Thursday, September 20, 2012

Governor's Demanded Audit of Port Authority Finds Need For Toll Hikes

The Port Authority of New York and New Jersey recently underwent an outside audit as required by Governors Chris Christie and Andrew Cuomo. They did so because of the fallout over a major toll and fare increase that went into effect earlier this year and follow-on hikes set for the next three Decembers as well as complaints that the agency was diverting funds for transportation projects to finish the World Trade Center project.

The audit report, prepared by the consulting firms Navigant Consulting Inc. and Rothschild Inc., finds that the Port Authority must raise tolls in order to maintain its credit rating and carry out infrastructure maintenance and upgrades over the next decade.
The report, prepared by the consulting firms Navigant Consulting Inc. and Rothschild Inc., lays out $26.9 billion in projects the Port Authority is poised to undertake through 2020 — everything from replacing the suspender ropes on the George Washington Bridge to raising the Bayonne Bridge and completing the World Trade Center. But it also identified about $44 billion in needs, including fixing aging terminals at Newark Liberty International and La Guardia airports.

To generate enough revenue to finance those projects, the report recommended that the agency attract private corporations to invest in joint projects and pursue aggressive cost-control measures, some of which Port Authority officials said they recently put in place. Port Authority officials said they would also pursue advertising revenue at its facilities to bring in more non-toll and fare money and would also continue to collect money owed by other government agencies and toll cheats.

The report mounted a strong defense of last year’s toll hikes at the agency’s bridges and tunnels, to $9.50 from $8 during peak travel times. They are scheduled to rise an additional 75 cents each December through 2015. Without those increases, the Port Authority would have had to cut $6 billion from its capital plan over the next decade, imperiling critical projects and its credit rating, the report said. Even with the toll hikes, the report said, the agency is losing money on its bridges, tunnels, trains and bus terminals. The report also encouraged the Port Authority to “educate the public” about tolls on some of the New York City-owned bridges linking Manhattan and its boroughs.
The Port Authority is responsible for infrastructure that is in many places approaching 80 years of age or more.

Bridges such as the Goethals and Outerbridge crossing need replacement due to their being functionally obsolete. The Bayonne Bridge must be raised to permit Super Panamax shipping to port facilities.

The George Washington Bridge needs upkeep, including replacing the suspenders that carry the bridge deck weight.

Airport terminals at JFK, LGA, and EWR are 52 years old and contribute to delays and bad customer experiences. The average age for PATH facilities is 72 years, and Port commerce facilities are 57 years old. The increasing age of the facilities means more must be spent to maintain a state of good repair, and that facilities need to be replaced or modernized to maintain competitive advantages over other facilities nationally and around the world.

The full report indicates $3.2 billion in capital construction for airport rehabilitation and improvement projects, focused on Newark Liberty's Terminal A, JFK's Terminal 4 and 5, and LaGuardia's entire terminal infrastructure.

Further, PATH would see another $2 billion in infrastructure projects, including extending rail platforms to accommodate 10-car trains, signal work, and tunnel modernization.

More than $4 billion would be spent on bridge-related projects, though the figure for raising the Bayonne Bridge appears to be 20% higher than the $1 billion costs previously acknowledged for that project. Also, the Goethals Bridge replacement span costs don't appear to show the full cost for that project - which are expected to be financed in a public-private partnership.

The report also indicates a negative free cash flow largely as a result of WTC construction, PATH, Ferry and Port facilities. This situation needs to be addressed all while maintaining the current level of service. At the same time, the bulk of the negative cash flow is the result of WTC construction, which means that the sooner the construction is completed, the sooner that the Port Authority will obtain revenues from WTC related facilities - the office tower rents, retail spaces, and taking construction costs off the books. The ongoing delays in construction have only made the Port Authority's financial situation worse, but it isn't sole reason. The Port's operations incur losses of $28 per container because the revenue stream from tenant rentals is insufficient to cover recurring capital costs, such as dredging and system upgrades. PATH loses about $3 per passenger, which is comparable to other mass transit systems although PATH doesn't get federal subsidies as seen in other mass transit systems.

Aviation facilities are the key generator of Port Authority revenues, with more than $20 in revenue per passenger, while bridges and tunnels generate $7.50 per vehicle.

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