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N.J. Dem Leader Fears Fallout From Tunnel Bill Fight

Wed February 09, 2011 - National Edition
Beth DeFalco



TRENTON, N.J. (AP) Now that New Jersey Gov. Chris Christie has filed a formal appeal of the $271 million bill the federal government sent the state for canceling a new rail tunnel under the Hudson River, a prominent state lawmaker is concerned the federal government might withhold funds from other transportation areas to recoup money it said it’s owed.

Christie doesn’t believe the state owes a penny for canceling the planned tunnel.

But State Senate President Stephen Sweeney worried that New Jersey could lose out on $128 million the federal government offered to credit back to help ease traffic jams once the state pays in full.

And, he questioned whether the federal government could withhold money from other transportation areas.

“If I’m the federal government, I just withhold your aid in the future,” Sweeney said. “If that’s the case and they gave you a chance to get a discount and now I’m going to lose an extra $128 million ... you’ve got to start thinking.”

Christie spokesman Michael Drewniak disputed that, saying, “Senator Sweeney seems to be speaking with a fundamental misunderstanding. If we don’t owe it, the federal government can’t withhold it.”

However, in November the Federal Transportation Administration sent the state a letter and warned it that if the bill wasn’t paid, it could recoup the money through “administrative offset” and could report the delinquent debt to commercial credit bureaus and to the Justice Department for collection.

Christie, a Republican getting noticed for his budget cutting ways, canceled the project Oct. 27. He cited potential cost overruns that he said could add $2 billion to $5 billion or more to the $8.7 billion pricetag.

Federal authorities promptly mailed the state a bill for $271 million for engineering and construction work done on the tunnel before Christie canceled the project, which had been planned for decades.

Federal officials say Christie knew New Jersey would have to repay money if he canceled the project.

To speed up construction, Christie successfully urged federal officials in April to use a type of funding agreement that federal law requires to be repaid if the state backed out.

According to the Early System Work Agreement, “If an applicant does not carry out the project for reasons within the control of the applicant, the applicant shall repay all government payments made under the work agreement plus reasonable interest and penalty charges the Secretary establishes in the agreement.”

Only five transit projects have been awarded Early System Work Agreements in the past 30 years, including the tunnel project, and only New Jersey has canceled its project.

Christie is fighting the bill and filed an appeal with the FTA. In the appeal, attorneys for the governor say New Jersey has “no liability for any repayment” because the reasons for canceling the tunnel — rising cost estimates and a state fiscal crisis — were out of the governor’s control.

Christie also now contends that most of the money — $225.5 million — was given to New Jersey before a work agreement was executed and that the work already completed has ongoing value for future transportation projects in the region.

After Christie scrapped the deal, New Jersey U.S. Sen. Frank Lautenberg asked the federal government to mitigate the amount the state owes, and the FTA offered to send back $128 million if New Jersey paid the full bill first.

Christie’s lawyers now say that offer is proof that the federal government knows the money belongs to the state.

“There is no basis in law for requiring that [NJ] pay these funds to FTA only to have them subsequently returned,” the state said in its appeal.

The FTA said it is reviewing the state’s response, but gave no timeframe for a decision.

The tunnel was intended to supplement a century-old, two-track tunnel under the Hudson River that has been at capacity for years. The new tunnel would have been able to handle an extra 25 New Jersey Transit commuter trains per hour during peak periods.