The Port Authority of New York and New Jersey Comprehensive Annual Financial Report for the Year Ended December 31, 2007 Prepared by the Public Affairs and Comptroller’s departments of The Port Authority of New York & New Jersey 225 Park Avenue South, New York, NY 10003-1604 www.panynj.info Table of cont en ts Introductory Section Mission Statement 2 Port Authority Facilities 3 The New York-New Jersey Region 4 Letter of Transmittal to the Governors 5 Board of Commissioners 6 Officers and Directors 8 Letter from the Executive Director 9 The Year in Review New beginnings 10 It’s time to build again 12 Respecting the environment 18 Fostering opportunity, building communities 20 New standards in customer service 22 Operations: Making it happen every day 24 Aviation 25 PATH 28 Port Commerce 29 Tunnels, Bridges & Terminals 31 Development 32 Letter of Transmittal to the Board of Commissioners 33 Financial Section Report of Independent Auditors 39 Management’s Discussion and Analysis 41 Basic Financial Statements Consolidated Statements of Net Assets 49 Consolidated Statements of Revenues, Expenses and Changes in Net Assets 50 Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements 53 Financial Statements Pursuant to Port Authority Bond Resolutions Schedule A – Revenues and Reserves 82 Schedule B – Assets and Liabilities 83 Schedule C – Analysis of Reserve Funds 84 Statistical Section Statistical Section Narrative 87 Schedule D-1 – Selected Statistical Financial Trends Data 88 Schedule D-2 – Selected Statistical Debt Capacity Data 90 Schedule D-3 – Selected Statistical Demographic and Economic Data 92 Schedule D-4 – Selected Statistical Operating Data 93 Schedule E – Information on Port Authority Operations 94 Schedule F – Information on Port Authority Capital Program Components 95 Schedule G – Facility Traffic 96 1 Mission To identify and meet the critical transportation infrastructure needs of the bistate region’s businesses, residents, and visitors: providing the highest quality, most efficient transportation and port commerce facilities and services that move people and goods within the region, providing access to the rest of the nation and to the world, while strengthening the economic competitiveness of the New York-New Jersey Metropolitan Region. 2 The Port Authority of New Y ork & New Je rsey Fa cilit ies The Port Authority of New York & New Jersey operates many of the busiest and most important transportation links in the region. The Port Authority’s facilities and services include: Aviation Port Commerce Development John F. Kennedy International Airport Auto Marine Terminal Bathgate Industrial Park LaGuardia Airport Brooklyn-Port Authority Marine Terminal Essex County Resource Recovery Facility Newark Liberty International Airport Elizabeth-Port Authority Marine Terminal Ferry Transportation Stewart International Airport Howland Hook Marine Terminal Industrial Park at Elizabeth Teterboro Airport Port Newark The Legal Center Downtown Manhattan Heliport The Teleport Port Authority Trans-Hudson Waterfront Development Tunnels, Bridges & Terminals Journal Square Transportation Center Queens West Waterfront Development Bayonne Bridge PATH Rail Transit System The South Waterfront at Hoboken George Washington Bridge The World Trade Center Site George Washington Bridge Bus Station Goethals Bridge International Business Development Holland Tunnel Representatives in Hong Kong, London, Lincoln Tunnel Shanghai and Tokyo Outerbridge Crossing Port Authority Bus Terminal 3 The New Yo rk-New Je rsey Region The New York-New Jersey Metropolitan Region, one of the largest and most diversified in the nation, consists of the five New York boroughs of Manhattan, Brooklyn, Queens, Staten Island, and The Bronx; the four suburban New York counties of Nassau, Rockland, Suffolk, and Westchester; and the eight northern New Jersey counties of Bergen, Essex, Hudson, Middlesex, Morris, Passaic, Somerset, and Union. Area 3,900 square miles Population 17.2 million (estimate for 2007) Labor Force 8.5 million (average for 2007) Total Wage and Salary Jobs 8.0 million (average for 2007) Total Personal Income $897 billion (estimate for 2007) (For detailed statistical and demographic information on the region, see Page 92 in the Financial Section of this report) 4 The Honorable The Honorable David A. Paterson Jon S. Corzine Governor Governor State of New York State of New Jersey Dear Governors: In conformance with the Port Compact of 1921, I am pleased to submit to you, and the legislatures of New York and New Jersey, the 2007 Comprehensive Annual Financial Report of The Port Authority of New York and New Jersey. As an agency and as a region, we are facing significant transportation challenges. Among them is the urgent need to improve mobility of people and goods to foster economic growth and opportunity. We are actively working to plan, design, and build transportation systems and improvements that will ease congestion throughout our region’s transportation network – in the skies, on our roads and rails, through our ports, and on our bridges and tunnels. At the same time, we remain committed to promoting environmental sustainability and providing the highest levels of service and integrity for the benefit of our customers and our stakeholders. In 2007, our agency identified ways to fulfill our mission more effectively, operate our facilities more efficiently, and serve our customers and the general public more responsively. We undertook several key governance changes designed to provide the public with greater access to information about the agency and its activities, and the transparency of our decision-making processes to ensure that our activities meet the highest standards of public accountability. We also forged key partnerships with others to advance projects vital to regional growth and prosperity. These include redevelopment of The World Trade Center site, where we made significant progress on the construction of several components in the development of that important project. Another key partnership is the Access to the Region’s Core (ARC) project, a second commuter rail tunnel under the Hudson River that will expand regional transportation capacity, ease congestion at other trans-Hudson crossings, and remove thousands of automobiles from the roads. The Port Authority has set aside $3 billion toward this key project, which will be developed in conjunction with NJ Transit and other regional stakeholders. Both The World Trade Center site redevelopment and our commitment to the ARC project are key elements of the Port Authority’s updated 10-year capital plan. That plan, adopted at the end of 2007, outlines $29.5 billion in trade and transportation infrastructure investments for the region over the next decade. Consistent with agency goals to alleviate congestion and reduce pollution from transportation sources, the plan directs nearly $8 billion to regional mass transit initiatives. To fund this updated capital plan, we recognized that the agency would require increased revenues. Our Board authorized a series of public hearings – one of the most extensive public outreach efforts in the agency’s history – on a toll/fare increase proposal, our first in seven years. It was an opportunity for us to conduct a dialogue with our customers and stakeholders about our region’s critical transportation needs in the years ahead. On behalf of the Commissioners and the staff of the authority, I thank you for the support you have demonstrated for the Port Authority and its programs. We look forward in 2008 to building upon our achievements of the past year. Sincerely, Anthony R. Coscia Chairman April 24, 2008 5 Co Bommissioard of ne rs Anthony R. Coscia, Chairman Henry R. Silverman, Vice Chairman Virginia S. Bauer 1 Bruce A. Blakeman Michael J. Chasanoff Christine A. Ferer Charles A. Gargano 2 Angelo J. Genova 3 David S. Mack Raymond M. Pocino Anthony J. Sartor Jack G. Sinagra 1 David S. Steiner Anthony E. Shorris, Executive Director Susan Bass Levin, First Deputy Executive Director 1 Commissioner Bauer joined the Board on June 19, 2007, succeeding Commissioner Sinagra. 2 Commissioner Gargano resigned from the Board on August 15, 2007. 3 Commissioner Genova resigned from the Board on July 1, 2007. Origins of The Port Authority of New York and New Jersey The Port Authority was established by Compact between the states of New York and New Jersey on April 30, 1921, as the first interstate agency created under the clause of the United States Constitution permitting compacts between states with the consent of Congress. The Compact also created the Port District, an area of about 1,500 square miles in both states, centering about New York Harbor. Over the years, the mandate of the agency has developed to promote and protect the commerce of the bistate port, and to undertake port and regional improvements not likely to be financed by private enterprise or to be attempted by either state alone: modern wharfage for the harbor shared by the two states, tunnel and bridge connections between the states, terminal and transportation facilities, and in general, trade and transportation projects to promote the region’s economic well-being. Governance of the Port Authority The Governor of each state appoints six members of the agency’s Board of Commissioners, for overlapping six-year terms; each appointment is subject to the approval of the respective state senate. Commissioners serve as public officials without remuneration. The Governors retain the right