A Saturday night, massacred

I’ve been following politics for a long time, long enough that the Friday night news dump seems like a predictable and even hackneyed way of navigating a news cycle dominated by primetime TV and less-read weekend early edition newspapers.

But the Saturday news dump is something new to me. Moreso on the Saturday following Christmas, and after 6 p.m. A reliable indicator that something interesting is afoot and that some real down and dirty hardball is going on.

So let the record show that just after 6:15 p.m. on Saturday December 27th the website of the governor of New York dropped some news that had been kept quiet until only an hour or so earlier.

The Alliance

In spite of the months-long wrangling by leaders in the four chambers of New York’s and New Jersey’s legislatures to draft and pass a pair of identical bills reforming the legendarily sprawling and powerful Port Authority of New York and New Jersey, the governors of those two states rejected them out-of-hand. Never mind that the bills had unanimous support among legislators in two states with vastly different work calendars, or that the current, ongoing investigations swirling around the Port Authority’s operations and the governors’ appointees to its board and staff presented a once-in-a-generation moment to discipline the nearly 90-year-old agency. N.J. Gov. Chris Christie and N.Y. Gov. Andrew Cuomo had other ideas, and decided that Saturday night — when all eyes are traditionally on infrastructure politics — was the ideal time to reject the legislators’ work and propose their own serious reform agenda.

Statements have already been posted from the legislators in both states expressing their disappointment and surprise. I’ll leave that for other outlets to cover.

Instead, what I briefly want to discuss here [my first Medium posting] is the report that the governors are citing to justify their vetos and some of what’s contained within.

I go through reports like this pretty often in my work as a historian who spends a lot of time thinking and writing about how the U.S. developed a financial and transportation infrastructure of banks, insurance companies, canals, railroads, and highways to facilitate the movement of money and goods and people across vast expanses of territory in a federal union of layered local, state, and national authorities. I’m interested in how corporations fit into this system and why they were embraced by Americans who were skeptical about unaccountable authority and aggregations of capital, but who nevertheless thought that one of the core functions of government was to help people make money and turn connections and influence into profits.

So, the Port Authority: an agency created by New York and New Jersey in the 1920s to take some of the corruption out of bridge and tunnel building while also creating an institution that had the authority to manage a bi-state project and the capacity to finance projects designed by professional engineers and built by competent construction firms. Professionalization. Rationality. Good governance.

In reality, creating a Port Authority doesn’t take the politics out of infrastructure building. It hides it, and makes it harder to detect. It creates a veneer of professionalism that may indeed be real, but can also conceal self-dealing and petty graft. Instead of exercising influence openly, the two states’ governors can now use their appointees as proxies and compete for spoils in the more structured yet fundamentally out-of-sight venue of the agency’s executive offices and closed sessions of its board of commissioners.

In this vein, it’s important to note that the ‘Special Panel’ that Govs. Christie and Cuomo appointed back in the spring to study the Port Authority consisted of the chair and vice chair of the agency (directly appointed by the two governors), another agency commissioner from N.J. who had recently been Christie’s chief of staff, and the counsels (top lawyers) to each of the governors. In other words, the authors of the report might as well have been the governors themselves. There are no degrees of separation or independence from Trenton or Albany to be found here. No blue ribbon panel of independent notables drafted these recommendations. No larger-than-life ex-governors or ex-anythings were in a position to tell the states’ executives to take a hike. The Christie-Cuomo Special Panel Report’s authors are Christie and Cuomo and the people who work in their offices.

It is not entirely surprising, then, that the report goes out of its way to ratify the governors’ past actions while suggesting that any future reforms of the Port Authority should be firmly controlled by and decided by Christie and Cuomo.

All selections from p. 44

In their veto statements rejecting the legislators’ work, both governors belittle the bills they rejected on Saturday. Cuomo’s says:

Christie’s is more pointed:

What’s interesting — to me, at least — is that while the governors’ statements seem to offer a future avenue for cooperation with their states’ legislators, their ‘Special Panel’ report is all about consolidating executive power. If you go through all 99 pages of this report looking for something that legislators will be asked to do in the future, you’ll come up empty. They’re cut out of the process. Those ‘reforms’ outlined in the report are instead aimed at redeploying money and streamlining the Port Authority chairmanship and day-to-day direction in a way that hands more power to the governors without any of the good governance, transparency, audits, FOIA compliance, fiduciary duty obligations, and conflict of interest clarifications that were the main thrust of the now-vetoed legislative bills. None of the changes I see in this report require legislative consent or statutory changes to the Port Authority charter.

In short, the legislature—and, I suspect, the public—thought that 2014 would bring greater transparency and accountability to an agency that seemed plagued by conflicts of interest, self-dealing, rogue management, and potentially illegal mission creep. But instead, we’re finishing up the year with a plan that intensifies the potential for new conflicts of interest to take root among the governors’ appointed board of commissioners and hands more discretionary power to the two governors whose actions and appointees are still very much under investigation and who were already caught red-handed playing games with toll hikes.

From page I-5 of most recent Port Authority bond disclosure (Aug. 2014)

So, let’s set aside the question of whether Chris Christie and Andrew Cuomo are the the most plausible sources of authentic reform at the bigger-budget-than-26-states-combined Port Authority. What’s actually in this report?

There’s actually some sensible stuff in here, like getting the Port Authority out of the real estate business and selling off money pit ‘assets’ like the Red Hook terminal.

But what is also in here is a vision for partially privatizing crucial Port Authority operations under the guise of ‘partnering’ with private sector investors and corporations in a way that would further dilute the already-muffled voice that voters and toll-payers have in the governance and decision making that goes on at the agency’s Park Avenue South offices. To be clear, there’s nothing inherently wrong with so-called P3s (public-private partnerships). They have deep historical roots in American infrastructure building.

But they also have limitations in that they cede ownership and control of assets to private interests and financiers. The Port Authority is already a creature that answers to its bondholders. But being a bondholder isn’t the same as being an owner or shareholder. The Special Panel and, no doubt, the well-connected financial consulting firm they hired to make recommendations about the agency’s future—a firm called the Promontory Group—suggests the following:

From pp. 96–7 of report

Now, I know it’s shocking that a financial services consulting firm would tell a transportation agency that it should hire a ‘global investment advisory firm.’ In fact, I wouldn’t be surprised if the short list of recommended firms are all on that consultant’s client list.

Promontory Financial is mainly known for being the revolving door that carries former Treasury Department and Securities and Exchange Commission officials back into the private sector. Founded in 2001, the firm’s clients are primarily financial institutions rather than transportation agencies.

Given that the Port Authority already spent more than $5 million in recent years on audits and outside consultants, and that such spending drew scrutiny as recently as 2013, it’s unclear why Promontory was selected or what made them qualified to perform an analysis for a panel that is already supposed to be expert in running a transportation agency. The author of the PDF file in the metadata for the Christie-Cuomo special report has a biography that lists her focus as being in “regulatory and compliance issues” at “international and domestic financial institutions”—not mass transit or aviation or marine infrastructure financing or management. If you hire a financial consulting firm to assess your agency, don’t be surprised if they come back with a set of recommendations that benefit the banks and private equity firms they serve. If I was a Port Authority bondholder, I’d be very very careful about reading the fine print on whatever comes from this Promontory Group suggestion embraced by the Special Panel:

Taken together, these suggestions to further financialize the Port Authority and seek out private sector partners would increase the need for clear ethics rules and fiduciary duty pledges among the agency’s commissioners and staff. Yet the law that would have made such changes was vetoed by Christie and Cuomo, leaving in place rules that have allowed agency commissioners to retroactively recuse themselves from votes they shoudn’t have taken in the first place. An agency like the Port is going to be riddled with ethical conflicts — the only reason you become a commissioner at the Port Authority is because you likely have some experience in Port-related business. But where’s the bright line? Who knows. The legislatures had outlined a clear ‘fiduciary duty’ rule—one well understood in corporate boardrooms and securities law. But since that won’t happen, we’re left to wonder just what kinds of interests will be in play when Port Authority commissioners and the governors who appoint them sit down to carve up the agency’s finances and assets in the awarding of contracts to private firms that will now also cede ownership and long-term control of those assets to those firms. Just look at what the Promontory/Special Panel report envisions for the PATH train system that runs between Manhattan and Hoboken, Jersey City, and Newark:

In 1817 just before it approved a bill that would begin construction of the Erie Canal, the New York legislature and Erie Canal Commission got an offer from a wealthy former N.Y. Assembly speaker to personally build the canal in exchange for decades-long ownership of the project and exclusive rights to its tolls. When lawmakers turned the offer down, it was a major evolutionary development in how Americans would build and fund public projects — a big enough moment, in fact, that I wrote a book about it!

At some point, the handouts… er, incentives!… needed to privatize a public project can simply become too asburdly expensive and generous. Which brings me to the Special Panel’s plans for the aforementioned PATH system.

Of all the sections of the Christie-Cuomo report, the PATH section strikes me as the kind of proposal that might have been hijacked by a cabal who wants to pick a political fight with the mayors and residents of Hoboken and Jersey City while handing over the system to a favored firm they already have in mind. That, or someone just didn’t think the proposal through.

Here’s what the report calls for:

See that? Eliminating overnight service. For $10 million in possible savings/year.

One of the chief appeals of living in Hoboken or Jersey City is that there are regular PATH trains that connect it to the New York City and its subway, making these cities feel like another New York City borough, only with lower rent and a breathtaking view of the skyline. As a commenter on the Hoboken’s Facebook page put it plainly: “If they cut overnight PATH service Hoboken becomes a much less attractive place to live.” That comment, by the way, garnered 50 ‘likes’ in just a few hours on Sunday.

But more importantly Hoboken’s residents are the top — as in, #1 — per capita users of public transportation in the country. Fifty-six percent of the city’s residents commute to work via mass transit, so any Port Authority policy changes to PATH — particularly when it comes to fares and schedules — will be felt in the daily lives and bank accounts of the city’s residents and businesses.

Moreover, in the scale of the Port Authority’s overall budget and finances, a $10 million savings is chump change. The agency spent $323 million on a temporary PATH station at the World Trade Center that had to be demolished once the new $4 billion transit center opened. That’s enough to run overnight service for 32 years, or about 370 years depending on how you want to start adding it up. I find it odd that the report would spend so many words suggesting a change while simultaneously understating its impact all for the sake of $10 million, knowing that such PATH service changes would disproportionately affect two towns whose mayors have been in high-profile feuds with Gov. Christie during the past year and a half.

Even in terms of PATH’s own budget, $10 million is a tiny sum:

In short, the political implications of the suggested service change is so obvious that I can’t fathom how the governors’ appointees and counsels didn’t see what they were doing in here and why Jersey City mayor Steve Fulop and Hoboken mayor Dawn Zimmer were caught by complete surprise when people covering this story (me included) contacted their offices for comment about the proposed changes.

All of which reinforces the idea that this report is less about reform than it is about power.