Termination of the Project

While the New Jersey governor had affirmed support for the ARC project  in an April 6, 2010, letter to the Secretary of Transportation, on October  27, 2010, the governor announced the cancellation of the project, citing  potential cost growth and the state’s fiscal condition. Anticipated Benefits of ARC Project

		Regional Travel Demand and Mobility

According to the studies we reviewed, the ARC project would have  provided a significant increase in rail capacity for moving commuters  between New Jersey and New York. NJT and other planning organization  officials said that increases in capacity were a key mobility benefit of the  project. With this increase in capacity, projections made as part of the project’s  environmental study showed an anticipated increase in transit ridership  as follows:
Daily trips between New Jersey and New York Penn Station would  have increased from about 174,000 without the project to about  254,000 (a 46 percent increase) with the project by 2030. Economic Activity

Studies estimated the ARC project would have generated economic  activity in the region that would have affected jobs and personal income,  business activity, and home values, among other things. Another study  estimated that the project would generate about 5,700 construction- related jobs each year during the 9-year construction.years after completion of the project, the same study estimated the  region would gain 44,000 new jobs as a result of improved access,  which would make the region more competitive compared to other   In addition, 10   The same study estimated that 10 years after completion,  regions.the project would have added almost $4 billion in personal income to  the region, in 2006 dollars. Environmental Effects

The ARC environmental study estimated the project would have created  limited, but mostly positive environmental effects. FTA  determined that these short-term negative effects were adequately  addressed by mitigation plans. Project Cost Estimates Increased Over Time and about Half the Planned Funding Was from Federal Sources

In 2003, the first cost estimates for the concept of a new commuter rail  tunnel between New Jersey and New York—developed by NJT and other  local agencies in the major investment study—ranged from $2.9 billion to  $3.6 billion (in year 2000 dollars). ARC project cost estimates increased over time  as shown in table 1. Third, project cost estimates  are sensitive to factors such as changes to the scope of the project. After discussions, FTA and NJT agreed upon  a baseline cost estimate of $8.7 billion in 2009. After considering  comments from NJT, FTA revised the cost range to $9.8 billion to  $12.4 billion. As of April 2010, about half the estimated cost of about  $8.7 billion would have come from federal sources with the remainder  divided at the local and state levels between the Port Authority and the  New Jersey Turnpike Authority. Planning Documents Did Not Determine the Source of Funding of Potential Cost Growth

The general project agreement, which was a document prepared as part  of the New Starts process and signed by NJT and the Port Authority in  2009, addressed potential cost growth. The additional funding options  discussed included increased funding by the federal government, New  Jersey, and the Port Authority; a federal railroad loan; or a public-private    Because the project was terminated before a  partnership contribution.full funding grant agreement was entered into between FTA and NJT,  there was no final agreement by all the parties on the issue of  responsibility for ARC cost growth. Agency Comments

The Department of Transportation reviewed a draft of this report and  provided technical comments, which we incorporated in the report. Appendix I: Federal Transit Administration’s New Starts Process

The Federal Transit Administration (FTA) provided federal funding for a  portion of the Access to the Region’s Core costs through its New Starts  program.
Why GAO Did This Study

Studies have estimated that transit travel demand between New Jersey and Manhattan will increase by 38 percent by 2030. The Access to the Regions Core commuter rail project was designed to help meet that rising demand. In October 2010, the governor of New Jersey, citing potential cost growth and the states fiscal condition, withdrew state support and cancelled the project. The New Jersey Transit (NJT) was the lead agency for the project, supported by the Port Authority of New York and New Jersey (Port Authority). The project was to be partially funded under the Federal Transit Administrations (FTA) New Starts program.
GAO was asked to examine (1) what would have been the mobility, economic, and environmental benefits of the project according to major planning studies; (2) the project cost estimates over time; and (3) how, if at all, documents prepared as part of the New Starts process addressed potential cost growth for the project.
GAO reviewed the literature and major project planning studies, FTA reports, and economic and cost estimates by NJT and other planning organizations. GAO interviewed officials from FTA, state and local transit agencies, and local planning organizations. GAO is making no recommendations in this report.
The Department of Transportation provided technical comments, which GAO incorporated in the report.

What GAO Found

Studies estimated that the Access to the Regions Core commuter rail project would have provided mobility benefits, but other benefits would either have been limited or are difficult to measure. According to various studies:
The project would have helped meet the projected increase in travel demand and improved mobility by doubling the number of daily peak period trains, and significantly increasing daily trips between New Jersey and Manhattanfrom about 174,000 without the project to 254,000 with the project by 2030while reducing transfers and station crowding and improving reliability of service.
The project potentially would have generated economic activity in the region in the form of jobs and income, business activity, and increased home values, but many economic effects were hard to predict with certainty. For example, the extent to which the project would shift the location of economic activity, versus providing additional net economic activity, is uncertain.
The project was estimated to have created limited but mostly positive environmental effectsin particular, improved air qualityand included measures to mitigate negative effects such as noise and storm water runoff.
Over time, the cost estimates for the project increased from an initial estimate of $7.4 billion in 2006. In 2008 and 2010, FTA performed risk assessments and revised the cost estimate. FTA and NJT agreed upon a baseline cost estimate of $8.7 billion in 2009. After considering comments from NJT, which projected lower costs than FTA, FTA revised its estimate and issued a cost estimate of $9.8 billion to $12.4 billion in October 2010. As of April 2010, federal sources were expected to fund about half the cost, with the remainder divided between New Jersey Turnpike funds and the Port Authority.
Because the project was terminated before FTA and NJT entered into a full funding grant agreement, there was no final agreement by all the parties on the issue of responsibility for project cost growth. While the Secretary of Transportation and the governor of New Jersey held discussions on additional funding options, planning documents did not address the source of funding of potential cost growth for the project.