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 Amtrak's plan to build a new two-track tunnel under the Hudson
River and revamp its rail infrastructure in the region got a boost
earlier this month when the federal government agreed to foot half
of the bill.
New Jersey and New York are on the hook for the rest, but financial
hurdles both states face suggest they could try to tap the plan's
private funding option to meet their commitment or get their
bi-state transportation authority to do that.
Private financing would be especially suited to the expansion and
revamp of New York's Penn Station, but could also help fund tunnel
construction itself, Drew Galloway, Amtrak's deputy chief of
Northeast Corridor Planning and Performance, told Reuters.
"It certainly seems to lend itself to some aspect of public-private
partnership involvement, particularly in station development,"
Galloway said about the plan, known as Gateway Program.
 The project would be one of the largest in the United States using a
combination of private and public money, highlighting fiscal
constraints and the growing calls for the use of private capital in
the renewal of the nation’s creaking infrastructure. (Graphic:
http://reut.rs/1R6vQ9v)
SURCHARGES AND TOLLS
New York has several expensive projects, including funding of its
subway and commuter rails, that already compete for funding while
New Jersey grapples with high debt, a pension system shortfall and a
sluggish economy.
The Port Authority, which owns New York City area bridges, airports,
tunnels and ports, will create a new unit to run the project and
that unit could form partnerships with investors.
Such partnerships, common in Europe and Canada, typically would have
the private sector design, build, finance, operate and maintain
parts of the project - sometimes for decades - while the public
entity would retain ownership.
The Port Authority is already using public-private partnerships for
a $4 billion LaGuardia Airport upgrade and a $1.5 billion revamp of
a bridge linking Staten Island to New Jersey.
"There's enormous interest," said Joseph Aiello, a partner at global
infrastructure investment firm Meridiam.
He said his firm was already talking to contractors about bidding on
the project.
A surcharge on commuter tickets, tolls for freight traffic or
facility maintenance payments are possible ways for private sector
players to earn back their investments, analysts said.
Besides the new tunnel construction, the Gateway Program also
envisages repairs to the existing two-track tunnel, which dates from
1910 and suffered damage from Hurricane Sandy three years ago, as
well as improvements to stations, bridges and tracks.
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The project will help the region handle an expected 16 percent
population increase over the next 25 years, according to Andrew
Lynn, director of planning and regional development at the Port
Authority.
The agency says its infrastructure serves an area within a 250 mile
radius, which accounts for a quarter of the U.S. gross domestic
product.
The construction and repairs could take up to 20 years and the first
stage - an environmental review and preliminary engineering - could
begin as soon as early 2016 and take up to four years.
The states could issue tax-exempt municipal bonds, among the
cheapest forms of borrowing, to cover their share of the cost.
However, private sector funding would help reduce public exposure to
the risk of cost overruns, says Jorge Rodriguez, head of
infrastructure debt at Deutsche Asset and Wealth Management in New
York.
New Jersey in particular can ill afford such overruns, given a
projected $83 billion pension funding gap and a depleted
transportation fund.
Representatives for Governor Chris Christie, who canceled a similar
rail tunnel project in 2010, did not reply to requests for comment.
Meanwhile New York, while not as fiscally stretched, has several
big-ticket projects underway that are not yet fully funded. A
spokeswoman for New York Governor Andrew Cuomo said it was "too
early in the process to hypothesize" about financing the Gateway
plan.
(Reporting by Hilary Russ and Edward Krudy in New York; Editing by
Daniel Bases and Tomasz Janowski)
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