Gateway Project/New York Penn Station capacity improvement
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I don't think Secretary Foxx's proposal is that NJ and NY pay the entire costs of Gateway. The additional payments from the NEC states, operating surplus from the Acela and NE Regionals, and the NEC Commission capital grant allocations are presumably part of the mix in figuring out how to fund Gateway. Or, for starters, break out as a Phase 1 stage to fund for now, the State of Good Repair components - two new Hudson tunnels, North Portal Bridge, Sawtooth bridge replacement/rebuild - spelled out in the project overview map linked to by Andrew above.
There are many stakeholders and political players in the process of figuring out to fund the Gateway project. Going to be a long and bumpy ride.
On August 10, the NJ state Senate held a hearing on the recent breakdowns on the NEC that delayed many NJT trains and the Gateway project. NJ.com: Failing equipment, delays could become the new normal, Amtrak VP says. Has a picture of the prop, a cutout section of the 1930s power cable that failed, brought by Amtrak.
Excerpt:
I think there is a typo in the article because $1 billion to get the system to a state of good repair doesn't match the 2nd paragraph figure of $4 billion a year.
A massive RRIF Loan needs to be in the mix! Commuter rail fees are going up this October 1st, and will have to again over the next several years to help fund Gateway. NEC profits can be reinstated into debt service, and the Port Authority of NY and NJ must contribute as well.
From the same article: "http://www.nj.com/news/index.ssf/2015/08/failing_equipment_delays_could_become_the_new_normal_amtrak_vp_says.html
"Gordon said he was heartened by Gardner's testimony that the federal government could put up 80 percent of the estimated $14 billion funding for Gateway through a federal railroad reconstruction program that has $35 billion in uncommitted funds and a loan program that could help states fund their share over 35 years".
My concern, though, is that a RRIF loan gets offered--and even the state of New Jersey offers to chip in--but NY State Governor Cuomo REFUSES! Thus, Gateway ends up never happening--just the replacement of the Portal Bridge and Manhattan Concrete Casing Tunnels.
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What do you mean that NEC profits can be "reinstated" into debt service?
Rather than subsiding unprofitable long distance trains, Amtrak's plan is to put the operating profits back into improvements on the Northeast Corridor--and Gateway is a top candidate to receive these future profits.
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jis
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Presumably after they have used part of said profits to pay off the planned RRIF loans for the Aclea IIs. They will need more than just the NEC profits to pay off an RRIF loan if that is what the feds force them to use to cover the Feds 80% in the 80-20 formula, which is of course not what they force highway projects to do.
Andrew, you keep harping on using RIFF loans to pay for Gateway and NEC infrastructure. I expect federally backed RIFF or TIFIA or equivalent loans will be part of the funding package, but I think you overestimate how much debt load the fully loaded operating surplus from the Acela and NE Regionals could be used to cover. In FY14, the Acela and NE Regionals generated a net "surplus" of $482 million according to the September 2014 monthly report. Sounds like a lot, and it does help to put Amtrak on a better financial footing than it was in the pre-Acela era. But, not all of it can go for debt service, some has to go towards paying for the national system and a margin has to be left for recessions and down years.
So, let's say 60% of the $482 million is set aside, $290 million, to cover bond/loan debt payments. The interest rates on 30 Year Treasury notes are around 3% at present. But the era of really low interest rates is about to come to an end with the Federal Reserve about to slowly start raising rates. It will be at least 2-3-4 years before Amtrak or a new entity set up to fund and manage Gateway will be in a position to take out a loan. 30 Year rates may be 4% or 5% or higher by then. I will leave it to you to figure out how big a loan can be taken on with a 30 year loan at 5% interest with $290 million a year in payments available. Once the loan is taken out, the credit card from NEC net "surplus" is effectively maxed out for decades to come. How much of the loan money do you spend on rolling stock to replace the Acelas and Amfleets? How much do you sink into NEC infrastructure and Gateway that gets stuck with 30 years of debt service payments that have to paid?
One avenue of federal funding I have not seen discussed in the press coverage are the Sandy emergency relief funds. The concrete casing is be paid for by Sandy mitigation funds. Using that logic, the new tunnels would qualify. Much of the Sandy mitigation funds have already been allocated. US DOT may have some reserves set aside that could be allocated towards the tunnel parts of the project. There are a lot of Sandy relief funds sloshing around NJ, but I suspect Christie is not going to respond positively to re-allocating more than a token amount of NJ Sandy relief funds to a Gateway State of Good Repair project because he and the power brokers are using those funds for their political interests. Another avenue is to end sequestration which would make some additional relief funds available, but this requires a functional Congress.
jis
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Specially considering that quite a bit of the Sandy relief funds seem to have bypassed those that were actually harmed by Sandy in NJ. There really isn;t a large trove of unallocated fund sitting around anywhere in NJ that does not have prior legitimate claims on it. There needs to be new money allocated. There aren;t enough smoke and mirror in the world for already budgeted money for other purposes to be hijacked.
More news on the efforts to line up funding for Gateway. Nj.com: Christie, Senators to meet with feds on rail tunnel funding.
So, at least Gov. Christie will take a short break from pestering the voters in NH.
I still believe that as the overall economy improves, Gateway will get the green light for funding. Senator Schumer has talked about a development corporation that could maximum the amount of money that Gateway could get from federal funding. http://observer.com/2015/08/schumer-calls-for-a-gateway-development-authority-to-fund-hudson-tunnels/
A second article regarding Gateway: http://politickernj.com/2015/08/80-20-federal-split-low-cost-loan-should-bring-governors-to-table-on-gateway-tunnel/
Amtrak is planning to finance Acela 2's with incremental growth in Acela revenue. From.... http://www.amtrak.com/ccurl/133/704/FY15-Budget-Business-Plan-FY16-Budget-Justification-FY-15-19-Five-Year-Financial-Plan.pdf "Amtrak intends to fund the acquisition of this equipment through some type of long term financing. Amtrak’s high level business case supporting the release of the request for proposals shows that incremental growth in NEC revenues resulting from the high-speed trainsets will fund Amtrak’s debt service obligations associated with the financing."
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jis
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I think Senator Schumer's plan for setting up a separate agency is, well, interesting and questionable. It may just be a way to give some cover from Cuomo's non-action. We already have one enormous agency whose charter includes construction and maintenance of trans-Hudson infrastructure, which we seem to be neither able to control nor manage, except as a piggy-bank for the two Governors to dive into from time to time for their pet projects. So now we will just have another agency which we will probably lose control of sooner rather than later.
As for NEC surpluses, what is the real number? How would one know when a significant portion of the costs involved are computed by allocation, and are not grounded in any real accounting rollup?
You cannot count on Acela growth for financing Acelas while depending on the same thing to also finance infrastructure.
As for NEC surpluses, what is the real number? How would one know when a significant portion of the costs involved are computed by allocation, and are not grounded in any real accounting rollup?
You cannot count on Acela growth for financing Acelas while depending on the same thing to also finance infrastructure.
A funding option that has not been talked about is some sort of revenue bond, repaid with tolls from use of the project. This would bring in private money for a portion of the project and reduce the staggering amount of money the states and feds need to spend.
This type of bond can be guarenteed by the government(s) to accept the risks of default which usually has a lower rate of interest than non guarenteed bonds where the investors assume the risk of default.
This type of bond can be guarenteed by the government(s) to accept the risks of default which usually has a lower rate of interest than non guarenteed bonds where the investors assume the risk of default.
Do you think this meeting will be about minimizing New Jersey's contribution to Gateway?
neroden
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NY routinely sets up "public benefit corporations" (usually ending with the word "Authority", as in "Metropolitan Transportation Authority" and "New York State Dormitory Authority") to do all kinds of things, and has done for a hundred years. Mostly because the state government has a constitutional debt limit, but the public benefit corporations don't. (We should get rid of the stupid constitutional debt limit, but that's another matter.) Anyway, there are hundreds of these public benefit corporations. Setting up another one would be business-as-usual in New York State. If it would allow flow-through of grants from many different sources, it would probably be beneficial. And in NY, the state can set one of these up in a week.
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jis
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A pretty good analysis of the current situation:
http://www.northjersey.com/news/analysis-hudson-rail-tunnel-plan-is-popular-but-no-one-wants-the-bill-1.1391222
As for setting up an authority, NY State can do whatever it likes or needs to do to participate most effectively within the bounds of its constitution, but in order to build an interstate tunnel the authority charged with doing so will have to be chartered by a compact of states which will probably require some federal action, like setting up the PANYNJ did. What NY State can do within itself is interesting for dealing with which body from New York will participate but beyond that is of little interest to anyone who is not sitting in New York state I am afraid. Therefore, my assumption is that Schumer is not talking of setting up just a NY State Authority.
http://www.northjersey.com/news/analysis-hudson-rail-tunnel-plan-is-popular-but-no-one-wants-the-bill-1.1391222
As for setting up an authority, NY State can do whatever it likes or needs to do to participate most effectively within the bounds of its constitution, but in order to build an interstate tunnel the authority charged with doing so will have to be chartered by a compact of states which will probably require some federal action, like setting up the PANYNJ did. What NY State can do within itself is interesting for dealing with which body from New York will participate but beyond that is of little interest to anyone who is not sitting in New York state I am afraid. Therefore, my assumption is that Schumer is not talking of setting up just a NY State Authority.
neroden
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PANYNJ is a public benefit corporation under New York State law. Its treatment under New Jersey law and under federal law is another matter, but that's the New York side of the ledger dealt with. 
Other "Class D Public Authorities" (interstate) are the Niagara Falls Bridge Commission (representatives from NY and Ontario), and the Buffalo and Fort Erie Public Bridge Authority.
Other "Class D Public Authorities" (interstate) are the Niagara Falls Bridge Commission (representatives from NY and Ontario), and the Buffalo and Fort Erie Public Bridge Authority.
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A meeting is now scheduled for Tuesday, August 18th, between Secretary Foxx, Christie, Menendez and Booker.
http://www.nj.com/traffic/index.ssf/2015/08/federal_loan_could_get_new_hudson_river_rail_tunnel_built.html
http://www.nj.com/traffic/index.ssf/2015/08/federal_loan_could_get_new_hudson_river_rail_tunnel_built.html
Thirdrail7
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Do you think Gov Christie still remembers where New Jersey is? :giggle:
That being said, it should be an interesting meeting.
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I really hope that Christie is not just attending this meeting in order to please his voters--without making any additional effort to jump-start the Gateway Project.
Some people think that the Port Authority can be the contributor for the states of New York and New Jersey. from http://politickernj.com/2015/08/80-20-federal-split-low-cost-loan-should-bring-governors-to-table-on-gateway-tunnel/
"Gardner also noted that more than $30 billion remain in the federal Railroad Rehabilitation Infrastructure Financing program for low-interest loans for major railroad infrastructure projects, and that the Gateway program would be a suitable use for that money. New York City’s Metropolitan Transportation Authority got a $967.1 million loan from the program in May at a 2.38 percent interest rate.
“As the bistate agency whose principal mission is trans-Hudson transportation infrastructure, the Port Authority is the logical entity to provide the local match for Gateway,” said Sweeney. “The loan program could make that commitment easier.”
Sweeney has pushed for the agency to include $3 billion to jump-start Gateway as part of its new 10-year capital plan. A 35-year RRIF loan – which is justified for a tunnel expected to last 100 years – would cost between $120 million and $130 million a year at the current 2.7 percent long-term Treasury rate. The administrator of the Federal Railroad Administration has the power to authorize loans from the RRIF program, which was previously authorized by Congress at a $35 billion funding level. (It is my understanding that the Port Authority will likely be renewing their 10-year capital plan this Fall).
Senator Weinberg said she and her colleagues are prepared to reach out to and work with the state’s congressional delegation and the Port Authority to “move the idea forward.”
“We are more than prepared to be pro-active to move this idea forward with a financing plan that gets the project done,” said Senator Weinberg. “Spreading out the Port Authority’s cost up to 35 years would be beneficial because the agency has other critical infrastructure needs, starting with the reconstruction and repair of the Port Authority Bus Terminal to meet increased bus ridership demand over the next 30 years.”
Some people think that the Port Authority can be the contributor for the states of New York and New Jersey. from http://politickernj.com/2015/08/80-20-federal-split-low-cost-loan-should-bring-governors-to-table-on-gateway-tunnel/
"Gardner also noted that more than $30 billion remain in the federal Railroad Rehabilitation Infrastructure Financing program for low-interest loans for major railroad infrastructure projects, and that the Gateway program would be a suitable use for that money. New York City’s Metropolitan Transportation Authority got a $967.1 million loan from the program in May at a 2.38 percent interest rate.
“As the bistate agency whose principal mission is trans-Hudson transportation infrastructure, the Port Authority is the logical entity to provide the local match for Gateway,” said Sweeney. “The loan program could make that commitment easier.”
Sweeney has pushed for the agency to include $3 billion to jump-start Gateway as part of its new 10-year capital plan. A 35-year RRIF loan – which is justified for a tunnel expected to last 100 years – would cost between $120 million and $130 million a year at the current 2.7 percent long-term Treasury rate. The administrator of the Federal Railroad Administration has the power to authorize loans from the RRIF program, which was previously authorized by Congress at a $35 billion funding level. (It is my understanding that the Port Authority will likely be renewing their 10-year capital plan this Fall).
Senator Weinberg said she and her colleagues are prepared to reach out to and work with the state’s congressional delegation and the Port Authority to “move the idea forward.”
“We are more than prepared to be pro-active to move this idea forward with a financing plan that gets the project done,” said Senator Weinberg. “Spreading out the Port Authority’s cost up to 35 years would be beneficial because the agency has other critical infrastructure needs, starting with the reconstruction and repair of the Port Authority Bus Terminal to meet increased bus ridership demand over the next 30 years.”
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neroden
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Christie certainly has no intention of helping the Gateway Project. Given enough pressure, however, he might agree to it; I don't think he cares enough to be spiteful about it.
It will be interesting to see how this all plays out.
New Jersey's Transportation Trust Fund will run out in June of 2016. Christie will leave office (that's if he does not become our next president or get indicted) in January of 2018.
I wonder if the next New Jersey Transportation Trust Fund will held contribute to Gateway.
Sweeney--who might become New Jersey's next governor--will take a tour of the North River Tunnels today. http://www.nj.com/news/index.ssf/2015/08/top_nj_dem_to_tour_aging_hudson_rail_tunnel_today.html
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jis
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I agree. He just does not care. Now if we were talking a couple of road tunnels, the entire picture changes. Christie is a dyed in the wool '60s and '70s roadnick, that's all. He simply does not believe that rail has a role to play and deep down believes any investment in rail is wasted money. It should all go to highways.
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I doubt that the PA will take out any loan at all. They first need to reduce their current debt load to manageable levels.
So, with New Jersey in effect about to max out its credit card on transportation infrastructure debt because NJ has not increased its gasoline excise tax in 25 years, the state Senator wants the Port Authority to take on a $3 billion RIFF loan. So his answer is let the PANYNJ piggy bank pay for it, or at least for the next few years, while NJ is stuck in political gridlock. A Port Authority piggy bank that has been tapped by Christie and Cuomo along with fiascoes like the huge cost overruns on the World Trade center PATH station.
The US DOT and the FRA have to follow the law and statutory regulations in awarding the RIFF loans, I suspect there would be legal issues with the FRA awarding a RIFF loan for part of the project while the remainder is unfunded. What happens to the federal investment if the project stalls out after spending $3 billion with tunnels bored out halfway under the the Hudson? OTOH, Secretary Foxx may have the authority to waive many of the regulations. For that matter, I don't think the FRA can award a a RIFF loan for a project that doesn't have a completed EIS either. Although the North Portal Bridge is shovel ready.
Going to be a long dance to see who ends up paying for it and what gets built when. Anyway, the NYT is keeping up the pressure with an editorial: Build a New Hudson River Tunnel. Starting excerpt:
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