Christie, a rising star in the Republican Party for his fearless budget-slashing, has argued that his cash-strapped state can't afford to pay for any overruns on the $9 billion-plus rail tunnel under the Hudson River. The state is on the hook for $2.7 billion plus overruns.
"In the end, my decision does not change," Christie said. "I cannot place upon the citizens of New Jersey an open-ended letter of credit, and that's what this project represents."
The federal government and the Port Authority of New York and New Jersey were each set to contribute $3 billion to the project, dubbed ARC for "Access to the Region's Core."
Now, New Jersey is likely to have to repay the federal government $350 million of the $600 million already spent getting the project started. It's also likely New York City will make a bid for the $3 billion in committed Port Authority funds to help complete the city's Second Avenue subway and rail access to Grand Central Station from Long Island.
Transportation Secretary Ray LaHood called the decision "a devastating blow" to New Jersey commuters, construction workers and engineers, and the state's economy.
"The governor's decision to stop work on this project means commuters - who would have saved 45 minutes each day thanks to the ARC tunnel - will instead see no end to traffic congestion and ever-longer wait times on train platforms."
LaHood said transportation officials worked over past weeks to come up with alternative ways to bring the project "to life."
The governor said that he was given four financial options but that no agreement could guarantee New Jersey taxpayers would not pay more than $2.7 billion for the completed project. Christie said LaHood's final offer came Sunday: $378 million in additional federal money.
Another option would have allowed New Jersey to take out federal loans through the Railroad Rehabilitation and Improvement Financing program, but Christie would not borrow more money to cover the project.
Christie also squelched the idea of scaling back the project, saying that would make it less useful to commuters, and he shot down the use of public-private partnerships, which other cities have used for large infrastructure projects.
In a memo to Christie, New Jersey Transit Director James Weinstein said that such partnerships could be used "to address cost and technical risk" of the project, but that developing one would take 18 months. Even then, Weinstein said, there is no assurance that New Jersey would like the price or terms.
Former Gov. Jim McGreevey, a Democrat, said he sees Christie's point.
"Obviously the tunnel is critically important, but the governor puts forth a good point - how are you going to pay for it? I think what he was looking for was some sort of shared responsibility from the federal government for overruns, and that New Jersey simply not bear the entirety of that financial burden," McGreevey said Wednesday on MSNBC.
Construction began last year on the tunnel, which has been in the works for 20 years. In September, Christie suspended work on the tunnel and ordered a cost review. He pulled the plug two weeks ago but gave himself time to reconsider at LaHood's behest.
The tunnel is intended to supplement a century-old two-track tunnel that transit officials say has been at capacity for years. It would double the capacity for NJ Transit commuter trains between New York's Penn Station and the city's populous New Jersey suburbs, a region with some of the nation's longest commutes.
Transportation advocates were disappointed and angry.
"The governor is sacrificing the future for this illusion of current responsibility," said Zoe Baldwin, spokeswoman for the Tri-State Transportation Campaign. "This tunnel would have been a long-term investment in the state's economic vitality. Everyone is stuck trying to get across the river, and that's not going to change."
Christie raised the possibility of partnering with Amtrak to build a new tunnel to New York City but said no substantive discussions had taken place.
More than 625,000 people trek into Manhattan from New Jersey each work day, about 185,000 by rail, and even a minor derailment or delay translates into long stretches of waiting for trains to get to and from work.
On Monday, an eight-car train derailed outside Penn Station, snarling the evening commute for tens of thousands. No one was injured, but nine of the station's 21 tracks were affected, Amtrak spokesman Clifford Cole said.
Federal Transit Administration chief Peter Rogoff has said that the tunnel would shorten rail trips in the region and reduce the need to transfer, which can save precious minutes. Officials estimated it would provide 6,000 construction jobs immediately and as many as 40,000 jobs after its completion in 2018.
"When you do the math, the benefits of this project far outweigh even the highest cost overrun predictions," said New Jersey State AFL-CIO president Charles Wowkanech, who represents 1 million union members.
Some proponents of the tunnel believe Christie is motivated, in part, by wanting to divert the money to state projects. He has refused to raise the gas tax, among the lowest in the nation at 10.5 cents per gallon, to beef up the nearly broke state fund. At least $1.25 billion became available for state projects with the tunnel's demise, but Christie said he hadn't yet figured out how to shore up the state fund.
"The governor can open any high school history text to see why his decision to kill the tunnel is so foolish," said state Senate President Stephen M. Sweeney, a Democrat. "Imagine where our country would be if it were not for the backbone built by 200 years of investments in roads, canals, railroads or the interstates."
Associated Press writers David Porter in Newark and Joan Lowy in Washington contributed to this report.