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NJ settles dispute over tunnel with Washington

New Jersey Governor Christie speaks as a screen shows former first lady Nancy Reagan looking on, at the Ronald Reagan Presidential Library a
New Jersey Governor Christie speaks as a screen shows former first lady Nancy Reagan looking on, at the Ronald Reagan Presidential Library a

NEW YORK (Reuters) - New Jersey Governor Chris Christie has agreed to reimburse the federal government $95 million for money that had been earmarked for a tunnel project Christie canceled after calling it too expensive.

The commuter rail tunnel under the Hudson River between New Jersey and Manhattan would have been America's largest public works project. Christie canceled the project last October, citing billions of dollars in projected cost overruns that would be borne by the state.

The move was applauded by some fiscal conservatives, who called U.S. President Barack Obama's stimulus program a waste of taxpayer money. Christie is now being courted as a Republican presidential contender.

U.S. Transportation Secretary Ray LaHood had initially said the state must repay $271 million in federal aid.

The settlement announced on Friday includes $51 million in New Starts money, which will now be made available for other projects, as well as half of the funds paid to the state out of the American Recovery and Reinvestment Act, LaHood said in a statement.

In a separate statement, Christie said the payment, which will be made over five years, will be offset by more than $100 million in insurance premium refunds.

"I am pleased to announce that we have negotiated a good-faith settlement with the Federal Transportation Administration that puts the interests of New Jersey taxpayers first by substantially reducing the federal government's original demand," Christie said.

"This represents a fraction of the federal government's initial claim and won't cost New Jerseyans any additional money, which would otherwise go to infrastructure improvements," Christie said.

(Reporting by Edith Honan; editing by Todd Eastham)

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