Objectives

To determine whether the Port Authority of New York and New Jersey (PANYNJ) collected all revenues due and identified revenue enhancement opportunities and whether PANYNJ followed its procedures in the leasing of properties. This audit covered the period January 1, 2014 through November 21, 2019.

About the Program

PANYNJ was created to promote and protect the commerce of the Port District – a region within approximately a 25-mile radius of the Statue of Liberty – and to undertake port and regional improvements not likely to be financed by private enterprise or attempted by either New York or New Jersey alone. PANYNJ conceives, builds, operates, and maintains infrastructure critical to the New York/New Jersey region’s trade and transportation network. These facilities include America’s busiest airport system, the Port Authority Trans-Hudson rail transit system, six tunnels and bridges between New York and New Jersey, the Port Authority Bus Terminal in Manhattan, the George Washington Bridge Bus Station, and the World Trade Center.

PANYNJ’s real estate portfolio consists of over 12,000 acres of land and 45 million square feet of office, industrial, retail, and technical space, and includes airport and marine terminals, buildings, warehouses, parking lots, billboards, and advertising spaces.

Key Findings

• PANYNJ did not realize revenue of $8.3 million from four leases at the World Trade Center (WTC) during the period June 2014 through November 2019. This amount included money due to PANYNJ for utilities, amounts due when tenants terminated their leases early, and other percentages of revenues specified in leases.
• During our audit scope, PANYNJ’s Real Estate Department leased seven external spaces for its use within a half mile of 1WTC at a cost of $15.9 million, despite the fact that 1WTC was not fully occupied at the time. Despite repeated requests, PANYNJ did not provide any documentation that it had evaluated its own available space before renting external space.
• Due to inadequate monitoring of its vendor and no independent tracking or verification of advertising revenue – lacking even a list of the estimated 1,000 spaces where advertisements were placed – PANYNJ does not have assurance that it is maximizing revenue from advertising at its airports.
• During our review of two sampled airport system leases, we found that a property leased from a municipality for future development of Newark Airport was later sub-leased to a private business for a for-profit purpose. PANYNJ should have notified the municipality of this sub-lease and paid real property taxes. The other lease was for a garage as part of the ongoing redevelopment of LaGuardia Airport. PANYNJ paid $1,040,755 in real property taxes for the period September 1, 2016 to December 12, 2019 instead of applying for an exemption based on the property’s use and PANYNJ’s status as a government entity.
• PANYNJ did not have formal policies and procedures for the leasing of properties. In addition, we found that PANYNJ did not always follow the process that PANYNJ officials described as routine.

Key Recommendations

• Collect all revenue due in a timely manner.
• Formalize policies and procedures for leasing external property, including requiring documentation of the decision to rent external property for PANYNJ use, such as the initial request for the space, an evaluation of the availability and usability of internal space, and the basis for determining that the leasing of external space was more beneficial for PANYNJ.
• Actively monitor the contract with the advertising vendor regarding inventory of advertising locations available for sale and advertisement pricing, and consider obtaining direct access to the vendor’s system to support monitoring of contracts.
• Ensure that the taxing authorities where the leased properties are located are properly notified of the property uses and of PANYNJ’s tax-exempt status.