[Update: Gov. Christie said on May 2 that the state would continue to fight the bill in federal administrative court. Federal officials said interest would begin accruing on the $271 million bill immediately.]

When Gov. Christie canceled the Access to the Region’s Core rail tunnel between New Jersey and NYC, he not only set back the region’s economy but also put New Jersey on the hook to repay $271 million that had already been spent on the project. His administration resisted, spending $800,000 in legal fees to fight the decision through the Federal Transit Administration’s appeals process. But FTA officials have now determined that the state must pay back the entire $271 million. USDOT Secretary Ray LaHood gave the state’s congressional delegation the news in a letter sent today with a copy of the FTA’s official decision:

The law is clear on this matter. In very specific and clear language, the statute requires FTA to collect the taxpayers’ funds if the project sponsor-in this case, NJT–disavows its responsibilities under the contract and fails to complete the project. Moreover, Governor Christie and the leadership of NJT were fully aware of these consequences and the requirements under the law when the Governor made his decision to terminate the project.

As MTR has recapped, the governor reversed his position on the tunnel, supporting it as recently as April 2010. LaHood writes:

In February 2010, Governor Christie sat in my office and expressed his full commitment to the completion of the ARC project. In March of 2010, when several news stories called Governor Christie’s commitment to the completion of the ARC project into question, I asked the Governor to restate that commitment in writing. He did so in a letter to me dated April 6, 2010. In that same letter, he even asked me to expedite the expansion of the [Early Systems Work Agreement between NJ Transit and FTA], which I did.

When the Governor suddenly announced 5 months later that he was putting the project on hold, I began a series of conversations with the Governor that culminated in my making two separate trips to New Jersey to meet with him personally. As part of those meetings, I presented several different possible scenarios regarding the financing and scope of the ARC project, all with the goal of keeping the project alive. The purpose of my efforts was to avoid the very circumstance in which we now find ourselves: no jobs, no congestion relief, and an enduring debt whereby New Jersey must return $271 million to the Nation’s taxpayers.

(The full letter is available here.)

The decision could have major impacts on New Jersey’s already shaky 5-year transportation funding plan, which assumed the state would win its case. When asked about the pending decision during legislative hearings, NJDOT Commissioner Jim Simpson told lawmakers only that “we are hoping we are successful.” If that hope’s been dashed, it’s not clear that the state has a contingency plan. New Jersey still has the option of suing in administrative court. The letter also leaves it open as to whether the money can be paid back in installments.