NJ to pay $95M for scrapped railroad tunnel to NY

AP News

9/30/2011 9:32:27 PM - AP News

New Jersey has agreed to pay back the federal government $95 million for a railroad tunnel to New York that Gov. Chris Christie scrapped nearly a year ago _ far less than the original $271 million bill the state was sent.

On Friday, U.S. Transportation Secretary Ray LaHood announced the deal, which calls for New Jersey to pay back the money on the Hudson River tunnel project in five years.

The $8.7 billion project to construct a second rail tunnel between New Jersey and New York _ known as Access to the Region's Core, or ARC _ was 15 years in the making when Christie pulled the plug in October, citing potential cost overruns of up to $5 billion. By then, the state had already received $271 million in federal money to get the project started.

The federal Department of Transportation sent Christie a $271 million bill, which the administration has fought for the past year, incurring more than $2.6 million in interest and penalties. Those fees were dropped as part of the deal.

In a statement issued by his office, Christie called the deal a "good-faith settlement" that he said "puts the interests of New Jersey taxpayers first by substantially reducing the federal government's original demand."

After Christie halted the tunnel, U.S. Sen. Frank Lautenberg of New Jersey asked the federal government to mitigate the amount the state owed, and the Federal Transit Administration offered to send back $128 million if New Jersey paid the full bill first.

The governor refused, and the administration went on to spend more than $1 million to fight the bill.

However, under terms of the settlement, New Jersey must spend more than $128 million in federal funds on transit-related projects that have been approved by the Department of Transportation. The money cannot be diverted for other projects.

"The governor's decision to kill the ARC tunnel project will hurt New Jersey in the long-term, but we were happy to work with the Department of Transportation to help reduce the costs of this mistake," Lautenberg said.

The tunnel was intended to supplement a century-old, two-track tunnel under the Hudson River that has been at capacity for years. The new tunnel would have been able to handle an extra 25 New Jersey Transit commuter trains per hour during peak periods. Without it, New Jersey is left a tunnel that can handle 23 Amtrak and NJ Transit trains.