Feb
07

Port Authority audit shines light on organizational flaws

By

When I started writing Second Ave. Sagas, Peter Kalikow was in charge of the MTA. Since then, I’ve seen Lee Sander and Dale Hemmerdinger take the reins; I’ve seen Helena Williams succeed them on an interim basis; I’ve seen Jay Walder come and go; and now Joe Lhota sits atop the agency. Depending upon how you wish to count, that’s six folks in charge over the span of five years and three months. With that kind of turnover, it’s amazing anything at the MTA gets accomplished at all.

The Port Authority has it worse. It must answer to two state governors and has a complex leadership structure that has seen seven executive directors since 2001 and frequent turnover in the chairmanship position as well. It was tasked with rebuilding the World Trade Center, and it recently enacted steep fare hikes and toll increases in order to fund an ambitious capital plan. It is a deeply dysfunctional and non-transparent bureaucracy that can’t even answer simple FOIA requests in less than four months.

Yesterday, Navigant Consulting released an independent audit of the organization, and its critique was a scathing one. Their preliminary review revealed ” a challenged and dysfunctional organization suffering from a lack of consistent leadership, a siloed underlying bureaucracy, poorly coordinated capital planning processes, insufficient cost controls, and a lack of transparent and effective oversight of the World Trade Center program that has obscured full awareness of billions of dollars in exposure to the Port Authority.”

The headlines today are all focusing on the World Trade Center. The Port Authority must contribute $7.7 billion — and perhaps a few hundred million more — to rebuild the felled towers, and no one can offer a regular accounting for the project. For those of us who have seen the costs of the Calatrava PATH terminal jump by a few billion dollars, this revelation can hardly be much of a surprise.

The more alarming lesson from the audit though concerns the Port Authority’s capital plan. As the PA is now, Navigant charges, a major real estate developer and holding company, it may not have the money or capacity to realize its ambitious capital plan. Navigant is urging further examination of the plan and process.

For now, though, what I read in the audit — available here as a PDF — reminds me, in part, of the MTA a whole bunch of years ago. The organization is overflowing with unnecessary and redundant positions while workers are making far too much money for their jobs, and no one really understands the organizational structure within the authority. Patrick Foye, a former MTA Board member, is now in charge, and he’ll have to do what Jay Walder spent a few years doing at the MTA. Cutting costs and reorganizing will become key buzz words.

For their parts, the men in charge seem to recognize this reality. “The consultant’s preliminary review underscores the need for the Port Authority to refocus,” Foye, the Executive Director, said. “A poorly coordinated capital planning process, insufficient cost controls and a lack of transparent and effective oversight of the World Trade Center program that has obscured full awareness of billions of dollars in exposure to the Port Authority all played a role in getting us to where we are today. Further, having the World Trade Center as the focal point of the agency’s work over the last decade has led to mission drift from our core role. We have much work to do to fulfill the agency’s mission as the provider of critical transportation infrastructure needs for the region and as an engine for economic growth and job creation. I am fully committed to working with the Governors and with Chairman Samson, Vice Chairman Rechler and the full Board to get this agency back on track.”

That’s a mouthful of buzzwords, but it has to become a reality. We’re too dependent upon Port Authority infrastructure for the agency to falter. It must move beyond the World Trade Center. It must address our 21st Century needs. It must find some stability at the top. As the MTA seeks stable funding sources, the Port Authority must become leaner. Not doing so puts our transportation infrastructure at a great risk indeed.

For a more skeptical take on the audit and the Port Authority’s work at the WTC site, check out this piece by Steve Cuozzo. Like I am, Cuozzo is highly skeptical of the billions spent on the PATH hub, few of which are going toward actual transportation capacity improvements.



Categories : PANYNJ

17 Responses to “Port Authority audit shines light on organizational flaws”

  1. If you think about what’s actually in the current Port Authority capital plan (roads, roads and more roads), dysfunction could actually be a very good thing for transit, at least until Christie and Cuomo are out of office.

    • Bolwerk says:

      Like it or not, a faltering road system isn’t good for the region either, and Chris Ward was well aware of that. We shouldn’t be anti-road, we should be anti-stupid road use. Even if we ignore cars, we’re going to need roads for freight and buses for the foreseeable future.

      • nyland8 says:

        I don’t think it’s a matter of ignoring cars, so much as it is a matter of conflict of interest. In a finite pool of funds, investing in roads can directly and negatively impact funding for commuter rail travel. If you’re in the game of improving pavement, you’re in the game of undermining the interests of commuter rail service. They do compete.

        • Bolwerk says:

          They compete for funds, not especially for users. Meanwhile, all rail users have goods delivered by truck freight because the rail system to accommodate that use has more or less been dismantled. Of course, things like CP and higher tolls probably save them money by reducing the time trucks spend on the road between deliveries – which is the main reason people with a kneejerk opposition to CP are simply quantitatively illiterate.

          Either way, we need roads. It’s just that how they’re used needs to be reconsidered.

  2. Bolwerk says:

    Steve Cuozzo looks like a man who always keeps a dead fish in his underwear. Maybe he changes it once a week. Seriously, he makes my skin crawl and is hard to take seriously. :|

    What is this though? (From the Cuozzo article:)

    Ominously, the interim report calls for “value engineering all possible aspects of the World Trade Center project.”

    Really? Value engineering is the notorious process by which a project’s original design is dumbed down to make it more affordable, and cheaper raw materials substituted for those intended by its architects.

    He seeems to be against being against overbuilding, or something.

  3. nyland8 says:

    As far as “mission drift from” their “core role”, the Port Authority should divest itself of the PATH system. While one can make easy rationalization for their control of regional shipping ports and regional airports – assets that involve international commerce and travel – the notion that they should be in any way involved in what is essentially a local commuter rail system is absurd. How much bureaucratic and operational redundancy might be eliminated over time if everyone employed in the PATH system were subsumed into the MTA?

    A commuter rail … in this case, a subway system … should be run by a Transit Authority – not a Port Authority.

    • Larry Littlefield says:

      “How much bureaucratic and operational redundancy might be eliminated over time if everyone employed in the PATH system were subsumed into the MTA?”

      What New York transit service should be slashed, and how much extra should NYC transit fares rise, to cover the much larger subsidy PATH commuters receive?

    • Nathanael says:

      The Port Authority exists to deal with anything which requires coordination between New York and New Jersey, basically. That’s why it has PATH.

      The two states are notorious for not being able to cooperate; I think NJT only gets into Penn Station because its predecessors Amtrak and Conrail did, and the access of buses from New Jersey to Manhattan isn’t exactly cooperation, more a matter of paying tolls. There’s a reason HBLRT hasn’t gone to Staten Island, the #7 hasn’t gone to New Jersey, and the last new Hudson River crossing was longer ago than anyone can remember. I guess Metro-North’s contract with NJT for the West-of-Hudson lines is a counterexample.

      • Nathanael says:

        And I’m not kidding about this being the reason the Port Authority exists. The PA was founded after a fight over Hudson River navigation which required the intervention of the Federal Government. Its entire reason for existence is to deal with things which NJ and NY would otherwise fight about.

  4. Larry Littlefield says:

    Like the LIRR, the PATH has very high costs relative to the subway. And like the LIRR, it has employees who live and are politically active in the suburbs. That’s a problem.

    But overall, I doubt “management dysfunction” is the problem, other than at the WTC site. The Port Authority went through a huge downsizing and streamlining years ago. Lots of people were fired. It’s economic development activities, which grew under Cuomo I, were cut back prior to 9/11. It was forced to lease out and end its management of the WTC.

    The Port Authority has few employees. That’s right, almost no employees. Almost everything except the PATH and the police is contracted out. I know this from the data. Average pay is high because all you have is managers. Manager pay is proportional to other people overseeing airports and seaports.

    Port Authority employment in March 2008.

    Highways 881
    Air Transportation 941
    Water Transport and Terminals 160
    Transit 1,133
    All Other and Unallocable 4,035

    Maybe they can cut back the 4,000 for other once the WTC moves a little further along. But again, they tried to get ride of the WTC and it ended up back in their lap, along with more police due to terrorism fears.

    The people who really have to answer for the WTC are in the construction industry.

  5. SEAN says:

    After the finantial meltdown in 2008, the PA’s borrowing costs went from almost 0% to near 20%. Any connection between that fact & what was in that report? It semed that the raiting agencies out of nowhere believed the PA was at a high risk for default on it’s bonds despite the fact they had no history of such issues. Besides, who believes those agencies anyway.

    • Larry Littlefield says:

      I think they did some of those interest rate swaps — like the ones that bankrupted Jefferson County in Alabama. Wall Street claims they will save money, but the cost explodes and Wall Street makes out like a bandit on the fees.

      Wall Street got some hooks in to the MTA with “advanced financial products” too.

      • Chris says:

        (1) The PA issued some auction-rate securities, which may have reset briefly to 20% when that market collapsed, but as a solid borrower they would have refinanced into normal bonds quickly – paying maybe 1 week of 20% interest on a small amount of their debt. Maybe talking a few hundred thousand dollars of extra costs.

        (2) The PA had some problems with swaps, but not the sort of issues seen in Jefferson County. It entered some swaps in anticipation of bond issuance that never happened. Had the bond issuance occurred, the swaps would have fixed their rate in advance as planned, which is helpful for agencies with fairly fixed revenues and limited budget. This type of issuance is not nearly as complex as the swap deal in Jefferson County nor as replete with fees (they are commodity products). The only problem is that the PA never issued the associated bonds or has already redeemed them. The appropriate action would have been to cancel the swaps or enter offsetting swaps so you no longer risk losing money; but this would have cost the PA money upfront so they didn’t do it, allowing the position to cascade to greater and greater losses.

        It’s bad financial management, but pretty common for public entities that use cash accounting rather than economic accounting and can’t look past the next election – they’d rather risk hundred-million dollar losses in the future than take a ten-million dollar loss today.

        • Larry Littlefield says:

          It isn’t cash accounting. It’s unsophisticated vics with other people’s money who believe the “financial experts.” There is zero public need for those swaps. And if rates weren’t falling, Wall Street would not have suggested them.

          The financial sector might have to be worried that a private company taking big losses would never do business with them again. Not so much public agencies. They’ll go right back to whatever financial company suggested the losing deal.

          If you are in a poker game and you don’t know who the sucker is, you are.

  6. The Cobalt Devil says:

    I’d like to personally thank the PA for helping me end my addiction to visiting/shopping in New Jersey over the past few months. Since the toll on the Hudson/Staten Island crossings went up to $9.50 during “peak” hours (which includes ALL DAY Saturday and Sunday), I’ve all but given up on day trips to the Jersey malls and to visit historic sites in the Garden State. I’m spending all my money on shopping, lunch, and museums/historic sites in NYC and Long Island, where I’ve visited many sites I’ve never been to before.

    I absolutely refuse to give these thieves one more penny out of my pocket. Since it’s obvious the PA wants less drivers on their spans, I’m more than happy to oblige. Let someone else pay for a bloated, ugly WTC complex.

  7. Paulie3jobs says:

    Where is the outrage by Gov. Christie over the WTC overruns? Shut the whole thing down, I refuse to pay for it. Like this will ever happen, too many cronies on the PA payroll.

    • The Cobalt Devil says:

      Big boy only yells at women and “numbnuts” in the legislature. All his friends/thieves at the PA get a free pass.

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