Financial Review
PUBLISHED: 21 Apr 2012
Manhattan is connected to New Jersey by the slenderest of links.
There is only one bridge, George Washington Bridge, built in 1931 – the world’s busiest, with 14 predictably jammed lanes of traffic. Then there are two road tunnels: narrow, four-lane Holland Tunnel, built in 1927, and the six-lane Lincoln Tunnel, finished in 1937. That makes 24 lanes of traffic in all, operating at 100 per cent capacity every day, causing delays amounting to millions of hours in lost productivity.
Trains cross the river too. Tunnels dating from 1909 carry subway traffic from just across the river. The lone remaining train tunnel opened in 1910 and is known as North River Tunnel.
Every morning and evening, trains wait their turn to dash through the North River Tunnel; 60 trains can pass in an hour, one each minute. The situation hasn’t changed for 100 years and is only expected to get worse. Demand for mass transit between New Jersey and Manhattan is expected to grow 38 per cent by 2030.
So when construction began in mid-2009 on a new rail tunnel between Manhattan and New Jersey, it seemed like an idea whose time had come.
The new project, funded by the federal government, the state of New Jersey and the regional bridge and tunnel authority, was expected to double the number of main-line trains running between New Jersey and midtown Manhattan in peak times. The cost was put at a bit more than $US10 billion ($9.65 billion).
Just over a year later, newly elected New Jersey governor Chris Christie cancelled the project. Why? Because it was “too expensive”.
Christie promptly transferred $4 billion set aside for the tunnel into the state’s ailing highway fund. The highway fund is usually supported by petrol taxes.
The governor’s decision was pure politics. By shifting money to the near bankrupt fund, Christie avoided breaking one of his key campaign promises: not to increase the tax on petrol.
Austerity-minded conservatives applauded. Christie vaulted to national attention. Some even mentioned him as a future presidential candidate.
Now it’s come out that Christie’s figures showing the project was too expensive were unfounded.
The Government Accountability Office just released a detailed report revealing that Christie’s claims were flawed.
Cost estimates of the project in the two years before the cancellation hadn’t been rising and most of the funding was coming from the federal government and the local bridge and tunnel authority, not the state of New Jersey as the governor claimed.
But that’s only half the story. Like the man who knew the cost of everything and the value of nothing, “too expensive” can only be evaluated in relation to the tunnel’s expected payoff. That’s not something Christie wants to talk about.
The largest city in America, New York, sits hard by the most densely populated state in the country, New Jersey. A mile-wide river separates the two. Millions of people cross between them. Hudson River bottlenecks and traffic jams are the stuff of legend. Yet there’s been no expansion of bridges or tunnels since the 1930s.
You can run the numbers. Even on the back of an envelope, I quickly add up half a billion dollars in annual benefit. As a floor, that’s a return of around 5 per cent.
But numbers are hardly even necessary. The new tunnel is practically a textbook case for infrastructure spending. Just imagine what North Sydney would be like today without the harbour tunnel. Yet this kind of small-mindedness over infrastructure spending is characteristic of regions all over the US.
And it may be coming to other parts of the world. With austerity in vogue, the next few years don’t look promising for infrastructure spending in Europe either.
What’s more, cancellation of the New Jersey/Manhattan rail project couldn’t have come at a worse time. Heralded in 2009 as the biggest infrastructure project in the US, the rail link was widely considered as a sign that the nation was investing in its future. It would have doubly paid off as a much-needed, timely economic stimulus. And to top it off financing costs remain at historic lows.
Overall, the US record on infrastructure spending is abysmal. It spends about 2 per cent of GDP on the construction of infrastructure compared with 5 per cent in Europe and 9 per cent in China, government data says.
And it’s beginning to show. In 2010 the US ranked 23rd for overall infrastructure quality, behind Spain and Chile, according to a World Economic Forum report.
Meanwhile, the American Society of Civil Engineers consistently rates the nation’s infrastructure well below average. It’s most recent study assigned an overall D grade to US infrastructure and estimated it would take $US2.2 trillion over five years to bring it into a state of good repair.
Governor Christie’s decision to cancel the rail project may have been clever politics but it is dreadful policy. The Government Accountability Office report noted that the project would have generated economic activity in the region in the form of jobs and income, business activity, and increased home values. How expensive is that?
PUBLISHED: 21 Apr 2012
Anna Bernasek
Manhattan is connected to New Jersey by the slenderest of links.
There is only one bridge, George Washington Bridge, built in 1931 – the world’s busiest, with 14 predictably jammed lanes of traffic. Then there are two road tunnels: narrow, four-lane Holland Tunnel, built in 1927, and the six-lane Lincoln Tunnel, finished in 1937. That makes 24 lanes of traffic in all, operating at 100 per cent capacity every day, causing delays amounting to millions of hours in lost productivity.
Trains cross the river too. Tunnels dating from 1909 carry subway traffic from just across the river. The lone remaining train tunnel opened in 1910 and is known as North River Tunnel.
Every morning and evening, trains wait their turn to dash through the North River Tunnel; 60 trains can pass in an hour, one each minute. The situation hasn’t changed for 100 years and is only expected to get worse. Demand for mass transit between New Jersey and Manhattan is expected to grow 38 per cent by 2030.
So when construction began in mid-2009 on a new rail tunnel between Manhattan and New Jersey, it seemed like an idea whose time had come.
The new project, funded by the federal government, the state of New Jersey and the regional bridge and tunnel authority, was expected to double the number of main-line trains running between New Jersey and midtown Manhattan in peak times. The cost was put at a bit more than $US10 billion ($9.65 billion).
Just over a year later, newly elected New Jersey governor Chris Christie cancelled the project. Why? Because it was “too expensive”.
Christie promptly transferred $4 billion set aside for the tunnel into the state’s ailing highway fund. The highway fund is usually supported by petrol taxes.
The governor’s decision was pure politics. By shifting money to the near bankrupt fund, Christie avoided breaking one of his key campaign promises: not to increase the tax on petrol.
Austerity-minded conservatives applauded. Christie vaulted to national attention. Some even mentioned him as a future presidential candidate.
Now it’s come out that Christie’s figures showing the project was too expensive were unfounded.
The Government Accountability Office just released a detailed report revealing that Christie’s claims were flawed.
Cost estimates of the project in the two years before the cancellation hadn’t been rising and most of the funding was coming from the federal government and the local bridge and tunnel authority, not the state of New Jersey as the governor claimed.
But that’s only half the story. Like the man who knew the cost of everything and the value of nothing, “too expensive” can only be evaluated in relation to the tunnel’s expected payoff. That’s not something Christie wants to talk about.
The largest city in America, New York, sits hard by the most densely populated state in the country, New Jersey. A mile-wide river separates the two. Millions of people cross between them. Hudson River bottlenecks and traffic jams are the stuff of legend. Yet there’s been no expansion of bridges or tunnels since the 1930s.
You can run the numbers. Even on the back of an envelope, I quickly add up half a billion dollars in annual benefit. As a floor, that’s a return of around 5 per cent.
But numbers are hardly even necessary. The new tunnel is practically a textbook case for infrastructure spending. Just imagine what North Sydney would be like today without the harbour tunnel. Yet this kind of small-mindedness over infrastructure spending is characteristic of regions all over the US.
And it may be coming to other parts of the world. With austerity in vogue, the next few years don’t look promising for infrastructure spending in Europe either.
What’s more, cancellation of the New Jersey/Manhattan rail project couldn’t have come at a worse time. Heralded in 2009 as the biggest infrastructure project in the US, the rail link was widely considered as a sign that the nation was investing in its future. It would have doubly paid off as a much-needed, timely economic stimulus. And to top it off financing costs remain at historic lows.
Overall, the US record on infrastructure spending is abysmal. It spends about 2 per cent of GDP on the construction of infrastructure compared with 5 per cent in Europe and 9 per cent in China, government data says.
And it’s beginning to show. In 2010 the US ranked 23rd for overall infrastructure quality, behind Spain and Chile, according to a World Economic Forum report.
Meanwhile, the American Society of Civil Engineers consistently rates the nation’s infrastructure well below average. It’s most recent study assigned an overall D grade to US infrastructure and estimated it would take $US2.2 trillion over five years to bring it into a state of good repair.
Governor Christie’s decision to cancel the rail project may have been clever politics but it is dreadful policy. The Government Accountability Office report noted that the project would have generated economic activity in the region in the form of jobs and income, business activity, and increased home values. How expensive is that?
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