The Port Authority of New York and New Jersey paid $95.5 million to lease land for the Hudson River tunnel project only one week before work on it was halted. The payment was for a ten-year lease on a mostly vacant 2-acre parcel that officials say was needed for the tunnel entrance for the doomed ARC Tunnel commuter rail project.
The $8.7 billion public-works project was stopped by New Jersey Gov. Chris Christie on Sept. 10, after he determined the state could not take the risk that the project could be completed on budget, putting the state on the hook for potentially billions of dollars in cost overruns. A cost study on the project determined that with cost overruns, the price of the tunnel could potentially exceed $13 billion.
A month after the temporary halt, Christie, cancelled the project.
The lease deal, locking up rights to use the property, was signed on Sept. 3. The Port Authority told The Record newspaper it signed a preliminary contract for the site in October 2009. Port Authority officials said breaking the deal could have brought a possible lawsuit and substantial losses.
The property is owned by an investment group headed by Joseph B. Rose, a top administration official in the office of former New York Mayor Rudolph Giuliani. Rose served an eight-year term as the Chairman of the New York City Planning Commission. At the time, he was an outspoken critic of the Port Authority, claiming it was mismanaged and committed too many of its resources to New Jersey interests.
Richard Schwartz, a spokesman for the investment group, said they had planned to build a one-million square foot hotel on the property, but agreed to the Port Authority lease under threat of having the property taken by the agency through the power of eminent domain.
The parcel, known as the “Georgetown” property, was appraised two times at a value of $125 million. For the $95.5 million payment, the Port Authority received a surface easement for 10 years, which would enable it to relocate a ConEd yard that would have been closed by the construction. The payment also included rights to drill deep under the site.
The Port Authority said recently that it paid over $150 million to tie up several small parcels of land needed for the construction, and in total, spent about $600 million before the project was cancelled. It says it has been approached by developers interested in the Georgetown property, although it is doubtful that the monies could be recovered, since surface rights to the property expire in 10 years.