Amtrak’s Gateway project moves ahead

Federal and Amtrak officials and state officials from New York and New Jersey announced Nov. 11, 2015 that they have reached an agreement on funding commitments and a governance structure that will allow the long-awaited, critically important $20 billion Gateway Tunnel Project to construct two new rail tunnels under the Hudson River to move forward.

The agreement establishes a new federal commitment to fund 50% of project costs and creates the “Gateway Development Corp.” under the Port Authority of New York and New Jersey (PANYNJ) to leverage billions in federal grant and loan funding for the project. The corporation will include the states of New York and New Jersey, the U.S. Department of Transportation (USDOT) and Amtrak as members and will be established and chaired by PANYNJ.

“The agreement marks a major milestone in the effort to build a new trans-Hudson river tunnel that is an essential portion of Amtrak’s eight-state Northeast Corridor connecting the states of New York and New Jersey and is one of the region’s most critical infrastructure projects,” said Governors Andrew M. Cuomo of New York and Chris Christie of New Jersey.

The framework agreement includes a first-ever federal funding commitment that Senators Chuck Schumer (D-N.Y.) and Cory A. Booker (D-N.J.) secured from the USDOT and Amtrak to cover no less than 50% of the project costs via grants and other federal funding. The 50% federal funding commitment comes in response to Governors Cuomo and Christie’s Sept. 15, 2015 agreement in which they announced that the two states would take responsibility for developing a funding plan to cover 50% of project costs if the federal government committed to provide 50%.

“Building this new tunnel is absolutely critical to the long-term vitality of New York and the entire northeast region,” said Cuomo. “We have been working to break the federal logjam and get the federal funding that this massive undertaking requires, and for the first time, with this agreement, our partners in Washington are putting real dollars—not just loans—on the table. New York and New Jersey’s offer to pay 50% of the project was meant to provoke federal action, and I thank Sen. Schumer and Sen. Booker for their support in accomplishing that goal. As soon as the federal government delivers the funding we will proceed—because our shovels are ready.”

In order to develop a financing plan for the Gateway Project, Gateway Development Corp. intends to identify and maximize federal grant opportunities in conjunction with USDOT, and will pursue low-interest loans from the Railroad Rehabilitation & Improvement Financing (RRIF) and Transportation Infrastructure Finance and Innovation Act (TIFIA) “that will allow all project partners to access capital as inexpensively as possible. Due to the extraordinary circumstances involved in building one of the largest infrastructure projects in the nation, the senators and governors intend to work together to ensure that payment of debt service is deferred to the time when the Gateway Project is placed into service.”

Schumer and Booker worked closely with U.S. Secretary of Transportation Anthony Foxx and Amtrak Chairman Anthony R. Coscia, and secured a commitment from both that their respective agencies would cover half of the total project costs. The federal share of funding for the project is likely to come from a combination of New Starts Grant dollars, Amtrak Northeast Corridor profits, Amtrak capital funds, annual appropriations, and other similar federal sources. In addition, the federal partners may utilize a low-interest federal loan to lower the cost of capital for their share, for which Amtrak and/or their federal partners or federal designees will take responsibility for debt-service payments. The local share may include, among other financing strategies and options, the use of federal loan programs for which the states, the PANYNJ and/or its partners or designees take responsibility for debt-service payments. Establishing a special-purpose development entity allows the PANYNJ to direct multiple federal sources of funding to the project.

In addition, the federal and state partners agreed, “due to the nature of this project and to make it a reality in a timely manner, to work together to expedite all environmental and planning approvals needed to bring this project online as soon as possible.” New Jersey Transit is working closely with Amtrak on planning and engineering and has taken the lead in NEPA (National Environmental Policy Act) procedures associated with the project.

“We applaud Governors Christie and Cuomo and Senators Schumer and Booker for reaching agreement on the concept of establishing a new Gateway Development Corp. and their commitment to advance this critical program,” said Amtrak President and CEO Joe Boardman in a statement. “The Gateway Program is essential to ensuring safe and reliable mobility for the region’s rail passengers. Amtrak looks forward to working with all stakeholders to establish this new entity and to preserving and expanding the vital Northeast Corridor rail link that serves as a foundation for the region’s economy.”

Gateway Development Corp. is structured as follows:

• All parties will cooperate to establish a development ‎corporation as a special purpose entity under the Port Authority to oversee the program.

• In accordance with the proposed capital funding split and existing ownership interests, the federal government, represented by USDOT and Amtrak, will share membership/representation in this corporation equally with New York and New Jersey. There will be a four-member board: New York (Port Authority), New Jersey (Port Authority), Amtrak, and USDOT.

• A Port Authority member shall serve as the “chair” of the board with the Amtrak member serving as vice chair, constituting an executive committee of the Corporation with primary responsibility for working directly with the Executive Director or Chief Executive Officer on the daily functioning of the Corporation.

• The member entities shall establish governance and define the decision-making processes of the board, and all decisions shall require approval from all four board members. The board may, where appropriate, delegate decision making authority.

• Primary dedicated staff for this corporation should be provided by the Port Authority and Amtrak, as well as other appropriate entities when needed. The Port Authority shall provide office space, administrative, IT, and logistical support for the corporation.

• The corporation may establish, as necessary, subsidiaries, joint-ventures or other entities in order to undertake program activities (including planning, design, construction and financing) in order to enhance program execution and permit the use of private-public partnership structures.

• The corporation may utilize assets, workforce, design, construction management, procurement, grant eligibility and other capacity of appropriate entities including the Port Authority, Amtrak, NJ Transit and contractors through appropriate agreements to carry out Program activities.

• Ownership of new assets built through the program will reside with the corporation and improvements to existing assets will be conveyed to the current railroad owners. To the extent ownership of new assets remains with the corporation, it will enter into operating agreements with the respective railroad operators utilizing those assets on appropriate terms. Amtrak and NJ Transit will have perpetual easements through new tunnels and other assets built by the corporation. All these agreement shall be done on appropriate terms and shall require unanimous approval of the board.

• The corporation’s expenses and activities shall be funded by the member entities or per other arrangements established by the corporation and the long-term operation of any of the corporation’s assets is intended to be accomplished on a self-sustaining basis.

Gateway Development Corp.’s initial goals are to “develop a financing plan for the project based on a 50/50 cost share between the federal government (including Amtrak) and the state and local governments (including the Port Authority); to “identify and maximize federal grant opportunities for the program in conjunction with USDOT” and “To access the RRIF program to allow all partners to access capital as inexpensively as possible. It is the shared understanding that the corporation will pursue innovative federal funding programs including RIFF and TIFIA for the federal, state and local partners.”

Gateway Development Corp. will commission, fund and approve/supervise planning, EIS and design, engineering and construction work‎ carried out by itself or individual agencies. “All parties agree, due to the nature of this project and the urgent need to make it a reality in a timely manner, to work together to expedite all environmental and planning approvals needed to bring this project on-line as soon as possible, including requesting the placement of the project on the federal infrastructure ‘dashboard’ qualifying the project for expedited attention within the federal system,” the corporation said.