- Port Authority's new capital plan could free up $7.5 billion
- Moody's analyst estimates $2.5 billion available annually
The Port Authority of New York and New Jersey may free up $7.5 billion by extending its capital spending plan by three years, a budget maneuver that could jump-start funding of a new bus terminal or rail tunnel under the Hudson River.
The transportation agency is preparing its 2017-2026 capital program that will supplant the current plan, which ends in 2023 and provides little for the long-stalled projects. With Port Authority spending at the World Trade Center winding down, the agency will be able to spend about $2.5 billion a year on capital projects, Moody’s Investors Service analyst Earl Heffintrayer estimated.
“Obviously the World Trade Center construction projects were a large portion of the capital plan over the last several years,” said Heffintrayer. “They free up $7.5 billion just by extending the plan from 2023 to 2026, which goes to fund a good portion of at least one of the facilities.”
After spending 14 years rebuilding the World Trade Center following the Sept. 11, 2001 terrorist attacks, and allocating almost $2 billion for New Jersey road and bridge repairs, the agency is confronting a project backlog that’s straining its finances and feeding tension between New York and New Jersey commissioners.
Port Authority debt has ballooned 170 percent to $25 billion since 2002. Annual deficits at its PATH railroad and Manhattan bus terminal measure $400 million and $100 million respectively. To bolster its finances, the agency has leaned heavily on drivers over the last five years by raising cash tolls at its bridges and tunnels to $15 from $8. There’s no appetite to raise them higher.
“We’re going to have to come up with non-toll and fare revenue sources,” Port Authority Executive Director Patrick Foye said at a March 24 board meeting.
The financial pressure hasn’t undermined the confidence of investors because the agency has kept its credit rating at the fourth-highest rank from Standard & Poor’s and Moody’s Investors Service. A Port Authority bond with a 5 percent coupon and callable at par in 2025 traded Friday at an average yield of 2.6 percent, about 1 percentage point more than top-rated debt, according to data compiled by Bloomberg.
Replacing its decaying 65-year-old depot near Times Square in Manhattan and building a bus parking garage may cost $10 billion and take 15 years.
At the same time, New Jersey Governor Chris Christie and New York Governor Andrew Cuomo have committed to pay half of an estimated $20 billion project to build a new Hudson River rail tunnel and expand New York City’s Pennsylvania Station, which serves Amtrak and New Jersey Transit.
The new projects are essential because the infrastructure network between New Jersey and New York is overburdened and Amtrak’s 100-year-old rail tunnel has fewer than 20 years before its two tubes must be closed for repairs. In 2010, Christie killed a plan to build a new tunnel under the Hudson, concerned about cost overruns. The Port Authority earmarked $1.8 billion for New Jersey road projects, including rebuilding the Pulaski Skyway, which connects Newark and Jersey City.
Failure to build the tunnel has “catastrophic potential,” not only for the hundreds of thousands that commute to New York City from New Jersey but also for Amtrak’s Northeast Corridor, Port Authority Chairman John Degnan, a Christie appointee, said March 22 at a Bloomberg transportation conference in New York City.
The Port Authority’s current $27.4 billion 2014-2023 capital plan allocated less than $230 million for a new bus terminal and nothing for a new rail tunnel.
The current depot, which comedian John Oliver dubbed the “single worst place on planet Earth,” serves 230,000 commuters daily. Usage is projected to grow to about 340,000 passengers by 2040.
Under the Port Authority’s existing revenue stream it would be able to afford about $2.5 billion of spending per year, according to Heffintrayer, the Moody’s analyst.
The Port Authority won’t be able to spend it all on new projects. Some of the money will be needed to maintain existing infrastructure, he said. Forty percent of the current capital plan goes to keeping its facilities in “a state of good repair.”
“This is an old agency with old facilities,” he said.
Port Authority commissioners have said proceeds from the sale of development rights could help fund the new bus terminal. The agency could also raise rents from retail stores and fees it charges bus operators.
Interest costs on a $10 billion facility funded equally between cash and debt, would be about $200 million annually, or about $80 million more than the current terminal’s operating expenses, Heffintrayer estimated.
“It’s questionable whether they could raise the rates on their users high enough to cover expected O&M and debt service costs,” he said.
Engineering and construction consultants hired by the Port Authority pegged the new terminal’s eye-popping price tag on a number of factors: New York’s City’s higher construction costs, the need for unusually heavy steel gauge, the density of the site, phasing to keep the terminal open during construction and restricted work schedules to maintain access to the Lincoln tunnel.
Port Authority chairman Degnan, has said the agency should sell its real-estate, including the World Trade Center site, to fund transportation infrastructure. New York City’s Department of Finance values the World Trade Center site at $2.9 billion.
“We ought to sell any real estate we have that isn’t related to the transportation mission and leverage the money we get from that,” Degnan said.