Anxiety grows as Hudson Tunnel funding standoff continues

The basics:

• Federal funding remains frozen as Hudson Tunnel Project nears possible Feb. 6 work stoppage
• Gateway Development Commission says credit lines nearly exhausted after months of stalled funds
• Elected officials, labor leaders & advocates warn of job losses, regional economic harm
• Analysts estimate up to $445B in long-term economic benefits tied to Gateway Program

The future of the Hudson Tunnel/Gateway Program rail project remains murky amid growing concerns and uncertainty over a federal funding freeze that threatens to paralyze the project.

As NJBIZ reported Jan. 27, the Gateway Development Commission announced that without a resumption of federal funding, work will stop on the critical, $16 billion infrastructure project by next week, Feb. 6.

At that meeting, a number of elected officials spoke, including Senate Minority Leader Chuck Schumer, D-N.Y.; U.S. Rep. Josh Gottheimer, D-5th; as well as GDC leadership, labor leaders and others. Reaction to the situation has been swift and forceful, with political leaders, labor unions and regional stakeholders warning that halting the project would have serious economic, transportation and workforce consequences for New Jersey, the region, the Northeast corridor and the entire country.

As the clock ticks toward a potentially devastating work stoppage, that strong pushback continues.

“We can’t afford to let funding for Gateway lapse,” said U.S. Sen. Andy Kim. “It wouldn’t just mean lost jobs in New Jersey, it would be a massive hit to our economy nationally. This isn’t a political issue in New Jersey; Democrats and Republicans want to restart this funding. It’s time to protect American jobs, keep our economy moving forward, and restart this funding.”

Running on credit

“The Gateway Tunnel remains the most important infrastructure project in the nation, and the news that construction may halt due to withheld federal funds is deeply troubling and should sound alarm bells for commuters, workers, and businesses,” said Assembly Speaker Craig Coughlin, D-19th District. “The growth of our region is not optional, and the infrastructure that supports it cannot be either – walking away now would strand investments already made and unnecessarily increase the long-term costs.”

The Trump administration paused federal funding last fall, pending a review of the Disadvantaged Business Enterprise program. That happened against the backdrop of the government shutdown.

As funding remained frozen, the GDC utilized a credit line to fund ongoing construction in the meantime. However, the organization says that credit line is nearly exhausted – emphasizing the need to un-pause the congressionally appropriated federal funding. Otherwise, work will need to cease.

“The progress we have made since the project started construction would not have been possible without the support of the federal administration,” said GDC Chief Executive Officer Tom Prendergast. “Since federal funding was paused in October, we have done everything in our power to keep construction moving forward as planned, but we cannot fund this work on credit indefinitely.”

In a Jan. 28 social media post, Gov. Mikie Sherrill said, “The president is illegally attacking the most urgent and consequential infrastructure project in the country. Terminating the Gateway Tunnel project will kill jobs, devastate our economy, and increase commute times.

“I will not back down from this fight.”

‘It’s crazy’

As of this writing, things remain at a standstill while the Trump administration faces off with congressional Democrats over key issues, such as immigration. Meanwhile, a deadline to fund the government by Jan. 31 once again looms.

“It’s Chuck Schumer and Democrats who are standing in the way of a deal for the Gateway Tunnel Project by refusing to negotiate with the Trump administration,” White House spokesman Kush Desai told NJBIZ. “There is nothing stopping Democrats from prioritizing the interests of Americans over illegal aliens and getting this project back on track.”

The situation has project supporters and advocates calling for the release of funds.

“We’ve spoken many times about the importance and impact of the Hudson Tunnel Project … and today I’m here to be very clear: the federal government must restore federal funding for this project now,” said New Jersey Alliance for Action President Jerry Keenan, who spoke at the meeting. “The Hudson Tunnel Project isn’t just a regional priority. It’s the most urgent infrastructure project in America. Our national economy depends on getting it done.”

The Hudson Tunnel Project isn’t just a regional priority. It’s the most urgent infrastructure project in America. Our national economy depends on getting it done.
— Jerry Keenan, president, New Jersey Alliance for Action

Keenan laid out the importance between the jobs and economic impact for the construction itself – as well as the cost of not getting in a new rail tunnel in place. The current, storm-damaged North River Tunnel is now 116 years old.

“Let’s also be clear. Funding for the project has already been allocated,” said Keenan. “The federal government has signed legally binding agreements committing to provide these funds. Continuing to fund the Hudson Tunnel Project doesn’t take money away from anything else. It simply honors commitments already made.

“More than $1 billion taxpayer dollars have already been invested. Massive construction is underway in both New York and New Jersey. Stopping now puts that investment at risk. It’s crazy.”

$445B in economic benefits

In his comments at the Jan. 27 meeting, Regional Plan Association President and CEO Tom Wright said we are living on borrowed time with the age of the current infrastructure and tunnel. He also stressed the economic impact.

“RPA’s analysis found that the Gateway program – including the Hudson Tunnel Project – will generate roughly $445 billion in economic benefits by 2060 creating and sustaining more than 46,000 jobs on average each year over several decades,” said Wright. “These figures represent not only construction activity, but continued economic productivity from improved transportation infrastructure.

“Specifically for the Hudson Tunnel Project, construction activity alone will produce approximately $19.6 billion in economic output and create about 95,000 jobs during the building phase. These jobs span direct construction roles and induced employment across the supply chain and supporting businesses.

“But the economic upside of Gateway isn’t just about growth – it’s about avoiding catastrophic losses,” he continued.

“Because the existing tunnels are already fragile and damaged, the only way to repair them is to close them – effectively reducing trans-Hudson rail capacity by up to 75% during the repair period. Such a shutdown would ripple through the entire transportation system.”

On the ground view

NJBIZ spoke to Greg Lalevee, business manager, International Union of Operating Engineers Local 825, whose members are working on the project – and would be impacted by any work stoppage.

“Unfortunate situation,” Lalevee told NJBIZ. “Hope that this gets worked out.”

He sees the situation in three buckets.

“First and foremost is the absolutely incredible amount of work that’s already been done to advance the project. For the projects that are either at or near completion and others that are mid-production with gaping holes dug around and everything else. That’s just not a place I think anybody could, would, or should want to be,” said Lalevee. “For people who have wanted to maybe call this a boondoggle – you’re about to make it one – if this happens.

“The second part is – hopefully things get worked out. But if this turns into a whole process where every time there’s a continuing resolution or some kind of problem, whether it’s between the president and the minority leader or whatever this turns out to be, and this project becomes the hostage,” Lalevee continued. “What’s going to happen is there’s a few more components of this project to bid and contractors are going to have to price that in, and that’s not going to be a small-ticket item or a good-ticket item.

“And that’s not only going to raise the cost of the project.”

Missed opportunities

Lalevee said that as somebody who’s been involved in this process advocating for the project for the last decade-plus, he does not know any of the key stakeholders, entities, political leaders or states involved who do not want to deliver the project ahead of schedule and under budget.

“So, anything that’s going to balloon that cost, if you will, it is just a scar on the whole thing,” Lalevee stressed. “And then the third and largest component are the literally thousands of jobs that won’t be seen; and the number of people that will be hurt because of it. And some of those people belong to my union, so I care about that a lot.

“But that extends to my colleagues in the other trades – the engineering companies, the downstream businesses that will sell supplies or other stuff here.”

Describing infrastructure as a multiplier, Lalevee bemoaned missing out on the potential impact a project of this size and scope offers.

“And then we have to think about the existing tunnels that are compromised,” he said, noting that just rehabbing is not modern infrastructure. “That’s just sticking a finger in the dike – or putting a band-aid on things. And it’s not a solution to the real issue that we have that it’s old. There needs to be serious investment here to upgrade and rehab.”

Cautious confidence

“What is your confidence level that something gets worked out before this Feb. 6 stoppage?” NJBIZ asked Lalevee.

“My concern is that this is starting to feel like Groundhog Day a little bit,” said Lalevee. “The money’s been appropriated and everything that, to me, this is really a non-issue. When I think of, similarly, highway funding, which will be up for discussion in Congress this year. Those are usually five- and six-year bills. Because these are all matching funds. Doesn’t matter if you’re red state, blue state, Arkansas, New Jersey, doesn’t matter.

“States have their DOT’s [Departments of Transportation] and these things are done with different matches – and there’s different formulas. So, it lends stability.”

Lalevee explained, for example, that you can’t do a three-year bridge project having to go back for funding every year.

“Contractors would never bid on a project like that,” he said. “It would almost be impossible to predict. You would have to have total trust that budgets were going to work out every single year. And, certainly, not indicative of what we’re seeing right now.

“So, that impacts my confidence, if you will. Because this can’t be a stop-and-start process. This has to be – you’ve committed the money and you go, and that’s it. You run the thing to the end. And I hope that people see the academics of work done, economic impact, jobs – and more jobs and more jobs again,” Lalevee continued.

“But it’s hard to be very confident when this thing just keeps coming up.”

Job losses

He said that the Feb. 6 work stoppage would impact hundreds of operating engineers — members of his union as well as hundreds of laborers, hundreds more carpenters, and iron workers.

“You’re going to have inspectors, engineers – the number is going to be in the thousands,” Lalevee explained. “And everybody’s kind of backed in their cake because the job is halfway through. We all know we’re in construction – the job ends eventually. But think about next month’s mortgage payment.

“You didn’t think you were going to have to think about that for another four or five years. Now, you’ve got to think about it tomorrow.”

Lalevee also noted that many companies hired more people because they had this business on the books.

“Now, you’re going to be going into layoff mode,” said Lalevee. “That’s never good. So, I just hope cooler heads prevail in the end – and figure this out.”

Please stay with NJBIZ for the very latest on this developing story.