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You're viewing an archived copy from the New Jersey State Library. Committee Meeting of ASSEMBLY TRANSPORTATION, PUBLIC WORKS, AND INDEPENDENT AUTHORITIES COMMITTEE "The Committee has invited Richard Sarles, Executive Director of the NJ TRANSIT Corporation, to provide testimony on the Access to the Region's Core Tunnel project and other issues concerning NJ TRANSIT" LOCATION: Committee Room 11 DATE: January 26, 2009 State House Annex 10:00 a.m. Trenton, New Jersey MEMBERS OF COMMITTEE PRESENT: Assemblyman John S. Wisniewski, Chair Assemblywoman Linda Stender, Vice Chair Assemblyman Thomas P. Giblin Assemblyman Matthew W. Milam Assemblyman Vincent Prieto Assemblywoman Caridad Rodriguez Assemblyman L. Harvey Smith Assemblywoman Connie Wagner Assemblyman John F. Amodeo Assemblyman Scott Rudder Assemblyman Scott T. Rumana Assemblyman Brian E. Rumpf ALSO PRESENT: Maureen McMahon Aaron Binder Jerry Traino Jonathan Pushman Assembly Majority Assembly Republican Office of Legislative Services Committee Aide Committee Aide Committee Aide This transcript was prepared from an Internet Webcast, and therefore may not be completely accurate due to technical limitations Excerpt of Meeting Transcribed by The Office of Legislative Services, Public Information Office, Hearing Unit, State House Annex, PO 068, Trenton, New Jersey You're viewing an archived copy from the New Jersey State Library. TABLE OF CONTENTS Page Richard R. Sarles Executive Director NJ TRANSIT 3 H. Charles Wedel Chief Financial Officer NJ TRANSIT 11 APPENDIX: Testimony submitted by Richard R. Sarles 1x pnf: 1-24 rs: 25-38 You're viewing an archived copy from the New Jersey State Library. 1 You're viewing an archived copy from the New Jersey State Library. (This is an excerpt of the Assembly Transportation, Public Works and Independent Authorities Committee meeting held January 26, 2009, including the testimony of Richard Sarles, Executive Director of the NJ TRANSIT Corporation, regarding the Access to the Region’s Core Tunnel project and other issues concerning NJ TRANSIT.) ASSEMBLYMAN JOHN S. WISNIEWSKI (Chair): --being the testimony, the discussion of the members is not only amplified for this room, it is also broadcast live on the internet. And I would ask for a roll call, please. MR. PUSHMAN (Committee Aide): Assemblyman Rumpf. ASSEMBLYMAN RUMPF: Here. MR. PUSHMAN: Assemblyman Rumana. ASSEMBLYMAN RUMANA: Here. MR. PUSHMAN: Assemblyman Rudder. ASSEMBLYWOMAN RUDDER: Here. MR. PUSHMAN: Assemblyman Amodeo. ASSEMBLYMAN AMODEO: Here. MR. PUSHMAN: Assemblywoman Wagner. ASSEMBLYWOMAN WAGNER: Here. MR. PUSHMAN: Assemblyman Smith. ASSEMBLYMAN SMITH: Here. MR. PUSHMAN: Assemblywoman Rodriguez. (no response) MR. PUSHMAN: Assemblyman Prieto. ASSEMBLYMAN PRIETO: Here. 2 You're viewing an archived copy from the New Jersey State Library. MR. PUSHMAN: Assemblyman Milam. ASSEMBLYMAN MILAM: Here. MR. PUSHMAN: Assemblyman Giblin. ASSEMBLYMAN GIBLIN: Here. MR. PUSHMAN: Vice Chair Stender. ASSEMBLYWOMAN STENDER: Here. MR. PUSHMAN: Chairman Wisniewski. ASSEMBLYMAN WISNIEWSKI: Here. MR. PUSHMAN: We have a quorum. ASSEMBLYMAN WISNIEWSKI: We have several bills that are on the agenda that we will be considering. But first we’re going to take some testimony. Just so everybody’s clear on the agenda: Assembly Bill 3285 by Assemblywoman Casagrande, and Assembly Bill 3358 by Assemblyman Diegnan are going to be considered together -- they’re similar bills, and there will be an Assembly Committee substitute. We have amendments on just about all of the bills, and we’ll get to them in due course. For discussion only is Assembly Bill 3338, adding a nonvoting member to the NJ TRANSIT board. And speaking of New Jersey TRANSIT: One of the nation’s largest and best-run transit agencies is right here in New Jersey, moving an enormous number of people every day; and we’d like to see them move more people so we can free up capacity on our roadways and help the environment. We have with us this morning the Executive Director -- and I’d like to call Executive Director Rich Sarles up, along with anyone else you have, Rich. 3 You're viewing an archived copy from the New Jersey State Library. Good morning. R I C H A R D R. S A R L E S: Good morning. ASSEMBLYMAN WISNIEWSKI: Mr. Executive Director, there are lots of issues that are going on in New Jersey TRANSIT that are of interest, not only to the public, but also to members of this Committee. I think two of the big ones are the tunnel underneath the Hudson River -- and you hit a milestone in that recently with the Record of Decision, which is something that many people have not believed was going to happen for a very long time. So congratulations on that. I’d like you to brief the Committee on that issue. Something else that is also of equal importance is the current financial crisis in the country and how that impacts everything. And what many people may not believe is that there is a small impact on New Jersey TRANSIT in terms of the cross-border leasing that had been done over the years, which provided enormous financial benefit to the agency. But now (indiscernible) some problems with companies like AIG, there is a potential impact on New Jersey TRANSIT, and I’d like you to discuss that with the Committee as well. I know you may have a statement, so I’ll let you start with that. MR. SARLES: Thank you very much, Mr. Chairman. And with me today is Charlie Wedel, our Chief Financial Officer. So when you have questions on the financial aspects, he may help me out a little bit. ASSEMBLYMAN WISNIEWSKI: Good morning, Charlie. MR. SARLES: Good morning, Mr. Chairman and members of the Committee. Thank you for inviting me to speak here today. 4 You're viewing an archived copy from the New Jersey State Library. I’m pleased to give the Committee an update on the ARC Mass Transit Tunnel, as well as to review with the Committee certain financial issues which arose in the wake of the financial market collapse last year. The news on the Mass Transit Tunnel is that we’re on-track to begin construction this year. Thanks to the leadership and hard work of Governor Corzine, Senator Lautenberg, and Senator Menendez, as well as the entire Congressional delegation, this vital infrastructure project has received all necessary approvals from the Federal Transit Administration and is ready to receive Federal funding. Those approvals include the FTA’s Record of Decision, formally ending the rigorous Federal environmental review, and the FTA’s notification to Congress that the Agency intends to approve the project’s entry into final design. The Tunnel truly is on the move. As I have said before to this Committee: We are committed to building this Tunnel and proud to lead this effort on behalf of Governor Corzine and Commissioner Dilts, because I know that it is the ideal project to boost our economy and it will create lasting transportation benefits for our citizens. Passengers will be served by new, state-of-the-art Penn Station expansion under 34th Street, featuring wide platforms and 13 high-speed escalators, with direct connections to New York subways including, for the first time, the Broadway and Sixth Avenue lines. The Mass Transit Tunnel also doubles the rail capacity between New Jersey and New York, and improves the robust rail system within New Jersey. Since I appeared before the Committee about a year ago, we have finalized the last piece of the regional funding commitment for the Mass Transit Tunnel. Together with our partner, The Port Authority of New 5 You're viewing an archived copy from the New Jersey State Library. York and New Jersey, local funding of $5.7 billion is now committed. Today, New Jersey TRANSIT and the Port Authority are working closely with our Federal delegation to ensure Congress includes money for the Tunnel and other worthy shovel-ready TRANSIT projects in the Federal stimulus package now being put together in Washington. As our Senator said last week at the Lautenberg Rail Station, within months of receiving a Federal funding commitment, we can all advertise some $600 million worth of construction contracts, with another $3 billion to follow shortly thereafter. Let me be clear about this: actual construction will start, not just design work. In fact, the Mass Transit Tunnel will create some 6,000 construction-related jobs a year, each year, through its completion. Those figures are conservative. The jobs created by the tunnel during construction will generate $4 billion in new gross regional product, keeping our hardworking families working. Then after the tunnel is completed, the increase in regional convenience and competitiveness generated by the tunnel’s added rail capacity will produce 44,000 permanent jobs. With more and improved service, both to New York and within New Jersey, a boost to regional competitiveness in the future, and a major stimulus to the economy now, thanks to the thousands of good-paying jobs during construction the Mass Transit Tunnel is the right project at the right time. Chairman Wisniewski and members of the Committee, I would also like to take this opportunity to update you on our efforts to protect New Jersey TRANSIT from the effects of the current financial crisis on its U.S.-leveraged lease portfolio. Let me start by providing some background and context. 6 You're viewing an archived copy from the New Jersey State Library. In the early 1990s, the Federal Transit Administration, as part of their push to encourage innovative financing, promoted leveraged lease transactions to transit agencies across the country, called lease in, lease out -- or LILO transactions; and subsequent sale in, lease out -- or SILO transactions. Under these lease-back transactions, executed by New Jersey TRANSIT from 1994 to 2003, TRANSIT agencies sold or leased assets to private entities in exchange for up-front cash payments, usually 5 to 10 percent of the asset’s value.