Purpose

To determine whether the Port Authority of New York and New Jersey: evaluated properties that are not essential to its core mission, as required, and took appropriate action; and followed prescribed procedures to help ensure it received appropriate payment amounts from the sales of real property.

Background

The Port Authority of New York and New Jersey (Port Authority) was established in 1921 with a wide-ranging mission that includes the administration and coordination of terminals and other transportation and shipping facilities located within the port district of New York and New Jersey. The Port Authority’s real estate portfolio consists of over 12,000 acres of land and 45 million square feet of office, industrial, retail, and technical space. Other than the major transportation facilities (airports, rail lines, bus terminals, bridges and tunnels) major Port holdings in New York include the Bathgate Industrial Park in the Bronx, the Teleport in Staten Island, the Queens West Development, and the Word Trade Center.

According to the Port Authority’s 2014 Annual Report, its mission is to “Meet the critical transportation infrastructure of the bi-state region’s people, businesses and visitors by providing the highest-quality and most-efficient transportation and port commerce facilities and services to move people and goods within the region, provide access to the nation and the world, and promote the region’s economic development.”

The Port Authority has five departments that reflect its major business segments: Port Commerce, Aviation, the World Trade Center, the Port Authority Trans-Hudson and Tunnels, Bridges and Terminals.

Port Authority officials indicated that they follow Administrative Instruction 25-3.02 (AI), which governs the disposition of real property.

Key Findings

• Our examination revealed that the AI is obsolete. The AI was last updated on October 2, 1990, and its procedures are no longer consistently followed. In some cases, the AI does not reflect the Port Authority’s current policies for administering property disposals. We interviewed Port Authority officials about the AI and found that officials from key departments who were subject to certain AI provisions for real property matters) were unfamiliar with it.
• We examined records of seven Port Authority properties that were disposed of during the audit period. The value of the dispositions ranged from $650,000 to $42.0 million for five properties. (One disposition was an exchange of properties without assigned values, and the remaining property transaction was not finalized at the time of our review.) We found that the Port Authority was not in compliance with one or more provisions of the AI for all the seven properties. The degree of non-compliance with the AI varied from property to property. For example, for “Block 734, Lots 18 and 30” (a lot in the Hudson Yards District in Manhattan), three required provisions were not followed, including advising the affected municipalities, community organizations and government agencies of the disposal. This requirement was not followed for six of the seven properties reviewed. For the Newark Legal and Communications Center (NLCC), the Port Authority did not comply with six provisions, including “requiring that the Port Authority recommend and obtain a consensus on the method of disposition.” This requirement was not followed for four of the seven properties reviewed. Additionally, for 3 of the 7 properties, the disposition did not comply with the requirement that the Management and Budget Department ensure that the affected line department is appropriately credited for the proceeds of the disposition. Exhibit B of the report details the various instances of non-compliance with the AI’s ten primary administrative requirements for the seven properties.

Key Recommendations

• Formally review and update the policies and procedures for periodically reviewing real property and identifying unneeded real property holdings and disposing of them in a timely manner. Disseminate the policies and procedures to all applicable departments and personnel.
• Periodically review the policies and procedures for identifying unneeded real property holdings and disposing of them to ensure they kept current.
• Develop and implement formal quality control processes to ensure that there is full compliance with policies and procedures for identifying unneeded real property holdings and disposing of them.