Senator Schumer's Speech at the Rudin Center

The full text of Senator Schumer's speech at the Rudin Center, as prepared, about the Gateway Tunnel project:

"Good morning and thank you all for coming. Thank you to NYU and specifically Bill Rudin, Mitchell Moss and the Rudin Center for hosting and helping to organize this event.

Today I want to speak about the very real possibility that in a matter of years – not decades – the only two rail tunnels running under the Hudson River into Manhattan will become inoperable.

Because the tunnels were flooded in Sandy and are deteriorating faster than we anticipated – and purely because the tunnels are old, far too old -- they are, inevitably, only a few years away from being structurally unsound. “Closed in need of repairs.”

We are fast approaching a regional transportation Armageddon: the busiest rail line in the country stranded without a way into New York.

Make no mistake: closing the tunnels would be cataclysmic for commerce. For New York. For New Jersey. For the country.

If one or both tunnels must go offline for any extended period of time, we are talking about throwing the world’s largest monkey wrench into the gears of New York’s economy, creating awful conditions.

During last month's hair-pulling tunnel delays, we got a taste of what is to come.

If we don't come together – NOW – and find a way to fund and build this vital transit link, we risk putting our whole regional – even national economy in harm's way.

Like the 'Ghost of Christmas Future' in Dickens's "Christmas Carol," we got a soul-chilling premonition of our future when we experienced the massive delays in the current Hudson rail tunnels.

It was maddening. It was chaotic. It was sclerotic to our economy.

Now imagine that as a permanent part of our regional reality.

Businesses choose to locate and expand here in NYC precisely because they can attract a range of workers – from the janitor to the cleric to the managing director – who can efficiently get to and from work. If that ability to travel en masse is severely hamstrung, and those workers can't get there like they can in other cities, they will look elsewhere. Or they will move.

In a brutally competitive national and global economic marketplace, failure to build this vital link is insane. (It's tantamount to economic suicide.)

And let's think for a moment about the New Jersey impacts. If it becomes a decades-long nightmare for millions of families to commute to Manhattan from New Jersey, people will locate in Westchester and Long Island instead of River Edge and Ramsey.

Beyond the profound diminution in the quality of life, think about the negative effects on property values. The potential losses in family wealth are mind-boggling.

Yes, failure would willfully erode our position of economic preeminence and choke off future regional growth. In human terms this would negatively impact the ability of countless New Yorkers' and New Jerseyans' ability to live, work, shop and play right here in the Big Apple.

It might even be so severe as to create a regional or even national recession. After all, the New York economy is a vital spoke in the nation's economy, an engine of national GDP growth.

But the problem goes beyond New York and New Jersey. It is a federal problem. If the tunnels aren’t built, it will affect our economy from Maine to Virginia – a quarter of our nation’s economy.

All because we have not been able to make significant upgrades or expansions for over a century!

Allow me a historical digression.

In 1901, Alexander Cassatt, the president of the Pennsylvania Railroad, boarded a train in Philadelphia bound for New York – the first leg of his family’s trip to Europe.

But Alexander Cassatt’s train was forced to a halt on the western bank of the Hudson – there was no way across the Hudson by train.

He waited in a growing crowd of disembarking passengers to board the ferries – the only way to reach Manhattan was a dangerous bobbing and weaving through a clattering of ships in New York harbor.

That was 1901. If we do nothing – if financial pressures, political shortsightedness, regionalism or simple inertia keep us from building these tunnels new – we will see a scene like the scene that greeted Alexander Cassatt at Hoboken over a century ago: a mass of commuters, stranded on the west bank of the Hudson, looking across the great river as they queue up to board ferries.

Imagine that for a moment. That is the scale of the problem we face.

The answer to this challenge is a project many of us have been pushing for awhile.

Amtrak has given it the name “Gateway” – and it is our way forward. Or rather, forward, under, and through into Penn Station.

In this speech, I will first address the scale of the problem we face – which involves an honest accounting both of the progress we’ve made thus far, and the massive challenges that remain.

Second, I will propose a specific plan of action to get the Gateway project off the ground, a plan which hinges on the creation of a new development corporation; one comprising of all the stakeholders, imbued with the financial authority necessary to leverage billions of dollars from private, federal and state funding pots.

Third, I will identify precisely where this new development corporation should look for funding, and how Congress and the Administration can facilitate the process, through legislative changes and executive authority.

No doubt it will take a gargantuan effort – “Gateway” is the single biggest infrastructure project in the country.

It incorporates several important upgrades we need to make on the Northeast Corridor in the New York-New Jersey area, but the most important part of the Gateway program is building two new tunnels under the Hudson...

Those who have been paying close attention know this already. Amtrak and NJ transit send 450 trains a day through two tunnels under the Hudson, which were constructed in 1910 and remain largely as built.

On an annual basis, Penn Station has well over triple – triple – the number of users than all three NYC-regional airports (JFK, LaGuardia, and Newark) put together.

Nowhere else in America are so many trains relying on so few tracks built so long ago.

A few years ago, experts were already sounding the alarm. The Northeast Corridor had become the busiest rail line in the country; profits were increasing; ridership was skyrocketing.

We knew we had to soon replace the tunnels and add capacity, especially at what had become a chokepoint – the northernmost tracks in New Jersey leading to the tunnels into Penn Station.

The Port Authority conceived the ARC plan – “Access to Region’s Core” to deal with the tunnel issue; it would build a third and fourth tunnel to allow trains to continue into New York while the two existing tunnels were repaired. It was fully funded; we were ready to go, we started work in mid-2009, but Governor Christie pulled the plug just over a year later.

Diverting funds from the ARC tunnel for the Pulaski Skyway was the wrong move. The ARC tunnel was a high-priority and already fully funded. I supported it. It was a bad idea to stop it and a worse idea to cannibalize it for projects that ought to have been funded by the New Jersey Department of Transportation, perhaps with some help from federal highway dollars.

The Port Authority should have pressed forward on ARC. As I said then, “it was like eating our seed corn.” I made it very clear at the time that I disagreed with Governor Christie on this, and we had some harsh words. But afterwards, we worked extremely well together in the wake of Sandy.  He’s also been a partner on Immigration Reform, and we enjoy a good working relationship to this day.

That relationship – and the relationship of all the stakeholders in this project will be critical to moving Gateway forward. On the ARC project we may have disagreed – but in order to move Gateway forward we will all need to work together.

And then Sandy hit. Seawater rushed into the tunnels. Salts and chlorides infiltrated the walls of the tunnels and accelerated their deterioration. Thus, the timeline for necessary repairs was drastically accelerated and confirmed that Christie's decision to pull the plug on ARC was a massive mistake.

The most popular rail line in the most prosperous nation on earth was skating along thin ice getting thinner.

After the failure of the ARC project, Amtrak grabbed the mantle and their engineers put together the “Gateway” plan.

But Amtrak – underfunded and stretched thin – did not have the financing lined up the way the Port Authority did for ARC.

The cost of building new tunnels is very high – that is not disputed. The entire Gateway program will cost upwards of twenty billion dollar.  Initial estimates for just the tunnels have ranged from ten to fourteen billion.

And additional work, such as a building a new Portal Bridge at Hackensack, is estimated to cost an additional ten billion dollars.  And let me stress these are just initial estimates.

But many of us did not want to wait before a full plan could be put in place. There were certain things that had to be done immediately, otherwise the cost of the project would have jumped.

That is why I pushed so hard to start work on the “box tunnel” – the concrete casing foundation for the tunnel under Hudson Yards.

If we didn’t put this foundation in the right place, and at the right time – when the platform over the Hudson Yards was being constructed, Gateway might not have ever happened, or at least cost billions more.

I was able to secure over $185 million in federal funding from the Federal Transit Administration (FTA) for Amtrak to build the so-called box tunnels in the right place.

Related – who owns Hudson Yards – acted as an upstanding corporate citizen, and built Hudson Yards in coordination with the box tunnel, allowing Amtrak to secure the appropriate right-of-way when the tunnel under the Hudson River would be built.

The MTA, led by Governor Cuomo, was also a critical partner, moving a maintenance facility that ran through this right-of-way.

If we hadn’t done this, Gateway would have likely cost billions more, adding to the mountain of financing we have to climb.

We were able to keep the project alive while the search began for the larger pot of funding. But there are no more preliminaries, the tunnels have to be financed and dug now.

To achieve what we must achieve will take vision. The same kind of vision gifted to earlier generations; to men like Alexander Cassatt who eventually built the two tunnels under the Hudson – and four more under the East River for good sport – to send the Pennsylvania Rail Company into Manhattan, across to Long Island, and up to New England, linking by rail the entire Northeast and mid-Atlantic.

We require the same vision and determination gifted to the early stewards of the Port Authority, who conquered the Hudson in their own way; who built the George Washington Bridge under budget and ahead of schedule; who followed up that massive feat by finishing the Lincoln tunnel and by bringing three airports into the 21st Century.

These were times when men and women of vision armed with a noble purpose were able to marshal the forces of government and industry to solve “unsolvable” challenges.

Now we must re-new what they made new. In generations past it was a problem of underdevelopment – they simply had to build.

To us – we have to re-build, re-engineer, re-invigorate. It is an entirely different, substantially more complex task. We have to fix a city running on century-old infrastructure.

To do that, we require a renewal of the same spirit that built this – the greatest economic center in the world – in the first place.

Gateway is a massive, expensive, long-term project with many elements and several phases.

It will require leadership from our two governors, Governor Christie and Governor Cuomo.

It will also require real resources from the federal government. And the bipartisan political support to overcome the short-sighted mindset of those who reflexively oppose any and all government investment – even investments like this that are so obviously fundamental to the peak efficiency of the American economy.

It will take energy, commitment, several leaps-of-faith, but above all else: it will take cooperation.

Several entities would benefit from the project, and have a giant stake in its progress: Amtrak, the federal government (represented by the Secretary of Transportation), the states of NY and NJ (represented by their governors), the MTA, NJ Transit, NYC and the Port Authority.

For Gateway to progress, we have to unite these forces. For Gateway to have a chance at garnering enough funding, there needs to be an entity that can access various pots of funding from all levels of government and an ability to leverage private capital and issue debt.

Furthermore, each of these forces needs to play an active role in every step of the project - from the engineering and design work that needs to be done now, to the financing, and eventual construction. No one group can sit on the sideline or take a “wait and see” approach. Every stakeholder needs to engage on this project now.

The only way to do that is for each of these entities to come together to form a new partnership: the Gateway Development Corporation.

This would be the single most important, immediate step forward for Gateway – and I’m urging all parties to come together to get this done right away.

It will require each entity donating staff and resources to the effort. It will require real commitment from the top brass at Amtrak, the Port Authority, the states of NY and NJ, the city (NYCDOT), NJ Transit and the MTA.

But we need a new development corporation for several reasons:

First, the scale of the project is so large that we need to leverage the resources of all the transportation and state agencies we have to achieve progress.

The main tasks of this development corporation should be to develop the roles and responsibilities of the parties and to create a cooperative structure for planning, funding, financing, and ultimately “building” Gateway.

Without a single agency directing traffic, Gateway could only move forward one inch at a time, grant-by-grant, undertaken by the separate agencies in a piecemeal fashion. That makes a project such as this, with so many moving parts – and a rigid chronology of construction – extraordinarily difficult.

Input should come from all parties – everyone should have a seat at the table – but the planning and financing and implementation of Gateway should be driven by one conductor: the development corporation.

Second reason for creating a new development corporation: this is the best way to access the various pots of public funding – specifically federal funding.

Amtrak can’t access federal mass transit funding. The Port Authority and regional Transit Agencies can’t access federal railroad dollars the way Amtrak can. We’ll only get Gateway done by adding up several pieces of financing, with an eye toward getting the maximum amount possible from the federal government - and we can only do that if each entity has a seat at the table.

And finally, a non-profit development corporation in this mold could attract private financing in much the same way that Moynihan Development Corporation arranged the financing for Moynihan station.

Moynihan as you may remember, with a Board that consists of the Federal government (US DOT), New York State and New York City, was able to create and will ultimately monetize such assets as air rights and development rights, which could bring in a significant portion of the project funding. We could follow this type of model same here.

Let me stress: creating this development corporation is paramount. It will, by itself, create forward momentum, but more importantly, it’s the only way this project will get done in a coherent way.

What’s more – collaboration is something all of these entities have experience with, just look at the work currently being done by the Northeast Corridor Commission. That group is made up of many of these very same stakeholders and has been able to come up with reasonable capital cost-sharing formulas.

And the best part is – we can begin the process tomorrow. A non-profit in the mold I’m describing can be created under existing state law (no legislation needed) both in New York and New Jersey without much legwork.

So what does it take? A mutual recognition by all the parties that the problem is now upon us, and that it’s time to start working to fix it. That’s it. We can start this corporation tomorrow and we should.

Creating the corporation will be the most important, immediate step we can take – but it’s also the easiest in terms of legwork.

The hardest part is piecing together the massive financing puzzle.

As I’ve said, while there is still no official estimate, Gateway is believed to initially cost at least 20 or 25 billion dollars. It’s a very rough initial estimate and a number that is only going to climb the longer we wait.

We will have to pull together funding from various sources: but Governor Cuomo is right, we should seek the maximum amount possible from the federal government.

These tunnels should be a national priority. Just like the ARC project, the federal government needs to contribute hugely to Gateway. I don’t know if we can achieve a project fully funded by the federal government – but we should explore every possibility.

I would like to lay out five things we can do on the federal funding side that I think would be most beneficial for this new development corporation.

In particular, I will work to make sure the federal government can provide a hefty share in direct funding. There are a couple ways to facilitate this.

First, and most promising, Congress should give Amtrak the ability to cordon-off profits generated by the Northeast Corridor.

The Northeast Corridor generates tremendous profits. But now, most of that money is used to subsidize long-distance routes that are big money-losers for Amtrak.

There is a bipartisan move in Congress to allow Amtrak to cordon-off the profits it makes on the Northeast Corridor, and use it for capital investment on that corridor. It keeps the money in the Northeast and reinvests it.

This proposal is already in the Senate transportation bill and has the support of some of the leading Republicans on the transit committee in the House.

In order for that to happen, Congress must also provide Amtrak with an adequate annual appropriation to cover operating losses on the rest of the system. Adequate operating support for Amtrak would give the agency the ability to reinvest profits and dedicated capital funding from the Highway Trust Fund into infrastructure.

But if the Northeast Corridor can cordon off profits – that could mean as much as $500 million per year or more because the profits are going up.  And we can use this money as a straight capital commitment to Gateway and other similar Northeast Corridor projects.

That is a large revenue stream which could be a game-changer to fund the project.

Amtrak will undoubtedly be a key source of funding for Gateway. They own the tunnels; they receive an annual appropriation from Congress, which, if it is robust and comes with the necessary flexibility – like cordoning off Northeast Corridor profits, will go a long way to getting Gateway paid for.

Second, we need to push for a major increase in funding to the federal “New Starts” program under the FTA, so that the transit agencies can access federal grant dollars.

Via the Gateway Development Corporation, the MTA and NJ Transit could apply for FTA New Starts grant funding to cover the costs as the project advances - just like they are for the 2nd Avenue Subway and East Side Access projects.

While Amtrak can’t apply for New Starts, the MTA and NJ Transit could apply, another reason we need a development corporation with both groups included.

New Starts funding can play an important role in this project – just as it did in the ARC project.

But, as with several pots of federal infrastructure funding, the yearly congressional appropriations have not been adequate to keep up with the demands of our nation’s infrastructure, especially since the Tea Party, hard-right wing of the Republican caucus gained a foothold in Congress.

Their shrink-government-at-all-costs movement has had an impact; biggest of all was sequestration.

Shrinking appropriations bills along with inadequate surface transportation bills have hamstrung infrastructure investment for the past 5 or so years, and it needs to come to an end if we want to get a project like Gateway moving.

The good news is there is a growing movement in Congress to increase funding for transit and for the Highway Trust Fund. Earlier this month we witnessed the Senate passing a bill that increased funding, and the House envisioned one in their short-term bill.

Programs like New Starts have existing funds we can tap into, but the more money there is to spread around – it gets much easier to envision large capital grants for Gateway.

So Congress should pass an appropriations bill that gives New Starts and other programs like it a significant increase that would provide the capacity to support Gateway.

Third, Congress needs to pass a robust, long-term surface transportation bill that significantly increases investment in transportation. More specifically, that bill should include dedicated capital funding for Amtrak; funding that Amtrak can rely on year-in year-out and use to invest in large-scale projects like this.

There is a real chance for the first time to get a robust transportation bill, using revenues from a bill I helped craft with my Republican colleague Senator Rob Portman.

We would reform the international tax code in a balanced way that would not only make America more competitive for business; it would generate revenues far exceeding other bills in Congress.

Our proposal requires companies with cash parked overseas to return that money to the U.S. at a lower rate in the short-term – and then, under our proposal, we move the international tax system to a new, lower rate.

We would use the revenues generated from the one-time return of overseas earnings – called “deemed repatriation” – to pay for a large increase in federal investment in infrastructure.

Thankfully, these ideas are beginning to garner more widespread support in Congress.

We intend to use those prospective revenues to pay for the first substantial increase in infrastructure funding that we’ve seen in decades.

In addition, I have great partners in Congress who can help advocate for direct capital dollars to Amtrak and this project – members like Senator Gillibrand, Senator Menendez, who is ranking member of the Transportation Subcommittee in the Banking Committee, and Senator Booker, who is ranking member of the passenger rail subcommittee in the Commerce Committee.

Of course, other members from the Northeast and across the country understand the importance of this project and can help make it a reality.

But there is a special burden on Governor Christie to lobby HIS party in Congress to move in our direction on infrastructure funding: for one, he cancelled ARC – our first effort at fixing the tunnels. And second, the vast majority of riders – 80% – who would be impacted by tunnel closures are New Jersey residents who come into the city via NJ Transit.

Now, we have an opportunity for the feds to lead the way on financing highway infrastructure broadly defined. Governor Cuomo and Mayor de Blasio are helping advance that idea. Now Governor Christie needs to join the chorus pressing Congress for action, particularly his Republican friends who are still trying to bleed infrastructure dry. He needs to press them for New Starts money, he needs to press them for Amtrak funding; and he needs to press them on broader infrastructure funding.

Fourth, the Gateway Development Corps, once created, should engage with private sector partners on ways to contribute funds as I outlined earlier.

And fifth, and very important, if there are remaining costs after federal grant options have been exhausted the Gateway Development Corps’ should engage with Secretary Foxx on getting a significant RRIF application.

RRIF is the Railroad Rehabilitations and Improvement Financing Program – it is an amazing program that provides long-term, zero-interest federal financing.

If we cannot raise the $20-25 billion through these other options, we can rely on RRIF.

Secretary Foxx has made a generous offer of RRIF money that would provide zero-interest financing for 30 years. This is a tremendous offer, and can help us finance the project in a very cheap way.

The Administration was given $35 billion in loan authority by Congress through RRIF but they’ve only dispensed about $2 billion. Secretary Foxx and President Obama likely want to draw down the remainder of the authority soon. Gateway would be a perfect candidate for RRIF if additional funds are required.

As to who would repay this loan, we have to make sure RRIF has some flexibility. While it cannot be repaid using federal money, it can be repaid with other monies, including those from Amtrak, the private sector, the state and local sources.

If RRIF is utilized, the Gateway Development Corporation would have time to find a way to pay off this incredibly cheap financing backed by the feds – lowering the stakes on their portion of the cost-share. There are creative ways to pay back this financing without using state-based funds.

What can make this RRIF financing even more attractive is that it could be awarded to the Development Corporation in a new and innovative way that hold the states and other stakeholders harmless if significant federal funding for the project never materialized.

USDOT could give the Development Corporation the financing now but then also grant them the ability not to draw down until the federal grant dollars discussed above are secured for the project. This approach would ensure the availability of RRIF for the project if needed, but avoid leaving either of the states or other local entities holding the bag if federal funding isn’t secured.

These are five, concrete steps the new corporation can take, in partnership with the federal government – that would move Gateway forward in a significant way, and all of them are achievable.

Of course, I admit this plan is not gospel, but I believe it is our best shot and, moreover, I believe it can be done.

Amtrak already has $300 million from the federal government that is using today, both for the box tunnel and for preliminary design and engineering. But in order for this project to become real, each entity needs to be engaged in the design process.

I have laid out what I think is the right combination of funding sources for this project - but I am fully aware that over time and through negotiation, those sources might change slightly. But just because the entire funding structure isn't locked into place doesn't mean we shouldn't move forward.

By launching the development corporation – and by each partner contributing to the engineering and design of the project we can get things moving right away.

Engineering and design alone could take as much as three years – that's plenty of time for this funding structure to come together. But we need to get started right away – our region simply cannot afford for the stakeholders in this project to sit on the sideline. Time is of the essence, Amtrak has already started, and now it's time for all the other parties to join with them and get moving.

Let me offer one final key reason why the new corporation needs to be formed and all parties need to join together on engineering and design right away.

A project of this size will take several years to design and even more time to build. The clock is ticking on the existing tunnels. Their deterioration isn’t going to wait for us to have a fully approved financing structure.

We can continue to actively do construction over the next couple of years on the “upland” work in New York City – that is, extending the box tunnel from 9th avenue all the way over to 12thavenue so that we have the linkage to the eventual tunnels ready to go.

And we can move forward in a coordinated way on engineering and design of the new tunnels.

While those things are underway we can work together on the financing structure I laid out above.

But that is just the doormat for Gateway; it is only rolling out the red carpet.

Soon, very soon, we have to start digging.

You know, the experience Alexander Cassatt had that day in 1901 followed him to Europe while he was on vacation. The traffic he saw loading onto the ferries gave him the inspiration and the vision to build the first two tunnels under the Hudson.

The traffic we see today on the Northeast corridor gives us the responsibility to rebuild them for the 21st Century.

It’s time to get to work. Thank you."