Border war still stalls Maersk, Port Authority

It may be payback time at the Port Authority of New York and New Jersey.

Embittered that an edict by Gov. Christie Whitman has led to three months of paralysis on the 12-member board, New York commissioners are weighing retaliation.

In a continuing game of cat and mouse, Gov. George Pataki is now said to be demanding New York commissioners not act on the lease for a huge cargo terminal at Port Newark-Elizabeth until the board first votes on the long list of agency business stalled by Whitman's order.

Since September, Whitman has ordered major items held until a vote on the Maersk Sealand cargo terminal in retaliation for Pataki's initial reluctance to go along with the deal. But the months of continuing inaction have piqued the New York governor, who already was irked when an earlier agreement to bury the hatchet on the contentious issue came unraveled.

After an unprecedented war of words last spring over the cost of the huge northeast hub and whether it gave New Jersey too much, the two Republicans agreed to put the dispute aside for a time. That paved the way for the board to vote in June on $1 billion terminal projects at Newark and Kennedy airports to be built by Continental and American airlines.

Returning from its customary August recess, the board was suddenly confronted by Whitman's no-action-without-Maersk edict at its Sept. 30 meeting. After caucusing in executive sessions all day, the board canceled its public meeting at the last minute on orders from Trenton. No session was held Oct. 28 and the Nov. 18 agenda was packed mostly with routine housekeeping items.

Now, with the commissioners scheduled to meet for their final session of the year on Thursday, New Yorkers are insisting on a vote on more substantive items. They include the release of a request for proposals from developers interested in taking over the World Trade Center and the finalization of a deal to sell air rights above the Port Authority Bus Terminal for a 35-story office building.

"The agenda has to pass before Maersk Sealand," one New Yorker said flatly.

The countermove did not surprise Jayne O'Connor, Whitman's press secretary. "They seem to be coming up with excuse after excuse and yet we still have to hear from them the real reason why they are blocking this deal. I think they forgot."

O'Connor noted that Pataki wrote Whitman June 23 saying he was not opposed to Maersk Sealand. "This can be resolved tomorrow if New York does what it said it would do months ago, which is approve Maersk Sealand."

But Pataki's chief economic aide, Charles A. Gargano, said the governor's support came with an important condition.

We're still very concerned about the very large subsidy for this project," said Gargano, who is chairman of the Empire State Development Corp. "New York feels there has to be some kind of balance achieved if we are to move forward with Maersk Sealand," one that also accounts for agency subsidies to PATH and the Port Authority bus terminal.

At the same time, Gargano said it was unfair that the Port Authority agenda "should be held hostage because of one project. I don't think that's the right thing to do."

News of the latest twist in an impasse that has clouded much Port Authority business for almost a year came as the agency's executive director conceded the 78-year old institution was at a crossroads.

Robert E. Boyle, a long-time Pataki friend whom the governor named to the Port Authority's top administrative job in 1997, made the remarks last week at a forum sponsored by Crain's New York Business. It was the same audience he chose shortly after his appointment to echo Pataki's question on whether the Port Authority was worth preserving.

By January 1998 he told The Star Ledger he was convinced it was. Now, after seeing record revenues pour into the agency's treasury, reaching accords on 20 languishing contracts and nurturing a shell-shocked 8,000 employees out of the disillusion of a wrenching period of job cuts by his predecessor, Boyle was troubled a $40 billion agenda for growth at the seaports and airports was being jeopardized by political wrangling.

"The stewardship of the Port Authority over the years has certainly not been perfect, but, on balance, there has been no public authority in the world with a better record for as long a period of time," he said Tuesday.

"The question of what is in the public interest must be answered from the past and for the future," Boyle continued. "Are we better off without a strong Port Authority, or can we honestly say the Port Authority has not and cannot in the future serve the public interest and its stewardship of facilities they built should end.

"If that be the case, who will be the new steward?" he said. "Someone once said there are authors and critics in this world," he continued. "The public sector unfortunately has an abundance of the latter and a severe shortage of the former."

During the speech, Boyle pointedly noted the Maersk Sealand pact was not even ready for board action.

He said agency lawyers ruled that no agreement could be signed until the federal Maritime Administration sanctioned Maersk's $800 million acquisition of Sea-Land Service from CSX Corp. and until the lease was in its final written form. MARAD approved the acquisition the next day and the deal was closed on Friday.

Tommy Thomsen, president and chief executive of Maersk Inc. expressed hope the lease will be on Thursday's agenda but Gargano said it was unlikely due to the broader agreement the governors must reach while Boyle said merger related details still to be included in the lease made action more likely in January.

During an interview in his Twin Towers office on Thursday, Boyle said he saw no reason why the board could not act on the rest of the stalled agenda but he would not comment on a New York strategy that made the action a quid prop quo for Pataki's consent to Maersk Sealand.

Boyle, despite his long-time friendship with Pataki, said his role was not to negotiate a settlement between Albany and Trenton.

"The solution is between the governors' offices and the commissioners," he said. "I'm the executive director of the Port Authority and I represent both sides."

But not all commissioners agree that is their role. "Politically you've got to let the process work," said Peter Kalikow, a New York board member. "In the end, the direction is controlled by the governors."

The duty of negotiating a gubernatorial deal has fallen to investment banker Lewis M. Eisenberg of Rumson, a Whitman confidante who chairs the Port Authority board, and Gargano, the board's vice-chairman.

"There seems to be general agreement that Maersk Sealand, which now ready for signing, should proceed to agreement," he said, "Once that's done there's no reason to expect that other meaningful matters that have been caught in this process won't move forward as well."

But Gargano insists on a broader agreement that includes addressing financial losses incurred by the bus terminal and PATH that profits from bridges and tunnels will soon not cover. With $1 billion needed for a new car fleet and signal system, this could ultimately lead to the first hike in the $1 PATH fare since 1987.

Resolving the stalement could unleash a whole new era for the Port Authority. The agency is contemplating a $20 billion, 15-year capital plan.

"In these times of great stress on the transportation infrastructure it behooves all sides to move forward together," Eisenberg said.