Rick Cotton Talks COVID Impacts on the Port Authority
Things were looking good for the Port Authority of New York and New Jersey at the beginning of the year.
The interstate agency — which oversees a good chunk of the area’s transportation infrastructure — came off a strong 2019 that saw increased ridership with fares flowing in while it was embarking on much-needed renovation projects at the airports it operates: LaGuardia, John F. Kennedy and Newark-Liberty. It also had a beefy capital plan dedicated to addressing “legacy infrastructure that is subpar, far below what the region deserves in quality,” executive director Rick Cotton said.
“2019 was a banner year,” Cotton said. “Every one of our facilities was operating at levels, or near record levels, and setting new records virtually every month. At the same time, we had the largest capital plan in our history.”
The Port Authority looked poised for a repeat in 2020, until the coronavirus pandemic turned the world upside down. Usage at its facilities dramatically fell early this year — cutting fare and airport revenues significantly — while the agency rushed to develop safety protocols to help mitigate the risk to its staff of catching the virus. (Cotton made headlines as one of the first major New York officials to contract COVID-19 in March.)
Now, the agency is expected to have billions in shortfalls in paying for its 10-year, $37 billion capital plan. It has started to plead with the federal government to get a $3 billion infusion to get it back on track.
Commercial Observer sat down with Cotton (virtually) to talk about the damage the pandemic has wreaked on the agency, the effects of the federal government not stepping in to help, and its plans for next year.
Commercial Observer: How has the coronavirus impacted the Port Authority?
Rick Cotton: The activity levels at our airports plunged over 95 percent. Travel on our PATH commuter railroad plunged 95 percent. Traffic across our bridges and through our tunnels plunged more than 60 percent. The port was down nearly 20 percent. That just blew an enormous hole in our revenues. We estimate that we will suffer revenue loss in excess of $3 billion over the 24-month period beginning last spring.
What we’re doing is just handling that catastrophic impact on our facilities, but I’m proud to say that every single facility remained open and operating through the depths of the coronavirus and continuing until today. We developed a major focus, obviously, on the health and safety of our employees and the health and safety of our customers who used our facilities. Those initiatives were intense, but we had a very favorable record in terms of managing through it.
We managed to keep the major construction projects that were already in construction going, like the LaGuardia and Newark airport projects. We obviously had to find savings; we took $200 million out of our expense line in a very short period of time.
Can you talk me through the process of developing safety plans for the facilities, while coming up with ways to cut out $200 million from your expenses?
There wasn’t a choice, we had to do both. The first job, obviously, was to address the continued operation of the facilities. Take the airports. Given the dramatic drop in passenger volume, we worked closely with our partners — the terminal operators and the airlines — to reduce the operating footprints of each terminal, each concourse. That, itself, produced economies. But we also dove into just identifying every single expense that we possibly could cut back on.
The safety procedures were an entirely different challenge. We very, very quickly eliminated any major gathering of employees.
We went very quickly to where one-third of our employees were working remotely. We also went very quickly to where we have A and B teams, so that we would separate employees with common skill sets, and have one come in on one shift and the B come in on another shift. The point being, if you wound up with an employee testing positive, you wouldn’t result in having every single person with that particular skill being forced to quarantine for 14 days.
Has usage at airports started to pick back up?
The answer at the airports is the recovery is quite slow. Air travel remains significantly depressed. Our airports are still down 80 percent from what they were pre-COVID. Travel on our PATH commuter railroad is still down just under 80 percent of what it was pre-COVID. The travel on the bridges and tunnels has recovered somewhat. It’s still down 10 percent.
The seaport has probably been the most resilient. Back in the spring, its cargo volumes were down about 16 or 17 percent. This August was actually a bit above August of a year ago, and August of a year ago was a record. The supply lines throughout the crisis have proved very, very resilient, which, obviously, is a good thing for the country and the region.
With the exception of the seaport, we’re still losing revenue very severely. Our estimate was, in the second quarter, we were losing revenue at the rate of about $240 million a month. So, if you extrapolate that, as of August, we have lost just about $1 billion in revenue.
What’s the impact of that revenue loss for the agency?
The Port Authority, as you may know, is totally self-sustaining in normal times. We don’t get any funding from New York. We don’t get any funding from New Jersey. We don’t regularly get any funding from the federal government. The Port Authority was set up almost 100 years ago to generate its own revenues from business deals with partners who lease facilities at the airports and the seaport, from tolls, from fares, and from other fees that we charge. Those revenues exceed our operating expenses, and we take every dollar of that net operating income and put it into our capital construction program.
When our revenue lines get severely compromised, what it means is that we lost that financial support for our capital construction ambitions, and that’s the situation that we’re in now.
What would happen if the federal government doesn’t step in with the $3 billion in aid you requested?
We’re grappling with that. We are still advocating as strongly as we can with the federal government in D.C. to recognize that this is a once-in-a-generation, or once-in-a-hundred-years, financial devastation, and that they really need to step up and provide some degree of financial support.
We’re combing through our capital plan. We’re making contingency plans, in terms of, what the impact will be. We’re trying to hold off making final decisions until we have a somewhat better read on both what the best judgment is, in terms of, the recovery trajectory and what’s to be expected from Washington.
I know you’ve said you’re still finalizing all of this, but are there any plans for the future to start raising tolls or PATH train fares and cutting service?
We’re really trying to identify our options at this point. There’s certainly no decisions, we’re really trying to figure out what our options are.
The pillars that we put in the ground in terms of moving forward are those projects that are under construction. We’re committed to move those forward; the two leading examples being the complete rebuild of LaGuardia and the construction of the brand-new Terminal 1 and the associated parking garage and central rental car facility [at Newark].
We’re committed to finishing those; it wouldn’t make sense to stop in the middle. So, the challenge in terms of our ambition, in terms of infrastructure projects that are still in the design phase is whether we can preserve those. That has really been our pitch to Washington. What’s at stake is not only having 21st-century infrastructure — which this country is way, way behind on — but also our construction spending could be a major driver of the economic recovery that is so desperately needed.
How has the pandemic impacted the construction times on the airport projects?
We really have been able to sustain the construction through the COVID crisis. It has definitely produced enormous challenges, because all of the workflow rules have had to be adjusted to assure the health and safety of the construction workers.
There was an initial period where things slowed down briefly, but we really have sustained the construction schedules. There’s no question that it added huge, additional challenges, because it’s not only about the construction workers on-site, it’s a question about workers at fabrication facilities that are scattered around the country. The schedule of the construction projects has to adjust if one of those fabricators or suppliers has their own challenges with COVID.
Public meetings have recently started for the $2 billion AirTrain project at LaGuardia [which would connect the airport with the subway and Long Island Railroad]. Why do you think that project is still so important?
Every single passenger survey has identified access to the airports as one of the key criteria by which they judge the quality of an airport. LaGuardia is the only major airport on the East Coast without a real mass transit link. That is unconscionable. It is a symbol of the subpar nature of what that airport has been in the past.
It’s wildly overdue for air travelers to have that option, but the advantage of the AirTrain goes well beyond that. The fact is that the roads around LaGuardia are enormously congested. The congestion currently challenges air travel, because nobody has any idea how long a trip to the airport would be, particularly at peak periods. That very congestion affects other motorists, so getting people out of their cars is a contribution to reduce congestion.
From the point-of-view of public benefit, the AirTrain will provide a reliable and predictable rail mass transit trip to the airport, it will get people out of cars and reduce road congestion, and it will benefit the environment. I believe it would be irresponsible not to provide that rail link to LaGuardia Airport.
Do you have a sense of how many Port Authority workers tested positive for COVID-19?
It was a relatively low number. It was in the vicinity of 200, but that’s been over the past seven or eight months. One thing we kept very close track of was the number of Port Authority employees who were out on quarantine. At the high point, if you went back to March or April, as, obviously, all of this hit very quickly, we were up to about 700 employees in quarantine — most of them because they had been exposed to someone who wound up testing positive. With very diligent work, as I said with all of these workplace changes, within a couple of months, we were down under 100. We’re still at around 60 to 70 employees who are in quarantine.
In the course of the entire outbreak, we had two employees who died. One was a person who was working remotely, so it didn’t come from a workplace exposure. And one was in a maintenance facility. But we put a lot of effort into trying to assure the health and safety of our employees, and we started very quickly. The urgency of doing that came home very quickly to me, since I was actually one of the earlier cases of getting the virus in the first week in March, so it brought it home to me on a very personal basis.
What was the experience of fighting the virus like?
I was lucky in that I was virtually asymptomatic. I had very, very mild symptoms. My wife, who contracted the virus at the same time, had a more serious and more difficult road, but we’re both fully recovered. The main thing that comes home to you is the anxiety and the unknown. The virus is, obviously, so variable in terms of its effects on individuals. Obviously, you don’t know in the beginning how it’s going to affect you — or, in my case, my wife — so it’s an intense emotional and anxiety-producing experience.
I know everything’s up in the air, but what’s the plan and goals for next year?
The goal for next year is to work as hard as we can to give people confidence in the safety and public health protections that are in place at all our facilities. We strongly believe that air travel will come back. Travel occupies a hugely important part of people’s lives. It gives them something to look forward to [and] enables trips to be with family, friends, and business. We believe it’s a question of when, not if, and we want to work as hard as we can to both provide health and safety protections and give people confidence in their safety when they travel.
Then, we are highly focused on salvaging our ambitions in terms of our capital plan. That is an enormous challenge, given the economic challenge the virus has done, but we’re highly focused on it.
Editor’s note: The interview was conducted before the presidential election. Cotton did not respond to a follow-up question on the impact a new administration might have on the Port Authority seeking federal funds.