PERSPECTIVE: As driving into Manhattan gets more expensive, NJ rail system might not hold up

Congestion pricing could, and should, raise property values in transit-oriented New Jersey communities

New York Gov. Andrew Cuomo called on the state legislature to enact a congestion pricing plan to fund the MTA’s capital program in order to prevent a nearly 30 percent MTA fare hike or further deterioration of the transit system.

New York’s congestion pricing scheme will be good for the environment and good for folks trying to get around Manhattan. It also would have been good for New Jersey, but for a self-interested and shortsighted political decision made a decade ago. That choice, and the consequences flowing from it, should serve as a warning to policymakers. Like most such warnings, however, this one will almost certainly be ignored.

Under the plan, which is included in the budget worked out between the New York State Legislature and  Gov. Andrew Cuomo, drivers will pay an amount yet to be determined – reportedly in the range of $10 to $12 – for the privilege of traveling by motor vehicle south of 60th Street all the way down to Battery Park. Drivers crossing the Hudson River through the Lincoln and Holland tunnels will get a credit toward the new charge. But those crossing via the George Washington or Gov. Mario M. Cuomo bridges would not. The proceeds, projected at about $1 billion per year, would be used to repair and upgrade the Metropolitan Transportation Authority’s subways, buses and commuter rail lines.

Much of the response on this side of the Hudson to the New York plan has focused on its effect on drivers commuting into Manhattan over the George Washington Bridge. Jersey City Mayor Steven Fulop tweeted that New Jersey should retaliate for this indignity by hitting New York City residents who commute to New Jersey with a similar levy. Cathartic, perhaps, but not terribly productive.

More substantively, Gov. Phil Murphy wrote to his New York counterpart asking that drivers using the George Washington Bridge be afforded the same credit as those crossing through tunnels. But New York officials seem loath to begin carving out exceptions that would erode their revenue expectations.

Murphy also asked that some of the revenue collected by the new toll be directed to rail operations serving New Jersey commuters — a reasonable request given that one of the goals of the program would be to encourage commuters to use public transportation. “The double-charging of George Washington Bridge drivers will ultimately shift more individuals onto constrained and aging NJ Transit and PATH systems without the commensurate capital support to mitigate those impacts,” he wrote. In this effort, Murphy could have some leverage because New York will likely need help from New Jersey in collecting the tolls.

Motivating development

But the implications of congestion pricing could ripple beyond drivers if, as its proponents contend, public transit ridership does indeed increase. The formula is simple: if trains become more attractive, property around train stations becomes more valuable.

Carl Goldberg, founder and managing member of the Roseland-based development firm Canoe Brook Associates, says he supports New York’s move “from an environmental perspective as well as alleviating some congestion in the Manhattan business district.” He also believes congestion pricing in New York will drive up real estate values in New Jersey.

“I understand the angst around congestion pricing,” he says. But the scheme will “continue to motivate the development community to build near mass transit.” And that will create sustainable, walkable communities in New Jersey.

To be clear, Goldberg has an economic interest in that dynamic. He is known for transit-oriented developments in Morristown and Jersey City, among other places. But there is historical support for his optimism.

In 2010, the Regional Plan Association analyzed the effect of improvements to NJ Transit’s system on property values. The study, which was aimed at gauging the impact of a new Hudson River Rail tunnel on real estate prices, found that homes near train stations appreciated in value significantly after NJ Transit introduced its Midtown Direct, Montclair Connection and Secaucus Junction services. “Cumulatively, these three projects boosted home values by $11 billion,” the RPA found. “This represents $250 million a year in new property tax revenue for municipalities.” Homes within walking distance of train stations showed the most robust growth in value.

“That’s a good analogy,” Goldberg says of the potential effect of congestion pricing on both mass transit use and real estate values.

Admittedly, there are significant differences between the two situations. Congestion pricing will likely affect fewer commuters. In addition, improved rail service acted as an inducement, whereas commuters might feel forced onto trains by higher tolls. Kate Slevin, senior vice president for state programs and advocacy at the RPA, downplayed the effect on property values. If the proposal is implemented in its current form, “very few NJ drivers will actually pay the congestion pricing fee,” she said in an email response to questions about the plan.

Nonetheless, the new Manhattan toll will at least add to the perception that mass transit is a more attractive option and under normal circumstances property values should go up and continue rising as commuters and developers recognize the new reality.

That new reality, though, includes the likelihood of a rail commuting nightmare. Transit agencies could soon be required to shut down the Hudson River rail tunnel for repairs necessitated by damage from Hurricane Sandy. The resulting disruption could reduce the viability of mass transit and force thousands of riders back on the roads.

The reason? The proposed tunnel that prompted the 2010 RPA study was never built. Then-Gov. Chris Christie cancelled the project ahead of his ill-fated presidential campaign. And the Gateway Project, the current plan to dig a new crossing, is being held up by the Trump administration. Closing the damaged tunnel without the Gateway Project replacement will dramatically reduce the transit system’s capacity.

“Congestion pricing without the Gateway Project going forward is a catastrophe,” Goldberg says.

New Jersey homeowners missed out on the $18 billion in added property value that RPA projected would be produced by the new tunnel. And now, with another boon to mass transit landing in the state’s lap, they could miss out on another bump. In fact, if the predicted – and predictable — catastrophe occurs when the tunnel is closed, real estate values along train lines could suffer for years.

Therein lies the cautionary tale. For most elected officials, kicking problems down the road is the safest political course. Eventually, though, that road runs smack into other problems, creating even bigger problems. That’s why we can’t have nice things.

Jeffrey Kanige

NJBIZ Business Events