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Port of No Reform

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Port of No Reform

How a scandal-plagued agency survives September 14, 2015
Former Port Authority chairman David Samson

The nation was introduced in September 2013 to the Port Authority of New York and New Jersey via the Bridgegate scandal, in which officials of the bi-state agency conspired with staffers of Garden State governor Chris Christie to close down lanes of the George Washington Bridge as political retribution against a local mayor. The easy exploitation of the Port Authority by a few well-connected individuals was nothing new to residents of the metropolitan area. They’ve seen for years how the scandal-plagued agency serves the interests of its political masters, rather than residents of New York and New Jersey. Now, as lengthy investigations into the Port Authority proceed, we’re getting deeper glimpses into its dysfunction—and of the cost to the region.

Last week, United Airlines chairman Jeff Smisek and two other top executives at the carrier, which uses the Port Authority-managed Newark Airport as one of its main hubs, were forced to step down in the wake of an internal investigation sparked by subpoenas from U.S. Attorney Paul Fishman’s office. Though the airline won’t say what it found, the Record reported back in February that Fishman had possibly uncovered a deal between Smisek and former Port Authority chairman David Samson in which United agreed to restart service between Newark and Columbia, South Carolina—where Samson has a vacation home—as part of lease negotiations between the airline and the agency. United was upset at the steep fees charged by the Port Authority at Newark—more than 50 percent higher than it pays at other major airports—and Smisek was trying to engineer a better deal through Samson.

If indeed there was such a quid pro quo—and Fishman’s office issued new subpoenas in the ongoing probe last month—it would represent business as usual at the Port Authority. When it’s not engaging in petty political games and insider deal-making, the agency can be relied upon to mismanage the major assets under its care. Given the task of rebuilding Ground Zero, for example, the Authority has spent $2 billion more than projected on the site’s new transportation hub alone, including some $650 million in administration costs (including construction management, inspection, and contract monitoring). Wild overspending at Ground Zero, helping to double the Port Authority’s debt over ten years, is one reason why, as Nicole Gelinas has described, the agency has jacked up rates at its money-making facilities—notably local bridges, tunnels, and airports—but slashed investments in needed capital projects it now can’t afford, like a new Manhattan bus terminal. Vice President Joe Biden may have labeled the Port Authority-run LaGuardia Airport something out of “a third world country,” but LaGuardia is practically an oasis compared with the bus terminal, which the agency can’t afford to rebuild any time soon, even though it is, as the Asbury Park Press wrote in April, a “money machine.” The Port Authority’s strongest suit is in fact squandering money. As a 2011 report by the New York State comptroller noted, the agency lacked oversight on dozens of expensive contracts it let out for rebuilding work, including an absence of documentation to support payments to architects, engineers, and others.

The Port Authority also remains plagued by questionable connections between its high-powered board members and its vendors. Last year, Manhattan district attorney Cyrus Vance Jr. launched an investigation that reportedly included examining the redevelopment of the World Trade Center site. Former board member Anthony Sartor, who owns an engineering consulting firm and headed the redevelopment committee at the Authority, had to recuse himself from numerous contract votes because of potential conflicts of interest. He resigned last year. Meanwhile, press reports have said that U.S. Attorney Fishman’s investigation has also focused on Samson and whether his votes as chairman benefitted clients of his law firm.

The cluster of new investigations has revived talk of reforming the agency—a regular theme among good government types in New York and New Jersey that rarely goes anywhere. In 2014, legislators in Trenton and Albany jointly negotiated bills that needed to be passed in each state to reform the Port Authority’s practices. Among other changes, the bills would have weakened the ability of each state’s governor to make key appointments to the agency. But Governors Cuomo and Christie blocked the legislation and instead directed the agency to reform itself—including beginning a national search for new executives to lead it. The reform efforts left the Port’s fate largely in its own hands.

In the early days after Bridgegate, critics opined that it was time simply to break up the Port Authority and give each state control over its own assets—something proposed periodically since the agency was first formed in the early 1920s. Rudolph Giuliani advocated just such a strategy back when he was New York City mayor because, he argued, the agency’s mishandling of LaGuardia and JFK did serious damage to the city’s reputation. The chief obstacle has always been the wildly diverging financial prospects of the agency’s individual units. Some, like the Hudson River crossings and the airports, collectively throw off billions of dollars in excess revenues, which wind up subsidizing money losers, like the PATH train system. But these cross subsidies are precisely why the Port Authority should be dismantled. They have enabled the agency and governors of both states to pursue wildly impractical spending plans. Without such subsidies, New Jersey would have had to figure out years ago a better way to finance and operate the grossly inefficient PATH system. Without subsidies, New York could never have pushed the Authority to sink a staggering $10 billion into the rebuilding of Ground Zero.

The United board moved quickly to jettison Smisek to avoid opening itself up to damaging criminal investigations and devastating shareholder lawsuits. For United, acting fast may have been a matter of survival. For the Port Authority, however, the current blizzard of investigations is little more than business as usual. And it will remain that way as long as the agency can rely on billions of dollars in revenues extracted from the people of the region to paper over its own shortcomings.

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