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The Port Authority Leviathan

from the magazine

The Port Authority Leviathan

Mired again in scandal, the unwieldy New York–New Jersey agency desperately needs reform. Winter 2016
New York
Infrastructure and energy
Public safety

In the aftermath of the September 11 terrorist attacks on the World Trade Center complex, developers, policymakers, and ordinary New Yorkers broadly agreed that the site should be rebuilt and that whatever rose in place of the Twin Towers should be ambitious—and certainly tall. Fourteen years and countless borrowed dollars later, the project is near completion. One World Trade Center—more grandly dubbed the “Freedom Tower”—has risen to its promised 1,776 feet, with the assist of a 400-foot mast. Originally intended by celebrity architect Daniel Libeskind to be a spiraling, Cubist reflection of the Statue of Liberty, America’s new skyscraper champion is essentially an oversize version of any American city’s tallest building—except that it sits atop a 20-story concrete block to deter truck-bomb attacks. What really sets One World Trade Center apart is its $2 billion price tag, nearly double the original estimate, making it the world’s most expensive building.

Beneath the “shellacked, monomaniacal” Freedom Tower (in the words of New York Times critic Michael Kimmelman), another massive architectural structure is taking shape: an underground train station for the PATH, the commuter rail service that links lower Manhattan to Newark, Hoboken, and Jersey City. The PATH desperately needs to make capital improvements to its cast-iron, cross-river tubes, which rest beneath the Hudson River’s bed and date to 1909, but that essential project has taken a backseat to the construction of a $4 billion white marble concourse that the New York Post has called a “shrine to government waste and idiocy.”

The Post had the “waste and idiocy” part right, but the development work at the World Trade Center isn’t “government” as we normally think of it—an institution responsive, at least theoretically, to democratic politics. That’s because one agency stands at the center of both these expensive and contentious architectural projects: the Port Authority of New York and New Jersey, which owns the land and was involved in the construction of the original World Trade Center. Established in 1921 in an effort to quell the perennial squabbling between New York and New Jersey over control of New York Harbor, the Port Authority was designed to be unaccountable to the public. Its originators, steeped in Progressive-era faith in technocratic management, envisioned an agency run by disinterested professionals, insulated from the pressures of day-to-day politics. In the 94 years since its founding, however, the Port Authority has proved anything but politically disinterested. Fueled by the power to issue bonds backed by tolls, the agency has steadily expanded its holdings, which now encompass a staggering set of properties vital to the functioning of the New York metropolitan area and its $2 trillion economy. These include a half-dozen airports (including three of the nation’s largest); the nation’s third-busiest port; the world’s busiest bridge, busiest tunnel, and busiest bus terminal, along with a handful of other bridges, tunnels, and bus terminals; the PATH commuter rail system; its own police force; and, yes, the World Trade Center itself. Almost a century into its history, the Port Authority has grown into a gargantuan apparatus of inefficiency, overreach, corruption, and waste.

Illustrations by Sean Delonas

How a relatively modest initiative to standardize rates of cross-Hudson freightage developed into a massive, financially opaque institution—with a mission that has expanded well beyond its original scope—is partially a function of the late-nineteenth-century cult of expertise. In his 1887 essay “The Science of Administration,” Woodrow Wilson propounded the idea of professional management of public assets. Such management, “removed from the hurry and strife of politics,” Wilson and his contemporaries believed, would guard against the kinds of spoils systems and machine politics typified by New York’s Tammany Hall. The Port Authority was thus designed from the outset to operate largely as an independent body—it would offer “government without politics,” in the words of Jameson Doig, whose book Empire on the Hudson is the seminal history of the agency. Ruled by a board of commissioners appointed by the governors of New York and New Jersey, the Port Authority ostensibly operates free from the day-to-day concerns and petty rivalries of local governance. The commissioners serve staggered, six-year terms, theoretically insulating them from political concerns, though the governors retain a veto over the board’s decisions.

Despite these noble intentions, however, the Port Authority has long since become a swamp of mysterious accounting practices, patronage, favoritism, self-dealing, and mission creep. It has also served as an instrument of political retaliation, as in the “Bridgegate” episode of September 2013, when high-ranking Port Authority officials, all close political allies of New Jersey governor Chris Christie, closed two of the three lanes of eastbound traffic to the George Washington Bridge, apparently to punish the mayor of Fort Lee, who had failed to endorse Christie for reelection. Yet, despite nearly a century of concerns that the Port Authority had become unmanageable and unaccountable, reform efforts to date have proved fruitless, in part because the agency’s hold on the New York metro area economy is tentacular. If major American financial institutions proved “too big to fail,” the Port Authority seemingly has become too big to change.

A key reason for this inertia is the interrelated finances of the PA’s many units. Simply put, profitable divisions of the conglomerate subsidize the less successful ones—meaning that reforming any part of the Port Authority will affect in some way its other parts. The primary generators of cash in the Port Authority portfolio are its three main airports: Kennedy, LaGuardia, and Newark. These aviation hubs generated approximately $2.5 billion cumulatively in cash flow from 2007 to 2011, according to an outside consultant’s report. Over the same period, another immensely profitable Port Authority asset, the George Washington Bridge, generated $1.4 billion. (These figures are net and account for operating and capital expenses.) On the other side of the ledger, though, the Port Authority lost $2.3 billion running the PATH. The PATH has high fixed costs for personnel and maintenance and mostly static revenues. Unlike most major American commuter rail systems, the PATH receives zero subsidies from the tax base. Since raising fares to match the real cost of ridership is politically infeasible, the PATH is essentially subsidized by the tolls and fees levied on bridge crossers and airplane travelers.

The story of how the Port Authority came to be responsible for the PATH system is emblematic of the political trade-offs and self-dealing that characterize the PA’s history. In 1961, when planning for the World Trade Center was under way as part of David and Nelson Rockefeller’s vision to develop lower Manhattan, including Chase Plaza, New Jersey governor Robert Meyner was shown a scale model of the design for his approval. According to Eric Darton, whose 2000 book Divided We Stand details the development of the World Trade Center, Meyner shrugged his shoulders and asked Governor Rockefeller: “What’s in it for me?”

To answer that question—and to gain New Jersey’s consent to build the World Trade Center under the financing and construction aegis of the Port Authority, which needs legislative approval to commence major projects—the Rockefellers and famed Port Authority executive director Austin Tobin agreed to acquire and refurbish the bankrupt Hudson and Manhattan Railroad, which became the PATH system. They also approved the location of the World Trade Center complex on the west side of Manhattan, on land owned by the railroad. The Port Authority thus reluctantly took on ownership and maintenance of a failed commuter rail system, in order to build a trade complex that, even then, was projected to be revenue-neutral, at best.

Likewise and more recently, the rebuilding of the World Trade Center after the 9/11 attacks has been an unfolding saga of egotism and grandiosity of Augustan proportions—best expressed in a set of “wings” that will hover above the massive World Trade Center Transportation Hub. Observers have compared the wings, designed by Spanish “starchitect” Santiago Calatrava, with a “kitsch stegosaurus” and a stripped bird’s carcass. The original designs for the wings appeared impressive: looking at images of Calatrava’s work at the Milwaukee Museum of Art, one can see why the Port Authority’s commissioners and various state officials were sold on his proposal. But architectural sketches and models are notoriously unreliable in their representation of scale and point of view. What might have appeared soaring and majestic in an empty plaza is diminished, truncated, and dismal when crammed between a set of 1,000-foot skyscrapers. Meanwhile, leaks in the structure have damaged retail spaces in the mall that is still in ovo beneath the roosting architectonic bird, thereby pushing the opening date for the complex from late 2015 to mid-2016.

The Hub’s upper portion, the Oculus, will operate directly below the wings; the concourse as a whole will supposedly rival Grand Central Terminal’s in breadth. Port Authority press literature breathlessly describes the Hub/Oculus as “the third largest transportation center in New York City”—in other words, the smallest of the city’s three train stations. To get a sense of what the Hub/Oculus will look like, one can now venture into the World Trade Center West Concourse, which runs under the West Side Highway and connects the WTC complex with Brookfield Place, formerly the World Financial Center. Clad in stunning white marble lozenges, the West Concourse is impressive, but it cost more than $100 million and will likely be expensive to maintain. Somewhat reminiscent of the interior scenes in 2001: A Space Odyssey, the West Concourse has been characterized by one critic as “the most expensive hallway in the world.”

“I’ve yet to see a construction project that came in under budget,” says New York state senator Michael Ranzenhofer, who chairs the committee with oversight over the Port Authority. While that adage surely comforts many construction managers, it’s hardly a statement of universal truth: the Empire State Building and the George Washington Bridge are famous examples of New York City projects that were completed within their original budgets. Regardless, in the Port Authority’s case, a culture of systematized waste ensures that projects regularly run into the red. Outright corruption is a real problem as well. Longtime Port Authority commissioner Anthony Sartor, who also owns a major engineering firm, headed the PA’s subcommittee overseeing the redevelopment of the World Trade Center. Sartor resigned from the committee in 2014, following an investigation into dealings that his company had with other firms with Port Authority contracts. The Wall Street Journal reported that, while Sartor did recuse himself from 181 votes of the full board of the Port Authority in matters touching on conflicts of interest, he nevertheless participated in the negotiations leading up to the votes, which were a formality, in any case, as they were almost always unanimous. Another Port Authority commissioner, Chairman David Samson, a former New Jersey attorney general appointed to the Port Authority by Governor Chris Christie, resigned after facing accusations of conflicts of interest and self-dealing pertaining to his legal practice. Samson is also being probed for having pressured United Airlines to establish a special route between Newark’s airport and Columbia, South Carolina—where he maintains a weekend home. The Newark-Columbia route operated just twice a week: from Newark on Thursday evenings, with a return leg on Monday mornings. It was discontinued three days after Samson’s resignation from the Port Authority; five months later, United CEO Jeff Smisek stepped down as a direct result of the scandal.

To pursue various political goals, New York and New Jersey politicians have long exploited their leverage over the Port Authority’s pool of assets. For example, in 2007, with the approval of then–New York governor Eliot Spitzer, the Port Authority moved to expand itself well beyond its historical scope when it agreed to purchase the operating lease of sleepy Stewart International Airport, 60 miles north of Manhattan. Stewart had made news in 2000 as the first American airport to be privatized, when New York State sold its lease to National Express Group, a British transit company. Spitzer, then state attorney general, approved the sale for $35 million. After six years of National Express Group’s management, during which Stewart saw a decline in passenger travel, the Port Authority agreed to buy the lease for $78.5 million.

More recent airport intrigue involves the Jersey shore, where the Port Authority took over partial management of Atlantic City International Airport—located well outside even a generous consideration of the agency’s scope of operations. Atlantic City, where casino gambling was legalized in a 1970s attempt at revitalization, is a city on the verge of economic collapse. (See “Boardwalk Vampire,” Autumn 2015.) Four major casinos closed in 2014, and gambling revenues are half of what they were eight years ago. Empty lots dot its famed boardwalk, and urban blight surfaces just one block inland from the sea. Attempting to express his civic pride, Atlantic City’s mayor Don Guardian could only come up with: “At least we’re not Detroit!”

Hoping to leverage the Port Authority’s relationships with major airlines, Governor Christie leaned on the aviation unit to absorb marketing responsibilities for the Atlantic City airport, which was served only by Spirit Airlines. The Port Authority entered talks with Air Canada to introduce a Toronto–Atlantic City route—on the condition that the state of New Jersey subsidize the route, effectively indemnifying Air Canada from any loss. United Airlines agreed to begin flying into Atlantic City but backed out when it became clear that there was not enough demand to justify serving the South Jersey coast. Another airline, Choice Aire, commenced chartered Nashville–Atlantic City flights in May 2015.

The Port Authority declined my requests for comment on why it had sought to assume partial control of the Atlantic City airport. The minutes of the board’s March 2013 meeting, when the vote to absorb the airport took place, inadvertently reveal the thinking:

Incorporating ACY (Atlantic City International Airport) into the Port Authority’s network of airports would create a more integrated airport system. The Port Authority recognizes that the challenges raised by airport system congestion must be addressed by exploring both expansion at its existing airports and shifting demand to the region’s outlying airports, thus creating capacity at the three core airports. Outlying airports such as ACY can also serve local areas, build up local economies and expand the offering of air travel options.

The idea that the Atlantic City airport, which is far closer to Philadelphia than it is to New York, would “create capacity” at Newark or JFK is far-fetched. But the board, in its passing reference to the need to “build up local economies,” made clear the real reason for the decision: to try to salvage Atlantic City as a tourist destination.

The Port Authority spends enormous sums on such “regional development” projects that have little or nothing to do with its core mission. For example, in 2011, Governor Christie pulled the plug on a long-awaited trans-Hudson rail tunnel, insisting that the Port Authority divert $1.8 billion out of $3 billion it had raised through a bond offering for the tunnel, in order to rebuild the decrepit Pulaski Skyway. The skyway connects Newark to the Holland Tunnel and is thus only tangentially related to Port Authority operations and, in any case, is owned and managed by the New Jersey Department of Transportation. The Securities and Exchange Commission is investigating the diversion of funds from the bond offering for other purposes, and the Federal Aviation Authority is following up a complaint by United Airlines that, through the steep fees it pays to land at Newark Airport, it is subsidizing non-aviation-related projects. So far, the PA has spent close to $2 million in legal fees to defend itself against the charges.

All this overextension can obscure the fact that, even with the assets that form the core of its portfolio, the Port Authority is a managerial mess. Vice President Joe Biden raised eyebrows when he remarked that LaGuardia Airport was indistinguishable from facilities in “a Third World country.” Anyone who has experienced the dripping ceilings and interminable delays at what pilots call “LaGarbage” knew what he meant. Plans for the reconstruction of LaGuardia’s Central Terminal Building have languished for years. Finally, in 2014, it appeared that the renovation project was nearly under way. But then, New York governor Andrew Cuomo inserted himself into the bidding process, announcing a “design competition” that would run in tandem with the standard submission of construction bids. Companies vying to win the $3.6 billion project would have to amend their bids in response to the winning design. Cuomo’s critics said that he was slowing down an already-tedious process and creating unnecessary obstacles that would increase the cost of the project.

In 2015, Cuomo and Vice President Biden announced a new plan: to tear down LaGuardia and rebuild a new airport on the site. The new LaGuardia would have more modern terminals, better baggage-handling facilities, and expanded taxiways. What it would not have, however, are longer or additional runways, which are the primary cause of delays. The makeover of the airport, as one industry analyst put it, “is just creating a larger waiting room” for existing capacity. Meantime, the Port Authority is asking the FAA for permission to collect an extra $110 million in passenger fees to pay for preliminary construction.

With financial mismanagement such a regular refrain, it should come as no surprise that the Port Authority has been borrowing billions of dollars to fund its current operations, and is deep in debt. (See “The Port Authority’s Cloudy Future,” Autumn 2012.) The PA borrowed $8 billion alone to pay for its share of the World Trade Center redevelopment, but it has other pressing projects that will cost enormous sums—such as replacing the bus terminal on Eighth Avenue. The existing structure, with its warren of hallways and inexplicable landings, is well over capacity; the estimated price tag for a new terminal is north of $10 billion. A radical plan to raise the roadway of the Bayonne Bridge, to allow a new generation of larger container ships to pass underneath it, could cost $1.3 billion.

The PA plans to raise part of the money needed for these major projects and also to fund ongoing expenses through toll increases. On the George Washington Bridge, for instance, the cash toll for cars entering Manhattan rose to $15 in 2015; as recently as 2008, the toll was only $8. Trucks crossing the bridge pay $114. Tolls on the Hudson River tunnel crossings have similarly spiked—they’re now $14 for cars paying cash. Even with these higher fares, it’s clear that, for the near future at least, the Port Authority will need to issue a great deal more debt to manage its current needs.

Figuring out where to begin reforming the Port Authority is almost as vexing as imagining where to end. The most ambitious approach would be a complete dismantling of the entire structure, with the airports spun off to individual management; the PATH system made part of New Jersey Transit, which operates its own commuter rail system into Manhattan already; the bridges and tunnels handed over to MTA Bridges and Tunnels, the successor organization to Robert Moses’ Triborough Bridge and Tunnel Authority; and the real estate portfolio being sold off to private bidders. In 1996, New York mayor Rudy Giuliani proposed a plan along these lines, which also included folding the Port Authority Police Department into the NYPD and creating a New York Airport Authority to manage the airports. An alternate proposal would break out the Port Authority’s assets along state lines—bringing them under more direct political control and improving accountability. Some form of revenue-sharing would be necessary for the bridges and tunnels, though the two states might find themselves back where they started 100 years ago, bickering over haulage-cost details.

Making any of these major restructuring plans work would require enormous political will—and imagination. Again, many Port Authority units are economically unsustainable, relying on revenue from other parts of the conglomerate, meaning that any breakup would produce real winners and losers. It is one thing to demand that New Jersey Transit or the MTA absorb the PATH system, but someone would have to absorb the half-billion-dollar loss that the system runs annually. And breaking the Port Authority apart also would mean dealing with the creditors of the institution’s $18 billion in outstanding bonds. New York and New Jersey have different credit ratings and different outstanding debt obligations. Complexities would abound.

Short of dismantling the Port Authority, major reforms could be pursued within the existing structure. In 2014, the legislatures of New York and New Jersey took an unprecedented step to do so, proposing changes that included the establishment of whistle-blower protections; the restructuring of the executive office of the Port Authority; strict rules about the disposal of Port Authority property; the elimination of self-dealing on the part of commissioners; opening of meetings to the public; and requiring each commissioner to promise to “perform duties and responsibilities to the best of his or her abilities, in good faith and with proper diligence and care.” The reform bills passed in both houses, in both states, unanimously. No one dissented.

Then, just before the bills were set to become law, Governors Cuomo and Christie vetoed the bills simultaneously, on the Saturday between Christmas and New Year’s Day, having decided that any reform of the Port Authority should originate from their respective offices. The governors issued a joint news release calling for their own version of comprehensive reform and claiming to “embrace the spirit and intent” of the vetoed bills. With their eleventh-hour intervention, Cuomo and Christie set back a golden chance for positive change; their watered-down versions of the original reform bill have gone nowhere in the New York and New Jersey legislatures.

This setback shouldn’t discourage further efforts to remake the agency, however. The unanimous legislative votes clearly indicate public support for serious change at the Port Authority. The agency has become a formidable political force in its own right, often more powerful than the institutions that gave it life. Only concerted effort to rein in its abuses and formulate a more sensible vision for its future can ensure that the Port Authority lives up to its original mission—to provide smooth, nonpolitical administration of essentially nonpolitical matters.

Research for this article was supported by the Brunie Fund for New York Journalism.

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