The Port Authority of New York and New Jersey

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The Port Authority of New York and New Jersey

225 Park Avenue South
New York, New York 10003
U.S.A.
Telephone: (212) 435-7000
Web site: http://www.panynj.gov

State-Owned Company
Incorporated: 1921
Employees: 7,000 (est.)
Sales: $2.65 billion (2000)
NAIC: 921130 Public Finance Activities

The Port Authority of New York and New Jersey is a self-supporting public corporation that develops and operates trade and transportation facilities in an area of New York and New Jersey that falls within a 25-mile radius of the Statue of Liberty. Receiving no tax dollars, the Port Authority depends on tolls, fee, and rents, providing a consistent revenue stream that allows it to raise vast sums through the issuance of bonds. Overseeing the corporation are 12 nonsalaried commissioners, six appointed by each governor of New York and New Jersey. Some of its facilities include the George Washington Bridge; the Holland and Lincoln tunnels; Newark, LaGuardia, and John F. Kennedy airports; Manhattan’s only bus terminal; and the PATH rapid transit system. Perhaps the best known Port Authority property, the twin towers of the World Trade Center, were destroyed in the terrorist attack of September 11, 2001, which cost the lives of approximately 3,000 people, including the Port Authority’s executive director and 73 other employees.

Bickering Over New York Harbor into the 20th Century

Because New York and New Jersey bordered the New York Harbor and the Hudson River, the two states invariably came into conflict over the use of the common waterway. The situation was only exacerbated with the completion of the Erie Canal in 1825. The canal stretched from Lake Erie to the Hudson River in Albany, New York, which then allowed New York Harbor to be connected to the great interior of the United States, an arrangement that transformed New York City into the unrivaled commercial center of the nation. New York and New Jersey finally settled their border dispute with the Treaty of 1834, which essentially split the Hudson River down the middle, but conflict continued to dog the two states well after the Erie Canal was superceded by railroads. In 1916 the situation came to a head when New Jersey interests filed a complaint with the Interstate Commerce Commission over rail rates, which they claimed were set artificially high to protect New York interests. If New Jersey was successful in forcing railroads to lower freight costs, its harbor facilities would gain a decisive economic advantage and draw commerce away from Manhattan. Rather than fight the suit, New York leaders, led by Progressive politicians and the New York State Chamber of Commerce, elected to take a broader view of the conflict. Rather than just adjusting rail rates, they concluded that the parties needed a way to mutually manage the Port of New York, to reduce inefficiencies and ease congestion. The situation was simply intolerable: A tangle of railroad lines converged on New Jersey towns that lay across from Manhattan, at which point freight had to be loaded onto ferries to be transported across the Hudson. Rail congestion became so bad at times that trains were backed up as far away as Pittsburgh.

The man most responsible for the creation of the Port Authority was Julius Henry Cohen, the counsel of the New York State Chamber of Commerce, who was charged with looking into the ICC suit. He firmly believed in the principle of cooperative planning, as well as keeping politics and potential corruption out of public programs. In early 1917 he was able to convince politicians in New York and New Jersey to form a bistate commission to find a way to resolve their differences over the port. Cohen was then named counsel to the commission. Two years later he submitted a draft proposal for a Port of New York Authority, patterned in large part on the Port of London Authority. According to lore, the English had no name for their organization until a proposed Act of Parliament had been written. Because so many of the provisions began with the phrase, “Authority is hereby given,” the drafters decided to call the organization the Port of London Authority. With New York Harbor now appropriating the term, Authority would be widely adopted by harbors and other agencies.

Establishing the Port Authority of New York in 1921

According to Princeton professor Jameson W. Doig, Cohen’s draft proposal was “a regional planner’s dream.” It granted the agency regulatory powers and made it self-supportive and, therefore, insulated from politics, by generating self-supporting revenues. Moreover, it had the ability to borrow money, backed by the credit of the states. Over the course of the next two years, however, much of the teeth was taken out of Cohen’s proposal before the two states finally approved it in April 1921. The Port Authority of New York (it would be renamed the Port Authority of New York and New Jersey in 1972) came into existence with an abstract mandate to “purchase, construct, lease and/or operate any terminal or transportation facility” within New York Harbor, and a vague ability to “borrow money and secure the same by bonds.”

The first objective of the Port Authority was to bring order to the rail and waterborne freight system. By December 1921 it released a comprehensive plan that called for a coordinated system of railroad tracks, tunnels, and marine terminals designed to eliminate inefficiencies and spur economic growth. It also required the cooperation of a dozen rail lines, which meant consultations with all the parties. The result was a decade of endless discussions before the proposal finally withered and died. In the meantime, the Port Authority made its name in the construction of bridges, in particular the George Washington Bridge.

For decades bridge designer Gustav Lindenthal had been promoting his own idea of improving the area’s transportation problems. He proposed a 12-track railroad bridge, enough to accommodate all the rival lines that crossed the Hudson River into the heart of midtown Manhattan (the 1921 version included an additional 20 automobile lanes). After the Port Authority rejected the plan, Lindenthal’s chief assistant, Othmar Am-mann, tried to convince him to scale down the bridge and move it north. Lindenthal refused to compromise on his dream, and Ammann left his service to develop his own plans for a bridge spanning the Palisades of Fort Lee, New Jersey, and the upper tip of Manhattan, one intended for the new automobile age. It would serve only cars and light-rail transit, making it much cheaper to build and eliminating the cooperation of the railroads. He was able to enlist the support of New Jersey’s new elected governor, George Silzer, who, according to Doig, “was interested in advancing his political career through a record of tangible accomplishments.” Silzer, through his commissioners, was able to persuade the Port Authority that vehicular traffic congestion fell within its purview. Although the Port Authority was interested in Ammann’s bridge, it still held out hope that it could convince the railroads to agree to its transportation plan. Finally in 1924 Silzer and Ammann were able to persuade the Port Authority to build two smaller automobile bridges joining New Jersey to Staten Island, which would become the Outerbridge Crossing and the Goethals Bridge. With momentum now on their side, Silzer and Ammann gained enough support in both New York and New Jersey for the construction of the Fort Lee bridge, which upon completion in 1931 would be named the George Washington Bridge. (Before then, the Port Authority also built the Bayonne Bridge.) Under Ammann’s leadership all four of the Port Authority bridges came in ahead of schedule and under budget, and firmly established the reputation of the bistate agency.

The building of the George Washington Bridge allowed the Port Authority to argue successfully that it should be allowed to build a midtown tunnel to New Jersey and to take over the Holland Tunnel, which opened in 1927, years behind schedule and well over budget. The merger made sense, because, according to Doig, “the two trans-Hudson crossings in separate hands would risk the possibility of destructive competition, as each tried to attract traffic by lowering tolls below its competitor’s level.” The toll revenues derived from the Holland Tunnel also allowed the Port Authority to service its debts while its bridges finally came on line and began to generate revenues. The new midtown tunnel, named the Lincoln Tunnel, would open in 1937 and add even more cash flow to the agency.

Following World War II the Port Authority expanded its scope to include commercial aviation. Newark Airport, which opened in 1928, had been a pioneering facility, boasting the first paved runways and the first air traffic control tower. It soon became the busiest airport in the country, but was eclipsed in 1939 by a new airport built in the borough of Queens by Mayor Fiorello LaGuardia. By 1945 Newark was asking to Port Authority to take over the operations of its airport. As had been the case with railroads earlier in the century, aviation clearly required more effective coordination. New York City considered the creation of a city airport authority, but in the end it also turned to the Port Authority, which in 1947 took over LaGuardia Airport, as well as New York International Airport (later renamed John F. Kennedy Airport), which was under construction and opened a year later. Rather than simply give the airports away, however, the city chose to lease them to the Port Authority, provided the agency agreed to develop and operate the facilities on a self-supporting basis. In 1949 the Port Authority added to its aviation portfolio by purchasing the small Teterboro Airport in the New Jersey Meadowlands. It opened a Heliport in lower Manhattan in 1960.

Company Perspectives:

The company’s mission is to identify and meet the critical transportation infrastructure needs of the bistate region’s businesses, residents, and visitors: providing the highest quality, most efficient transportation and port commerce facilities and services that move people and goods within the region, provide access to the rest of the nation and to the world, and strengthen the economic competitiveness of the New York-New Jersey metropolitan region.

The Port Authority also became involved with buses when in 1944 New York City requested that the Port Authority build a midtown bus terminal. Once again the agency was charged with bringing order to a chaotic situation. Interstate bus traffic to Manhattan had resulted in the establishment of eight separate bus terminals located in a one-square-mile area. Aside from traffic congestion cause by so many buses wending their way through the island, the cramped terminals offered little in the way of comfort for passengers. The Port Authority drew up a plan to build a large consolidated bus terminal on the west side of Manhattan, with a connection to the Lincoln Tunnel to ease street traffic. Although most of the bus companies agreed to move into the proposed facility (which eventually opened in 1950), Greyhound, the largest bus operator, refused to give up its 34th Street terminal. The Port Authority was willing to compromise and allow Greyhound to keep its terminal, as long as it did not allow other bus companies to use it, but Greyhound rejected the proposal. A 20-year battle ensued. Over the years, Greyhound attempted to gain permission to expand its terminal, but each time it was denied. Finally in 1963 Greyhound gave up its 34th Street facility, as well as one on 50th Street, and began using the Port Authority Bus Terminal.

Although the Port Authority was involved in bridges and tunnels, airports, and a bus terminal, it was also heavily engaged in the marine activities of the Port of New York. In 1952 it assumed responsibility for the Hoboken piers, and in 1956 took over the Brooklyn Piers. The Port Authority then became involved in the revolutionary practice of containerization, which was introduced at Port Newark in 1956. Steel containers of cargo were stacked on ships and then directly unloaded onto specially designed trucks or rail cars, resulting in a significant savings of time as well as providing inventory and quality control measures. In 1962 the Port Authority established a standard when it opened the world’s first all-container port facility, the Elizabeth-Port Authority Marine Terminal. This early embrace of containerization provided the Port of New York with a competitive edge that lasted well into the 1980s, when less expensive ports began to lure away customers.

Conceiving the World Trade Center in the 1950s

The Port Authority’s entry into the management of commercial property came through the World Trade Center, which was first conceived in the 1950s by a group of businessmen led by David Rockefeller, CEO of Chase Manhattan Bank and brother of New York’s Governor Nelson Rockefeller. The goal was to revitalize lower Manhattan, which had been losing financial firms to outlying areas, by building a new office complex that, it was hoped, would attract new tenants involved in international trade. The Rockefeller Group turned to the Port Authority for a number of reasons: The agency already owned some of the land, it had cash in hand, and it could float bonds. Moreover, half of its commissioners were appointed by David Rockefeller’s brother. The idea was met with enthusiasm by the Port Authority’s director, Austin Tobin, who was interested in expanding the power of the agency.

Critics charged that the World Trade Center project was more about ego and politics than it was about sound business considerations. To get New Jersey’s backing, the Port Authority had to agree to take over the troubled Hudson& Manhattan Railroad, used by many New Jersey residents who commuted to Manhattan. The system would be renamed the Port Authority Trans-Hudson, or PATH. Originally, the World Trade Center complex was to be built on the East Side of Manhattan, but New Jersey insisted on a West Side location, so it could at least be seen from the New Jersey side of the Hudson. To gain public support for the World Trade Center, its developers grossly underestimated its final costs. Furthermore, according to critics, the idea of building a pair of 110-story office towers was more hubris on Tobin’s part than it was a reflection of market conditions. Construction began in 1966 and by the time the first tower was completed and went onto the market in 1970 its introduction simply aggravated an already difficult situation. The economy was entering a recession and the tower only added to a glut of available office space, resulting in a drop in real estate values. Moreover, it failed to bring in new firms to the city, instead drawing tenants from surrounding buildings. Even then, to ease the high vacancy rates the Port Authority had to rely on the State of New York to relocate almost all of its New York City Offices into the towers, and move its own offices there as well. The towers, and the other buildings that made up the World Trade Center complex, did not come close to full occupancy until the economic boom of the 1990s. Political critics portray the World Trade Center as a “patronage bonanza,” while architectural critics regarded the twin towers as sterile and old-fashioned even before they opened.

In the 1990s the World Trade Center, and the twin towers in particular, would gain new meaning because of the people who chose to destroy it. At 12:18 p.m. on February 26, 1993, terrorists detonated a truck bomb in the underground garage of one of the towers, resulting in the deaths of six people and leaving more than 1,000 injured. Ironically, when the explosion occurred, some people thought that a plane had hit the building. The Port Authority moved quickly to repair the damage and reopen the World Trade Center. In short order evidence also was uncovered that led to the arrest and conviction of the terrorists who planted the bomb.

Key Dates:

1921:: Port Authority of New York is established.
1930:: Port Authority takes over the operation of Holland Tunnel.
1931:: The George Washington Bridge opens.
1937:: The Lincoln Tunnel opens.
1947:: Port Authority takes over New York’s two airports.
1962:: Port Authority takes over Hudson& Manhattan Railroad, creating PATH.
1970:: The World Trade Center opens.
1993:: The World Trade Center is bombed by terrorists.
2001:: The twin towers and other buildings of the World Trade Center are destroyed by terrorists.

In 1995 George Marlin became executive director of the Port Authority and began instituting cost-savings measures that included budget cuts and layoffs. A firm believer in privatization, he was also instrumental in selling the Vista Hotel, part of the World Trade Center, to Host Marriott, as well as unloading other nontransportation businesses. The governors of New York and New Jersey disagreed over the allocations of the Port Authority’s resources and its proposed toll increases, resulting in an 18-month stalemate that prevented the agency from launching new spending initiatives that would benefit both states. Once the impasse was settled in June 2000, the Port Authority announced a $9.6 billion, five-year capital plan to improve existing port, airport, and transportation facilities, as well as to provide financial support for a Second Avenue subway line that had been promised to Manhattan residents for decades.

The Port Authority’s embrace of privatization reached its culmination in the spring of 2001 when it agreed to lease the twin towers of the World Trade Center to Silverstein Properties for 99 years at a cost of $3.22 billion. It was a deal of a lifetime for Larry Silverstein, but his control of the skyscrapers would be shortlived. On the morning of September 11, 2001, terrorists hijacked two commercial jet airliners, loaded with enough fuel for a coast-to-coast flight, and intentionally flew them into the towers. To everyone’s horror, both skyscrapers collapsed to the ground within an hour, taking the lives of some 3,000 people. Silverstein vowed to rebuild the towers, although it was unlikely that he would construct anything close to 110 stories high. The Port Authority, with its offices in the twin towers, suffered the loss of its new director, Neil Levin, and dozens of other employees. The economy of the area served by the agency also was dealt a severe blow by the attack. With a major capital plan ready to implement, however, the Port Authority was again poised to make a key contribution in the revitalization of the New York and New Jersey economy.