SCHUMER, BOOKER, AMTRAK CHAIR ANNOUNCE BREAKTHROUGHS ACHIEVED IN JUST-PASSED TRANSPO BILL THAT PROVIDES CLEAR PATH TO FEDERAL FUNDING FOR GATEWAY TUNNEL; NEW LAW PUTS GATEWAY ON TRACK FOR BILLIONS OF MUCH-NEEDED, ADDITIONAL FEDERAL DOLLARS
In Trifecta Victory, Bill Allows: 1) Profits on Northeast Amtrak Line To Be Used for Tunnel, Approximately $200-$300M A Year; 2) New Federal Railroad Rehabilitation and Improvement Financing (RRIF) Rules Making Federal Low-Interest Loans More Accessible To Development Corp. Structure & Improving Repayment Structure; and 3)Expansion Of “New Starts” Transit Program That Will Allow Gateway To Secure Even More Federal Funds
Schumer, Booker: New Law Is Trifecta Victory That Gets Federal Share of Gateway Financing On Track
U.S. Senators Charles E. Schumer (D-NY) and Cory Booker (D-NJ) today announced major victories for the Gateway Program in the just-passed federal transportation bill that will provide at least three reliable funding sources for the advancement of the sorely needed national-priority project. The Gateway Project includes a number of individual projects, but most critically would build new trans-Hudson River rail tunnels — growing reliable capacity on an essential portion of Amtrak’s eight-state Northeast Corridor that connects New York and New Jersey. The Program is projected to cost an upwards of twenty billion dollars and initial estimates for the tunnels themselves have ranged from ten to fourteen billion dollars. Until now, funding sources for the project have been limited.
Last month, Senators and Governors of New York and New Jersey, as well as the USDOT reached an agreement on funding commitments and a governance structure for moving forward on the project, announcing an intent to establish the Gateway Development Corporation and split the costs 50/50. And now, with the passage of the federal transportation bill, a pathway for funding and financing the massive project has been made even clearer. The transportation bill, also known as the FAST Act, provides three specific changes that will help support this project:
First, the bill includes changes to Amtrak’s structure, for the first time allowing Amtrak to reinvest profits generated on the Northeast corridor in the Northeast. This new funding structure will help provide the resources needed to advance the Gateway Program by increasing the amount of capital dollars available for Amtrak to utilize and creating a more predictable revenue stream that can be borrowed against. In August, Schumer delivered a speech on the Gateway Program and what must be done to get the project off the ground. As part of his speech, Schumer identified this funding change as a major potential source of federal grant money for Gateway. In addition, in 2014 Schumer gave a floor speech in which he called for this change, saying it was critical to the Northeast. Booker, the top-ranking Democrat on the Senate Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security, which has jurisdiction over Amtrak and passenger rail in the US, authored the Railroad Reform, Enhancement, and Efficiency Act earlier this year to make this change – which was ultimately included in the FAST Act.
Second, the bill makes key reforms to the Railroad Rehabilitation and Improvement Financing (RRIF) program, a $35 billion federal loan program that will help speed improvements to major rail projects in New York, New Jersey and across the country. The bill will make federal low-interest loans even more accessible for large rail projects like Gateway and unlock needed funding for these types of projects. The reforms include a change to the repayment requirements and timeline to add more flexibility, which Governor Andrew Cuomo (D-NY) has specifically endorsed. It includes streamlining and transparency provisions and allows for the creation of Master Credit Agreements, which the development corporation can utilize by securing loan authority now and then wait to draw down on that loan until they are ready to utilize. Booker championed these changes to RRIF in the Railroad Infrastructure Financing Improvement Act, which he introduced in March, and Railroad Reform, Enhancement, and Efficiency Act.
Third, the bill changes the Capital Investment Grant program, known as New Starts, by creating a new way for the USDOT to evaluate projects which are both passenger rail and mass transit focused. Typically New Starts is a grant program geared exclusively toward mass transit projects - like those sponsored by the MTA or NJ Transit. This change will help a project like Gateway, that provides both mass transit and passenger rail benefits, receive a higher New Starts scoring and thus more funding. This change is important to the Gateway program, because the new tunnels by both a transit provider, NJT, and a passenger rail provider, Amtrak. Aligning the New Starts program to better work with and evaluate these types of projects is critical to helping utilize it as part of the federal contribution to the project.
“The trifecta of significant federal funding victories in this transportation bill will keep the Gateway tunnel project on the rails and moving full steam ahead,”said U.S. Senator Charles Schumer. “Passing the first long-term transportation bill in years and increasing federal investment in infrastructure was a top priority of mine, and for all the Gateway project partners including New York, New Jersey as well as Secretary Foxx and Amtrak’s Anthony Coscia, who both fought hard to make this bill a reality. By working together to ensure Gateway priorities were included in this national legislation, we have set the stage for Amtrak profits, federal loans and grant dollars stop right here in New York and New Jersey, benefitting our nation’s most important transportation corridor.”
“This legislation is not only another step forward for the Gateway project, but a critical investment in the safety and efficiency of our nation’s surface transportation network,” said U.S. Senator Cory Booker. “I am pleased that this final package includes provisions Introduced that will enable Amtrak for the first time to reinvest revenue from the Northeast Corridor back into the Northeast Corridor and allow more flexibility in financing for vital infrastructure projects like Gateway. These are critical provisions for affirming the 50/50 cost share between the federal government and states outlined in the Gateway Development Corporation framework announced last month. I stand committed to continuing to move Gateway forward in order to provide much needed relief to New Jersey commuters while bolstering our region’s long term economic growth.”
"While this is not the bill I would have written, the FAST Act takes steps towards improving our critical surface transportation infrastructure," said Senator Menendez, the ranking member of the Senate mass transit subcommittee. "Language I fought to include was added into the final bill to get Gateway on track by making it eligible for the New Starts program that provides billions of dollars for major transit projects. Replacing the aging Hudson River rail tunnels is our number one transportation priority, and I look forward to continuing to work with our partners in the region to maximize the funding, financing, and policy provisions in this bill to their greatest extent."
“The federal transportation bill we passed last week helps pave the way for funding for the desperately needed Gateway tunnel. Millions of commuters in the Northeast Corridor are forced to rely on tunnels that are overburdened and in dire need of repair, and the Gateway tunnel would bring much-needed relief to this network and help boost the region's economy. This is great news for New York,” said U.S. Senator Kirsten Gillibrand.
"I applaud the efforts of Senators Schumer and Booker and others in the NY-NJ delegation to move the Gateway project forward through their work on the recent transportation bill. I will use these new tools to do all we can at the Federal level to make this critical project a reality,” said Transportation Secretary Anthony Foxx.
“Members of Congress from throughout the Northeast - including Senators Schumer and Booker, as well as Secretary Foxx, deserve tremendous credit for passing a long-term infrastructure bill that will help move the Gateway Program forward. The changes secured in the bill to how Amtrak is funded, as well as the changes to the RRIF and New Starts program get us yet another important step closer to making this program a reality,” said Chairman Anthony Coscia, Amtrak Board of Directors.
Amtrak and New Jersey Transit currently send 450 trains per day through two tunnels under the Hudson River, which were constructed in 1910 and remain largely as build. The Northeast Corridor (NEC) runs trains between Boston and Washington DC and according to Amtrak, NEC had its highest ridership year ever in FY2014 with 11.6 million riders (up 3.3 percent from the prior year). In contrast, ridership on long-distance routes declined by 4.5 percent. In FY2014, the NEC generated $1.191 billion in ticket revenue.
The FAST Act gives Amtrak the ability to cordon-off profits generated by the NEC and use it for capital investment along the corridor. Right now, the NEC generates millions in profits annually, however, most of that money is used to subsidize long-distance routes in more rural locations of the country. The FAST Act’s change will allow Amtrak to keep the profit it generates in the Northeast Corridor and reinvest it directly into the corridor to ensure that the infrastructure can continue to deliver high performance. If Amtrak achieves $400M in net revenues annually, then Amtrak could have an estimated $200M-$300M in additional funds per year between 2016 and 2020, the life of the bill, to invest in the Gateway Program and the NEC. Over a thirty year loan period these profits could mean as much as $6-9 billion. Additionally, if Amtrak’s Northeast Corridor profits continue to grow as Congress increases its annual appropriation to Amtrak, as called for in this bill, then Amtrak could have even more money to invest in Northeast Corridor infrastructure like Gateway. This money can be used as a straight capital commitment ?and a source for securing debt toward Gateway and other Northeast Corridor projects.?
The FAST Act makes a number of important changes to the Railroad Rehabilitation & Improvement Financing (RRIF) Program that help make it easier to use for large scale projects like Gateway. Specifically, those changes include:
- Repayment Schedule – Under current law, loan repayment must begin within 6 years of the date on which the loan was originally disbursed. The FAST Act would require repayment to commence within 5 years of the date on which a project is completed. This change is critical for Gateway given the length of time for construction of the project.
- Master Credit Agreements – The FAST Act would authorize the Secretary, under certain circumstances, to commit to issuing a loan or loans at future dates for a program of related projects, contingent on all applicable conditions being satisfied. This change would allow for USDOT to commit RRIF financing to the project now and then allow the Development Corporation to draw down on those dollars only as needed.
- Pre-Construction Costs – The FAST Act would clarify that costs related to eligible activities, including pre-construction activities such as planning and design, may be financed. It would also establish eligibility for reimbursement of planning and design expenses. Given that the Gateway Program will have millions of dollars in pre-constructions costs and years’ worth of planning a design needs this change is particularly helpful.
- Creditworthiness – The current RRIF creditworthiness review and loan sizing process is focused on the credit quality of the borrower and the liquidation value of the asset being financed. The FAST Act would permit the utilization of a project-finance style lending approach where, in addition to the value of any tangible asset being offered, the creditworthiness evaluation could also consider the underlying cash flow potential of the project, revenue streams dedicated to it, or investment grade ratings on the loan. This has the potential to improve the creditworthiness of the Gateway project and therefore improve the potential RRIF loan terms.
Capital Investment Grant
The current structure of the New Starts program is geared toward providing direct capital assistance to transit projects sponsored by transit agencies – like the Second Ave. Subway sponsored by the MTA. The Gateway Program is unique in that many of the assets that will be constructed will be shared by both transit agencies like the MTA and NJT, as well as by railroads like Amtrak. In order to help improve the evaluation and scoring of joint projects like Gateway, the FAST Act included changes to the New Starts Program that properly defines eligible costs, scoring and evaluation models, and other needed legislative approvals for funding joint public transportation and intercity passenger rail projects. These changes will help further improve the Gateway Programs ability to secure a large New Starts grant for the project.
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