Report Traces Port Authority's Flaws to a Crumbling Business Model- NYTimes.com Page 1 of4



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# Report Traces Port Authority's Flaws to a Crumbling Business Model

By MATT FLEGENHEIMER APRIL 1, 2014



### Foryears, the Port Authority ofNew York and NewJerseyhas been an easytarget

- a behemoth so politicized that its role in the lane closings at the George Washington Bridge lastyear is perhaps the scandal's least surprising element. On Friday, Gov. Chris Christie ofNewJersey saidthathe was "intriguedby the idea ofdismantling the Port Authority" and dividing control between the states. A day later, Gov. Andrew M. Cuomo ofNew York agreed that "structural changes are a possibility" atthe agency. But as the furor over the lane closings has grown, engulfing Mr. Christie and several ofhis top aides, a review ofagency operations suggests that its familiar flaws

- mismanagement, patronage, rivalries between the two states

- are secondary to a decaying business model, done inby a relentless desire to expand beyond the agency's core transportation functions. In recent decades, according to a new report, the agency has increasingly yielded to governors on fiscally dubious projects, contributing to a need in recent years to seek new revenue from bridge andtunnel toll increases. The report, released on Tuesday from the Rudin Center for Transportation Policy and Management at New York University, says the agency spentmore than $8oo million from 2002 

### to 2012 

### on "regional projects" chosen bythe governors' offices. In the coming years, the pace ofspending on zero-return state projects is expected to accelerate.

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As a result, the most powerful testaments to the agency's peril, according to former agency officials andtransportation experts, are notfound amid thebridge

access lanes ofFort Lee, N.J. They can be tracedto the grounds ofindustrial parks built in the Bronx and in Yonkers, with little obvious transportation purpose, or along the Pulaski Skyway, which the agency agreed to rehabilitate after Mr. Christie canceled the construction ofa rail tunnelbeneath the Hudson River in 2010 and claimed billions in planned spending to be New Jersey's money. The prospect ofreform is particularly urgent, according to the review, given the increasing burden posedbythe PATH rail system. In 2012, the system lost about $400 million, according to data compiledby the authors, more than twice its loss in 2000. The report estimated thatbetween 2002 and 2020, the agency will have put
more than $4.6 billion into the PATH system, andthat excludes more than $1 billion in spending on a new PATH station atthe World Trade Center. "It is no longer possible for the PortAuthority to adequatelyfund its own facilities and services while simultaneously allocating hundreds ofmillions for non -revenue-generating state projects," wrote the report's authors, Mitchell Moss, the Rudin Center's director, and Hugh O'Neill, a former assistant executive director at the PortAuthority. For decades, governors have relied onthe agency to help pay for projects. Mr. Christie in particular appearedkeenly aware ofhowthe agency's
resources could be steered. Whenhe appointed Bill Baroni, a close ally, as deputy executive director, the governor noted that the agency offered "significant opportunities for funding projects in the state ofNewJersey." Mr. Baroni resigned in December as questions mounted about thelane closings. Though the scandal has prompted calls for reform, attention has only begun to focus on the agency's financial model as a root problem. "It's like telling Dracula he's got to leave thebloodbank," said Stephen Berger, who was executive director at the PortAuthorityfrom 1985 to 1990. Asked about the N.Y.U. analysis, a spokesman for the PortAuthority saidthe agency would not commentuntil officials there could review the full report.

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- NYTimes.com

The authority has made several changes in recent months, including the adoption ofmore transparent rules to announce votes and recusals, but progress has come infits and starts. Page 3 of4

Other proposals have ranged from the modest

- the most recent meeting of a newly formed oversight committee devolved into quarrels about whom to invite for a panel on nonbinding recommendations- to Mr. Christie's suggestion that dismantling the PortAuthoritywas worth considering. ' Mr. Cuomo has signaled a willingness to assume more state responsibility for the agency, announcing in Januarythat the state would take over the management ofmajor construction projects at Kennedy and La Guardia Airports. Yet the agencyis too important, and its operations too entrenched across both states, to consider tearing it down completely, experts say. Among many complications wouldbe determining who retains control ofbistate facilities like the George Washington Bridge. According to data compiled by the report's authors, thebridge and its bus station earned about $360 million in 2012. Speaking to reporters on Tuesday after a speech in Midtown Manhattan, the PortAuthority's executive director, PatrickJ. Foye, said that dividing the agency "would be an extraordinarily challenging and difficult endeavor." But Mr. Foye added that "lots ofchallenging and difficult things have been undertaken to great advantage, or sometimes to not great advantage." In fact, the PortAuthority's operating model has thrived inthe past. From the 1930s through the 1950s, the agency built or developed some ofthe region's most significant infrastructure, including the Lincoln Tunnel and the airport that would become Kennedy. In the 1960s, though, the modernblueprintfor bistate interactions was formed. The PortAuthority developed the World Trade Center and, to secure the approval ofGov. Richard J. Hughes ofNew Jersey, agreed to rehabilitate and operate the privately owned Hudson andManhattan Railroad, which would become the PATH. The move "represented a significant departure from past practice," the authors wrote. "The PortAuthoritywas not merely getting into another line of business- it was taking on an ailing rail transit network that (as all parties acknowledged upfront) would never cover its operating costs, let alone provide any return on the authority's investment."

http://www.nytimes.com/20 14/04/02/nyregion/report-traces-port-authoritys-flaws-to-a-crumbling-b... 4/4/20 14**R~port** Traces Port Authority's Flaws to a Crumbling Business Model

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As late as the 1990s, the agency's business model still appeared to be working, with theburdens ofprojects often offset by profits from increases in both air passengertraffic and the volume ofcontainer cargo at agencyports. But the PATH's growing cost and an increased devotion to state projects chosen by governors havejoined with otherburdens to imperil the agency. The Port Authority Bus Terminal, thebusiestbus station in the world, has proved a significant drain, with a netloss ofmore than $105 million in 2012, according to the authors. And the Sept. 11 attacks had a significant effect on the PortAuthority's bottom line. In 2000, the World Trade Center accounted for more than $33 million in net revenues; in 2012, it produced an operating loss ofmore than $46 million. (The authors' figures were compiled using the PortAuthority's annual reports, its recent 10-year, $27.6 billion capital plan and an outside auditfrom a consulting firm in 2012, and other sources.) In addition to abandoning nonessential state projects, Mr. Moss andMr. O'Neill said, one potential remedy wouldbe placing the executive director in charge of all high-level appointments, and making clear thatthe deputy executive director reports only to the executive director, notto a governor. Itwas the current executive director, Mr. Foye, who reopened the lanes last September in Fort Lee.

A version of this article appears in print on Ape!! 2, 2014, on page A20 of the New York edition with the headline:**l~eport** Traces Port Authonty's Flaws to a Crumbling Business Mode!.

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