridor. With ARC, Amtrak wouldn’t have faced the same degree of time-sensitive pressure for tunnel construction, but the long-run need is for even bigger investments.

Amtrak’s proposed alternative, known as the Gateway program, would include a new two-tube rail tunnel under the Hudson River, with a price tag that could reach $16 billion. The full Gateway program also calls for an expansion of Penn Station and the development of other transportation arteries into New York and would not be completed until 2030. Amtrak estimates that the new tunnel could be built by 2025 if funds were appropriated immediately. Amtrak officials are not sure, however, whether the existing tunnels will hold up for another decade in light of the damage from Hurricane Sandy.

“We don’t yet know what the rate of deterioration will be for the existing tunnels in terms of reliability of service,” says Stephen Gardner, the vice president of Northeast Corridor development for Amtrak. “We can see the damage, but we don’t know what that will mean for future operations.” Currently, Amtrak says, repair work on the tunnels is being done during 55-hour weekend periods, but “longer-term closures cannot be avoided.

The damage from Sandy highlights a new issue that policymakers must take into account: the need to “climate-proof” infrastructure so that it can withstand future storms and rising sea levels. Climate-proofing will require even heftier investments than previously envisioned.

But there is another kind of climate—the political climate—that stands in the way of addressing these needs. Neither the federal government nor the state has committed the necessary capital for rail and other infrastructure development. The federal stimulus dollars are gone, the funds that New Jersey previously earmarked for ARC have been spent, and New Jersey’s Transportation Trust Fund has been depleted.

In New Jersey, the state government’s finances have spiraled downward under Christie’s leadership. New Jersey’s credit rating has been downgraded eight times. The state pension system has lost billions of dollars under management by one of Christie’s political appointees. After Christie withheld legally required state contributions to the pension fund, the fund’s trustees filed a lawsuit against the governor to demand that the payments be made. And Christie’s support at home has been slipping. A Rutgers University poll released last October found that more New Jersey voters held an unfavorable impression of Christie than a favorable one.

Still, many Republicans in the country consider Christie a real leader, a “tough guy” who stands up to big interest groups (like schoolteachers!). After friendly gestures toward Obama in 2012, Christie won re-election as governor the following year with 60 percent of the vote, including 32 percent of registered Democrats. Since then, Christie has been cultivating support from the Republican base. As chairman of the Republican Governors Association, he spent significant amounts of time throughout the 2014 midterm election season campaigning for Republicans in 37 states, all the while expanding his own personal national donor network.

Enthusiasm among Republicans for Christie may not be as robust as it once was, but he remains a serious contender for the party’s presidential nomination. After all, Republicans around the country are not going to ask why the governor of New Jersey canceled a rail tunnel under the Hudson River. And Christie will be long gone from state politics when people in the region are left to suffer the consequences of that decision.

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