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Breaking Up PA Would Solve Christie's Transportation Trust Fund Problem

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Credit: Governor's Office/Tim Larsen

Gov. Chris Christie’s proposal to dismantle the Port Authority of New York and New Jersey in order to give each state control more than $1.3 billion in annual tolls would solve his biggest fiscal headache: where to find $1.6 billion a year in state revenue to renew the Transportation Trust Fund (TTF) without adding massive state debt or raising gas taxes right in the middle of the 2016 presidential primaries.

New York's Gov. Andrew Cuomo's statement this weekend that he might support Christie's proposal to break up the Port Authority caused consternation among transportation experts, who believe that splitting the agency in two would lead to more dysfunction in transportation development and less long-term regional thinking and planning.

Bailing Out

For Christie, splitting the Port Authority in two would provide the same sort of bailout as his decision to cancel the Access to the Region’s Core (ARC) rail passenger tunnel and shift $1.8 billion in Port Authority revenues and $1.3 billion in New Jersey Turnpike Authority toll money earmarked for the tunnel to provide the pay-as-you-go money needed to renew the TTF in 2011 without raising taxes.

But if the bistate agency was dismantled, Christie would have full control over New Jersey’s share of revenues and New Jersey project decisions without having to worry about the PA's lawyers or New York's representatives -- a very real threat.

Port Authority documents obtained by The Record showed that even as Christie was announcing that PA money earmarked for the ARC Tunnel would be used to repair the Pulaski Skyway and other Jersey bridges and highways, PA officials were objecting behind the scenes, saying it was an illegal use of PA funds. After months, the two sides finally reached a compromise, but Christie’s gamble with ARC had been in danger of not paying off.

For Christie, being able to earmark $500 million a year or so in Port Authority revenue for New Jersey highways and bridges as pay-as-you-go projects as part of the next Transportation Trust Fund, without having to ask PA officials or New York’s Democratic governor for permission, would eliminate a political and fiscal nightmare.

Without that money, Christie would either have to persuade the Democratic Legislature to allow him to borrow virtually all of the $1.6 billion in state matching funds needed to pay for highway, bridge and mass transit construction projects for Fiscal Years 2017-2021 – which is unlikely. Or he could go along with Democratic calls for an increase in the state’s gas tax, which is the third-lowest in the nation, and which Sen. Raymond Lesniak (D-Union) and Assembly Speaker Vincent Prieto (D-Hudson) have already been pushing.

Either option – adding $8 billion in state debt or breaking his “no new taxes” pledge -- would be anathema to Republican primary voters, and Christie would have to announce the decision in his February 2016 budget speech in the middle of the presidential primary season. That’s why fiscal policy experts have been predicting privately that if Christie decided to run for presidency, he would resign by the fall of 2015 to run as a full-time candidate and leave the TTF problem to Lt. Gov. Kim Guadagno. Being able to plug in the Port Authority money would enable him to refinance TTF at reasonable debt levels without a gas tax hike, and eliminate the need to resign.

Family Feud

Citing a history of conflicts at the Port Authority between New York and New Jersey interests, Christie announced during a Statehouse press conference Friday that he was “particularly intrigued by the idea of dismantling the Port Authority operations from under one roof to two.” Christie added, “The best way to deal with this is to take the Hatfields and McCoys and move them to separate homes, because they haven’t been able to get along, despite my best efforts and the best efforts of Gov. Cuomo.”

Given the legal and logistical difficulties of disentangling a 93-year-old bistate agency with joint ownership of six bridges and tunnels, three airports, a major port, a bus terminal, the World Trade Center and the PATH rail line, Christie’s statement was dismissed initially by some as a diversion from the Bridgegate scandal and the resignation of embattled Christie ally David Samson as Port Authority chairman.

But New York Gov. Andrew Cuomo’s statement to New York budget reporters Saturday that he is also willing to consider putting an end to the bistate agency alarmed transportation advocates who have been calling for Port Authority reforms.

“What’s horrendous here is that Cuomo seems to be taking advice from Christie rather than from his own commissioners, who understand the need for an authority having regional responsibility for long-term transportation needs,” said Jameson W. Doig, a Dartmouth University professor whose Empire on the Hudson is the definitive history of the Port Authority.

“The basic problem is not the structure of the agency, but leadership, with Cuomo being passive and Christie being aggressive in stacking the agency with his patronage appointees and pushing to get what he wants,” Doig said. “The problem wasn’t too much conflict. It was that for too long, Cuomo and his commissioners were not willing to engage in the level of conflict that was needed to preserve the integrity of the agency.”

Transit expert Martin E. Robins said he was incredulous that Christie was arguing that the Port Authority should be dismantled because it “has been riven by rivalry when it was his appointees who set up the war room to map out how to mislead the public on the toll increase and it was his appointees who blocked off the George Washington Bridge access lanes, and in both cases hid it from executive directors who were appointed by New York.”

Robins, the director emeritus of Rutgers University’s Alan M. Voorhees Transportation Policy Institute, called the proposed dismantling of the Port Authority “a very serious mistake that would lead to short-term state budget needs taking priority over the long-term transportation needs of what is truly a regional economy.”

He noted that the Christie-commissioned internal investigation of Bridgegate led by former New York City Deputy Mayor Randy Mastro only recommended that states be given more responsibility over their own projects. That is what Cuomo called for during his State of the State speech when he announced that his transportation department would be taking over control of work at LaGuardia and John F. Kennedy airports because he was displeased with the Port Authority’s progress.

However, while the Mastro report recommended a bistate commission to suggest reforms to the Port Authority’s structure, the report also said: “If the Governors were to reach agreement on fundamental changes, they could go to their respective State Legislatures immediately to take such reforms.”

Fundamental Agreement

And Cuomo and Christie are clearly in agreement not only that each state’s governors should have authority over issues in their own states, but that fundamental change is coming. “I don’t think there’s any question that structural changes are a possibility,” Cuomo said, adding that dissolution of the agency is “very complex, because the entire legal and financing mechanism that exists has an asset base that is now a bistate asset base,” and therefore, “it’s much easier said than done.”

Most important, however, Capital New York reported that Cuomo seemed to question the very need for a regional agency in his Saturday conference call.

“The Port is now more about running individual activities in two different states as opposed to joint and regional activities,” Cuomo noted, adding that there are fewer large-scale bistate projects than there were in the past when the Port Authority built bridges and tunnels linking the two states. “You have fewer of those now and you have for quite a bit of time.”

One of the reasons there is no major joint project on the horizon is Christie’s 2010 cancellation of the ARC rail passenger tunnel that would have doubled rush-hour rail commuter capacity between New Jersey and New York City. It was in the planning for 17 years and would have been the largest public works project in the nation. Citing fears about cost overruns, Christie turned back a $3 billion federal grant and eventually agreed to repay the federal government $94 million for tunnel work that had been wasted.

The ARC tunnel cancellation helped make Christie a national Republican hero and led other Republican governors to reject federal grants to build modern rail lines linking major cities in Ohio, Wisconsin. and Florida.

But Assemblyman John Wisniewski, chairman of the Assembly Transportation Committee, charged at the time that Christie cancelled the ARC Tunnel so that he could divert billions of dollars in Port Authority and Turnpike toll revenue earmarked for the project and instead provide pay-as-you-go funding for the five-year $8 billion reauthorization of the Transportation Trust Fund in 2011.

Whether Christie was justified in his fear of cost overruns and whether he knew he was going to use the Port Authority and Turnpike toll money to fund the TTF is now the subject of subpoenas issued by the Legislature’s Joint Select Committee on Investigation, which Wisniewski co-chairs. The panel also has subpoenaed documents pertaining to the massive 2011 toll hike that is raising tolls on the six Port Authority-owned bridges and tunnels from $8 to $15 by 2015.

Robins and Doig both noted that Port Authority officials in 2011 were reluctant to approve Christie’s diversion plan, which he used to pay for the current reconstruction of the Pulaski Skyway and several other projects, arguing that the Port Authority did not have the legal authority to allow for payment of projects not technically falling under its jurisdiction.

The Record yesterday quoted a memo from Carlene McIntyre, assistant general counsel to the Port Authority, asserting that there was “absolutely no support” for the Christie administration’s insistence that the Port Authority could simply “write a check” to the Transportation Trust Fund.

“Just as the Port Authority cannot give money to a municipal government to plug a hole in their municipal budget (a structural deficit like the city of Newark’s), neither can the Port Authority expend Port Authority funds to plug a hole in the TTF’s operational expense budget,” McIntyre wrote.

Back to Bill

It was Bill Baroni, Christie’s appointee as deputy executive director of the Port Authority -- who resigned in December before his role in squelching public disclosure of the Bridgegate lane closures was known -- who led the charge inside the agency to find legal grounds to allow the diversion of the Port Authority funds, The Record reported.

The $1.8 billion allocated over five years by the Port Authority turned out to be the only pay-as-you-go funding that actually went into transportation capital projects over the past four years.

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For the third year in a row, with state revenues coming in below projections, Christie has broken his January 6, 2011, promise to use the New Jersey Turnpike money freed up from his cancellation of the ARC Tunnel project to ramp up pay-as-you-go funding and reduce borrowing for the Transportation Trust Fund.

Based on the 2011 schedule, this fourth-year budget for Fiscal Year 2015 was to include $324 million in Turnpike toll revenue, plus $166 million from general state revenues, for a total of $490 million in pay-as-you-go funding for highway, rail and bridge construction projects.

But with soaring pension, retiree health benefits, and debt service costs, Treasurer Andrew Sidamon-Eristoff said there was no general revenue available for pay-as-you-go funding, and the Turnpike Authority money once again was used to cover NJ Transit operating costs that otherwise would have had to come from the general fund.

With the Turnpike toll money going into the general fund for the third year in a row, the state was forced to borrow an additional $261 million for the Transportation Trust Fund in FY13, $375 million extra this year, and $476 million more next year, bringing Christie’s total borrowing for TTF to more than $5.6 billion and pushing annual transportation interest costs well over $1.1 billion in next year’s state budget.

Even if the Christie administration was able to continue tapping the $324 million a year raised through New Jersey Turnpike toll increases originally earmarked for the ARC Tunnel for Fiscal Years 2017 to 2021, it is hard to see how that money could go into the Transportation Trust Fund because it will still be needed to cover New Jersey Transit operations – especially during FY17 and FY18, the final two years of the phase-in to required actuarial funding levels.

Christie already has come under criticism for increasing TTF debt levels, and his percentage of pay-as-you-go financing during his first four years was the lowest since the program was created under Republican Gov. Thomas H. Kean in the mid-1980s.

In fact, transportation advocates have questioned whether Christie will be able to allocate the full $8 billion in transportation capital spending he promised in 2011, but Treasury spokesman Christopher Santarelli said the full amount would be appropriated by FY16.

With Christie himself warning that future state budgets will be tight, the ability to tap additional money from Port Authority revenues is the only option Christie has that does not require raising taxes, which would go against his mantra that “New Jersey doesn’t have a revenue problem, it has a spending problem.”

“That’s what this Port Authority restructuring is all about,” said Doig. “All Christie wants is the ability to carve out more money for New Jersey projects and use it however he needs to, regardless of the region’s long-term transportation needs.”

Both Doig and Robins warned not only against any plan to split the Port Authority in two, but also against any reform proposal that would give governors more power over decision-making, including the proposal by Republican members of the Legislature’s Joint Select Committee on Investigation to require the governors of both states to sign off on all director-level appointees.

In the Beginning . . .

Doig said Christie and Cuomo should look at the history that led to the creation of the Port Authority before tearing it apart.

“The Port Authority was created in 1921 as an agency whose commissioners would be appointed not by local mayors, but by governors, in the hope that it would take short-term pressures off the agency,” Doig said. “Between 1924 and 1931, the Port Authority finished the Lincoln Tunnel, built the George Washington Bridge, and both the Goethals Bridge and the Outerbridge Crossing to Staten Island, and the Bayonne Bridge. It worked because it was a single coordinated agency with a regional mission.”

One of the great advantages of the Port Authority, Doig said, is that it runs all three airports – Newark Liberty in New Jersey and LaGuardia and John F. Kennedy in New York -- on a regional basis. “In the Bay Area, the San Francisco Airport Authority runs one airport and the Port of Oakland runs the other,” Doig said. “Because of regional competition, you can’t get a nonstop into Oakland even though two-thirds of the population lives on the Oakland and Berkeley side. It’s just inefficient. You have to go through San Francisco.”

Doig acknowledged that there have often been conflicts between New York and New Jersey over Port Authority priorities, with New York Govs. Averell Harriman in the 1950s and George Pataki in the 1990s complaining that too much money was going to the New Jersey port; Pataki held up dredging during the negotiations, Doig noted.

“In the entire history of the Port Authority, we have never had anything like the dysfunction of the past four years,” Doig said. “It would be a shame if those who caused that dysfunction were also responsible for destroying the agency itself.”

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