New York vs. New Jersey: Law, Equity and Politics

Written by David Peter Alan, Contributing Editor
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New York and New Jersey Governors, respectively, Kathy Hochul and Phil Murphy.

For many years, Albert L. Papp, a longtime transit advocate in New Jersey, has referred to the river that separates New York and New Jersey geographically as the “Hudson Ocean.” Today, a conflict between the transit providers in the two states (with Connecticut also playing a minor role) provides the latest example of a feud that bestows credibility upon the moniker that Papp conferred upon the river.

The conflict between the states on both sides of the “Hudson Ocean” highlights the opposing nature of the two sides of the legal profession and the court system: law and equity. It also might bring into play the factor that can (and often does) override legal reasoning: politics. 

The subject of the dispute is the money available to transit providers through the COVID-19 relief acts passed by Congress last year. Railway Age has reported extensively about the lifeline that Congress has thrown to the embattled transit agencies around the nation that have struggled with declining ridership and revenue since the virus hit, while, at the same time, needing to serve riders who depend on their services. Coverage included statements from transit managers and rider-advocates everywhere who predicted devastating service reductions and massive fare increases for the remaining riders if the federal government did not come to the rescue.

Congress stepped in with some emergency funding for transit, even if the aid turns out to be temporary. Some rider-advocates are pushing for such operating support to become permanent, but Congress will not be able to do much about anything else until it deals with the current infrastructure bill and the other bill to enhance social programs, for which most Democrats have yearned for decades.

The pot of available money for transit is limited. Sadly, some providers are fighting over it. This is happening in New York and New Jersey at the present time. In short, New Jersey’s share could last New Jersey Transit considerably longer than New York’s share could last the Metropolitan Transportation Authority (MTA), which runs the subways and buses in New York City, Metro-North, the Long Island Rail Road and the Staten Island Railway. 

Reporters for local papers and other media have covered this in detail.

Colleen Wilson summed up the dispute in her report in the July 6 edition Bergen County-based Record, “Why NY, NJ and CT are warring over how to split $14B in transit aid (and it’s been months).” She began her report: “Imagine there’s a sandbox where the transit agencies from New York, New Jersey and Connecticut are supposed to be playing nicely together … Except, in this sandbox, there’s $14.2 billion that needs to be shared … Let’s just say not everyone is playing nicely … New Jersey and Connecticut say they are in agreement about how the funds should be split. New York says it deserves a larger share of the money…. If New York gets its way, the agencies that serve New Jersey and Connecticut commuters—many of whom work in New York—could lose out on hundreds of millions.”

Wilson’s report quoted Ronald Epstein, Assistant Commissioner for Policy and Planning at the New York Department of Transportation (NYDOT), as writing to New Jersey and Connecticut officials that the money should be split so as “to direct resources to systems that suffered the greatest losses.” New York wants $687 million more than was allocated under the Corona Virus Aid, Relief, and Economic Security (CARES) Act and later under the Corona Virus Response and Relief Supplemental Appropriations Act (CRRSAA). Of that amount, $673 million (98% of the total) would come from the share allocated to New Jersey, and $14 million (the other 2%) from the share allocated to Connecticut. 

There is a formula for federal grants under §5307(d); the Urbanized Formula Grants (UEZ) program, which determines how a recipient’s share of the available funds is determined. The statute sets rules, and a government agency (the Federal Transit Administration in this case) applies the rules. That is the basis of law: going by the rules that were established by a governmental authority. Clearly, New Jersey wants the rule applied “by the book” and argues in essence that the FTA should let NJ Transit have its “full share” according to the statute.

The concept of “equity” has its origins in English law during the Middle Ages, when judges had the authority to fashion remedies for persons who could successfully argue that a strict application of the law would be unfair. Cases of equity in today’s courts are often about modifying a contract or a parent’s duty to pay child support, or specifically enforcing a land sale contract. One of the most common reasons why a party would seek a modification of a rule is that circumstances have changed.

In effect, New York’s MTA is making an equitable case. Andrew Albert, a rider-representative on the MTA Board, told Railway Age that the agency carries 40% of the nation’s transit riders on its various properties, while it received only 16% of the available funding. That is the sort of claim that sounds in equity: that the strict application of the rule would be unfair to New York’s systems and the riders who depend on them for mobility. It is also, essentially, an argument that circumstances have changed since the formula in §5307 of federal transportation law was established, because nobody could have foreseen at the time it was enacted that the COVID-19 virus would strike and bring unprecedented pressure to bear on every transit provider and every transit budget.

While there is currently no litigation ongoing between New Jersey (or NJ Transit) and New York (or the MTA), and the prospect of such litigation is extremely unlikely, it is instructive to think about the arguments that the transit providers (or the states, as their surrogates) would make. New Jersey, with Connecticut joining it, would argue that the law is the law, that the statutory formula should control, and that it should not be modified. New York would argue that no event has ever crippled transit the way the virus has, and that New York’s transit, its riders and very economy need additional funds to stay alive, and that it is necessary to bend the rules to avoid a catastrophe of monumental proportions.

I attempted to contact the FTA, but the agency could not be reached for comment. So far, the local papers report that the agency is keeping its hands off the dispute. Nobody is arguing yet that the FTA should protect the region’s transit riders by at least mediating a settlement of the dispute, so the available money would bring the greatest possible benefit to the greatest number of transit riders. It might be good for the riders if somebody did. 

In the past, local advocates have argued that the FTA should take a more active role in determining the cost-effectiveness of proposed capital projects, to make sure that the money at issue is spent wisely and not wasted on projects that would produce sub-optimal benefit for transit riders and the taxpayers who will ultimately pay for those projects. The next logical step would be to argue that the FTA should have a duty to make sure that transit riders and taxpayers benefit through wise management and allocation of the funds it controls, and that helping New Jersey and New York reach an equitable settlement in the current dispute would constitute a service to those riders.

Beyond the FTA, this situation could provide an opportunity for Transportation Secretary Pete Buttigieg to step up and attempt to mediate a settlement. He was mayor of South Bend, Ind., for two terms, so he has experience with urban politics, even if his experience with transit per se is limited. Helping to resolve a dispute between major transit providers in two heavily blue states would be an appropriate task for a federal official from the same party, and it would look good for him and his fellow Democrats if he were to succeed. 

In a letter dated Sept. 12, New Jersey Gov. Phil Murphy, a Democrat,  asked Buttigieg to mediate the dispute, according to a report in the Newark-based Star-Ledger from Aug. 13. Larry Higgs reported: “New York officials agreed to use the federal formula to allocate CARES Act funds, but balked when it came to using that formula to distribute December 2020’s … CRRSAA and the American Rescue Plan Act (ARPA), passed in March 2021.” New Jersey’s Congressional delegation sent a letter to FTA Administrator Nuria Fernandez with a similar request. 

Clayton Guse reported in the New York Daily News on Sept. 19 that MTA head Janno Lieber also made a similar request. Guse quoted an FTA spokesperson as saying: “Federal public transportation law does not give the FTA the authority to make the determination on how these funds are sub-allocated among transit providers.” So far, Buttigieg has not gotten involved in the dispute, and neither has Fernandez.

New Jersey appears to be on solid ground arguing adherence to the established statutory formula. New York also appears to be on solid ground arguing that circumstances have changed in a manner that nobody could have foreseen when the formula was created, and that it would be fundamentally fair to allocate funds based on today’s unique circumstances.

In reality, it appears that local politics will determine how the dispute between the agencies is ultimately settled. When I contacted NJ Transit for a statement, I was referred to the Governor’s office. Even though NJ Transit and the MTA have structures under the statutes that established them that indicate a degree of independence, that independence does not seem to exist in practice. Instead, the governors of both states have consistently taken a strong hand in running the agencies in recent years. 

New Jersey Governor Phil Murphy provides an example. He appoints the head of the agency and all members of its Board. He took an active role in managing it, even before he took office, when the chief of his transition team ordered the head of the agency at the time (appointed by former Gov. Chris Christie) to demand the resignations of a number of managers—a political means for terminating them. 

Murphy is now facing Republican challenger Jack Ciattarelli as he runs for re-election. He holds a comfortable lead at this writing (13 points according to the latest polls), but he has lost some ground, and there are indications that the race may tighten in the final days of the campaign. While it is still considered highly likely that Murphy will be re-elected, taking a strong stand about money for his transit agency is behavior that could be expected from any politician running for re-election. 

It is not difficult for Murphy to take that stand. He is calling for the statutory formula to be applied as written. New York wants to change the allocation, which is always a more difficult position to defend. Will Kathy Hochul, the Empire State’s new governor, get involved in the dispute? As I recently reported, Hochul has become involved with transit-related issues that concern New York City and its suburbs, even though she has been in office for less than two months, and she hails from a town near Buffalo, at the other end of the state. At the same time, it is reasonable to assume that Hochul’s predecessor, Andrew Cuomo, who recently resigned in disgrace and whose micro-managing of the MTA is well-known, is partly to blame for the standoff.

There are impending negative consequences stemming from the dispute. Grants for both agencies involved are being delayed. Elected officials in the towns and counties in the MTA service area have also expressed their concern about what will happen to their constituents who ride. 

“The argument by New York officials is based on the MTA’s $17.5 billion annual operating budget, far larger than NJ Transit’s budget of $2.6 billion,” Guse reported in the Daily News. NJ Transit’s budget, normally approved in July, has been held up, too, due to the stalemate. He also reported that the three states have until Nov. 8 to reach agreement on a plan to split the funds and submit it to the FTA. If they fail, they will be ineligible for a share of $2.2 billion in transit grants under the American Rescue Plan.

The stark question remains whether elected officials, all of whom are Democrats (including Connecticut Gov. Ned Lamont), are letting their transit-riding constituents down by failing to make the difficult decisions needed to resolve the funding dispute that has the potential of making the transit network in the nation’s largest metropolitan area even worse-off from COVID-19 than it has been up to now.

The dispute will be settled eventually. The FTA is still holding the stakes, and both states need the money, even though New York argues greater hardship than New Jersey is suffering. New Jersey and New York can’t hold out forever, even though at the moment they continue to stare each other down across the “Hudson Ocean.” 

David Peter Alan is one of America’s most experienced transit users and advocates, having ridden every rail transit line in the U.S., and most Canadian systems. He has also ridden the entire Amtrak network and most of the routes on VIA Rail. His advocacy on the national scene focuses on the Rail Users’ Network (RUN), where he has been a Board member since 2005. Locally in New Jersey, he served as Chair of the Lackawanna Coalition for 21 years, and remains a member. He is also a member of NJ Transit’s Senior Citizens and Disabled Residents Transportation Advisory Committee (SCDRTAC). When not writing or traveling, he practices law in the fields of Intellectual Property (Patents, Trademarks and Copyright) and business law. The opinions expressed here are his own.

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