March 29 (Bloomberg) -- The Delaware River Port Authority, which runs Philadelphia-area bridges and trains, improperly borrowed to fund a $440 million economic-development program while ignoring work on its facilities, an audit found.
Oversight was haphazard, with development projects missing applications and approvals, while the program shifted from loans to outright grants, the audit released today by New Jersey Comptroller Matthew Boxer shows.
Borrowed money went into a social fund that underwrote $10,000 for cocktail hours and carriage rides with lawmakers, while $15,000 paid for three galas, including an “Argentina-Night of Tango,” the audit shows. The funds spent on groups linked to commissioners and agency executives “largely went to organizations that provided a personal benefit” to authority officials, according to the report.
“To state the obvious, commuters who pay to cross the Delaware River every day should not have their toll money used for DRPA officials to enjoy a carriage ride through Philadelphia or a ‘night of tango and wine,’” Boxer said in a statement distributed with the report.
Governors Sought Audit
The bi-state agency, which operates river crossings linking New Jersey and Philadelphia, is funded mainly through tolls on the Ben Franklin, Walt Whitman, Betsy Ross and Commodore Barry bridges, amounting to $248.6 million in 2010. The agency, which also runs the Patco commuter-rail line, raised bridge tolls by $1 to $5 in July to fund a $1 billion capital program.
In 2010, Republican New Jersey Governor Chris Christie and Democratic Pennsylvania Governor Ed Rendell sought tighter controls and the audit at the agency. Republican Pennsylvania Governor Tom Corbett, after taking office in January 2011, replaced six board members and appointed himself the chairman.
Christie, 49, pushed to end toll breaks and car allowances at the agency. The audit showed that authority officials, and in some cases their friends and relatives, were able to avoid more than $1 million in tolls during 10 years after being put on a free-pass program.
“As soon as Governor Christie took office, he zeroed in on the DRPA as among the worst offenders in terms of abusing toll payer money for employee and commissioner perks and large-scale spending outside the agency’s core mission,” Michael Drewniak, a Christie spokesman, said in an e-mail. “Governor Christie fully supports the comptroller’s findings and recommendations and will continue to work with Governor Corbett in enforcing reforms at DRPA.”
The agency’s charter limits spending on regional development projects to funds left after maintenance work. In the absence of a surplus, the authority sold bonds for more than $440 million of development, “while ignoring a backlog of bridge and capital facility projects,” the audit said.
In response to a draft of the findings, authority Vice Chairman Jeff Nash told the auditors that “at no time did DRPA postpone for the benefit of economic development efforts any project that involved public safety or security.”
The authority also let insurance brokers share $1.5 million in commissions during the past decade in deals described in the audit as “ambiguous and nontransparent.”
The agency has already overhauled how it awards insurance contracts, halted economic development, taken away the free-toll perks and ended the civic fund, Tim Ireland, an authority spokesman, said in an e-mail. It hired an inspector general to review the audit and suggest changes, he said.
“We take the concerns expressed by the OSC very seriously, and we will be taking steps to evaluate and address recommendations in the report as promptly as possible,” Ireland said.
Among the companies that took part in the splitting of insurance fees was Conner Strong & Buckelew, whose executive chairman, George E. Norcross III, is a Democratic party leader in southern New Jersey. According to Boxer’s report, the firm was paid $455,000 by another broker from 2003-09 as “referral payments” to obtain authority business.
While sharing insurance commissions isn’t illegal in New Jersey, it “has been the subject of substantial criticism” by oversight agencies and has been banned in New York and at least one other state, the audit found. Investigative agencies in New Jersey and New York have called the practice “politically motivated and wasteful of taxpayer money,” Boxer said.
“Commerce Insurance Services and its successor companies acted in an entirely proper, legal and ethical manner in full compliance with all statutory, regulatory, industry and professional standards,” Hugh Braithwaite, a spokesman for Conner Strong, said in a statement.
‘A Personal ATM’
Boxer said his investigation “revealed a history and culture of weak policies, procedures and internal controls that have contributed to wasteful spending and mismanagement.”
“We found people who treated the DRPA like a personal ATM, from DRPA commissioners to private vendors to community organizations,” Boxer said. “People with connections at the DRPA were quick to put their hand out when dealing with the agency, and they generally were not disappointed when they did.”
Almost $60,000 from the social fund paid for ads in a newspaper where a commissioner was the chief executive officer, according to the report. The fund, set up in 2004, also paid for tickets to sports events used by authority officials.
In one “egregious” incident of improper use of agency expense accounts, two authority employees charged up more than $2,000 for a Pennsylvania Society Weekend at New York’s Waldorf-Astoria hotel in 2009. The event bore no connection to managing bridges and mainly consisted of political fundraisers and receptions sponsored by lobbyists, according to the report.
“It’s as much getting the mindset back to our mission: It’s not economic development; it’s not taking care of political contributors,” Kevin Harley, a spokesman for Corbett, said in a telephone interview. “It’s about moving people back and forth across the Delaware River in a safe and efficient manner. Its that simple.”
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