Mar
17

Righting the listing Port Authority ship

By · Published in 2014

The kicker to Charles Bagli’s latest Times article on economic shenanigans surrounding development at the World Trade Center site is a brilliant one. After delving into the fighting over a $1.2 billion loan the Port Authority is considering issuing to Larry Silverstein, Bagli coaxed out a quote from Kenneth Lipper, PA commissioner and Silverstein opponent, that highlights just how far away the Port Authority is from any sort of transit-related mission.

“It’s not a question of whether to build it,” Lipper said. “We’re only talking about timing and who’s going to pay for it, the public or the private sector. I want to finance it consistent with our mission, regional transportation.”

You may pause at that quote and wonder what financing another office building near Ground Zero when the first one isn’t fully rented has to do with regional transportation. You may wonder why the Port Authority is even considering giving out a $1.2 billion loan when that money could go toward better airports, another trans-Hudson rail tunnel, traffic studies or a whole slew of transportation-oriented studies. You may wonder, in fact, just what the Port Authority’s mission is these days and when it’s going to get back to it. Good question.

Since the days of 9/11 launched the Port Authority into an endless money pit of litigation and construction and since New Jersey and New York seemingly forgot, a few years later, how to run the agency, it’s been nothing but trouble. The PA is building the world’s most expensive subway station and the world’s most expensive office building. It’s not devoting resources to the region’s needs that it’s been tasked with overseeing, and it is debating whether or not to issue another loan to Larry Silverstein for another building.

Here’s the deal in a nutshell:

Eager to get the building up, Mr. Rechler, the authority’s vice chairman, crafted a proposal with the developers’ advisers at Goldman Sachs: The Port Authority would guarantee a $1.2 billion construction loan — half the cost of the building, and double the previous commitment — for Mr. Silverstein. That essentially promises Mr. Silverstein’s lenders that the authority would pay the loan if he could not. The developer would also have the use of $1.3 billion in tax-exempt bonds, which can be attractive to investors.

In return, Mr. Silverstein would have to put up about $450 million in cash and, unlike the old deal, pay interest and fees to the authority, which would also have to right to foreclose if Mr. Silverstein defaulted on his payments for the $1.2 billion loan.

I don’t think that’s a particularly great deal for the Port Authority (though Steve Cuozzo disagrees). Maybe this loan can push 3 World Trade Center higher; maybe it can help the PA begin to reach the cap of $25 million a year in rent payments it could receive when every square foot of space in the yet-to-be-built building is rented. But maybe not.

Outside of the maybes, it’s another real estate project funded by an agency that’s not a real estate investment firm. It’s another project that takes dollars away from solving Laguardia’s physical issues, from expanding JFK’s runways, from modernizing Newark, from building out the PATH. It’s a monetary move that isn’t consistent with the Port Authority’s mission, and it’s a New York-based chit that will push New Jersey to ask for a similarly diversionary expenditure on the other side of the Hudson.

As Ted Mann reported in the Journal this past weekend, a panel will soon convene to study ways to overhaul the Port Authority. It’s a tall order, requiring cooperation across a political aisle and a wide river. As Mann reports, PA appointees want “to return the authority’s focus to its core mission of building and maintaining transportation infrastructure in the region.” Something has to give to get there, and yet another billion-dollar loan should be just the thing to go.



Categories : PANYNJ

34 Responses to “Righting the listing Port Authority ship”

  1. John-2 says:

    The PA went awry 50-plus years ago, when Nelson Rockefeller’s plans to build his massive self-contained office complex on the East River met the Hudson & Manhattan’s bankruptcy, and the chance to acquire the prime real estate that was Hudson Terminal. The subway the Port Authority took possession of never caught the imagination of the politicians who were the buyers — it was the land above it (and to the west of it) and what they planned to do with the land that got their pulses racing.

    As it was in 1962, so it is in 2014 — PATH remains the necessary evil of the whole deal, updated because it provides the New Jersey access that justifies the location of the WTC, but without having any sort of champion even in the way Bloomberg pushed the 7 extension to speed development of Hudson Yards. PATH’s value is more that it has to have an exit and entrance on the street, so why not a $4 billion, multi-story one? What’s above the station, even if it’s massively overpriced and the funds better spent elsewhere, is going to be more important than what’s underground to the PA’s current leadership and the politicians overseeing their plans (and about the only thing you can say is the misguided goals are completely bi-partisan, having gone from a Republican governor in New York and a Democratic one in New Jersey a dozen years ago to the exact opposite today, with no change in direction).

    • boerumhillscott says:

      I agree, except that I would add that a good chunk of the $4 billion transit center (probably well over half) is really part of the PATH’s office/retail real estate project. In effect, transit money is making the grossly overpriced real estate project look better than it really is.

    • Rob says:

      Right. As someone who has been around as while, I can tell you that the pa has been [rightly] criticized for decades for neglecting its purported transit-related mission. In reality, it has never seen its core mission as building and maintaining transit [vs. highway and port] infrastructure in the region. That is how we got the wtc in the first place.

    • Nathanael says:

      On freight, the Port Authority went wrong when it decided to let the Port of New York languish in favor of the Port of New Jersey.

      I’m not sure what purpose PANYNJ serves at the moment. NY and NJ seem to pursue their own independent, unrelated projects on their own schedule and without coordination, and the Port Authority seems to be simply be a slush fund for funds to pass through from either NY or NJ.

      • Jonathan says:

        I’m not sure that shifting most port activity to New Jersey was wrong or even avoidable. Containerization replaced wharves filled with longshoremen everywhere, so that’s not a Port Authority choice. If I were building a container port in the New York area, I’d certainly locate it in an area served by many interstate highways and a variety of double-stack-capable rail corridors. New Jersey is also the site of most large distribution centres. A port on the New York side would likely have no rail service to speak of and would require trucks to cross expensive and very congested bridges to get to the rest of the country.

        • Nathanael says:

          So how do you get goods to the portion of the country on the east side of the Hudson? See the problem? And that *is* the problem. The port of Boston is no longer arranged well for freight service either, FWIW.

          • Bolwerk says:

            Trucking them probably involves I-95, which is easier from NJ. And then the rail freight connections in the northeast might be unusually bad, with NYC’s options being a big joke.

          • Andre L. says:

            It is a much less important factor than deciding how do you transport containers through much of the rest of the country from there.

            Sea freight comprises of two major paradigms today: heavy bulk transport (for oil, gas, minerals and grains), requiring massive facilities to unload ships with ease (on a heavily automated process); and containers.

            Manhattan doesn’t have the space, the railways, the pipelines or the highways to accommodate the support infrastructure such terminals require.

            This is why all major global port hubs moved away from the warehouse-and-a-pier model to the modern docks-with-retroport one. Name a big World port (Rotterdam, Shangai, Singapore, Hamburg, Santos), and you’ll see these sort of reconfiguration.

            Since the New York port facilities are located close to the most prime real estate location in USA, it made absolutely sense to shift operations to New Jersey.

            The proportion of cargo that passes through the port that originate or end east of the Hudson is much lower than west of the Hudson. It is also very expensive to build (even if land was made available) support facilities and transportation infrastructure east of the Hudson. Therefore, it makes no sense to think the NY side as a viable port location.

  2. Spencer K says:

    NJ spent then ARC funds on the NJ Turnpike. Isn’t that diversionary enough?

    • Joseph Steindam says:

      In addition to that diversion, Christie convinced the PA to pay for the rehab of the Pulaski Skyway since New York “is getting shiny new buildings.” I think Ben’s worried that shelling out more money for the WTC site will give Christie ammunition to demand assistance for other projects, although he’s basically already gotten everything he’s wanted out of the PA: they’re going to raise the Bayonne Bridge, they’re extending the PATH to the AirTrain station, and the PA took over operations of the Atlantic City Airport. And of course, he took the ARC funds to pay for the Turnpike widening without having to raise the gas tax.

      • lop says:

        Is raising the Bayonne Bridge illegitimate?

        • Nathanael says:

          Actually, it kind of is. It’s a way of diverting freight from the Port of NY to the Port of NJ. The projects which would have made the Port of NY more viable have repeatedly been postponed and not done.

  3. Larry Littlefield says:

    The big issue for the Port Authority, long term, is this.

    For decades the bridges and tunnels and airports have been huge money makers. Port Authority politics has been about fighting over and handing out that pot of money. Not only handing out the surplus revenues that are present today, but also those that will be collected tomorrow, through debt.

    But what if the surplus money from the bridges, tunnels starts to go away?

    The Port Authority got rich as people moved to the suburbs and moved away from bus and rail transportation to automobiles and airplanes. This shift was facilitated by two things: cheap oil, and federal money. And in the case of the airlines a third thing: glamour that enticed people to invest in airlines even though they lost money, over and over again, decade after decade.

    Now the glamour is gone, and people are insisting that the airlines make money. Their labor costs, once excessive, may now be too low to attract competent workers, particularly in the regional carriers. They have stuff the airplanes with passengers, but oil prices keep rising and so do fares. How long before air travel starts to fall to a level consistent with making profits.

    And younger generations are poorer, and less likely to drive. Vehicle miles traveled are falling across the country. How long before Port Authority toll revenue starts to fall?

    The Port Authority needs to squeeze these golden gooses while they can, and get out of debt as fast as possible. If it doesn’t recover financially from 9/11 before the gooses start to lay fewer eggs, disaster looms. And not one person is reading the tea leaves and saying so.

    • Bolwerk says:

      As I remember PA finances, 2/3 crossings to Manhattan were somehow money losers. The GWB was subsidizing the tunnels, I guess by extracting fees from freight. So the cracks may have been opening sooner than anyone would have thought.

      OTOH, PA labor practices seem spendthrift, so whether that needs to be the case is another question.

      • Larry Littlefield says:

        My knowledge of the situation dates to the 1990s, but at the time the Holland and Lincoln ran a surplus too. How could they not? Of course of the Feds don’t completely reimburse the Sandy damage, they might be out of the black.

        PATH was designed to be a money loser subsidized by the WTC, but it began to drain more and more off and now of course the WTC is a money loser.

        The bus terminal used to make money, with the intercity carriers paying extra to subsidize NJT, but by the mid-1990s the decline of the bus industry made it a loser. I’m not sure if the revival of the bus industry has made it a winner again. But the roof leaks. It is a pit that needs investment.

        The port loses money. Ports are like convention centers — overbuilt due to inter-city competition.

        • SEAN says:

          The decline in the bus industry in the 90’s is mostly related to the Greyhound’s of the world & tour providers. Line run opperators like Decamp receive state & federal funding to opperate.

          Most people don’t realize that most of the line run private bus companies to & from the Port Authority don’t own their busses – NJT owns them but the companies livery is painted on instead of the NJT logo.

        • Bolwerk says:

          Well, this is from 2007. I don’t know when they stopped, but I could have sworn they were in the red in 2004 or 2005.

          Actually, that comment about the bus terminal is a lot more telling. These assets could sustain themselves, but the wider subsidized road system was feeding them all along. So profitability is a rather misleading indication. It’s like when you see carheads complaining about supposedly profitable highways’ funds being used for transit &nadsh; in reality, drivers who aren’t spending much time on highways are subsidizing the highways, while property taxes and general funds cover the slack.

        • Spendmor Wastemor says:

          The port losing money may have something to do with paying crew upwards of $250K/year, in some cases for jobs which don’t require them to be there or perform work. One was interviewed as to why he was being paid his $100/hr while at a family barbeque; he explained that according to his contract he generally didn’t have to be at the port.

    • Spendmor Wastemor says:

      The bridges and tunnels are currently such a choke point that if current user drive less, others will fill in. Some are now dissuaded by traffic.

      You’re also forgetting that people outside NYC are not yet conditioned to accept the degrading conditions aboard transit. Most NYC residents have been indoctrinated, but try stuffing the average American into a box full of other people’s sweat after making them wait on a platform redolent of other people’s urine and see what they think of you.

      • Nathanael says:

        In other cities, the subways, buses, and commuter trains are nicer.

        The issue you’re describing is “the degrading conditions in New York City”. Nothing to do with “transit”.

        Other cities have sparking clean platforms and comfortable, nice-smelling trains.

        Why New York doesn’t?… ask Larry Littlefield. New York City has extra-bad conditions, though.

        • Bolwerk says:

          Meh, I don’t even agree. Yes, stations are degraded and sometimes smell like piss. Crowding on NYCTA isn’t as bad as you’d think from the kvetching, and few off-peak trains are constantly SRO. NYC’s vehicles themselves are about as good as anywhere else, in the USA anyway.

          The most offensive problem just seems to be that NYCTA is slow for the distance you go, and some of that goes back to deferred maintenance. It’d be cheaper to stop paying for the labor roles we don’t need and start doing the modernization we do need; that goes for subways and surface transit.

          Even then, saying it’s preferable to sit in traffic in New Jersey is dubious at best and the notion that people are indoctrinated to tolerate the subway is classist claptrap.

          • The most offensive problem just seems to be that NYCTA is slow for the distance you go…

            Except for on certain elevated portions of the BMT, this has more to do with an overreaction to the 1991 crash north of Union Square than with deferred maintenance at this point. But you point is still valid. Trains should be faster.

          • Spendmor Wastemor says:

            “indoctrinated to tolerate the subway is classist claptrap”

            I did not mean ‘Indoctrinated’ to be read literally, more of a metaphor. This perhaps does work in a blog post.

            What exactly is classist about hating being jammed into a metal can breathing sweat? The construction gang I worked with wouldn’t take to that, and we were neck deep in black dust, breathing solvents and gas fumes on the job. Nobody used transit except for a couple downtown jobs… even then the foreman got a parking spot.

            • Bolwerk says:

              Metaphor for what then? Your choices are either take the subway, drive in, or move nearer to your workplace. I doubt anyone needs to explain to you why transit might often be the preferred option.

              Besides that I think your description of “being jammed into a metal can breathing sweat” is a gross exaggeration of the level of discomfort a typical transit ride entails, you even describe what’s classist about it yourself: your foreman gets a parking spot even when the proles have to deign to take the train, and you all generally scoff at the idea. Transit users smell, and working class construction workers who also sweat on the job are too good to be around the wrong kind of sweat-stink.

              Ironically, the suit-wearing, upper middle class professional services types who regularly take the train probably thumb their noses at the black dust-encrusted plebes you work(ed) with. Meanwhile, much of the TWU hierarchy probably shares your contempt for the riders.

            • Nathanael says:

              Automobiles without A/C are well described by the phrase “jammed into a metal can breathing sweat”.

              You do know modern subway trains are air-conditioned, right?

              • Alon Levy says:

                To be fair, the air conditioning in New York isn’t always strong enough to get temperatures down to acceptable levels, and the platforms are often sweltering in summer.

                But platform screen doors are unnecessary and will cost One. Billion. Dollars!

          • Nathanael says:

            ” Yes, stations are degraded and sometimes smell like piss.”

            See, this isn’t true in other cities. Really. Not in Chicago, which has suffered from some pretty serious underinvestment and had trains which were really *crawling*. Not even in Philadelphia, where some of the stations are in really awful physical condition if you really pay attention to it…. they just *feel cleaner* there than in most of the NY stations.

            The vehicles vary in NYC, and the oldest ones are seriously not in good shape by any standard.

            “It’d be cheaper to stop paying for the labor roles we don’t need and start doing the modernization we do need;”
            Good point. Maybe that was my point, I don’t know. 🙂

            • I respectfully disagree about Philly. I’d much rather spend time in NYC stations than Philly’s. I find they smell worse and feel much less safe than New York’s.

              • Nathanael says:

                Hmm. It may depend on which stations you’ve been using.

                For some reason, I never ride the Broad Street line in Philadelphia, I’m always on the Market-Frankford or the trolleys.

                I hear the Broad Street line feels much more decrepit.

            • Bolwerk says:

              Everybody knows parts of NYC have stations that smell like piss. It’s not true for all of New York either, though why they don’t take it seriously I just don’t know. I still think Spendmore was being rather hypertrophic.

              I think the older vehicles are mostly okay, and in any event replacement is imminent. They have more problems, yes, but they are not exactly death traps or ruining the system. I think typically rolling stock is budgeted for a ~40-year life. Some in NYC is beyond that, but as I recall the reason for that is real world circumstance had it that the (modestly) newer equipment turned out to less reliable than some of the now oldest equipment.

              Can’t say I never smelled piss in Philly, but I was a rather frequent user of both the heavy rail lines and one trolley most of last year. Piss scent didn’t seem as bad as NYC. What sucked is the waits were just longer, at least on the heavy rail.

      • Larry Littlefield says:

        “The bridges and tunnels are currently such a choke point that if current user drive less, others will fill in. Some are now dissuaded by traffic.”

        I sort of agree but maybe not. That was certainly true in the past. When the economy went down the number driving stayed steady, and fewer rode transit. Then when the economy went up traffic got bad, so transit soared.

        This recession hasn’t worked that way, however. Younger generations are poorer, and more interested in electronics that driving. VMT has been going down. Enough to affect the bridges and tunnels, where demand has been suppressed? I’m not sure, but maybe.

        • Spendmor Wastemor says:

          ” Younger generations are poorer”

          Yes they are. And they’re having less fun than the boomers did.

          We got Change. The current generation can hope to unchange it.

        • Bolwerk says:

          Fuel is more expensive, building out green field suburbia requires building ever further away, younger generations are poorer, transit quality has markedly improved, Lower crime probably is a factor.

          Somehow I think the bridges and tunnels will still be a chokepoint for some time to come.

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