The Access to the Region's Core (ARC), conceived before Christie took office in January 2010, was to be a nine-mile-long commuter rail link running under the Hudson River, from Secaucus, N.J., to midtown Manhattan. In a final decision issued on April 29, U.S. DOT's Federal Transit Administration (FTA) said Christie and New Jersey Transit "terminated the project for reasons manifestly within their control" and thus must repay the federal funds expended. [See pdf of the decision.]

The next move is up to New Jersey. Kevin Roberts, a spokesman for Christie, said, "We disagree with the FTA's conclusion...."

He added, "New Jersey was unable to move forward with the ARC project for reasons beyond the State's control— billions of dollars in unaccounted for cost overruns and re-estimates of project costs late in the process only continued to increase New Jersey's already heavy financial burden."

Roberts also said, "For now, we will review the decision before determining next steps moving forward."

FTA's decision, signed by its associate administrator for budget and policy, Robert J. Tuccillo, said the state knew as early as August 2008 that the project's costs could rise as high as $12 billion.

FTA's directive was no surprise. After Christie cancelled the project, FTA in November issued a formal demand that the state repay the $271.1 million the agency had paid to the state.

New Jersey, as allowed, asked FTA to review the amount of the repayment claim and examine the agency's records concerning the matter.

New Jersey Transit (NJT) requested and received three time extensions, and filed its response on Jan. 25. The next action was FTA's April 29 final decision, rejecting the state's contention that it ended the project for reasons beyond its control.

According to FTA's decision, the state said those reasons included "allegedly drastic and unexpected increases in FTA's cost estimates for the project and NJT's alleged lack of control over FTA's cost estimate methodology."

In 2008, FTA estimated the project's cost in a range of $8.4 billion to $12 billion and last fall increased the figures, to between $9.8 billion and $12.4 billion.

In an April 29 letter to Sen. Frank Lautenberg (D-N.J.), U.S. DOT Secretary Ray LaHood said, "The law is clear on this matter. In very specific and clear language, the statute requires FTA to collect the taxpayers' funds if the project sponsor--in this case, NJT--disavows its responsibilities under the contract and fails to complete the project." [See pdf of LaHood letter.]

In a joint statement, Lautenberg and Robert Menendez, New Jersey's other Democratic Senator, said, "We worked hard to get the parties to negotiate a fair resolution of this conflict. However the state's outside lawyers pursued an all or nothing approach, which brings substantial risk to New Jersey taxpayers. Given the high stakes involved in this matter, we hope the state's approach is ultimately successful."

LaHood also said in his letter to Lautenberg that he would not at present use certain statutory "tools" to recover the federal ARC money, including withholding future funds.