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Port Authority Panel’s Focus on Asset Divestiture Raises Questions

Key issues on future of Port Authority loom at Degnan’s confirmation hearing before Senate Judiciary Committee

lincoln tunnel
New Jersey entrance to Lincoln Tunnel.

For Gov. Chris Christie, the preliminary report issued last week by the bistate Special Panel on the Future of the Port Authority provides the same political cover on Port Authority issues that Randy Mastro’s internal investigation did for Bridgegate. It gives the Republican presidential hopeful the ability to tell GOP audiences that he acted quickly to conduct a full review of the agency’s operations to implement the necessary reforms.

But unlike the Mastro team of lawyers, which issued its report in less than three months and disbanded, the commission of loyalists appointed by Christie and New York Democratic Gov. Andrew Cuomo will be meeting for another six months. Further, the changes it is considering will have a much greater impact on the future of the Port Authority than the post-Bridgegate overhaul of constituent outreach in the governor’s office.

In fact, the five-page interim report made it clear that the panel’s prime focus is on whether major Port Authority operations and assets -- up to and including bridges and tunnels -- should be transferred to the states of New Jersey or New York to own and/or operate. An equally controversial question is whether major and regional airports should be put under the jurisdiction of their respective states.

In fact, the report questioned whether the agency should be in the real estate business at all.

Any decision to break up the Port Authority would require legislation not only by both the New Jersey and New York state legislatures but also by Congress, which created the Port Authority in 1921. Divestments of major assets presumably could be accomplished by vote of the Port Authority’s 12-member board, which is already made up primarily of Christie and Cuomo appointees.

Rather than going through the Port Authority or the New Jersey or New York state legislatures, Christie and Cuomo are relying on their tightly controlled bistate executive commission to decide just how far they can or should go toward the breakup of the Port Authority that the Mastro report initially recommended and both Christie and Cuomo embraced as a potential solution.

Questions about the independence of the bistate panel and its members will be one of the issues raised when John J. Degnan, a former Democratic attorney general nominated by Christie to serve on the Port Authority, comes before the Senate Judiciary Committee for confirmation Thursday. Degnan is one of the three Christie appointees on the bistate panel.

Degnan, a former high-ranking Chubb executive, has close ties to Christie. He contributed to Christie’s reelection campaign in 2013. To the chagrin of Democrats, Degnan gave Christie cover in the ongoing battle over Supreme Court appointments by agreeing to serve on a replacement judicial advisory panel. It was set up after the original panel resigned en masse to protest Christie's refusal to reappoint Supreme Court Associated Justice John Wallace in 2010. . Degnan’s son, Philip, was appointed by Christie as an assistant U.S. attorney in 2006, and as head of the State Commission on Investigation after Christie became governor.

Christie’s other two appointees on the bistate panel are Port Authority Commissioner Richard Bagger, a former Republican state legislator who served as Christie’s first chief of staff in 2010 and 2011, and Christopher Porrino, the governor’s chief counsel. Cuomo’s three appointees also include his chief couinsel, and two of his Port Authority commissioners.

The Senate Judiciary Committee is going to want to ask Degnan just what the panel means when it says it plans to consider “whether certain operations or assets solely within one State should remain with the bistate agency, or whether they should become the charge of each respective State,” and “whether any of the bistate assets should be transferred to existing state agencies to enhance operating efficiencies and improve accountability.”

Cuomo specifically has discussed his dissatisfaction with the Port Authority’s operation of LaGuardia Airport, one of three international airports operated by the bistate agency along with Newark Liberty and John F. Kennedy. The Port Authority recently took over Atlantic City’s airport in a belated tradeoff for agreeing to run the airport in Newburgh, NY.

Further, the reference to “bistate assets” presumably means some or all of the six bridges and tunnels operated by the Port Authority – the Lincoln and Holland tunnels, the George Washington, Bayonne and Goethals bridges, and the Outerbridge Crossing.

The issue of “whether certain non-core real estate holdings should be divested in addition to those that the Port Authority has already begun to transfer” is clearer.

Jameson W. Doig, a Dartmouth University professor whose “Empire on the Hudson is the definitive history of the Port Authority, noted that the Port Authority Board of Trustees and senior staff have been discussing whether -- and indeed when -- the agency should divest the Newark Legal Center, the Essex County Resource Recovery Facility, and the Bathgate Industrial Park in the South Bronx to the states of New Jersey and New York.

While the World Trade Center is by far the largest -- and most fiscally draining -- Port Authority real estate initiative, the agency holds a broad portfolio. One of the most successful was an industrial park in Elizabeth that has been mostly sold off to Ikea, although the Port Authority still owns the AFI Food Service distribution site.

Other major developments include the Teleport business park in Staten Island; public-private partnerships on the South Waterfront area in Hoboken and the Queens West Waterfront; and the Portfields initiative that has redeveloped brownfields into warehouses in Elizabeth, Carteret, and Woodbridge.

The Navigant consulting study of Port Authority operations in 2011 recommended the sale of non-core real estate assets, noting that “many of these assets are not strategic to the business and are immaterial in value relative to core assets, while consuming capital and management resources.”

The bistate panel appointed by Christie and Cuomo added that they would consider “novel approaches to assets” in order to “maximize the financial and operational condition of the agency without adversely affecting any of the agency’s existing obligations.”

This could signal potential privatization, increased use of public-private partnerships, or following up on Navigant’s suggestion that the Port Authority take advantage of opportunities for real estate development on land it owns around Journal Square in Jersey City, or by building above the Port Authority Bus Terminal in New York City, and above the Dyer Avenue approach to the Lincoln Tunnel.

The confirmation hearings of Degnan and George Laufenberg Jr., administrative manager of New Jersey benefits for the Northeast Regional Council of Carpenters, to seats on the Port Authority Board of Trustees Thursday won’t be the last Port Authority hearings in Trenton this summer.

The Joint Select Committee on Investigation hearings on Bridgegate plans to subpoena several key current and former Port Authority officials to appear under oath this summer, Assemblyman John Wisniewski (D-Middlesex) and Senate Majority Leader Loretta Weinberg (D-Bergen), the committee’s cochairs, announced last week.

The committee plans to call Port Authority Executive Director Patrick Foye, whose planned testimony in June was delayed at the request of U.S. Attorney Paul Fishman; Deputy Executive Director Deborah Gramiccioni, who replaced the fired Bill Baroni; and former Chairman David Samson, who is the subject of a slew of conflict-of-interest investigations by federal and state officials.

The panel also plans to call Port Authority PBA President Paul Nunziato, whose officers oversaw the George Washington Bridge lane closures; Phillippe Danielides, a former top aide to Samson at the Port Authority; and Port Authority Deputy General Counsel Philip Kwon, who spent four days prepping Baroni for his testimony before the Assembly Transportation Committee last November, at which he said the lane closures were part of a since-discredited traffic study.

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