newjerseynewsroom.com

Full transcript of Governor's announcement:

Gov. Chris Christie: "Good morning. Yesterday, I received a final memorandum from Jim Weinstein, the Executive Director of New Jersey Transit, and the person in charge of the working group I put together about two and a half weeks ago to work with the federal government on the ARC project to see if there was a way to work around the unacceptable level of risk and cost that was being asked to be borne by the taxpayers of the state of New Jersey. And over the last two weeks, Mr. Weinstein, Bill Baroni, Deputy Executive Director of the Port Authority, and Wayne Hasenbalg, my policy director, have met with federal officials both in person and telephonically through conference calls to discuss various aspects of this plan to determine whether or not we could responsibly move forward for the taxpayers of the state.

"Let me be clear on a few things to make sure we're all on the same page in terms of background. This project, in August, was estimated by the FTA to have a cost range between $10.9 billion and $13.7 billion. When that was brought to my attention in August, it became clear to me that this was a project that had the potential for crowding out everything else that New Jersey is trying to do regarding fiscal responsibility. The potential for $2-5 billion cost overruns was something that was unacceptable for me to contemplate, knowing that it was just the beginning, potentially, of what this project would cost.

"Now, FTA and the New Jersey Transit worked together thereafter. There has not been significant change in those $2-5 billion numbers, as Secretary LaHood announced to all of you by press release last Friday. 1.9 to 4.8 is a whole heck of a lot different in my mind when you're talking about the scope of this project, as compared to $2 billion to $5 billion. Now, the FTA's full funding agreement required that any money over the $3 billion put forward by the federal New Start's program would have to be the responsibility of the state of New Jersey. $3 billion of that was to come from the Port Authority of New York and New Jersey. They need to stop there as well because that $3 billion is New Jersey money, because that $3 billion has to be matched by $3 billion in projects that will spent on the New York side of the river. So it's not as if that's free money from someplace that the toll payers and taxpayers of the state of New Jersey have no role in creating, or in fact, in order to keep the 50/50 equity that is the basis of the Port Authority of New York and New Jersey, $3 billion in projects was committed to the New York side of the river in response to the $3 billion that we have for the ARC project.

"Every dollar over that was again the responsibility of the taxpayers of New Jersey, including the portal bridge south, which for reasons that I will never understand, were not included in the original project. You need to understand that the $800 million for the portal bridge south and the building of the portal bridge south was an indispensable element to this project. The trains heading to what would be the ARC Tunnel would fall into the river without the portal bridge south and never get to the tunnel. Why the Corzine Administration excluded the portal bridge south from the whole scope of this pricing of this job is something that, you know, you'll have to ask the Corzine Administration, I don't know.

"But FTA, Federal DOT, New Jersey Transit, New Jersey DOT all confirmed to me during the time I have been Governor that the Portal Bridge South was not an optional project regarding ARC. It was a mandatory project and that every bit of the costs of that had to be borne by New Jersey. So, you are not taking New Jersey's price, even under the original Corzine estimates, up to $3.5 billion. The 2.7 that we were committed to under the 8.7 price tag plus $800 million for portal bridge. Now you're up to 3.5 billion for New Jersey with no cost overruns with the project coming in exactly on budget. So, federal transportation officials put out as you know their range of the low, medium, and high range for this project. Understand this - the low range that 9.77 billion dollar number that they used, by federal transit authority estimates had a 10% probability of the project being completed at or below that range, 10% probability. The mid-range number had a 40-50% probability by their estimates of coming in at or below that range and the high range had an 83% probability of coming at or below that range. So put this in perspective. Even on the high range, there was still a 1 in 6 chance that the price would exceed the high range of 5 billion dollars in cost overruns. Still a one in six chance that that would happen and a one in ten chance that it would come in at or below the low range. We then asked this working group to work on potential ways to deal with the cost overruns and the expense that it would mean for the people of this state.

"There are some issues that were raised and I want to walk you through those. First, phasing in the project to reduce the scope of it in the near term. There was a thorough review done by the group that made it clear that this approach would only delay, but not eliminate New Jersey's responsibility for the higher costs while significantly diminishing the value of the project to a large number of transit users. Scaling down this project would merely reduce the utility for the project to the people who would ultimately use it and would not reduce, in the end, any significant way the price that New Jersey tax payers would be on the hook for. Next, the idea of financing this project through the Federal Railroad Rehabilitation and Improvement Financing loan program. The federal rail administration is authorized to provide in instances like this direct loans and loan guarantees of up to 35 billion dollars. The loans can fund up to 100% of these qualified railroad projects and they ultimately need to be repaid. It is just another way of issuing debt. Except that you borrow the money from the federal government instead of New Jersey Transit or the State of New Jersey issuing bonds. Regardless of the terms that would be offered, in the end the tax payers of New Jersey would be on the hook for every nickel of the cost overruns. They just would get to pay it back with interest over a longer period of time rather than pay it up front. No way does that option diminish the burden on the tax payers. No way does it allow anyone else to help share the burden with us.

"There also was the issue raised of a public/private partnership. The federal team has pointed to the success of these three P's as they are called in the business - the Port of Miami Tunnel, the Denver Union Station, the Denver Eagle Transit project. There is - it was pointed out to us that there was some interest in the ARC project from some private facilities. But remember this, none of that will address the cost or the technical risk in the project. None of it will absorb additional costs from the tax payers because in the end, New Jerseyans are going to be responsible in some fashion to pay for the costs of it. In essence, it's the difference between public financing and private financing. It's really the only difference. You bring a partner in - we are still, the State of New Jersey and its citizens are going to have to pay for the cost of it."