Governor Christie and the ARC Project

by Reihan Salam

As regular readers know, I am a transit enthusiast, certainly when it comes to big, dense cities. Yet I’m also a firm believer in imposing spending discipline on the public sector. So I find myself torn over Governor Christie’s decision to end New Jersey’s role in funding the Access to the Region’s Core (ARC) project, thus effectively killing the project itself.

Paul Krugman’s column on the subject is primarily fulmination-oriented. Depressingly, it will be the first and last thing many educated people will ever read about ARC. For an informed take on the subject, I strongly recommend a recent op-ed published in the Bergen Record by the staff of the Regional Plan Association, a group that has been working on regional transportation and planning issues in the New York area since the 1920s. The RPA first explained what ARC could do for New Jersey’s economy:

 

The benefits of building the tunnel will be enormous. ARC will double the number of households in New Jersey within a 50-minute commute to Manhattan. Jobs in Manhattan pay, on average, 60% more than jobs in New Jersey. A study commissioned by NJ TRANSIT estimated that ARC would increase the Gross Regional Product by $660 million a year, split evenly on both sides of the Hudson River. And RPA’s own research estimates that building ARC will increase the value of New Jersey residences close to train stations by more than $18 billion over 8 years. In addition, only one-third of the funding for the project is coming from the State. In addition to $2.7 billion from New Jersey, the project has committed funds of $3 billion from the Port Authority of New York and New Jersey and $3 billion from the federal government – the largest commitment of federal funds for a transit project – ever! These funds will be put in jeopardy if the project is cancelled.

So why would Governor Christie consider putting such a worthwhile project on hold?

For Krugman and other critics, the answer is simple: Governor Christie is a nihilist bent on the destruction of public goods, who cares only about the short-term. (This is an interesting view given the political heat the governor has taken to press for pension reform and other measures that promise short-term political pain and long-term fiscal gain for the governor’s successors.) But the RPA, run by people who understand the funding structures that govern transportation in the region, has a different take:

One possibility is that the Governor is doing everything he can to make sure this doesn’t become another ill-fated Big Dig – the Boston Artery tunnel that ballooned from $2.8 billion in 1985 to $14.6 billion by 2006. If this is the case, then we should applaud the Governor for working hard to keep costs under control and make sure the project does not turn into another endless series of delays and overruns. This thinking does have some credence, since Governor Christie appointed two senior transportation officials – DOT Commissioner Jim Simpson and NJ TRANSIT Executive Director Jim Weinstein – with outstanding credentials and a record of supporting the project.

There’s a small problem with this paragraph, which I’ll get to in a moment. The RPA continues:

The less optimistic perspective is that the delay is a first step to killing or indefinitely delaying the project. Why would the Governor do this? Possibly because while ARC has its funding in place, the rest of the state’s transportation funding situation is a mess. This isn’t Governor Christie’s fault. Half a dozen Governors over ten years have spent more than the state’s Transportation Trust Fund could afford, collecting about $900 million a year in gas taxes and other sources, but spending about $1.4 billion each year on capital projects. The gap was filled by borrowing – a familiar story in New Jersey these days. Unfortunately, the bill is now due. Starting in less than one year, every dollar collected in gas tax revenues for the next 30 years will go to paying off bonds that have already been spent. Unless hundreds of millions of dollars in new revenues or significant cost reductions can be identified, the state’s capital spending on other transportation projects (street and bridge repairs, highway upgrades, other transit investments, etc.) will drop dramatically. [Emphasis added.]

The problem with that earlier paragraph is that “doing everything you can” isn’t always enough. There has to be a credible threat that a lack of spending discipline will lead to a cut-off of funds. In light of the troubles plaguing the Transportation Trust Fund, the prospect of Big Dig-style cost overruns would have endangered critical public services or led to massive tax hikes on all New Jerseyans to benefit relatively affluent commuters. Even if we’re perfectly comfortable with this brand of trickle-down economics, and perhaps we should be, one can see why a governor interested in equity and in New Jersey’s long-term fiscal health would decide not to risk it. 

Notice that in Paul Krugman’s account, no mention is made of the governors who played a role in sowing the seeds of the fiscal crunch. Krugman writes:

News reports suggest that his immediate goal was to shift funds to local road projects and existing rail repairs. There were, however, much better ways to raise those funds, such as an increase in the state’s relatively low gasoline taxes — and bear in mind that whatever motorists gain from low gas taxes will be at least partly undone by pain from the canceled project in the form of growing congestion and traffic delays. But, no, in modern America, no tax increase can ever be justified, for any reason.

But of course state and local taxes in New Jersey have steadily increased, and there is, in the view of some, always room to raise taxes. Does it make sense to point to the incompetence and corruption that has plagued transportation projects in New Jersey? Does it make sense that some citizens might object to the notion that taxpayers should suffer for terrible, shortsighted judgment on the part of half a dozen governors over ten years?

According to Patrick McGeehan of the New York Times, the governor ordered a spending review and was alarmed by the range of projections:

Just a month ago, Mr. Christie abruptly ordered a temporary halt to spending on the tunnel while state transportation officials reviewed its costs. The review found that the cost would probably exceed $11 billion and could be higher than $14 billion.

Sure enough, Governor Christie made the tough call after hearing that “the project would cost at least $2.5 billion more than its original price of $8.7 billion.” And who seriously believes that that would have been the last bit of bad news regarding cost overruns? 

I want to emphasize that I’m profoundly saddened by the news about the ARC tunnel and I wish that a generation of New Jersey politicians hadn’t frittered away scarce transportation dollars on wasteful projects and through incompetent management. But let’s keep a few things in mind:

The tunnel, which would have stretched under the Hudson from North Bergen, N.J., to a new station deep below 34th Street in Manhattan, was intended to double the number of trains that could enter the city from the west each day. The project’s planners said the additional trains would alleviate congestion on local roads, reduce pollution, help the growth of the region’s economy and raise property values for suburban homeowners. [Emphasis added.]

Are there other ways to reduce pollution by the same amount at lower cost? Yes, we know that’s true. To address congestion, we can and should put in place congestion pricing, performance parking, and other measures designed to reduce the flow of automobile traffic. If this means that more people will work closer to home or telecommute, so be it. Secondary business centers have been flourishing throughout the region, in Stamford, Connecticut and in affluent towns in central New Jersey. That trend will likely continue. And it is possible that the death of ARC will increase the relative attractiveness of living in New York city, which isn’t necessarily a bad thing.

As for raising property values for suburban homeowners — an important part of the story that is nevertheless neglected by Paul Krugman’s apocalyptic account — it’s not obvious to me that this should be the duty of every taxpayer in New Jersey, or indeed every taxpayer in the United States. 

If you’d like to read someone who’s making Paul Krugman’s case more convincingly, I recommend Yonah Freemark’s take.

P.S. The RPA has more on home values [PDF]:

A detailed comparison of the trip time reductions brought on by these three projectswith the trip time reductions expected from ARC reveals that ARC could raise home values by a cumulative $18 billion, generating $375 million a year in new property tax revenue for municipalities. This growing tax base will relieve pressure for municipalities to increase tax rates.

The methodology of the larger study raises some questions that I’m not equipped to answer, but I encourage you to judge for yourself. One has to ask, again, what we might do if our objective were to raise property values by that amount at the lowest cost to taxpayers. One suspects that a sharp reduction in crime and improvement in educational outcomes in urban school districts in New Jersey would be at the top of the list. 

It’s important to always remember that there are competing uses for taxpayer dollars. The burden to clear is not whether a given project would be a good thing in some abstract sense. Rather, it’s whether it is the best use of the money relative to the alternatives. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.