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Audit of NJ Transit Is In, Governor Pledges It Won’t ‘Collect Dust’

Detailed analysis of operational defects, but no definitive solution is offered to agency’s severe financial woes

Phil Murphy NJT audit
Credit: Edwin J. Torres/Governor's Office
Gov. Phil Murphy announces completion of audit into NJ Transit.

A long list of New Jersey Transit’s operational flaws was laid bare in a much-anticipated audit of the agency that was released by Gov. Phil Murphy yesterday, but several key findings won’t come as a surprise to regular commuters.

Highlighted in the review are NJ Transit’s declining reliability, lax communications, and an overall lack of vision and planning. The auditors, consulting firm North Highland, also point the finger at poor asset management and a revenue stream that is “inadequate, uncertain, and unsustainable.”

Murphy — who took office earlier this year and ordered the audit of the beleaguered mass-transit agency in one of his first actions as governor — was joined by the state’s top transportation officials and two key lawmakers as he went over the auditors’ major recommendations during a morning news conference in Metuchen. He promised the recommendations — which include making the agency a more data-driven organization with a simplified management structure and recommitment to customer service — would not “collect dust.”

But left out of the lengthy report is a definitive solution for NJ Transit’s funding woes. The auditors listed the many things other states do to offset a reliance on rider fares but stopped short of endorsing any one approach. The governor and the lawmakers also didn’t commit to any specific financial remedies during yesterday’s event, leaving that issue unresolved.

“We need to sit down with legislative leadership on both sides of the aisle and figure that question out,” Murphy said, before adding he is “open-minded as to how we’re going to get there.”

Remember the good old days

penn station rush hour
Credit: Luke Waltzer
Homebound New Jersey commuters waiting for NJ Transit trains in New York City's Penn Station, on a typical rush-hour evening.

Once known as one of the nation’s top transportation agencies, NJ Transit has struggled in recent years as state funding has not kept pace with increased ridership. The agency endured a fatal train crash at Hoboken Terminal in 2016, and this year is struggling to install Positive Train Control safety equipment in advance of an end-of-year federal deadline. The agency has also faced an increasingly upset customer base, thanks to its declining reliability and a series of fare hikes that were implemented during the tenure of former Republican Gov. Chris Christie which have made the faltering service more expensive to use.

Without identifying Christie by name, the audit faults the routine raiding of funds for NJ Transit’s operating budget that were supposed to go to capital improvements that occurred through his tenure. Murphy and lawmakers continued that budgeting practice this year, though the first-term Democrat has promised to eventually wean the agency off those resources and other raided funds.

Despite NJ Transit’s capital budget being increased earlier this year, the audit noted that the agency’s long-term needs are “substantially more than what is currently being invested.” It also concluded the total capital value of NJ Transit’s physical assets has declined by $1.5 billion since 2010 due to the lack of adequate investment.

“NJ Transit is the outlier of its peer group in both reducing its annual capital (spending) and allowing its asset base to depreciate,” the audit said.

“If NJ Transit continues to operate in this way (as a reactive asset operator) the state of the asset will continue to degrade without the ability to determine how, when and where a critical failure will occur,” the audit went on.

‘…more like a bureaucracy than a corporation’

On the operational side, the review found that NJ Transit currently operates “more like a bureaucracy than a corporation.” Among the managerial recommendations is a call for the agency to hire in-house legal counsel instead of relying on lawyers from the state Attorney General’s Office.

The audit also called for NJ Transit’s eight-member governing board to add two new members and suggested that candidates should have “technical skills in relevant professional disciplines, regular ridership, diversity of perspectives and geography.” That finding echoes the recommendations of transportation advocates who have also been calling for change at NJ Transit. A lengthy reform bill that’s advancing in the state Legislature also calls for an expanded NJ Transit board among other changes, including increased transparency and legislative oversight of the agency’s finances.

The auditors also encouraged the agency to continue to invest in social media to improve customer communications, but to hold back any light-hearted comments until after peak commuting hours.

“During rush hours when traffic or services are more strained customers will be more likely to lash out if they see a NJ Transit posting on Facebook,” the audit said.

In the section of the audit on NJ Transit’s struggles with hiring and with workforce morale, there is a call for streamlining the agency’s interview and hiring process. A decision made over a decade ago that prevents many employees from being able to join the agency’s defined-benefit pension plan is also raised as a key issue.

Reason why some talented employees have left

“The effective elimination of the pension removed a significant incentive for individuals hired post-2006 to stay and grow within the organization,” the audit said. “Consequently, some talented employees have left the organization for other transit agencies.”

That could be a cautionary tale for lawmakers after a fiscal-policy working group recently recommended shifting state and local government employees with less than five years’ experience to a hybrid retirement plan with some elements of a 401(k).

The audit also suggests Murphy may have inadvertently lowered agency morale himself during the transition phase late last year when he called NJ Transit a “national disgrace” during a news conference. Asked about that yesterday, the governor said he never intended that label to be an indictment of rank-and-file workers.

“It was because of leadership and because of a lack of funding,” he said.

The money question

On the topic of funding, the audit suggests that NJ Transit “had the lowest State operating assistance in FY2016 in comparison to other peer agencies.” It recommends that agency-owned real estate could be better leveraged with sales or leasing opportunities and more revenue could be raised from advertising to help fill the gap. The concept known as “value capture,” where private developers contribute more when public-infrastructure spending boosts the developers' investments, is also held up as an option.

The auditors also note that other states use dedicated sources of tax revenue to fund mass transit. While New Jersey’s constitution sets aside a portion of revenue from the sales tax and gas tax to fund transportation, NJ Transit lacks a dedicated funding source.

During yesterday’s news conference, Senate Transportation Committee chair Pat Diegnan (D-Middlesex) said it’s time to move forward despite the concerns about what’s happened at NJ Transit over the last decade.

“Whatever legislative initiatives are needed to make this right, we’re here to do it,” he said. “Let’s just make it happen.”

Added Senate Minority Leader Tom Kean Jr. (R-Union), “We need to get this right.”

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