Audit calls for ‘top-to-bottom’ redesign of Port Authority

BY ALINE REYNOLDS  |  Rebuilding the World Trade Center is turning out to be considerably more expensive than the Port Authority of New York and New Jersey’s initial budget projections.

An audit released last week revealed that the total cost to redevelop the World Trade Center has surged to an estimated $14.8 billion, up from the 2008 projection of $11 billion. The audit, performed by Navigant Consulting, Inc. and at the behest of NY Governor Andrew Cuomo and NJ Governor Chris Christie, was initiated in response to last year’s toll and fare hikes. The audit’s executive summary deems the Port Authority to be a “challenged and dysfunctional organization” in need of a “top-to-bottom redesign.”

The audit also pointed to the agency’s lack of transparency and “effective oversight” at the W.T.C. site that has “obscured full awareness of billions of dollars in exposure.” More specifically, the agency was accused of “inconsistent leadership, poorly coordinated capital planning, and inadequate cost control.”

Additionally, the Port Authority’s overall debt, which is expected to climb to $20.8 billion by the year’s end from $19.5 million in late 2011, “will remain a burden for years to come,” according to the audit.

The auditors attributed the W.T.C. budget overrun principally to the rush to open the National Sept. 11 Memorial in time for the 10th anniversary of 9/11. The audit also notes that costs also rose because of accelerated construction of the W.T.C. Transportation Hub as well as construction the agency undertook on behalf of the 9/11 Memorial Foundation and other parties involved in the redevelopment of the W.T.C. site.

At a press conferences last week, Mayor Michael Bloomberg backed the Port Authority’s decision to prioritize completing the Memorial Plaza over meeting cost projections from earlier years, and said it would be “naïve” to think such a large project wouldn’t cost more than initially expected.

“The bottom line is, this whole site is perhaps the most complex construction project in the history of the world — legally, politically, engineering-wise,” Bloomberg told reporters. “If America couldn’t have come up with a Memorial by the 10th anniversary… It would have been an embarrassment.”

In contrast, the audit did not sit well with Governors Cuomo and Christie, who said in a joint statement that “this record of historic failure” must be reversed.

“Steps have already been taken in the last two years, but much more must be done to restore the Port Authority to a responsible, highly transparent, well-managed organization,” said the Governors. “We will demand nothing short of the agency’s implementation of comprehensive recommendations and reform to achieve this critical mission.”

The results even startled Scott Rechler, who last June took the helm as vice chairman of the Port Authority’s Board of Commissioners.

“I came in with an expectation of trying to find where the challenges are, but I didn’t expect them to be as large as they were,” said Rechler.

In an effort to justify the audit data, Rechler said that, prior to the 10-year anniversary, issues such as maintaining construction costs and securing third-party reimbursements were secondary to finishing the Memorial.

“Now that we’re past that,” Rechler said, “we’ve taken a step back and realized that we can’t do business like that anymore. We have to get the W.T.C. development done at the highest standards possible, but in a responsible matter. We have to create transparency and develop a plan to solve these issues.”

In light of the audit, Pat Foye, executive director of the Port, has instituted a new set of financial controls and monitoring tactics to ensure that approved W.T.C. – related budgets are met, according to Rechler, who met with Foye and other Port Authority executives last week to review expectations of accountability.

“We’re making sure people in the finance department are monitoring any variances that might be occurring in advance [and understand] that no scope changes can occur without the sign-off of the executive director,” said Rechler.

Moving forward, the Port Authority won’t begin new W.T.C. construction projects without securing funding commitments from third parties, according to Rechler. However, he wouldn’t explain how the agency would go about enforcing such agreements.

Rechler said that, with these new measures in place, the agency is confident about meeting forthcoming deadlines for the completion of the W.T.C. Transportation Hub and towers.

The completion date of the 9/11 Memorial Museum, however, is still up in the air, as the Port Authority’s construction of the Museum has slowed in the wake of a financial dispute the agency is having with the 9/11 Memorial Foundation.

Rechler said the agency is working toward a consensus that doesn’t involve court action.

“My sense is there’ll be some negotiated settlement there that’s fair to everyone, without third-party arbitration,” said Rechler.

Officials at the National 9/11 Memorial said they were not consulted on the audit and confirmed that negotiations with the Port Authority about the contested costs were ongoing.

State Assembly Speaker Sheldon Silver, who toured Downtown residents around the Memorial prior to its opening to the public, stressed the need for the parties to reach an agreement as promptly as possible.

“Reasonable minds should just get together and resolve it,” said Silver. “I would hope that if they can’t resolve it among themselves, it would go to some kind of arbitration.”

Responding to the audit, Silver defended the Port Authority in a similar vein as Bloomberg.

“You can’t measure in dollars and cents what it means to have that up, and you can’t measure in dollars and cents building the other buildings around,” said Silver. “The fact remains that, if you live down here or you live anywhere and come down here, you see something that’s blooming, something that’s mushrooming — something that really says, Downtown is back.”

It is critical, Silver argued, that the agency forge ahead with the rebuilding of the W.T.C.

“What I’m concerned about is using this audit to say, ‘Let’s stop everything,’” said Silver. “That’s not a viable excuse, as far as I’m concerned, to delay things.”

Community Board 1 Chair Julie Menin echoed that the Downtown community wants to see the reconstruction of the W.T.C. site continue as expeditiously as possible. Asked about the audit, Menin said it was concerning to read about the steep price tags associated with the site’s rebuilding.

“What we really need is true transparency,” said Menin, “so these numbers aren’t shifting all the time and we don’t see costs ballooning.”