Report Traces Port Authority's Flaws to a Crumbling Business Model- NYTimes.com Page 1 of 4 

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N.Y. / REGION I NYT NOW 

Report Traces Port Authority's Flaws to a Crumbling 

Business Model 

By MATT FLEGENHEIMER APRIL 1, 2014 

For years, the Port Authority of New York and New Jersey has been an easy target 

- a behemoth so politicized that its role in the lane closings at the George 

Washington Bridge last year is perhaps the scandal's least surprising element. 

On Friday, Gov. Chris Christie of New Jersey said that he was "intrigued by 

the idea of dismantling the Port Authority" and dividing control between the 

states. A day later, Gov. Andrew M. Cuomo of New York agreed that "structural 

changes are a possibility" at the agency. 

But as the furor over the lane closings has grown, engulfing Mr. Christie and 

several of his top aides, a review of agency operations suggests that its familiar 

flaws - mismanagement, patronage, rivalries between the two states - are 

secondary to a decaying business model, done in by 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 and tunnel toll increases. 

The report, released on Tuesday from the Rudin Center for Transportation 

Policy and Management at New York University, says the agency spent more than 

$8oo million from 2002 to 2012 on "regional projects" chosen by the governors' 

offices. In the coming years, the pace of spending 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 and transportation experts, are not found amid the bridge 

access lanes of Fort Lee, N.J. 

They can be traced to the grounds of industrial 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 of a rail tunnel beneath the Hudson River in 2010 and claimed 

billions in planned spending to be New Jersey's money. 

The prospect of reform is particularly urgent, according to the review, given 

the increasing burden posed by the PATH rail system. In 2012, the system lost 

about $400 million, according to data compiled by the authors, more than twice 

its loss in 2000. 

The report estimated that between 2002 and 2020, the agency will have put 

more than $4.6 billion into the PATH system, and that excludes more than $1 

billion in spending on a new PATH station at the World Trade Center. 

"It is no longer possible for the Port Authority to adequately fund its own 

facilities and services while simultaneously allocating hundreds of millions 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 Port Authority. 

For decades, governors have relied on the agency to help pay for projects. 

Mr. Christie in particular appeared keenly aware of how the agency's 

resources could be steered. When he 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 of New Jersey." Mr. Baroni resigned 

in December as questions mounted about the lane 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 the blood bank," said Stephen 

Berger, who was executive director at the Port Authority from 1985 to 1990. 

Asked about the N.Y.U. analysis, a spokesman for the Port Authority said the 

agency would not comment until officials there could review the full report. 

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The authority has made several changes in recent months, including the 

adoption of more transparent rules to announce votes and recusals, but progress 

has come in fits and starts. 

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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 Port Authority was worth considering. 

' Mr. Cuomo has signaled a willingness to assume more state responsibility for 

the agency, announcing in January that the state would take over the management 

of major construction projects at Kennedy and La Guardia Airports. 

Yet the agency is too important, and its operations too entrenched across both 

states, to consider tearing it down completely, experts say. Among many 

complications would be determining who retains control of bistate facilities like 

the George Washington Bridge. According to data compiled by the report's 

authors, the bridge and its bus station earned about $360 million in 2012. 

Speaking to reporters on Tuesday after a speech in Midtown Manhattan, the 

Port Authority's executive director, Patrick J. Foye, said that dividing the agency 

"would be an extraordinarily challenging and difficult endeavor." But Mr. Foye 

added that "lots of challenging and difficult things have been undertaken to great 

advantage, or sometimes to not great advantage." 

In fact, the Port Authority's operating model has thrived in the past. From the 

1930s through the 1950s, the agency built or developed some of the region's most 

significant infrastructure, including the Lincoln Tunnel and the airport that would 

become Kennedy. 

In the 1960s, though, the modern blueprint for bistate interactions was 

formed. The Port Authority developed the World Trade Center and, to secure the 

approval of Gov. Richard J. Hughes of New Jersey, agreed to rehabilitate and 

operate the privately owned Hudson and Manhattan Railroad, which would 

become the PATH. 

The move "represented a significant departure from past practice," the 

authors wrote. "The Port Authority was 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." 

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As late as the 1990s, the agency's business model still appeared to be working, 

with the burdens of projects often offset by profits from increases in both air 

passenger traffic and the volume of container cargo at agency ports. 

But the PATH's growing cost and an increased devotion to state projects 

chosen by governors have joined with other burdens to imperil the agency. 

The Port Authority Bus Terminal, the busiest bus station in the world, has 

proved a significant drain, with a net loss of more than $105 million in 2012, 

according to the authors. 

And the Sept. 11 attacks had a significant effect on the Port Authority'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 of more than $46 million. (The 

authors' figures were compiled using the Port Authority's annual reports, its recent 

10-year, $27.6 billion capital plan and an outside audit from a consulting firm in 

2012, and other sources.) 

In addition to abandoning nonessential state projects, Mr. Moss and Mr. 

O'Neill said, one potential remedy would be placing the executive director in 

charge of all high-level appointments, and making clear that the deputy executive 

director reports only to the executive director, not to a governor. 

It was 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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