COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2002 > ILLUMINATE > INSPIRE > CONNECT > ENVISION Table of Contents 2002 ANNUAL REPORT 2002 ANNUAL Introductory Section Financial Section 2 Mission Statement 23 Report of Independent Auditors 3 Port Authority Facilities and Services 24 Management’s Discussion and Analysis 4 The New York/New Jersey Region General Purpose Financial Statements 5 Letter of Transmittal to the Governors 30 Consolidated Statements of Net Assets 31 Consolidated Statements of Revenues, 6 Board of Commissioners Expenses and Changes in Net Assets 8 Officers and Directors, Organization Chart 32 Consolidated Statements of Cash Flow 9 Letter from the Executive Director 34 Notes to Consolidated Financial Statements 10 2002 Overview Financial Schedules Pursuant to Port Authority 18 Letter of Transmittal Bond Resolutions 61 Schedule A – Revenues and Reserves 62 Schedule B – Assets and Liabilities 63 Schedule C – Analysis of Reserve Funds Other Supplemental Information 64 Schedule D – Selected Statistical Financial Data 65 Schedule E – Information on Port Authority Operations 66 Schedule F – Information on Port Authority Capital Program Components Statistical Section 67 Port Authority Facility Traffic 2002 ANNUAL REPORT 2002 ANNUAL 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, provide access to the rest of the nation and to the world, and strengthen the economic 2 competitiveness of the New York/New Jersey metropolitan region. Facilities and Services Aviation Port Commerce Waterfront Development John F.Kennedy International Airport Auto Marine Terminal Queens West Waterfront Development Newark Liberty International Airport Brooklyn Port Authority Marine Terminals The South Waterfront at Hoboken LaGuardia Airport Port Newark Teterboro Airport Elizabeth-Port Authority Marine Terminal Downtown Manhattan Heliport Howland Hook Marine Terminal International Business AirTrain JFK Greenville Yard Development Offices AirTrain Newark Oak Point Rail Freight Link London Tokyo Tunnels, Bridges & Terminals Port Authority Trans-Hudson Representatives in Hong Kong, Seoul, Shanghai, Singapore George Washington Bridge PATH Rail Transit System George Washington Bridge Bus Station Journal Square Transportation Center Bayonne Bridge Outerbridge Crossing Goethals Bridge Economic Development Holland Tunnel Lincoln Tunnel The Legal Center Port Authority Bus Terminal The Teleport Essex County Resource Recovery Facility Bathgate Industrial Park 3 Industrial Park at Elizabeth Ferry Transportation 2002 ANNUAL REPORT 2002 ANNUAL The New York/New Jersey Region Area 3,900 Square Miles Population 16.8 Million Total Labor Force 7.9 Million Total Wage and Salary Jobs 8 Million Total Personal Income $700 Billion (est.) 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, Richmond (Staten Island), and The Bronx; the four suburban New York counties of Nassau, Rockland, Suffolk and Westchester; and the eight northern New Jersey 4 counties of Bergen, Essex, Hudson, Middlesex, Morris, Passaic, Somerset, and Union. The Honorable George E. Pataki Governor State of New York The Honorable James E. McGreevey Governor State of New Jersey Dear Governors: In conformity with the Port Compact of 1921, we are pleased to submit to you and the legislatures of New York and New Jersey this 2002 Annual Report of The Port Authority of New York and New Jersey. In many ways, 2002 was a year that conclusively demonstrated the importance of the Port Authority to the economic well-being of New York and New Jersey. Although the Port Authority was still recovering from the devastating emotional and financial blows inflicted on September 11, 2001, the organization nevertheless moved forward with steady resolve and determination on initiatives that will improve the quality of life for residents of both states. Key among these initiatives was advancement of the multi-year infrastructure renewal program, designed to keep the bistate economy strong and globally competitive.The Port Authority delivered on major capital investments, which included making enhancements and introducing customer service improvements at the region’s airports, Hudson River crossings and port terminal facilities. Despite the continuing impact of the slow economy, and higher security and insurance costs on agency revenues, the Port Authority maintained its commitment to the region and the states, while holding the line on bridge and tunnel tolls and PATH fares. In collaboration with public and private partners, the Port Authority remained on schedule for re-establishing PATH rail service to Lower Manhattan.The $544 million PATH Restoration Program will rebuild the PATH connection to Lower Manhattan for thousands of commuters. Conceptual plans also are being developed for a PATH terminal facility — envisioned as the gateway to Lower Manhattan — at the World Trade Center site. Among the year’s many successes was the agreement signed with the City of Newark to extend the Port Authority’s lease of the city’s airport and seaport to 2065.The extension provides the long-term stability needed to ensure planning of future investments to improve service at the facilities, provide jobs and strengthen the regional economy.The Port Authority also was proud that a new name — Newark Liberty International Airport — was established as part of the agreement to honor the heroes of September 11. The Port Authority is financially strong and able to carry on with record levels of capital investment, helping to ensure a prosperous future for the bistate region. Over the five-year period from 2003 to 2007, the agency expects to invest approximately $8.7 billion in transportation and security improvements. More than $500 million alone has been earmarked to reinforce security systems and improve public safety at our critical transportation facilities. As we move forward, the agency will continue its mission of providing vital transportation and commerce services. 5 Very truly yours, Jack G. Sinagra Charles A. Gargano Chairman Vice Chairman April 10, 2003 Origins of the Port Authority The Port Authority of New York and New Jersey was established on April 30, 1921. It was the first interstate agency ever created under a clause of the Constitution permitting compacts between states with Congressional consent. The agency’s area of jurisdiction was called the Port District, a bistate region generally within 25 miles of the Statue of Liberty.The mandate of the agency was 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: a modern wharfage for the harbor shared by the two states, tunnel and bridge connections between the states 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 Commissioners to the agency’s Board of Commissioners, each appointment subject to the approval of the respective state senate. The twelve Commissioners serve as public officials without remuneration. The Governors retain the right to veto the actions of the Commissioners. Within the Port District, the Port Authority 2002 ANNUAL REPORT 2002 ANNUAL undertakes projects and activities in accordance with the Port Compact of 1921 and amendatory and supplemental bistate legislation. The Board of Commissioners appoints an Executive Director to effect its policies and manage day-to-day operations. Board of Commissioners Footnotes Jack G. Sinagra, Chairman 1. Commissioner Coscia joined the Board on April 3, 2003, Charles A. Gargano, Vice Chairman succeeding Commissioner Kushner. Commissioner Kushner joined the Board on June 26, 2002 and resigned from the Bruce A. Blakeman Board on February 26, 2003. Michael J. Chasanoff Anthony R. Coscia1 2. Commissioner Pocino joined the Board on June 26, 2002, Lewis M. Eisenberg2 succeeding Commissioner Eisenberg, who resigned from the Charles Kushner1 Board on February 19, 2002. David S. Mack 6 William J. Martini3 3. Commissioner Martini resigned from the Board on Alan G. Philibosian4 November 18, 2002. Raymond M. Pocino2 Bradford J. Race Jr.5 4. Commissioner Steiner joined the Board on January 22, 2003, Anthony J. Sartor succeeding Commissioner Philibosian. Henry R. Silverman5 Anastasia M. Song 5. Commissioner Silverman joined the Board on June 25, 2002, David S. Steiner4 succeeding Commissioner Race, who resigned from the Board on February 26, 2002. Joseph J. Seymour, Executive Director Board of Commissioners Jack G. Sinagra Charles A. Gargano Bruce A. Blakeman Michael J. Chasanoff Senior Vice President Chairman & CEO Attorney-at-Law Managing Partner Turtle & Hughes Inc. Empire State Development Robert M. Blakeman and Chasanoff Properties Corporation Associates Anthony R. Coscia Lewis M. Eisenberg Charles Kushner David S. Mack Partner Co-Chairman Chairman Senior Managing Windels Marx Lane Granite Capital International Kushner Companies Partner & Mittendorf, LLP Group The Mack Company William J. Martini Alan G. Philibosian Raymond M. Pocino Bradford J. Race Jr. United States Attorney-at-Law Vice President/Eastern