Proposed 2021 $7.3 Billion Budget Reflects Consequences of Agency’s Unprecedented Revenue Loss Due to COVID-19 Pandemic and Steep Drop in Volumes Across Facilities
Proposed 2021 Budget is a $1.3 Billion Rollback, a 15 Percent Reduction, From 2020 Budget
Without Federal Aid, Proposed Capital Budget for 2021 Will Need to be $1.2 Billion Less than Originally Projected, a 33 Percent Reduction, on Top of the $1 Billion COVID-Related Underspend in 2020 Capital Spending
Proposed Operating Expense Budget of $3.3 Billion Rolls Back Operating Expenses to 2018 Levels; 2021 Budget Maintains $190 Million in 2020 Cost-Savings and Maintains Service at Current Levels Without New Toll or Fare Increases
Public Comment Period Runs Through December 17; Comments Can Be Submitted Here
The Port Authority of New York and New Jersey today released for public review and comment the agency’s proposed $7.3 billion 2021 Operating, Capital and Debt Service Budget, a 15 percent reduction from pre-COVID plans and well below the amount necessary to deliver the projects in its 10-year Capital Plan. In particular, the $2.4 billion provisionally allocated for capital construction spending is 33 percent, or $1.2 billion, below the level contemplated in the agency’s Capital Plan for the year 2021. The proposed 2021 Budget is comprised of $3.3 billion for Operating expenses, $2.4 billion for Capital expenditures, and $1.6 billion for Debt Service and other expenses.
As a result of the projected twenty-four month $3 billion in lost revenues due to COVID-19, the 2021 proposed budget is $1.3 billion, or 15 percent lower, when compared to the 2020 Budget adopted by the Board of Commissioners in December of 2019. The agency also reported that it slowed capital spending in 2020 by $1 billion to align with reduced capital capacity, which has been significantly impacted by the historically low volumes across Port Authority facilities during the pandemic. When combined with the projected capital underspending in 2020 of $1 billion that is also a result of COVID-19, the two-year reduction in capital spending is $2.2 billion. Additional capital spending reductions in 2022 will follow if federal aid is not forthcoming.
“I want to thank agency staff for crafting a recommended spending plan that reflects the realities of operating the agency in the midst of a global pandemic and supports our most important strategic initiatives,” said Port Authority Chairman Kevin O’Toole. “The proposed 2021 budget shows the Port Authority, as it has for almost a century, is adapting to face new challenges while continuing to provide safe, secure and efficient movement of people and goods throughout the region.”
“Overall, the proposed 2021 Budget is an austerity budget,” said Port Authority Executive Director Rick Cotton. “In the absence of federal aid, our $3 billion revenue loss has forced us to slash our capital spending allocation for 2021 by 33 percent. That is simply not enough to deliver the rebuilding projects contemplated in our Capital Plan. On the operating side, we have aggressively but prudently cut costs, while we maintain our commitment to high standards of cleanliness and customer service to ensure the safety and security of our employees and customers, all while maintaining high levels of service at all of our facilities.”
2021 Total Projected Revenues
The agency’s ability to make capital investments as originally envisioned in the $37 billion 2017-2026 Capital Plan is severely reduced as a result of COVID-19 unless substantial federal assistance is provided to the Port Authority. The agency estimates a revenue loss of approximately $3 billion for the twenty-four-month period beginning in March 2020 compared to budgeted amounts — this is in-line with the revenue losses of $1.4 billion the Port Authority has incurred through October 2020, as well as the assumptions in the proposed 2021 Budget. The Port Authority projects a $980 million revenue loss in 2021 with lower Gross Operating Revenues as a result of lower activity levels continuing through 2021 and significantly reduced Passenger Facility Charge collections as a result of lower aviation activity. The Port Authority continues to advocate for federal support to offset its unprecedented loss of revenue; however, the proposed 2021 Budget does not assume any new federal COVID-19 stimulus aid to the Port Authority.
2021 Operating Expense Budget
The proposed 2021 Operating Expense Budget of $3.3 billion responds to the changed environment, reducing operating expenses to 2018 levels to balance operational needs with significantly decreased revenues and activity. This budget carries forward approximately $190 million of the cost reductions instituted in 2020 as well as other reductions necessary to offset unavoidable contractual increases elsewhere in the budget – while also providing the necessary funds to respond to the COVID-19 pandemic, maintain current service levels, and adjust to projected increases in activity across facilities in 2021.
Building on a series of measures from 2020, the Port Authority’s 2021 cost-saving initiatives include significantly reducing contract, consultant, and materials and supplies spending; reducing operating overtime hours 15 percent (253,000 hours) below the 2020 Budget; and reducing 626 positions, a 7 percent headcount reduction, achieved primarily through the elimination of vacancies created by a 2020 hiring freeze that will carry forward to 2021, targeted voluntary severance programs completed in the last 6 months of 2020, expected retirements through the first quarter of 2021, completion of time-limited assignments, and efficiencies that result in the elimination of certain positions.
The proposed 2021 Operating Expense Budget preserves funding for the agency’s operational, safety and security priorities, including several enhanced cleaning measures and technologies across facilities:
- $911 million to support overall agency Operations, which includes customer service, facility operations and utility expenses, represents a decrease of $46 million below the 2020 Budget reflecting activity-based and labor expense reductions across all departments.
- $772 million to provide peace of mind through world-class safety and Security, which includes both police and civilian security expenses, reflects a decrease of $19 million below the 2020 Budget. This decrease is driven by decreased police overtime and security guard coverage to align with projected activity levels as well as reduced equipment and supply purchases.
- $743 million for Maintenance of property, facilities and equipment reflects a decrease of $27 million below the 2020 Budget, primarily reflecting decreased maintenance projects and routines based on projected activity levels and multiple efficiency initiatives.
- $382 million for Management Services, which includes corporate expenses, staff department labor, line business oversight labor, and technology and communications, reflects a decrease of $47 million below the 2020 Budget, driven by a headcount reduction along with reductions in advertising expenses, consulting efforts, technology and management contracts.
2021 Capital Budget
The proposed 2021 Capital Budget reflects a reduction of 33 percent, or $1.2 billion, in the planned investment in critical infrastructure across all facilities versus the amount planned in the $37 billion 2017-2026 Capital Plan. The significant decrease is a result of reduced capital capacity caused by the impact of COVID-19 on Net Revenues. This planned decrease comes in addition to the $1 billion underspend in 2020 compared to the budgeted capital construction spend for 2020 of $3.6 billion – an underspend also driven by the 2020 revenue collapse caused by the virus crisis. Decisions about how to allocate the $2.4 billion 2021 capital allocation are part of the agency’s ongoing reexamination of its Capital Plan. Final decisions will await greater clarity on the federal response post-election and as the new Biden Administration takes office. Further capital spending reductions in 2022 are anticipated in the absence of federal aid.
2021 Debt Service Budget
The proposed 2021 Budget also includes debt service of $1.6 billion, an increase of approximately $160 million compared to the 2020 Budget, due to additional issuances required to fund the proposed 2021 Capital Budget.
The Port Authority is seeking public comment on the proposed budgets, which are available online. To view the budget materials, click here.
The proposed budgets will be on the agenda for action at the Board of Commissioners’ December 17 meeting.
Written comments can be submitted here through December 10. Comments also can be made at the Board’s December 17 meeting. The agency requests that comments be submitted as early in the comment period as possible. The agency will provide written comments received to the commissioners prior to their meeting.
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