The Port Authority of New York & New Jersey (PA) was established in 1921 to create a sustainable, depoliticized way to provide and manage bistate transportation infrastructure. At the time, the highly centralized, Progressive-era public authority model was state-of-the-art. Nearly a century later, however, the model’s three key limitations have become evident: politicized decision making, money-losing facilities, and declining financial viability.
In light of these developments, outside organizations and, indeed, the PA leadership have called for reforms. The goal is generally to return the agency to its core transportation mission by divesting real-estate assets and taking a more businesslike approach to its transportation assets.
These changes are worthwhile but fail to address the way the agency finances its system. By treating airports, bridges, and tunnels as cash cows to subsidize its other lines of business, the PA has ended up with mediocre airports, congested and inadequate bridges and tunnels, money-losing seaports, a pathetic bus terminal, and the worst heavy-rail transit system in the nation.
The PA needs reinvention: it should abandon common-pool funding and extensive cross-subsidies, and move toward infrastructure facilities funded by dedicated revenue streams and facility-specific accountability. The mechanism to do so is long-term public-private partnerships (P3s), which today mobilize hundreds of billions in new capital for infrastructure around the world.
The endgame is that the PA would no longer own or operate transportation infrastructure. Instead, it would plan and regulate an array of concession companies that would be held accountable for performance through bond covenants and terms embedded in their long-term concession agreements. Public pension funds should be a key investor in the new P3 concessions.
P3s would produce major benefits. These include added runway capacity at Kennedy and Newark Airports; the reconstruction and expansion of aging bridges and tunnels; more productive seaports; a greatly reformed Port Authority Trans-Hudson (PATH) rapid-transit system; and a sensible replacement of the Port Authority Bus Terminal.
Robert W. Poole is the director of transportation policy and the Searle Freedom Trust Transportation Fellow at the Reason Foundation.