Rule tweak makes paying for Hudson tunnel easier

JOHN REITMEYER, BUDGET/FINANCE WRITER | DECEMBER 20, 2021 

NJ Spotlight News

The North River Tunnel under the Hudson connects New York and New Jersey and carries Amtrak and NJ Transit passengers making 200,000 daily trips.

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A recently enacted federal infrastructure law set aside significant funding for mass-transit projects like a long-planned new rail tunnel under the Hudson River.

But a more subtle policy change included in the same law could also make it easier for New Jersey to cover its share of the funding for the tunnel project.

Among many new policy wrinkles written into the infrastructure bill as it moved through Congress earlier this year was a proposal to give low-interest federal-loan recipients more time to pay back what they borrow from the government.

That proposal made it into the final version of the bill that President Joe Biden signed into law last month, and as a result, the federal infrastructure loans, in some cases, can now be paid back over a term of up to 75 years.

More time to repay loans

The longer time frame for repaying the federal loans — the prior cap was up to 35 years — should make investing in major infrastructure assets more affordable for states like New Jersey and New York, which, under the tunnel project’s current finance plan, are hoping to use federal loans to help finance their local contributions.

Experts say the policy change will also better align the federal loans with the expected lifespan of things like the new rail tunnel, which is a signature element of the regional infrastructure renewal initiative known as Gateway and could be in use for a century or more.

“This change is of great benefit to infrastructure projects such as ours,” said Frank Sacr, the interim executive director of the Gateway Development Commission, as he discussed the updated federal loan programs during a recent public meeting.

Meanwhile, a longer repayment period that makes mass-transit projects more affordable could also advance climate-change goals given the role vehicle emissions play in worsening global warming. And it would also make sure future generations help pay for long-lasting infrastructure such as the new tunnel, adding some intergenerational equity to the infrastructural funding equation.

The trans-Hudson tunnel being used by both New Jersey Transit and Amtrak has been in service for over 100 years, after being built by the now-defunct Pennsylvania Railroad when Teddy Roosevelt was president.

Urgency to replace the Hudson tunnel

Though still safe to use, federal officials say it’s becoming increasingly difficult to maintain the tunnel, which was heavily damaged during 2012’s Superstorm Sandy, for daily train traffic. Closing just one of the two tubes that carry traffic in and out of New York City for emergency repairs would reduce the number of hourly trips allowed during peak times from 24 to six, officials have said.

Under an updated finance plan released earlier this year for what’s known as the Hudson Tunnel Project, it will take an estimated 8½ years to build a new rail tunnel at a total cost of $10.1 billion. Current plans also call for the eventual rehabilitation of the existing tunnel to further benefit the region’s rail capacity.

The cost of constructing a new tunnel will be split among the federal government and several local partners, with New Jersey’s share of the project estimated to be $1.6 billion, according to the updated finance plan. Other partners, including New York and the Port Authority of New York and New Jersey are also planning to make significant contributions.

In addition to applying for federal grant funding, which is still pending, the tunnel project’s local partners will also be seeking federal loans that would eventually be repaid with the monies pledged by New Jersey, New York and the Port Authority, according to the finance plan. And in New Jersey’s case, the loans would be repaid using revenues generated by the New Jersey Turnpike Authority, according to the plan.

The tunnel project recently cleared a final regulatory hurdle, and once the federal funding is in place, officials said construction could start in 2023.

Sacr highlighted ways the new infrastructure law has lifted prospects for the Gateway initiative during his agency’s recent meeting, including by renewing funding for several important federal grant programs that are used to support major infrastructure projects.

Making infrastructure more affordable

But he also praised the new loan repayment window for federal infrastructure loans, saying the longer term that some loans may now qualify for “better matches the useful life of infrastructure assets such as the tunnel.”

“It can help make large infrastructure around the country more affordable, so this is a very important change,” Sacr said.

The new loan-program rules were also discussed by public finance experts last week during a policy briefing on the infrastructure law that was hosted by the Volcker Alliance and the Penn Institute for Urban Research.

“Some of these projects do have useful lives into a hundred years, so that makes sense (and) that’s going to help leverage this money,” said Patrick Brett, head of Citigroup’s municipal debt capital markets and capital solutions.

In all, the more than $1 trillion infrastructure law set aside $90 billion for mass transit. Another $65 billion was earmarked for modernizing the power grid, which is considered a crucial step to transitioning to cleaner fuels, such as solar energy and offshore wind.

During last week’s policy briefing, U.S. Rep. Earl Blumenauer (D-Oregon) said allocating significant funding for rail projects, including in the Northeast Corridor region, is “extraordinarily important.”

He also suggested those investments and others could align well with broader climate-change goals and other policy priorities, if used properly. But he added: “If we don’t do it right, it could actually increase disparities and increase greenhouse gases in the sector — transportation — that accounts for most of our carbon pollution.”

“It is a great opportunity, but it is not guaranteed,” Blumenauer said.

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published this page in News and Politics 2021-12-20 03:29:26 -0800