Thursday, October 28, 2010

Christie Gets Off the Train -- Carlisle Gets In the Train

The letter below was printed in The Wall Street Journal, page A16 on October 28, 2010.

"I cannot place upon the citizens of the State of New Jersey an open-ended letter of credit," said Garden State Governor Chris Christie yesterday.

Mr. Christie was affirming his decision to cancel a bloated project to build a new railroad tunnel under the Hudson River to New York City. He also affirmed that a government that already taxes its citizens more heavily than any other state in the country and has still racked up more than $100 billion in unfunded liabilities must finally recognize its limits.

The proposed tunnel was a joint project of the state of New Jersey, the Federal Transit Administration, and the Port Authority of New York and New Jersey, with each contributing roughly equal amounts. The catch was that Jersey would pay for any cost overruns.

What are the chances that this project would have been completed on budget? Consider the history. Expected to cost less than $5 billion during initial planning, the price tag jumped to $7.6 billion amid environmental impact studies in 2005. By the fall of 2008, $8.7 billion was the working assumption—until last summer when the feds forecast at least $10.9 billion, and possibly as much as $13.7 billion. After Mr. Christie made it clear last month that he wanted to avoid the fiscal train wreck looming under the Hudson, the feds reduced their estimated costs to a range of $9.8 billion to $12.7 billion.

In any case, Garden State taxpayers would still have been on the hook as soon as the meter ran above $9.8 billion, which even the feds acknowledge was a 90% certainty. It's hard to blame Mr. Christie for sparing taxpayers from such a fate.

What does the state of New Jersey finances and Gov. Christie's action mean for us on Oahu?

If taxes are thoroughly accounted for, then Hawaii is comparable in taxing its citizens with New Jersey.

The rail tunnel was planned to cost under $5 Billion and right before going into construction it would likely cost $9 Billion to $12 Billion.

On Oahu's banana republic the rail is planned to cost close to $6 Billion and Carlisle is going for it. Previous mayors argued that it will cost less that $5 Billion when FTA Jacob's report said that there is a 5% probability that Honolulu rail will cost over $8 Billion.

A Star Advertiser analysis by Sean Hao showed that infrastructure repairs alone in Hawaii top $32 Billion and the whole in the state's employee retirement system that we must fill locally is over $8 Billion for a rough total in liabilities of $40 Billion.

Note that the letter above says that Governor Christie canceled the rail project because of New Jersey's $100 Billion in other liabilities. New Jersey is 8.5 million people. So our $40 Billion liability in Hawaii compared to New Jersey is proportionally 2.8 times larger!

Carlisle is oblivious of the fiscal hole we are in. Carlisle also has not realized that the politics and costs of rail have retired its proponents. One thing Carlisle has going for him is 6 to 12 months of opportunity to get off the train.