The Port Authority in Disarray

On the west side of the Hudson a similar pattern of public action emerged, although the institutional development was quite different. Under the leadership of the state Department of Transportation (which succeeded the Highway Department in 1966), service was stabilized on most New Jersey rail lines, new cars were acquired for many of the routes, and a series

[105] The 1968 plan had called for more than fifty miles of new subway lines; by 1974 this had been cut to a promise of forty miles; and in 1978 the total had been whittled down to the Queens lines, totaling less than fifteen miles, with the hope that these segments would be open for service by 1985. Yet the MTA leadership, finding its construction plans delayed, pressed forward with rhetoric. Enticed by the same optimism and edifice complex that had captured the MRTC in the 1950s and their own predecessors in the 1960s, MTA's leaders in 1977 saw a "new awareness . . . spreading throughout the land about the problems and importance of public transportation," and felt "confident that this awareness will inspire a new resurgence of public transportation ridership." The authority therefore set forth a new 10-year $5.5 billion program to expand subway and commuter rail lines, earning the MTA a vigorous attack from New York City's planning commission, which argued that air conditioning of cars and other modest improvements would be a better use of scarce dollars than a costly building program. See MTA, Annual Report—1976, pp. 2–3; New York City Planning Commission, Capital Needs and Priorities for the City of New York (New York: March 1, 1978), pp. 23–27. See also the series of four articles by Grace Lichtenstein, "The Subways," New York Times, May 8–11, 1978, and Ross Sandler and David Schoenbrod, "Tunnel Vision, Too," New York Times, April 14, 1978.

of modest improvements in the system was initiated. State operating subsidies and funds for capital improvements were extended to bus lines, thus preserving commuter services which in New Jersey carried considerably more passengers than the rail lines. The costs of these subsidies to private bus companies grew rapidly, however, leading the state in 1979 to initiate action to take over ownership and operation of major bus lines.^[106] Under the Port Authority, the Hudson Tubes became the PATH rail lines (for Port Authority Trans-Hudson) and were overhauled with new equipment and terminal facilities in lower Manhattan and Jersey City. As in New York, stabilization, overhaul, and increasing labor and other costs brought higher fares and continued dissatisfaction from New Jersey commuters. The new era also produced a series of ambitious plans for major improvements which were delayed by rising costs, conflicts over priorities, and disagreements over financing and institutional arrangements.^[107]

The most serious dispute in New Jersey centered on the role of the Port Authority in mass transportation. As the 1960s drew to a close, the bistate agency seemed protected from further involvement in rail transit by the 1962 bond covenant, which effectively limited the Port Authority's rail transportation role to the PATH tubes. Friends and enemies alike viewed the covenant, which seemed to foreclose deeper authority involvement in rail transit, as a premier example of the strategic skill of its officials in defending the agency's independence and power.^[108] What Austin Tobin had not expected was a governor who would demand that the covenant be changed and, when faced with resistance because of alleged constitutional barriers, would again demand that the covenant be changed—and further, insist that Port Authority officials agree with his view and make plans to plunge the agency deeply into rail transit, despite personal and legal reservations. But William Cahill, who was elected New Jersey's chief executive in November 1969, was such a governor.

Acting on his campaign promises, Cahill urged the Port Authority to press ahead with rail transit commitments and brushed off the protests of Tobin and his commissioners. By 1971, Cahill was using his veto power to delay its other programs, while advocating Port Authority action on a series of rail projects.^[109] When Tobin defended the authority's position as a self-

[106] New Jersey's program and results are summarized in the annual reports of the state's Department of Transportation (NJDOT). On New Jersey's bus programs, see Bus Subsidy Program Study Commission, State of New Jersey, Report to the Legislature (Trenton: January 9, 1978).

[107] For a sampling of New Jersey's hopes, plans, and disappointments, see Peter Carter, "$300 Million Rail Plan Is Proposed by Hughes," Newark Evening News, May 16, 1966; NJDOT, A Master Plan for Transportation (Trenton: March 1968); Dick Gale, "$2.5-Billion 'Master Plan' Outlined For Rails and Highways," Trenton Evening Times, March 12, 1968; Richard Phalon, "Mass Transit a Key Issue in Jersey Governor Race," New York Times, May 29, 1973; and James Manion, "N.J. May Bench Conrail, Run Rail Lines Itself," Trenton Evening Times, August 31, 1978. In New Jersey, as in New York State, a crucial element in the delays and lost aspirations was the defeat of several transportation bond issues at the polls during the 1970s.

[108] On the negotiations leading to the creation of PATH, the World Trade Center, and the 1962 bond covenant, see note 48 above and associated text. The role of tax-exempt revenue bonds in maintaining the independence of public authorities is described in Chapter Six; see note 21 in that chapter and associated text.

[109] The Cahill projects included expansion of the PATH rail system to other areas of New Jersey, Port Authority purchase of the Penn Central railroad station in Newark, and construction of a new rail tunnel from New Jersey to Manhattan near 48th Street to provide "direct rail access tomid-Manhattan for all New Jersey commuters." Early in his second year in office, Cahill said he would take "a much more aggressive, determined and stubborn approach to the failure of the Port Authority," and he referred to the 1962 bond covenant as a Port Authority "device to permit it to escape additional responsibilities," which had been accepted, "incredibly," by the state legislatures. These criticisms, together with the governor's comments on new rail projects, are set forth in William T. Cahill, "Remarks at Chamber of Commerce Dinner," February 4, 1971.

supporting body and expressed doubt that it could assume large deficits and survive, Cahill attacked the executive director publicly. He also directed that the New Jersey commissioners caucus separately before board meetings to establish a "New Jersey point of view," and he warned them to follow his lead on the mass transit issue if they wanted to be reappointed.^[110]

The Cahill barrage had an impact. In December 1971, Austin Tobin abruptly announced his retirement after nearly 30 years as executive director.^[111] Five months later, the authority's vice-chairman, a respected banker who shared Tobin's views on the bond covenant, also resigned.^[112] In the spring of 1972, after years of working with Tobin and his staff, Governor Rockefeller attacked the old regime and urged that William Ronan be chosen to replace Tobin and change the agency "from a rubber to a rails orientation."^[113] That November the two governors announced that the Port Authority had agreed to a plan which, within the constraints of the bond covenant, would permit it to apply more than $250 million of its own funds to extend the PATH rail lines into the New Jersey suburbs, provide rail service between Manhattan and Kennedy airport, and carry out other rail projects.^[114]

Then, in the spring of 1973, both states passed legislation ending the bond covenant for Port Authority bonds sold in the future, and a year later

[110] At a legislative hearing in early 1971, for example, Tobin protested: "Don't tell us that we can operate a mass transit system with a $300 million a year deficit on a self-supporting basis, . . . we can't, and God can't." In response to this typical Tobin strategy—emphasizing the extreme in rail transit burdens—Cahill exclaimed that Tobin "will not be making the decisions on what the Authority can or cannot do." See New York State Assembly Committee on Corporations, Authorities and Commissions, and Autonomous Authorities Study Commission of the New Jersey State Legislature, Public Hearing (New York: March 5, 1971), pp. 92–93; Henry Lee, "Ronan to Be Named Port Authority Head," New York Daily News, March 15, 1972. On the separate caucus, see Alex Michelini, "PA Commish Defends the N.J. Caucus," New York Sunday News, April 2, 1972.

[111] Tobin announced his decision on December 12 and immediately turned over his duties to his long-time deputy, Matthias E. Lukens, who was designated acting executive director.

[112] The commissioner, Hoyt Ammidon, had previously defended Tobin's actions and publicly opposed proposals that might violate the 1962 covenant. Ammidon was also chairman of the board of the United States Trust Company, an investment company which would later bring suit on behalf of the Port Authority's bondholders to protect the bond covenant; see discussion below. His views are set forth in Hoyt Ammidon, "Port Authority," letter to the editor, New York Times, March 24, 1971.

[113] "We don't want a continuation of the Tobin structure," Rockefeller opined, "which as everyone knows was a very tight, highly political structure and opposed to mass transit." Rockefeller's attack was motivated in part by his sense that leadership in the mass transit area had been usurped by his fellow Republican from New Jersey. See Frank Mazza, "Rocky Raps PA Steamroller," New York Daily News, April 28, 1972, and the transcript of his interview with John Hamilton, WNEW-TV, April 9, 1972.

[114] The new program is described in Port Authority, 1972 Annual Report (New York: March 1973), pp. 6–8. Also in 1972, in response to Cahill's urging that the title of the "misnamed Port of New York Authority" be altered, the agency became "The Port Authority of New York and New Jersey."

both states overturned the covenant retroactively. With that hurdle allegedly out of the way, Port Authority tolls were raised sharply in order to provide more funds to carry out additional mass transportation projects. Ultimately, the scheme failed. The repeal of the covenant predictably brought a bondholders' suit, and in 1977 the U.S. Supreme Court rejected the states' action as a violation of the obligations of the contract clause of the Constitution.^[115] The rail transit projects announced with fanfare in the early 1970s would have to be financed in some other way, not with Port Authority funds.

But the long battle to increase the authority's activities in mass transit had other results. In the complex world of the Port Authority, a sense of institutional purpose, effective central leadership, and staff morale had been crucially linked for thirty years to Austin Tobin's energy and intensive involvement in all major areas—and to staff expectations that funds would be available to permit them to carry out ambitious programs. As Tobin's energies became absorbed in the battle with Governor Cahill, the potentially separate empires—airports, world trade, and the other departments—began to drift apart; and when that conflict cast into doubt the ability of the Port Authority to raise and employ the sums needed to achieve large purposes, staff members worked less for the institution and more for themselves. The process was subtle: some did not know it was happening. And the change in the institution was uneven: in some areas, where there were new plans afoot, a lively interest in the future remained. But in department after department, a sense of forward motion—of the possibilities for forward motion—crept out, and staff morale fell.

Had Tobin II replaced Tobin I, it might have been different. But in December 1971 Tobin's replacement was a career staff member, designated as "acting" executive director; and he in turn was succeeded in 1973 by another careerist with the same tentative hold on the office until receiving a regular appointment in the fall of 1974.^[116] Perhaps neither of them had a taste for vigorous leadership; but in view of the uncertain legal situation and recurrent gubernatorial forays, it would have required a person of quite unusual abilities to do much better. Had Rockefeller's first choice been accepted in 1972, power might again have flowed into the staff director's office; but William Ronan was not acceptable to a majority of the commissioners, because of his advocacy of deeper rail transit involvement and their

[115] Immediately after the repealer was signed in New Jersey, the United States Trust Company filed a suit against the state. In 1975–1976, the trial court and the New Jersey Supreme Court found the statutory repeal to be a reasonable exercise of the state's police power, not prohibited by the state or United States constitutions. On appeal, the U.S. Supreme Court reversed the decision, concluding that the repeal, by permitting Port Authority funds to be used without restriction to fund rail transit projects (which might generate large deficits), had substantially impaired the bondholders' security, and therefore had violated the contract clause of the U.S. Constitution. See John H. Allan, "Law Dismays Municipal-Bond Dealers," New York Times, May 1, 1974; Roger Harris, "P.A. At the Crossroads," Newark Sunday Star-Ledger, August 21, 1977; United States Trust Company v. State of New Jersey, 431 U.S. 1 (1977).

[116] Matthias Lukens served in an acting capacity from the time of Tobin's exodus until he retired in August 1973; his successor, A. Gerdes Kuhbach, was acting staff director until August 1974, when he was named executive director. Lukens had been with the Port Authority for 24 years prior to replacing Tobin, including eleven years as Tobin's deputy. Kuhbach had been with the New Haven Railroad until 1962, when he joined the authority as director of finance, the position he held until replacing Lukens.

fear that this effort would end the vitality of the agency as a self-supporting enterprise.^[117]

For a time the leadership vacuum was filled by Ronan, who had served on the board since 1967 and became chairman in May 1974. But his strong protransit stance and earlier criticisms of other Port Authority officials made it difficult for him to gain support within the agency. For example, in 1972 he criticized his fellow commissioners publicly for appearing to "assign a higher priority to the bond market than to mass transportation" and expressed doubt that the board majority was "highly motivated toward the difficult decisions necessary" to fund large transit projects.^[118] By the end of 1974, Ronan himself had been publicly rebuked by Brendan Byrne, Cahill's successor as governor, for failing to make progress in mass transportation, and he was criticized inside the agency for his unwillingness to let staff members make decisions, while being largely absent from the Port Authority offices himself. As one commissioner noted openly in November 1974, "nothing is getting done." The authority was "dead in the water."^[119]

So the Port Authority drifted. Bridge and tunnel tolls were increased in early 1975 to fund mass transportation projects, an expansion of the Manhattan bus terminal was begun later that year, and in the spring of 1976 the governors of both states again announced that the Port Authority would help to finance a new mass transit program. But the 1972 program had never gotten underway, the legal uncertainties remained, and the authority's financial position had weakened—mainly due to multimillion-dollar yearly deficits generated at the World Trade Center, PATH, and Newark Airport.^[120]

In the spring of 1977, frustrated by the agency's inability to devise a legally acceptable transit program, Governor Byrne began vetoing board actions on all subjects, further undermining morale and a sense of direction at the authority. Byrne demanded that the agency either find a way to use the added moneys for mass transit, or rescind the 1975 toll increase. Otherwise,

[117] Ronan was known to be strongly interested in the post, He had already built a strong national reputation at the MTA, and the Port Authority, with its large net income base, would offer greater opportunities. Several factors undermined Ronan's candidacy: his sometimes arrogant style lost him support; his active effort in 1971 (as MTA chairman) to oppose federal funds for a Port Authority rail project—he argued that the MTA needed the money more—counted against him; and Governor Cahill was wary of Ronan's fondness for New York State and for Rockefeller, whose influence might tilt authority policies against Cahill's already beleaguered state. The evolution of the conflict is described in the following articles: Frank J. Prial, "Port Agency Seeks Successor To Tobin Within the Authority," New York Times, March 16, 1972; Frank J. Prial, "Port Authority Dissent: Ronan Gives a Hint of the Bitterness and Strife Among the Commissioners," New York Times, April 1, 1972; and Edward C. Burks, "Ferment in Mass-Transit Agencies," New York Times, April 5, 1974.

[118] See "Ronan Letter to Port Unit," New York Times, March 31, 1972. On various occasions, he had also criticized Tobin and other agency staff members for failing to meet their mass transit responsibilities.

[119] The quotations in the text are taken from Frank J. Prial, "Port Authority Has Fallen on Hard Times," New York Times, November 10, 1974; Prial's article accurately describes the authority's malaise during the mid-1970s.

[120] The Trade Center deficit reached $7.9 million in 1974 and $11.9 million in 1975; and a $400-million expansion program at Newark Airport added several million more ($8.6 million in 1975). In 1975 the PATH deficit exceeded $37 million. Between 1973 and 1977 total Port Authority personnel shrank from more than 8,000 to less than 7,700. The Port Authority deficit figures are set forth in the report of the New York State Comptroller, "Public Authority Financial Analysis Statements, No. 8–76" (New York: November 1976).

he said, "I will not let them operate. I will veto the minutes." While authority commissioners and staff searched feverishly for a way to underwrite mass transit without violating the bondholders' rights, Byrne vetoed the minutes of the board in May and again in June, thus blocking the Port Authority from approving contracts and taking policy actions in a wide variety of areas. Continuing to apply pressure during the summer, Byrne criticized the authority as "too staff-dominated" and as populated by people who take a negative view of rail transit. While denying that his widely publicized efforts were motivated by a desire for votes in his 1977 reelection campaign, the governor acknowledged that his constituents would welcome either forward action on a transit plan or a toll reduction.^[121]

Then, for the first time, scandal touched the agency's top officials. Rumors of inflated and fraudulent expense vouchers, of authority cars and helicopters appropriated for family outings of senior staff and commissioners, and of contract irregularities reached the press. By the fall of 1977 three senior officials had been disciplined, one had committed suicide, and New York State's Comptroller's Office had issued several detailed reports describing "extravagancy at public expense," "widespread padding of expense accounts," and other examples of misuse of public funds and of managerial weakness.^[122]

Yet even as these past abuses were generating banner headlines, the Port Authority began to recover, drawing on its financial resources, areal and functional scope, staff skills—and new leadership. The Supreme Court decision in April 1977, reaffirming the validity of the 1962 covenant, strengthened the authority's position in the bond market, and required that rail transit advocates search for alternative ways—consistent with the covenant's constraints—to involve the agency. Soon thereafter, in June 1977, Ronan, whose relationships with Governors Byrne and Carey were not close, was replaced as Port Authority chairman by Alan Sagner, one of Byrne's closest associates. At the same time, the board broke a tradition of fifty years and hired Peter C. Goldmark, Jr., as the authority's first staff director from outside its career ranks.^[123] Under its new leaders, the authority took steps to tighten managerial controls over the areas

[121] Byrne's 1977 veto strategy is described in "Byrne Vows Fight for Toll Trim or Transit," Newark Star-Ledger, April 28, 1977; Ralph Blumenthal, "Byrne Again Opposes Port Unit; Vetoes Its Plan for Bus Projects," New York Times, June 22, 1977; Ralph Blumenthal, "Byrne Affirms View on the Hudson Tolls," New York Times, August 11, 1977.

[122] Among the examples of extravagance cited in the reports were lavish overseas trips (in 1975–1976, three trips by authority officials totaled $100,000), costly dinners in honor of authority commissioners (one bill ran to $2,055), and the use of chauffeured vehicles to drive commissioners and senior officers to private clubs. More than two dozen senior staff members were accused of padding their expense vouchers, and two were involved in nepotism (one hired ten of his relatives for short-term jobs). The Port Authority vigorously resisted the view that abuses were "widespread" and after investigation disciplined six staff members for committing fraud and twenty-one others for minor abuses. See the official reports of the Office of State Comptroller, State of New York, 1977–1978; and Jameson W. Doig, "Illegal Behavior in Complex Organizations," typescript, 1979. The quotations in the text are taken from the state audit report of October 20, 1977.

[123] Sagner had been commissioner of the New Jersey Department of Transportation and a member of the Port Authority board since his appointment to these positions early in 1974 by Governor Byrne. Previously, he had been finance chairman of Byrne's gubernatorial campaign in 1973. At the time of his appointment as executive director, Goldmark was serving under Governor Carey as state budget director.

where there had been abuses, and pressed for a transit program that would meet legal restrictions while providing the two states with $240 million in new funding—to purchase commuter bus equipment, develop additional exclusive bus roadways, and aid other mass transit facilities. Believing that the authority's leaders were now willing and able to move ahead in the transit area, Byrne stopped vetoing authority actions.