Eminent Domain and the Transportation Trust Fund

"New Jersey's whole economy is so dependent on having a functional infrastructure that if we don't invest in that economic engine, we're going to hurt ourselves and be worse off in the long run." -- Assemblyman John Wisniewski (D-Middlesex)
Eminent domain used for traditional public purpose takings, such as roads, bridges, and mass transit improvements is not something the public opposes. In fact, all of us use and benefit directly from public transportation improvements and acknowledge they are a bona fide use of public tax dollars. The funding source for public transportation improvements is the transportation trust fund.

The trust fund is an essential component to all New Jersey Department of Transportation and New Jersey Transit eminent domain projects. As has been reported in the Star Ledger and elsewhere, the fund will run dry in July 2006. The fund is being overwhelmed by debt reported to be $7 billion. Current revenue based on the 10.5 cent gas tax and other revenue sources such as sales tax on cars will be consumed by debt service on the bonds, leaving no revenue for new projects. The hard reality is that the legislature and the new governor must raise taxes to supplement the fund.

This is not news by any means. The issue has been debated for the past three years, but no one has addressed the long term solution. The Asbury Park Press and Home News Tribune reported on the issue on November 25, 2003:

Two past issues plague the trust fund: over-reliance on bonding or borrowing money for projects and diverting $114 million that was supposed to go to the trust fund from taxes on petroleum product sales and on new cars, which went to the state's general treasury instead.

The trust fund was supposed to operate on a 50/50 basis between borrowed money and cash on hand for "pay-as-you-go projects," but the amount of borrowed or bonded money far outstripped the 50-percent level.

The message is the same in a New York Times article from February 7, 2005:

"The fund was established in 1984 and devised to prevent lawmakers from diverting the gas tax to nontransportation purposes. The idea was to create a pay-as-you-go system and dedicate gas taxes for road, bridge and mass transit projects, using a limited amount of borrowing for major capital expenses. Since 1990, however, the fund has relied so heavily on borrowing that this year it devoted nearly two-thirds of its budget to debt service. By 2006, its entire $805 million budget would be needed to pay off loans."
The trust fund is running out of money and will be bankrupt. Both the operating budget and capital improvement budget for the NJDOT must be replenished.

Borrowing from Peter to pay Paul won't work here. Governor-elect Corzine faces a $5 billion hole in his budget. There is simply no reserve available from other sources sufficient to keep the fund going. The Star Ledger reports an immediate infusion of $600 million is needed to avoid a halt in construction projects and cuts in bus and train services on or before July 1, 2006. Martin Robbins, in a Star Ledger editorial on October 31, 2005, suggests dedicating the full 800 million in treasury revenues currently generated by transportation related uses on a permanent basis to pay the cost of running our transportation system. This solution would stabilize the operating expenses of NJDOT and NJ Transit. However, it would take approximately $400 million out of the state general fund and would direct this money to transportation funds. This would add to the governor's budget problems, but would go a long way to stabilizing transportation funding in New Jersey.

The gas tax increase is probably the best option. A 15-20 cent per gallon tax increase coupled with other revenue options such as leasing the Garden State Parkway or the New Jersey Turnpike would probably save the day. The legislature should also consider selling or leasing the racetracks. Both Monmouth Park and the Meadowlands are successful operations with positive cash flow which should attract interest in the marketplace. All revenue options should be considered in an attempt to solve the cash needed to keep the trust fund viable. Increasing the sales tax to sevem percent is another idea which must be explored. Whatever revenue sources are tapped, the funds must be dedicated to transportation projects and not just put into the state's general fund.

The transportation trust fund is essential to New Jersey's economy. Roadway repairs, bridge replacements, and completion of projects in the NJDOT five-year plan are all dependent on the funds. These projects pay for construction jobs, design/engineering consultants, construction management, all of which are an essential part of the state's economy. Transportation projects are often funded by a combination of state and federal money. Some projects such as the Charlotte Circle and St. Paul's Viaduct improvements in Jersey City and the Wittpenn Bridge replacement between Kearny and Jersey City are 100 percent federally funded. Local roadway improvements, such as the Routes 46/80/23 interchange, are funded by a combination of state and federal monies. Critical to the state receiving federal highway funds is the obligation of the state to have available its portion of the project funding. If the state money is not available, a crisis will ensue, like the one we saw last summer when United States Secretary of Transportation Norman Y. Mineta threatened to hold back New Jersey's share of federal highway dollars because of the absence of state matching funds. Only the direct intervention by Senators Lautenberg and Corzine and New Jersey Commissioner of Transportation Jack Lettiere avoided a calamity.

However, the day of reckoning is here and the legislature must act. And when it does, the revenues must be sacrosanct. Meaning, it is, in fact a TRUST fund, held in trust for the benefit of transportation improvement in the state.

Written By:Ken Popson On December 5, 2005 3:02 PM

Cut the DOT staff in half and cut half of the projects they are working on. Start with the ones that are older than 4 years. I am involved with one that is at least 8 years old and has probably cost several million dollars and there is still no development in site.

These projects should pass a profitability test: If what they are proposing will only mildly improve traffic, it should be cut. We have to put the money where it will do the greatest good.

Route 18 in New Brunswick is a big boondoogle for someone. There's a lot traffic but it worked fine 90% of the time.