Philly's Delaware River toll authority "culture" of waste, mismanagement, corruption - NJ state controller

March 31, 2012

After an 18 month investigation the New Jersey state controller Matthew Boxer reports that the bistate operator of four toll bridges and a rail transit line in the Philadelphia area is riddled with corruption and mismanagement. In a press release Boxer says: "In nearly every area we looked at, we found people who treated the DRPA like a personal ATM (bank cash dispenser), from DRPA commissioners to private vendors to community organizations. People with connections at the DRPA were quick to put their hand out when dealing with the agency, and they generally were not disappointed when they did."

Even its name is a fraud. DRPA stands for Delaware River Port Authority but it has no port.  Its business is the four Delaware River toll bridges near central Philadelphia - Benjamin Franklin, Walt Whitman, Commodore Barry and Betsy Ross bridges - which are its only moneymakers.

It also operates a Philadelphia to Lindenwold NJ suburban rail transit line called PATCO which loses toll money heavily.  And it runs a single ferry. (see BACKGROUND below.) In the past two decades it spread its money into so-called 'economic development' projects - commercial ventures that investors wouldn't fund.

A statement from Boxer's office of state controller (OSC) highlights various abuses:

- insurance commission payments of shared among approved brokers regardless of whether they actually did anything for the toller, a senior employee at DRPA telling the OSC she was made to feel like she was dealing with "the f***ing Mob" (maybe she was?)

- lack of documented procurement procedures and consultants admitting they did no work for their money and claims by consultants they were required by DRPA to launder money to other consultants or contractors

- under the banner of a "social and civic sponsorship fund" toll monies were doled out at the whim of commissioners, there being no application process or auditing of how the monies were used, four fifths going to organizations linked to DRPA commissioners or which "provided a personal benefit to DRPA officials in exchange for the contribution"

- under the heading of "economic development" DRPA has incurred debt of $440 million, many of the projects arriving pre-approved by commissioners or state officials or getting only a superficial staff review for viability

- a steady move away from loans to such 'economic development' ventures toward outright grants to favored rackets

- commissioners and senior staff got lifetime DRPA-paid E-ZPass accounts for free passage over DRPA toll bridges and were able to enroll on their no-toll accounts "friends, business associates, in-laws, and their adult children"

- DRPA funding of hotel, conference and travel expenses to events unrelated to the toll business, some of them overtly political, social or personal affairs

"A history and culture" of waste and mismanagement

The report 81 pages long starts by saying that the investigation found "a history and culture of weak policies, procedures and internal controls that have contributed to wasteful spending and mismanagement of the funds..."

They say the $440m spent on so-called economic development projects contravened the authority's stated policies and had damaged its financial standing putting in jeopardy its ability to raise capital for the bridges.

The report acknowledges that DRPA has corrected or is working to correct some deficiencies but says: "tollpayers have borne a financial burden attributable to years of mismanagement and neglect, and continue to do so..."

It says a focus on Pennsylvania and New Jersey vendors getting equal revenues called "parity" was wasteful and led to abuses and many no-work payments called "true-ups."

DRPA officials had, the OSC says, falsely claimed the 'true-ups' were voluntary arrangements the insurance brokers worked out between themselves whereas "documents and witnesses reveal that DRPA representatives actively were engaged in this redistribution."

After the OSC inquiry was initiated in 2010 DRPA conducted its first competitive procurement of insurance, the report says, ending a long period over which insurance was placed with a favored group of companies.

'Economic development' rackets

On the so called economic development projects of DRPA the OSJ says:

"DRPA's charter mandated that DRPA-funded economic development should proceed only with 'funds available after appropriate allocation for maintenance of bridge and other capital facilities';

"DRPA did not have such surplus funds so DRPA incurred significant debt, through the issuance of bonds, to engage in economic development projects, while ignoring a backlog of bridge and capital facility projects;

"All of the DRPA economic development projects reviewed by OSC had incomplete or missing application and approval documentation, and many projects were approved by DRPA with little or no requisite due diligence, in contravention of stated DRPA policies and procedures;

"Although DRPA policy called for the monitoring of ongoing economic development projects to be accomplished, in part, through the submission of quarterly reports to the DRPA Board of Commissioners, quarterly reporting ceased prior to 2004 due to lack of board interest;

"Despite a recommendation from a financial advisor in 1996 to avoid outright grants and favor economic development loans, DRPA, over time, shifted from a loan-based program to a grant-based program, which not only led to decreased financial return to DRPA but also to less oversight and scrutiny of approved projects; and

"In contravention of its charter, DRPA has failed to update its Master Plan for economic development projects since 2005, thereby depriving the public of notice and comment concerning the more than $100 million expended on such projects since that time."

'Social and civic sponsorship" of perks and freebies

On the so called Social and Civic Sponsorship Fund OSC reports:

"DRPA did not use objective criteria to determine whether a particular contribution would be a reasonable and appropriate expenditure of tollpayer funds;
"Expenditures were approved in an informal manner and little, if any, requisite information was actually provided by the beneficiary;

"The majority of funds went to organizations linked to DRPA commissioners and executive employees; and

"The funds largely went to organizations that provided a personal benefit to DRPA officials in exchange for a contribution (e.g., tickets to galas, dinners and sporting events)"

DRPA reaction - going for Chutzpah Award of The Year

DRPA's reaction came in the form of  a statement today by the Audit Committee of the board of directors that began: "We appreciate the time, effort and dedication invested in the Office of the State Comptroller's report, as well as the care taken to identify practices that we agree should not be repeated in the future."

It says that many of the "topics" (thievery, giveaways, waste, mismanagement, disregard for rules, self-dealing and so forth) identified in the report  "already have been addressed by the DRPA, and we appreciate that the OSC has recognized those efforts."

DRPA's audit committee says:

- they have terminated no-work insurance fees and are adopting competitive procurement

- no new 'economic development projects' are being funded and the authority agrees it must focus its resources on its core local transport mission

- the much abused social and civic sponsorship fund was eliminated in 2010

- E-ZPass benefits are now limited to those negotiated in union arbitration

- a federal law enforcement veteran has been appointed as DRPA inspector general to conduct audits and act as a watchdog against "potential fraud, waste, abuse and illegal activities within the authority."

They say they "take the concerns expressed by the OSC very seriously, and we will be taking steps to evaluate and address recommendations in the report as promptly as possible."

Their statement concludes: "Again, we thank the Office of the State Comptroller on behalf of all DRPA toll payers, the general public and the DRPA itself for recommending ways to make the DRPA a better and more efficient public agency."

BACKGROUND: In 2010 the last year for which accounts are published toll revenues of $244m were collected from 101 million vehicle crossings, an average 276,000/day. The bridges had operating costs of $56m for a cash surplus of $188m.

The suburban train line grossed $22m in fares from 10.1m passengers (28k/day) but cost $47m to operate for a cash loss of $25m.

The DRPA ferry carries an average 440 passengers/day.

DRPA reported assets worth $1,813m and liabilities of $1,715m or net worth of $98m at end 2010.

DRPA exists by agreement of the states of Pennsylvania and New Jersey with the consent of the US Congress and is governed by a 16 person board of commissioners, 8 appointed by the governor of each state for five year terms.

The OSC inquiry was requested by the governors of the two states July 2010.

The longtime, apparently well entrenched CEO of DRPA is John J Matheussen.

Any serious reformers would recognize 'port authorities' like this as the political 'pork authorities' they really are, arrange for them to be disbanded, and their assets sold off by competitive bid so they could be run as proper businesses accountable to investors, rather than politicians.

Any proceeds could be used to pay down state debt.

Meanwhile up in Maine the Turnpike's former CEO Paul Violette must be wishing he'd been a chief toll exec in free-spending, forgiving Philadelphia rather than in Portland Maine where as he discovered to his cost, they are serious about such crimes. There the former free spending chief executive has surrendered most of his net worth in a civil suit, and pled guilty to criminal charges and is headed for some years in jail.

In Philadelphia no one has lost their job. No one has repaid a cent of the many millions of stolen money. And there isn't even discussion of criminal investigation, let alone prosecution. So far Matthew Boxer's report has evoked only quiet sighs and yawns.

copy of the NJOSC report:

TOLLROADSnews 2012-03-30

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