Trump May Balk On Loan Deals

The Bond Buyer - - Front Page - By Kyle glazier

The Trump Ad­min­is­tra­tion may be back­ing away from an Oba­maera White House agree­ment to fi­nance half of the Gate­way Tun­nel project con­nect­ing New York and New Jersey by rail, call­ing into ques­tion the fu­ture of an en­deavor that lo­cal lead­ers say is a cru­cial in­fra­struc­ture pri­or­ity.

The Fed­eral and New York gov­ern­ments traded letters last week af­ter the U.S. Depart­ment of Trans­porta­tion’s Fed­eral Tran­sit Ad­min­is­tra­tion raised “se­ri­ous con­cerns” about the up­dated plan of fi­nance for the $12.7 bil­lion project, which would al­low the ad­vance­ment of a long-stalled dual-track rail tun­nel un­der the Hud­son River. The project is con­sid­ered cru­cial for the en­tire North­east re­gion and has had the back­ing of New York Gov. An­drew Cuomo and New Jersey Gov. Chris Christie.

A year ago then pres­i­dent-elect Trump also placed the Gate­way project at the top of a list of 50 “Emer­gency and Na­tional Se­cu­rity Projects.”

Of the projects on Trump’s emer­gency projects list, 13 were listed as “seek­ing fed­eral” fi­nan­cial as­sis­tance, in­clud­ing some with price tags in the bil­lions of dol­lars, which would make them po­ten­tially heavy lifts if they were to go for­ward with less ro­bust Fed­eral back­ing.

While the Cuomo and Christie ad­min­is­tra­tions have hailed their suc­cess­ful ef­forts to line up state and lo­cal fi­nanc­ing, the Fed­eral com­mit­ment they ex­pected hasn’t ma­te­ri­al­ized. Un­der the com­mit­ments an­nounced last month, New York State will bud­get over a 35-year pe­riod to pay debt ser­vice on a $1.75 bil­lion fixed-in­ter­est loan un­der the U.S. Depart­ment of Trans­porta­tion’s Rail­road Re­ha­bil­i­ta­tion & Im­prove­ment Fi­nanc­ing pro­gram. New Jersey Tran­sit will com­mit $1.9 bil­lion, while the Port Au­thor­ity of New York and New Jersey will also chip in $1.9 bil­lion for a com­bined to­tal of $5.55 bil­lion.

FTA deputy ad­min­is­tra­tor K. Jane Wil­liams told New York bud­get di­rec­tor Robert Mu­jica in a Dec. 29 let­ter that the Fed­eral gov­ern­ment has se­ri­ous con­cerns with the plan of fi­nance, and does not con­sider there to be any ex­ist­ing agree­ment to foot the other half of the bill. That 2015 “frame­work agree­ment” was reached un­der the Obama ad­min­is­tra­tion.

“We con­sider it un­help­ful to ref­er­ence a non-ex­is­tent ‘agree­ment’ rather than di­rectly ad­dress the re­spon­si­bil­ity for fund­ing a lo­cal project where 9 out of 10 pas­sen­gers are lo­cal tran­sit riders,” Wil­liams wrote, also rais­ing con­cerns that the plan ap­pears to be “100% re­liant on Fed­eral fi­nan­cial as­sis­tance” be­cause it uti­lizes Fed­eral loan pro­grams.

Wil­liams also said that she was un­der the im­pres­sion that the plan no longer in­cludes the re­ha­bil­i­ta­tion of ex­ist­ing tun­nels, which she said was “the im­pe­tus for the project.”

Mu­jica re­sponded with his own let­ter, telling Wil­liams that the Fed­eral view­point is mis­taken and that to step away from the Obama White House’s agree­ment would rep­re­sent a se­ri­ous breach of faith. Trump cam­paigned on a tril­lion-dol­lar in­fra­struc­ture in­vest­ment and ac­cord­ing to New York and New Jersey dis­cussed the “50:50 agree­ment” with Cuomo, Christie, and mem­bers of New York and New Jersey leg­isla­tive del­e­ga­tions as re­cently as Au­gust. Mu­jica also noted the na­tional im­por­tance of the project in his let­ter., and said that Wil­liams is mis­taken to be­lieve that the re­ha­bil­i­ta­tion of the older tun­nels is no longer in­cluded in the project scope.

“The USDOT step­ping away from the 50:50 frame­work now would rep­re­sent step­ping away from a pre­vi­ously agreed upon path and the en­tire ba­sis for get­ting this crit­i­cal na­tional in­fra­struc­ture project done,” he wrote.

“The fact that these fund­ing com­mit­ments would uti­lize Fed­eral loan pro­grams should in no way be mis­in­ter­preted as “Fed­eral as­sis­tance” or “Fed­eral de­pen­dency,” Mu­jica added. “Do­ing so would go against decades of prece­dent when it comes to fund­ing in­fra­struc­ture projects of this scale and im­por­tance.” ◽

The Gate­way tun­nel project be­tween New York and New Jersey is a huge un­der­tak­ing that stake­hold­ers say is a must for the en­tire North­east re­gion.

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