NY TIMES, April 30--The next stop for New Jersey in its debt collection fight with the federal government may be federal court.
On Friday, the Transportation Department flatly rejected the state’s arguments for refusing to repay $271 million that was spent on a project, canceled last year, to build a pair of rail tunnels under the Hudson River. The message to Gov. Chris Christie was blunt: Repay now or we will collect the debt the hard way. Plus interest.
In a letter to New Jersey’s senators and representatives in Congress, Ray LaHood, the transportation secretary, warned that his department had “many tools under the Debt Collection Act to recoup the lost federal taxpayer funds, including withholding future state funding from a wide variety of sources.” But “in consideration of the current economic challenges burdening New Jersey,” Mr. LaHood added, he hoped to “develop a workable payment schedule” and avoid having to resort to those collection methods.
Mr. LaHood should not expect to find a check in the mail any time soon. Mr. Christie, who was in Massachusetts on Friday to speak at Harvard University, declared in January that “we are not paying the money back.”
Kevin Roberts, a spokesman for Mr. Christie, said the governor’s staff would “review the decision before determining next steps moving forward.”
One option is to sue the department to try to stop it from seeking to collect, but Mr. Roberts would not say if a lawsuit was being considered.
In the meantime, interest on the debt will pile up quickly. The federal government currently charges interest at a rate of 1 percent a year, which in this case amounts to more than $50,000 a week.
The dispute dates to last fall, when Mr. Christie, a Republican, chose to halt construction on the tunnel project, known as Access to the Region’s Core, or the ARC tunnel, which had just begun and was projected to cost $8.7 billion. The federal government had pledged to pay $3 billion of that cost, and the Port Authority of New York and New Jersey had committed $3 billion more.
But Mr. Christie said he had become alarmed by estimates of potential cost overruns. He decided that New Jersey could not cover those excess costs and, over strenuous objections from Mr. LaHood and Senators Frank R. Lautenberg and Robert Menendez, canceled the project.
When federal transportation officials demanded that New Jersey repay money already spent on the project, Mr. Christie hired Patton Boggs, a Washington law firm, to challenge that demand. The lawyers, who reportedly have billed the state and New Jersey Transit about $800,000, argued that the state stopped the project because of unforeseen costs that were beyond its control.
But in his letter, Mr. LaHood said Mr. Christie had affirmed his support for the project a year ago when New Jersey Transit officials knew that the cost of the tunnel could rise as high as $12 billion.
Mr. Lautenberg and Mr. Menendez, both Democrats, issued a joint statement criticizing the approach taken by Patton Boggs.
“We worked hard to get the parties to negotiate a fair resolution of this conflict,” the senators said. “However, the state’s outside lawyers pursued an all-or-nothing approach, which brings substantial risk to New Jersey taxpayers.”
A federal official involved in the dispute said the state could have offered to repay as little as $1 and the government would have been obligated to negotiate a settlement, a process which could have dragged on for years. All the while, no interest would have accrued on the debt, according to the official, who was not authorized to speak on the record.
Posted By: Richard Kigel
Saturday, April 30th 2011 at 11:28AM
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