Press Release Article


Date: Sep 19, 2012
Press Release Number: 127-2012

Rothschild and Navigant Phase II Conclude Port Authority’s Toll and Fare Increases Were “Necessary” to Fund Critical Transportation Projects

The results of two independent reviews of the Port Authority’s operations and financial structure are complete and both conclude the agency’s new leadership is radically reforming the agency.

The two separate reports, both made public today by the Port Authority, contain the findings of independent reviews undertaken by leading consulting and financial advisory firms, Navigant Consulting Inc. and Rothschild Inc. They conclude the agency’s leadership has moved quickly and aggressively to implement meaningful reforms – putting in place more than 50 distinct initiatives ranging from addressing compensation and benefits to revamping its organizational structure.

Governor Chris Christie and Governor Andrew Cuomo directed the Port Authority last year to undergo a full top-to-bottom audit of the agency and begin needed reforms.

Both firms also determined that the Port Authority’s toll and fare increases, the first of which took effect in September 2011, are “necessary” to support the agency’s capital plan for projects related to the “ITN” or Interstate Transportation Network (Tunnels, Bridges and Terminals, PATH and the Ferry Service) and to keep the agency’s more than 80-year-old facilities in a state of good repair.

Navigant writes, “The toll increases scheduled to go into effect over the next three years are necessary to meet the funding requirements of the Port Authority’s Preliminary 2011-2020 Capital Plan….and combined with the pursuit of further non-toll, non-fare revenue enhancements, as well as Agency-wide cost structure improvements, will be critical to maintain ongoing transportation infrastructure in a “State of Good Repair.”

Other key findings of the Navigant Phase II report are that the Port Authority has made great improvements regarding transparency and efforts to complete the World Trade Center Program within estimated cost; and that going forward, the agency must focus on non-toll/non-fare revenue enhancement opportunities and continued cost control.

Additional key findings of the Rothschild report are that the Port Authority’s debt capacity and debt service capabilities remain robust enough to meet the anticipated capital spending; the agency’s financing strategy has effectively sourced capital at very competitive costs; and Public Private Partnership structures may provide attractive financing alternatives moving forward.

Phase II of the Navigant report comes just a little more than seven months after release of its interim report, which identified the Port Authority as a dysfunctional agency in need of major reform.

In Phase II, Navigant specifically notes that the leadership at the Port Authority has a clearly defined roadmap to continue the agency’s ongoing transformation. The report says, “To date, the Port Authority completed or has underway over 50 distinct reform initiatives that range from addressing appropriate compensation and benefit structures, to the more profound measures of adopting Key Operating Principles and revamping of its organizational design.”

Navigant also described the efforts of the new leadership as extremely cooperative and coordinated, resulting in the successful launch of meaningful operating improvements. The report commends leadership for taking aim at poor management practices, a bloated bureaucracy with benefits that far exceeded those of comparable private- and public-sector organizations, other wasteful perks, and inadequate transparency.

As noted in the executive summary of the Navigant report, "The Port Authority is in the midst of a significant transformation. The Board of Commissioners, including the recently appointed Chairman and Vice Chairman, the Executive Director, and the Deputy Executive Director, are individually and collectively taking a proactive approach and are evidencing the resolve to drive change at all levels within the organization. If properly implemented, this change will help the Agency rid itself of years of inefficiency."

One clear result of the ongoing reform is that for the first time in Port Authority history, all non-union employees now contribute to the cost of their health insurance. Along with other changes, this will save the Port Authority $41 million through 2013 and tens of millions of dollars going forward.

“These independent reports clearly support the defined roadmap we are undertaking to transform this agency,” said Port Authority Chairman David Samson. “While we are encouraged by these findings, we recognize these are just the first steps of many that we will need to put in place to bring about lasting change. Our goal is to operate as efficiently as possible, reduce costs and continue making major investments in the region’s transportation network, while remaining transparent and accountable at all times.”

“The old way of doing business at the Port Authority is over,” said Port Authority Vice Chairman Scott Rechler. “We’ve already implemented key steps that allow us to do the public’s business better, and we will continue to advance the recommendations in these reports to move ahead aggressively with our reform while focusing on job growth and the economic well-being of the region.”

“We’ve made great strides to move this agency forward, but we’ve much more to do,” said Port Authority Executive Director Pat Foye. “The interim Navigant report described an agency in trouble. Today, however, both Navigant and Rothschild conclude we are taking the right steps to put this agency on solid ground. We are operating more efficiently and effectively and are keenly focused on improving the region’s vital transportation infrastructure.”

“The people of New Jersey and New York have demanded reform of the Port Authority,” said Deputy Executive Director Bill Baroni. “Our Governors demand it. Our toll payers demand it. And we are delivering that reform.”

The leadership’s roadmap includes taking 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 critical transportation infrastructure. These include:

  • Moving forward with ongoing efforts to hire a Chief Security Officer to oversee a newly established standalone Security Department;
  • Restructuring Board Committees to better align them with long-term objectives;
  • Adopting key operating principles that directly reflect the organization’s core mission and continuing with steps that create a culture of accountability, meritocracy and transparency;
  • Reorganizing the agency’s corporate structure to break down existing silos and recruiting and selecting highly qualified individuals to fill vacant management positions;
  • Sharply focusing on non-toll/non-fare revenue enhancements; and
  • Establishing a more focused, effective delivery program for capital projects.

Implementing the roadmap will be especially important, given the Port Authority plans to spend $26.9 billion on capital projects in the next 10 years, but has more than $44 billion of known investment needs during that period. According to Navigant and Rothschild, even with the scheduled toll and fare increases, the funds generated won’t even cover the agency’s capital needs for its ITN projects, necessitating careful prioritization, better value from current capital delivery programs, and consideration of creative, alternative financing structures.

The agency’s Capital Plan calls on the agency to undertake several major infrastructure projects in the very near-term. They include the replacement of the suspender ropes on the 81-year-old George Washington Bridge; raising the roadway of the Bayonne Bridge; the replacement of the Goethals Bridge; and the exp

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