New Jersey's Use of Stimulus Funds Breaks the Law


The NJ Turnpike Authority's projects are now illegal in two ways.

On Friday, TSTC wrote to Governor Corzine stating that using federal Build America Bonds — authorized by the American Recovery and Reinvestment Act — to pay for the expansion of the New Jersey Turnpike and Garden State Parkway would violate federal law. The Build America Bonds were authorized by the federal stimulus package, and offer government subsidies on interest rate costs.

“It is our position that the issuance of Build America Bonds to support the projects would violate the requirements of the American Recovery and Reinvestment Act of 2009 due to the lack of a mandated environmental review under the National Environmental Policy Act of 1969,” wrote TSTC general counsel Kyle Wiswall.

“We request that you either cancel the bond offering insofar as it includes Build America Bonds or begin the preparation of the applicable environmental review of the projects as required by federal law,” the letter continued.

For the non-lawyers among us, here’s the translation: projects that receive federal funding must receive federal environmental approval.  Neither the Turnpike nor the Garden State Parkway expansions have undergone federal environmental review. Therefore, neither are eligible for federal funding.  Until now, both were slated to receive only state funding, so the cursory state environmental review was all that the law required.

The warnings were not heeded by the Authority. This afternoon, the agency released the bond offerings, totaling $1.375 billion.

This recent move again calls into question the legality of the projects.  TSTC already has a lawsuit pending over the Garden State Parkway widening.

8 Comments on "New Jersey's Use of Stimulus Funds Breaks the Law"

  1. Cat Stoker | April 21, 2009 at 1:07 pm |

    Hasn’t the federal government always subsidized bond issues by the Turnpike Authority?

    If the Authority had issued its usual tax-exempt municipal bonds for the widening projects, the federal government would have been subsidizing the borrowing by forgoing taxes on the income earned by bondholders.

    How is this different?

  2. As TSTC understands it, the Build America Bond subsidy is a direct subsidy in the form of a reimbursement from the federal government to the state. Essentially, the federal government writes a check to the state. For regular tax-exempt bonds the subsidy is indirect, the product of an agreement that no federal tax is owed on the bond income. That is, no money changes hands between the state and the federal government.

    In addition, and perhaps more importantly, this differs from regular bonding in that the subsidy is created under the American Recovery and Reinvestment Act, subjecting it to the provisions of that Act. ARRA specifically states that federal environmental review is required for any project receiving money under the Act.

  3. Have you considered billboards to advertise your advocacy work? How about a huge sign at Exit 8A that says “THIS 25 MILE BACKUP, TAKING UP YOUR SUNDAY EVENING, IS BROUGHT TO YOU BY TSTC! PUT YOUR FAMILY AND BELONGINGS ON A BIKE WHEN YOU GO FROM BERGEN COUNTY TO DOVER, DELAWARE. SUCKERS!”

    You love the environment. You hate people.

  4. Eric F., You seem a little angry. Maybe your taxpayer dollars are being wasted on unnecessary road projects.

    Seriously, I encourage you to read this independent analysis which found that there are other options, besides widening, that could solve the congestion on the Turnpike:

  5. From the “Streetsblog” post it appears that the lockstep against transport continues…

  6. michael willis | April 29, 2009 at 1:59 pm |

    Any moneys spent on an already oversized road system further advances US DEPENDANCY ON OPEC AND ITS PETROSTATES.
    At least 25% of existing roadbeds should be converted to railway-tracks with road access to new train stations.
    The PENNSYLVANIA RAILROAD SYSTEM & THE NEW YORK CENTRAL RAILROAD were forced into bankruptcy due to their inability to compete with the new subsidized turnpike system allied with the backing of BIG OIL/BIG AUTO/BIG CONCRETE SPRAWL—

  7. Jonathan | May 7, 2009 at 3:17 pm |


    I am a very big supporter of TSTC, and probably support your positions 98% of the time. But I am mystified by your extreme desire to derail the turnpike widening. I agree that the NJ parkway should not be widened because it is used for local access and commuting, and reasonable, convenient transit alternatives are available. In addition, the level of tolls on the parkway is so low as to be insulting.

    However, the turnpike is a national highway of substantial significance. I think Eric. F’s comments are a bit extreme, but summarize the situation well. I have read your report that offers “alternatives” to widening the turnpike. The only “alternative” you offer is higher variable tolls, based on peak pricing theories. I am 100% in favor of higher tolls and even variable tolls based on usage, however, given the significance of this highway, you know well that you cannot institute the kind of variable tolls that are used in other areas, for example on CA-91 or on various HOT lanes around the country, because you wouldn’t be leaving any of the lanes at a lower rate or free. Thus the idea that you could keep charging higher tolls so as to insure the road remained congestion free is not feasible, either politically or from a transportation planning perspective. If a driver arrived at the highway on a Sunday evening to discover that the toll was $25 to get to exit 16 from exit 6 since the highway was congested that driver is going to fine some other way to drive there, but they will still drive. That is not going to force people onto Amtrak. Therefore, the highway really would become a Lexus highway, and all that would do is insure that those that can afford the highway will get a smooth ride, will pushing congestion to other arterial roads in the region. I thought it was funny that you showed all of those maps in your report on alternatives that showed what would happen to area roads if the turnpike was widened. I would argue that you would cause at least as much congestion on area roads by using truly variable pricing, since people would seek other routes to avoid the very high tolls that would be required to keep traffic moving.

    Although I am happy to pay a higher toll that is not going to cut congestion substantially enough to make the road a pleasant option to drive on during the 50% of the time that it is completely backed up. There are no reasonable alternatives to access NYC by vehicle from the south, and not everywhere someone might want to drive is accessible by rail. You guys have lots of targets for bad planning and bad environmental practices. Keep up against the parkway widening. But your turnpike quest is both counter productive, and annoying. Remember, the goal isn’t just to be right all of the time. The goal is to be effective. The turnpike widening was part of a deal to get funding for the ARC tunnel. You can argue all day that the funding for ARC shouldn’t have been tied to the highway widening, but that is you guys taking the high road, instead of the road that gets us a new tunnel and brings public support along as well. Pragmatism is a good thing.

  8. Thanks for your comments, Jonathan. Have you looked in detail at the Turnpike widening proposal? The size and scope of the project is really the biggest problem, and the reason we have been fighting the project. The plans call for adding up to three lanes in each direction, adding 170 lane miles of road. It will cost the state and drivers between 2 and 3 billion dollars. It’s truly a giant project, and should not be pursued without proof that it is absolutely necessary to deal with congestion on the road. In fact, the Turnpike Authority’s documents show – and our study confirms- that the widening is too large for the projected traffic volumes on the road. In other words, the Turnpike Authority is adding lanes just to add lanes.

    We have never said that there is no congestion on the road. There is and we drive the road like everyone else in New Jersey. We think the dangerous interchanges need to be fixed and congestion at those interchanges addressed. The idea behind our fighting it is that the state should have to make a strong case to the public about why a very expensive and invasive project is needed. In this case, the state has not made a case that a project of this size is necessary, and until they do, we will continue to fight the project. You say we aren’t being practical or effective, but in reality, what we want is the state transportation agencies to be both of these things. NJDOT and NJTransit generally put forth good projects, projects that are well thought out that have clear reasoning behind them. The Turnpike Authority, however, seems to just want to widen roadways because it’s part of a master plan they developed in the 1980s, not because the projects are the cheapest and most effective way of dealing with congestion on the road.

    – Kate

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