- Associated Press - Thursday, November 12, 2015

NEWARK, N.J. (AP) - Officials in New York and New Jersey announced an agreement Thursday to create a corporation to oversee plans to build a new rail tunnel under the Hudson River, though basic questions remain about how the estimated $20 billion project will be paid for.

Federal officials and Amtrak say they will be responsible for financing half of the project.

The new entity will be created within the Port Authority of New York and New Jersey. Gateway Development Corporation will coordinate the project and be controlled by a board with representatives from both states, Amtrak and the U.S. Department of Transportation.

New York Gov. Andrew Cuomo and New Jersey Gov. Chris Christie had sent a letter to Transportation Secretary Anthony Foxx in September pledging their states’ commitment if the federal government picked up half the cost.

“Everyone knew it was important, everyone said it was important, but nobody was coming up with the funding,” Cuomo said Thursday. “And I think our pledge at 50 percent was heard by the president, was heard by the Department of Transportation and we said, ‘Let’s stop talking and let’s start digging because we have start replacing the tunnels.’”

U.S. Sens. Cory Booker, D-N.J., and Chuck Schumer, D-N.Y., have been working with Foxx and joined in the announcement. Schumer had suggested establishing a development corporation in August.

Paying for the tunnel and other rail improvements included in Amtrak’s Gateway program, such as an expanded Penn Station in New York and a new bridge over New Jersey’s Hackensack River, is considered a unique challenge given the size and scope of the project.

The development corporation will seek federal grants and long-term, low-interest federal loans, according to Thursday’s announcement.

The federal government’s portion could come from grant programs and Amtrak’s capital funds and profits from its Northeast Corridor line, by far its most-used service. Congress is considering legislation to allow Amtrak to use the profits for NEC improvements; historically, it has been required to use those profits to subsidize its other, money-losing lines.

Financing experts say some level of public-private partnership also is possible, though that could require user fees, congestion pricing or fare increases to pay back private investors.

All options should be on the table, said Michael Sweeney, executive vice president and New York metro district leader for Kansas City-based transportation infrastructure consultants HNTB.

“At the end of the day, what we all have to look at is if we have money to pay for these things,” he said. “With Gateway, the answer is obviously no, or we wouldn’t be asking these questions. So congestion pricing and other ways to fund this have to be looked at.”

The development corporation will have a four-member board representing both states, Amtrak and the federal Department of Transportation. A Port Authority member will chair the board, and an Amtrak representative will serve as vice chair.

The Port Authority will provide primary support staff for the corporation as well as office space, administrative, technological and logistical support.

The tunnel project is considered critical for the Northeast corridor between Washington, D.C., and Boston, a region that produces about 20 percent of the nation’s gross domestic product.

The existing Hudson tunnel, built more than a century ago, is already at capacity and is a source of regular delays. Additionally, Amtrak officials said last year that the tunnel’s two tubes will eventually have to be taken out of service to repair saltwater damage from Superstorm Sandy in 2012.

Amtrak developed Gateway after Christie pulled the plug on a previous tunnel project in 2010 over fears of cost overruns. That project’s initial $8.7 billion price tag was to be split more or less equally between New Jersey, the federal government and the Port Authority. Christie had cited New York’s unwillingness to buy into the project as one of the reasons he axed it.

Amtrak has estimated it would take roughly 10 years to finish a new tunnel and longer to finish all the other elements.

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Associated Press writer Michael Balsamo in Long Beach, New York, contributed to this report.

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This story has been corrected to show that the announcement came on Thursday, not Wednesday.

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