September 19, 2012 / 7:47 PM / 8 years ago

UPDATE 2-NY-NJ Port Authority needs toll hikes -consultants

By Joan Gralla

Sept 19 (Reuters) - The long-awaited World Trade Center should be finished within its $14.8 billion budget, but the Port Authority of New York and New Jersey, the agency rebuilding the site, must raise tolls as it still faces major shortfalls in cash flow in coming years, a consultants’ report said on Wednesday.

As a result, the Port Authority not only must rely on planned toll increases, but also must find additional ways of raising money - from advertising to public-private partnerships - which could produce about $150 million a year, said consultants at Navigant Consulting Inc and Rothschild Inc.

The Port Authority, which runs the New York metropolitan area’s airports, ports, major bridges and tunnels and PATH commuting system, has $44 billion in expected capital needs, officials said. Its capital program for 2011 to 2020 totals $26.9 billion. Officials told reporters on a conference call that they would be “reprioritizing” their list of planned improvements. They did not name specific changes.

The report also said the bi-state authority will need to make significant repairs to its bridges and tunnels, many of which are at least 80 years old.

The Port Authority announced in 2011 that it would raise tolls on cars by $1.50 apiece in September - and by 75 cents each in December from 2012 to 2015. The increases were smaller than what was initially sought. But those toll hikes prompted such a public outcry that the governors of New York and New Jersey, Andrew Cuomo and Chris Christie, lowered the increases and commissioned consultants to analyze reforming the authority, which they jointly control.

The first consultants’ report issued in February faulted the agency for letting the cost of rebuilding the World Trade Center soar by nearly $4 billion - from $11 billion in 2008. That report described the agency as a “challenged and dysfunctional organization.”

Port Authority officials said the new report acknowledged the progress they have made since then by finding savings - including requiring non-union employees to pay for health insurance for the first time, which will save $41 million over 18 months.

Officials pledged to find hundreds of millions of dollars of additional savings, by squeezing soft costs, such as hiring lawyers and appraisers, and ensuring third parties pay in full, for example.

“We understand there are no blank checks,” Vice Chairman Scott Rechler said.

New initiatives include two to three hotels for John F. Kennedy International Airport and exploring more public-private partnerships for bridges, airports, and the World Trade Center.

“It’s across the board and we’re not excluding any opportunities,” said an authority official, who spoke on condition of anonymity.


The agency’s financial problems are enormous.

The Port Authority’s free cash flow between 2007 and 2011 was a negative $2.5 billion. Free cash flow is roughly defined as operating cash flow minus capital expenditures. Only the aviation division contributed positive free cash flow in the past five years, while the ports and the interstate transportation systems lost money.

Mass transit systems around the nation usually lose money but the PATH system, which carries commuters across the Hudson River, is notable for its rich subsidy.

“PATH alone produced a loss of $3.11 for every passenger carried,” the report said.

Commerce in the ports generated a loss of almost $755 million - more than $28 per container - as the “income revenue stream from tenant rentals is insufficient to offset large, recurring capital projects, such as dredging,” the report said.

The Port Authority traditionally has focused on transportation, but it also has a role in economic development. The World Trade Center project, in the eyes of some critics, has pulled the authority too heavily into real estate development.

The latest report sets out “a number of steps to return the agency to its core mission as a key driver of economic growth for the region and as a provider of transportation infrastructure,” Chairman David Samson said.

In addition to the recommendations to cut costs and increase revenue, the report outlined a management overhaul to improve coordination. It also proposed updating a strategic plan that dates back to 2006, and revising compensation for the Port Authority’s 7,000 workers to differentiate between “merit and tenure.”

Cuomo and Christie, in a joint statement, said the “conclusions by two independent reviews show that the Port Authority is finally on the right track, and the necessary reforms put into place by the agency’s leadership are beginning to deliver results, just as we demanded,”

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