For years, the Port Authority of New York and New Jersey has been an easy target — a behemoth so politicized that its role in the lane closings at the George Washington Bridge last year is perhaps the scandal’s least surprising element.
On Friday, Gov. Chris Christie of New Jersey said that he was “intrigued by the idea of dismantling the Port Authority” and dividing control between the states. One day later, Gov. Andrew M. Cuomo of New York agreed that “structural changes are a possibility” at the agency.
But as the furor over the lane closings has grown, engulfing Mr. Christie and several of his top aides, a review of agency operations suggests that its familiar flaws — mismanagement, patronage, rivalries between the two states — are symptoms of a decaying business model, done in by a relentless desire to expand beyond the agency’s core transportation functions.
In recent decades, according to a new report, the agency has increasingly yielded to governors on fiscally dubious projects, contributing to a need in recent years to seek new revenue from bridge and tunnel toll increases.
The report, released on Tuesday from the Rudin Center for Transportation Policy and Management at New York University, says the agency spent more than $800 million from 2002 to 2012 on “regional projects” chosen by the governors’ offices. In the coming years, the pace of spending on zero-return state projects is expected to accelerate.
As a result, the most powerful testaments to the agency’s peril, according to former agency officials and transportation experts, are not found amid the bridge access lanes of Fort Lee, N.J.
They can be traced to the grounds of industrial parks built in the Bronx and in Yonkers, with little obvious transportation purpose, or along the Pulaski Skyway, which the agency agreed to rehabilitate after Mr. Christie canceled the construction of a rail tunnel beneath the Hudson River in 2010 and claimed the $1.8 billion in planned spending to be New Jersey’s money.
The prospect of reform is particularly urgent, according to the review, given the increasing burden posed by the PATH rail system. In 2012, the system lost about $400 million, according to data compiled by the authors, more than twice its loss in 2000.
The report estimated that between 2002 and 2020, the agency will have put more than $4.6 billion into the PATH system, and that excludes more than $1 billion in spending on a new PATH station at the World Trade Center.
“It is no longer possible for the Port Authority to adequately fund its own facilities and services while simultaneously allocating hundreds of millions for non-revenue-generating state projects,” wrote the report’s authors, Mitchell Moss, the Rudin Center’s director, and Hugh O’Neill, a former assistant executive director at the Port Authority.
For decades, governors have relied on the agency to help pay for favored projects.
Mr. Christie in particular appeared keenly aware of how the agency’s resources could be steered. When he appointed Bill Baroni, a close ally, as deputy executive director, the governor noted that the agency offered “significant opportunities for funding projects in the state of New Jersey.” Mr. Baroni resigned in December as questions mounted about the lane closings.
Though the scandal has prompted calls for reform, attention has only begun to focus on the agency’s financial model as a root problem.
“It’s like telling Dracula he’s got to leave the blood bank,” said Stephen Berger, who served as executive director at the Port Authority from 1985 to 1990.
Asked about the N.Y.U. analysis, a spokesman for the Port Authority said the agency would not comment until officials there could review the full report.
The authority has made several changes in recent months, including the adoption of more transparent rules to announce votes and recusals, but progress has come in fits and starts.
Other proposals have ranged from the modest — the most recent meeting of a newly formed oversight committee devolved into quarrels about whom to invite for a panel on nonbinding recommendations — to Mr. Christie’s suggestion that dismantling the Port Authority was worth considering.
Mr. Cuomo has signaled a willingness to assume more state responsibility for the agency, at least in some cases, announcing in January that the state would take over the management of major construction projects at Kennedy and La Guardia Airports.
Yet the agency is too important, and its operations too entrenched across both states, to consider tearing it down completely, experts say. Among many complications would be determining who retains control of bistate facilities like the George Washington Bridge. According to data compiled by the report’s authors, the bridge and its accompanying bus station earned more than $350 million in 2012.
Speaking to reporters on Tuesday morning after a speech in Midtown Manhattan, the Port Authority’s executive director, Patrick J. Foye, said that dividing the agency “would be an extraordinarily challenging and difficult endeavor.” But Mr. Foye added that “lots of challenging and difficult things have been undertaken to great advantage, or sometimes to not great advantage.”
In fact, the Port Authority’s operating model has thrived in the past. From the 1930s through the 1950s, the agency built or developed some of the region’s most significant infrastructure, including the Lincoln Tunnel and the airport that would become Kennedy.
In the 1960s, though, the modern blueprint for bistate interactions was formed. The Port Authority developed the World Trade Center and, to secure the approval of Gov. Richard J. Hughes of New Jersey, agreed to rehabilitate and operate the privately owned Hudson and Manhattan Railroad, which would become the PATH.
The move “represented a significant departure from past practice,” the authors wrote. “The Port Authority was not merely getting into another line of business — it was taking on an ailing rail transit network that (as all parties acknowledged upfront) would never cover its operating costs, let alone provide any return on the authority’s investment.”
As late as the 1990s, the agency’s business model still appeared to be working, with the burdens of state projects often offset by profits from rapid increases in both air passenger traffic and the volume of container cargo at agency ports.
But the PATH’s ballooning cost and an increased devotion to state projects chosen by the governors have combined with other growing burdens to imperil the agency.
The Port Authority Bus Terminal, the busiest bus station in the world, has proved a significant drain, with a net loss of more than $105 million in 2012, according to the authors.
And the Sept. 11 attacks had a significant effect on the Port Authority’s bottom line. In 2000, the World Trade Center accounted for more than $33 million in net revenues; in 2012, it produced a net operating loss of more than $46 million. (The authors’ figures were compiled using a combination of the Port Authority’s annual reports, its recent 10-year, $27.6 billion capital plan and an outside audit from a consulting firm in 2012, among other sources.)
In addition to abandoning nonessential state projects, Mr. Moss and Mr. O’Neill said, one potential remedy would be placing the executive director in charge of all high-level appointments, and making clear that the deputy executive director reports only to the executive director, not to a governor.
It was the current executive director, Mr. Foye, who reopened the lanes last September in Fort Lee.
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