Borrowing against the toll revenue which would have been used to fund ARC would result in a capital plan about half the size of 2010's if the funding was spread out over 3 years -- or a plan one-third the size of 2010's if it was spread out over 5 years.
New Jersey is still reeling from the recent cancellation of the ARC tunnel project, which would have doubled train access to Manhattan. As Governor Christie and transit officials reviewed the project prior to the final determination, transportation advocates and industry experts speculated the move was, in part, an effort to use NJ’s $1.25 billion ARC obligation to replenish the state’s beleaguered transportation capital fund, the Transportation Trust Fund (TTF). The ARC funds were generated through a toll increase under the Corzine administration and are at the Governor’s disposal, but a TSTC analysis shows that cannibalizing America’s largest public works investment won’t be nearly enough to give NJ the capital plan it needs.
The Coming Crisis
As of July 1, 2011, every cent of the $895 million in incoming gas tax and other revenue which pays for transportation will go to debt service, meaning the TTF will be completely broke, without the ability to bond. Without new revenue, NJ will not have a capital plan. Raiding the ARC funds might have looked like an attractive source of revenue for a Governor adamantly opposed to increasing taxes, tolls or fees (unless you count transit fare hikes…). But a closer look shows how infeasible this proposal is.
Why ARC Funds Can’t Fill the Gap
First, the state is required to repay about $270 million to the federal government for work already completed on ARC, so the state’s $1.25 billion looks a bit more like $980 million. Next, NJ generally approves a 5-year transportation capital plan, further parsing out the funds at hand. In an early October legislative hearing, the Treasurer said Gov. Christie will present a 3- to 5-year plan.
A former high-level NJDOT official confirmed that in a best-case scenario, current bonding rates have the potential to generate a 3x multiplier. What does all this mean? It means that with a continued 1-to-1 federal match and ARC money alone as principal, NJ could use bonds to leverage a 5-year, $1.2 billion/year capital plan, or a 3-year, $1.9 billion/year plan. Either would be minuscule compared to New Jersey’s current level of investment; the 2010 capital program is $3.6 billion.
The Need to Invest
According to NJDOT, it will cost the state $846 million each year just to stop the spread of structurally deficient bridges, and $1 billion in capital improvements — such as track repair and new trains and buses — to bring NJ Transit into a state of good repair. Road repairs will cost additional hundreds of millions of dollars. These are goals NJ will not be able to meet with a diminished capital plan. For the average New Jerseyan, this will mean continued traffic due to slowed construction projects, dangerous intersections for drivers and pedestrians that will remain hazardous, bridges that continue to degrade and weaken, and increased NJ Transit delays caused by old wires, tracks, trains and buses.
In principle, using increased Turnpike Authority contributions for the TTF could be a boon to the fund’s stability — but relying solely on ARC funds to replenish the fund will require hundreds of millions of dollars in new debt and will not cover the cost of NJ’s transportation needs. During the press conference where he announced the cancellation of ARC, Gov. Christie said he would release a plan for the TTF by the end of this year, but his vehement anti-tax stance has advocates and industry wondering what other options he can turn to.
After the jump, a few more details on the ARC math: » Continue reading…
