Whose Authority?

Almost every state contains an “authoritywhich has financed and created many of our new bridges, tunnels, and toll roads. JUAN C AMERON finds that although the concentration of power in these agencies continues to increase they seem accountable to neither the slate nor the federal government. A graduate of the Harvard School of Business Administration, Mr. Cameron was on the Washington staff of the St. Louis POST-DISPATCH and is now a business reporter for the Boston HERALD.

MILLIONS of Americans today traverse a public authority’s bridge or tunnel or ride an authority-run transit system to work. Citizens live in authority-built apartments; they motor over turnpikes, work in office buildings, and relax in parks created and maintained by authorities. The public authority, in fact, is the fastest growing unit of local government in the United States today.

In large part this growth is a post-World-War-II phenomenon brought on by the pressure to provide highways, schools, bridges, tunnels, and other public works for the exploding metropolitan areas. The Federal Reserve Bank of Philadelphia last year counted some twelve hundred authorities operating in Pennsylvania alone — a thousand of which have been established in the past eight years. The Council of State Governments in a 1953 study found widespread use of the public authority for a whole range of undertakings in Maine, Michigan, New Jersey, Ohio, Oklahoma, Washington, West Virginia, Delaware, Louisiana, Nebraska, Virginia, Kentucky, Massachusetts, and New York, as well as Pennsylvania.

In addition to scores of federally financed housing authorities, New York state has thirtythree public authorities, which in 1956 controlled $2 billion of assets and employed fifty thousand men and women. An authority runs New York City’s transit system, employing forty thousand; another authority operates a resort, including bathhouses, pools, gymnasiums, and water-bottling works. Robert Moses, chairman of the Power Authority of the state of New York and also chairman of the New York City Triborough Bridge and Tunnel Authority, has called the authority “the nearest thing to business in government . . . business with private capital under public auspices . . . often attacked because it is too independent of daily pressures, too unreachable by the boys and therefore undemocratic.”

There is no doubt that the accomplishments of the public authority are impressive. For example, twenty-three authorities with a total investment of more than $5 billion have built 3210 miles of toll highways; other authorities have built most of the major toll bridges and tunnels.

While the authorities have some common characteristics, they vary widely in their powers, make-up, and type of management. Austin J. Tobin, executive director of the multipurpose Port of New York Authority, operates a $1-billion empire of tunnels, bridges, airfields, and bus, marine, and airline terminals that service much of the traffic in and out of New York City. To patrol this port complex, which last year collected $93 million from users of its toll facilities, Tobin commands a police force as large as that of New Orleans. He is paid $60,000 a year —more than either the mayor of New York City or the governor of the state.

William F. Callahan, chairman of the Massachusetts Turnpike Authority, runs what until recently was a single-purpose authority which operates a 123-mile dual highway built at a cost of S239 million. More than a million autos and trucks speed along Callahan’s roadway each month and in the course of a year pour some $9.8 million in tolls and gasoline and restaurant concession fees into his turnpike coffers.

Both authority managers enjoy the reputation of being “men who get things done.” New York Authority’s Tobin is a fifty-six-year-old lawyeradministrator — a gray-haired, urbane, efficient executive who has kept his authority away from partisan politics.

Callahan, a sixty-eight-year-old engineer-administrator who works in a more venal political community than many other authority chiefs do, runs a one-man show that relies heavily on political patronage to achieve its ends. While Tobin operates under a twelve-man unpaid board of trustees, Callahan operates as chairman of the turnpike’s three-man governing board.

The dramatic nature of its undertakings; the visible achievement of a bridge, tunnel, airport, or toll road smartly maintained; the politically painless tolls imposed on the user, not the taxpayer, have won a considerable public respect for the authority in many states.

Yet the public authority alarms many political scientists and city and state officials because it has grown so powerful and so complex. Those who run authorities show a strong partiality to administrative secrecy. The authority displays a built-in tendency to keep growing and expanding. In the case of toll-road authorities, especially, the ideal of the authority’s insulation from politics does not appear to have been achieved.

Municipal specialists like Britain’s William A. Robson have said that the authority fragments local government at the same time that it challenges government leaders and others who plan policy. Critics of the Port of New York Authority have charged that the authority, supposedly nonpolitical, develops a politics of its own — a politics of specialists who may or may not be responsive to the public interest.

Outright scandals, such as rocked the Delaware Joint Toll Bridge Commission in 1956, have been rare. In that year Governor Leader of Pennsylvania charged that “certain bridge commissioners” used the commission “as their private mint” and squandered tolls for their own purposes. The governor charged that the commission, which supervises fourteen free and five toll bridges spanning the Delaware River, was “shot through with graft and corruption.” The ten commissioners were found to be transacting business seated on chairs costing $400 apiece, around a $5320 director’s table graced with $200 gold cigarette lighters.

The governor alleged that three commissioners went to Phoenix, Arizona, to transact commission business, then detoured to Las Vegas, where their inspection of the resort’s night clubs and other establishments cost the commission $3465. The commission’s chairman is awaiting trial on charges that stemmed from these disclosures.

WHILE business transaction of port, housing, transit, and road authorities in Florida, Indiana, Massachusetts, and Illinois have raised charges of misdeeds from time to time, to date there is little proof of substantial graft and corruption on the authorities’ part. The main criticism of these public business enterprises has been on other grounds.

New York’s Temporary State Commission on Coordination of State Activities three years ago released a staff study that found that some of the state’s authorities filed no reports at all. In cases where the authorities did prepare reports, they left unanswered such questions as who was on the payroll; how much employees were paid; who supplied dry-cleaning services to personnel or paint for bridges, buildings, and roads; who provided engineering services and grass-cutting crews.

The commission described the reports as “incomplete.” Revenues by specific sources were not listed. Reserve funds were not explained. Personnel and salary policies and reports on personnel hired under contract were omitted. Said the staff report: “The fact that the state is not generally liable for authority bonds docs not relieve the legislature, the governor and the controller of their duty ... to protect the state’s interest in public authorities.”

Some authorities refuse to open their regular board meetings to the press and have balked at giving out more than fragmentary information to newspaper reporters, study commissions, or even, on occasion, to state officials. When Massachusetts’ “Little Hoover Commission” in 1950 asked the Mystic River Bridge Authority for information to aid its survey of state government operations, it received a letter that has become the stock reply of Massachusetts authorities to state-appointed commissions of inquiry ever since. John F. Donovan, executive director of the bridge authority, wrote on June 7, 1950, to the Special Commission on the Structure of the State Government as follows;

The Authority, while recognizing the desirable and laudable purpose for which your committee is functioning, feels there is a possibility of error in your request for the following reasons:

1. No money of the Commonwealth is involved in the construction of the Mystic River Bridge [a $27million span crossing Boston harbor].

2. No employee of the Mystic River Bridge is subject to Chapter 31 of the General Laws or in any way connected with any division or department of the Commonwealth.

3. The auditor of the Commonwealth and the Commissioner on Administration and Finance have no jurisdiction over the finances of the Authority.

4. ... The Authority is not subject to supervision by any board or department of the Commonwealth in the construction, operations or maintenance of the Mystic River Bridge.

In view of the foregoing, it is the opinion of the Authority that our activities do not come within the scope of your committee.

The matter still hangs fire in Massachusetts. Last year the state’s Legislative Research Bureau found it was “not clear" to what extent the Massachusetts law relating to public records applied to authority records.

In the mind of the Massachusetts Turnpike Authority chairman, William Callahan, however, the matter is resolved. “It’s none of the newspapers’ business. This is not a public corporation. I owe all my loyalty to my bondholders,”says Callahan. A recent visitor to his office heard the authority chairman explain that he saw no reason to open either his personnel records or the minutes of board meetings to the press or others interested in his “public instrumentality.” The Turnpike Authority defeated a provision in a bill last year which would have required it to open its regular meetings to the press. Turnpike police have attempted to halt newsmen from taking photographs of truck accidents on the toll road.

The legislature of the state of New York has conducted a running fight to learn more about its authorities’ inner workings. When a bill to force authorities to report more fully came before the legislature two years ago, a statement couched in the unmistakable, vivid prose of Robert Moses was released by him and five other authority heads describing the legislation: “impractical ideas edged with malice which emanate from ambitious, professorial minds . . . obviously a first step towards subjecting authorities to political controls and the enervating effect of centralized bureaucratic management.” Legislators replied that Mr. Moses had no sympathy with “democracy.”

THE clash between state governments and the authorities they have created is in a sense inevitable because of the very forces that brought this hybrid of government and business into being. The authority was invented just prior to World War I in England as a device to run the London docks, which had fallen into decay. British statesman David Lloyd George, it is believed, gave the new type of agency its name. To aides puzzling over what to call the London dock body, Lloyd George, recalling that the law creating it contained numerous phrases such as “authority is hereby given,” and so forth, suggested: “Ah, why not the Port of London Authority?”

New York and New Jersey took up the British innovation in 1921, when they established the bistate Port of New York Authority to resolve conflicts between them over development of their joint harbor serving the New York City area.

In the depression of the 1930s, when tax bases shrank drastically, and again after World War II, states turned to the public authority as a means of getting badly needed public works projects under way. The device allowed forty states which have constitutional debt limits to escape the uncomfortable feeling of staring down the barrel of a debt limit while an exploding population clamored for roads, bridges, tunnels, and schools.

The authority organization varies greatly from state to state. However, it possesses generally one key characteristic: the power to issue revenue bonds payable solely from charges against the users of its facilities. The state confers upon the authority the powers of both a private corporation and a government body. Like any corporation, the authority can sue and be sued, enter into contracts, purchase and hold land, hire officers and employees, and generally manage its affairs as it pleases. At the same time it possesses governmental powers and privileges such as those of eminent domain and exemption from local as well as federal taxation and regulation.

Private investors who furnish the authority’s building money have thought that a businesslike operation can flourish only if divorced from politics. They have generally insisted, consequently, that authorities be free from governmental control, as is any private corporation. For instance, in setting up the Massachusetts Port Authority to control and operate $200 million worth of Boston airport, pier, and bridge properties, the bankers insisted that the governor of Massachusetts give up his attempt to retain a veto power over the decisions of the authority.

While jealous to preserve their status of private enterprises not dependent on state tax funds, authorities have been willing to accept substantial, often interest-free loans from states to get planning or construction under way. At the beginning of this year, authorities owed New York state $106 million. The Thruway Authority owed $76 million of this debt, Moses’ Power Authority $2.9 million, and his Jones Beach State Parkway Authority another $15.2 million. Part of the Power Authority’s debt dates back to 1931. Massachusetts has subsidized its authorities with sizable advances and through deferred payments for state land takings.

Appointments to the authority, usually made by a mayor or a governor, help bridge the gap between the autonomous agency and its creating government. Because the authority is insulated from politics, leading citizens have been persuaded to accept authority appointments, and consequently it has been easier to sell authority bonds to investors. Lying in a hazy no man’s land between government and business, the authority is neither a private enterprise nor a government body.

.BEYOND the charge of administrative secrecy, many criticisms arc leveled at the authority concept. Some people disagree that it combines the best features of government and business; they think that it combines the drawbacks of both.

Investment bankers have sharply criticized the authorities for the glowing forecasts of traffic revenue made for them by consulting engineers prior to financing. Overoptimistic prospectuses by authority-employed engineers, coupled with intense local newspaper publicity of proposed authority undertakings, have tended to season the market for the sale of authority bonds to individuals, life insurance and fire and casualty companies, savings banks, and pension funds. The Securities and Exchange Commission, which strictly regulates publicity claims prior to the sale of corporate securities, has no control (except in cases of fraud) over authority financing, since these bodies are, under federal law, considered in the same category as political subdivisions.

Because the authority is not backed with the credit and taxing powers of the state, it pays from a quarter to a full interest point more for its money than does a government. It siphons off the revenue-producing facilities of a community which could be used to help defray school, public health, and other governmental costs. Its operation is contrary to concepts of democratic control.

Large multipurpose authorities like Tobin’s Port of New York Authority, which earned after operating costs $50.8 million in 1958, or Moses’ Triborough Bridge and Tunnel Authority, with earnings of $32 million available for debt service, are highly successful operations. Some of the newer and smaller single-purpose authorities, however, have performed less spectacularly.

Eighteen of twenty-three toll-road facilities, representing an investment of more than $5 billion, failed to earn their level debt service last year. Investment bankers consider the ability to earn this debt service — the amount needed for interest and to retire the borrowed money by the time the bonds mature — the general gauge of whether or not an authority is financially successful. Eleven of these same twenty-three road authorities failed to earn even their annual interest charges in 1958 — many by wide margins. At least one authority, the West Virginia Turnpike Commission, is able to make only partial interest payments to bondholders and has requested the state to Lake over the cost of policing the roadway.

In time, most of the road authorities are expected to be financially successful. Meanwhile, poor earnings have been the chief cause for the sharp drop in the price of authority bonds, with some issues selling at half their original face value. Investors’ losses in these widely held and traded securities are estimated in the millions of dollars.

The wealth of some and the relative poverty of other authorities have given rise to a characteristic not anticipated by the creating legislatures; authorities show an inherent tendency to merge and expand and to refuse to die when their law-given life has expired. Robert Moses’ Henry Hudson and Marine Parkway authorities of the 1930s have merged today, along with the New York City Parkway and Tunnel Authority, into the Triborough Bridge and Tunnel Authority that last year counted some 152 million motor vehicles passing through or over its seven bridges, two tunnels, and several hundred miles of roadway.

The excess revenue of this operation — some $13.6 million in 1958 — and the enormous new borrowing power it supports allow the authority engineers to start construction of new projects. At present, Moses’ authority is constructing the $90-million Throgs Neck Bridge and plans to use future revenues to take possession of the proposed $320-million Narrows Bridge.

In creating the Massachusetts Port Authority, the Commonwealth combined a money-making bridge serving Boston with the city’s pier and airport facilities, which operate in the red. Likewise, the Massachusetts Turnpike Authority has strengthened its credit rating by getting control of the money-making tunnel crossing Boston harbor. The turnpike that earned only 90 per cent of its interest requirements last year (its $1000 face-value bonds were selling in June, 1959, at $810) has improved its chances, consequently, for raising more money to push its toll road from the suburbs, where it now ends, into the heart of downtown Boston.

To obtain new grants of authority, such as Callahan did, requires negotiating with a legislature whose members are interested in jobs for constituents. It also requires a well-organized patronage apparatus.

Seasoned Massachusetts political reporters describe the turnpike head as more powerful than the governor in the state legislature. Some indication of this power could be seen when the legislature voted through the “Callahan package" last year. This gave the chairman, whose reputation is that of a “practical" man, control over two tunnels, one now being built, and over construction of a new $30-million state office building. It also appointed him to an authority to build a S20million underground garage in Boston, a position that Callahan recently resigned following a dispute over whether the public was to be admitted to the authority’s meetings or not.

Callahan says that the legislature’s willingness to grant him great powers is due not to patronage but to “friendships” he built up in his long public life that included two terms as head of the state’s patronage-ridden highway department. A survey by the Springfield Union on May 15, 1957, the day the authority opened its turnpike, suggests other reasons for the chairman’s popularity with the legislature. Springfield reporters driving along the midstate section of the road saw many familiar faces on duty at toll gates and in other supervisory positions. A count showed seven brothers, nephews, and fathers of politicians, as well as unemployed politicos themselves, in turnpike jobs. This list included brothers of three state representatives, the father of a district judge, and the chairman of the Holyoke Democratic city committee. A later check also found the son-in-law of a prominent Republican state senator on the payroll of the three-hundred-man authority.

Newspaper reporters covering road and bridge authorities in New York and New Jersey find these also patronage-minded. When Governor W. Averell Harriman retired from office last January, he used the New York Thruway as a haven for aides endangered by the shift in party control at Albany. Governor Harriman, following the example set by Governor Thomas E. Dewey before him, placed his patronage secretary, Milton Stewart, on the thruway as a $16,000 part-time special counsel, although lawyer Stewart had never practiced law.

One turnpike specialist for a New York investment banking firm, hearing of these activities, said, “Let’s not kid ourselves, these revenue authorities are political operations. They have to be. for their whole success depends on when and if the state builds access roads to bring traffic to and off their properties.”

Authority advocates say that the demands of the bankers to safeguard their investors’ money will force authorities to adhere to sound principles in finance and to curb inefficiency or graft, thus protecting the public interest as well. This argument has a limited validity. The interest of the securities underwriters does not necessarily coincide with the public interest.

Many states are working in the dark about the authorities operating within their borders. In addition, there is confusion as to how these autonomous bodies are to be brought under the overall planning control of a state or municipality. The Port of New York Authority has stubbornly resisted any effort to tap its net earnings to help defray the enormous losses of New York City’s rail commuting system, vital to the area’s wellbeing. The Massachusetts Turnpike Authority has moved covertly and publicly against a metropolitan planning board, proposed to coordinate road building in the Greater Boston area. One objection: the proposed planning agency might interfere with the Turnpike Authority’s aim to push its toll road into the city proper.

Here is the dilemma. Making the authority more subservient to public policy control also curtails its flexibility and autonomy, which are keystones in its ability to get things done. Yet as its numbers increase and its operations become more widespread, public officials need to be more fully and systematically informed about authority activities.

More political control by legislatures would undoubtedly, as investment bankers periodically warn, imperil the financing of authorities as well as raise involved legal points as to whether the state would not then become liable for authority debts and actions. If an authority goes into bankruptcy, however, there is little doubt that the state must take over its properties and pay off the bondholders. The roads, piers, bridges, airports, and tunnels must operate.

From its survey of Pennsylvania’s authorities, the Federal Reserve Bank of Philadelphia concluded: “Authorities are most dangerous when they operate behind a curtain of apathy. . . . [They] are established to serve the public interest. It’s up to the public to show an interest in authorities.”

To bring the authorities into the light of public scrutiny, state and municipal legislatures should require: 1. The filing of personnel plans and policies with the state, including salaries and the names of persons hired by contract; 2. submission to the legislature of annual reports, with the state controller having the right to postaudit authority accounts periodically; 3. the opening oi the authority’s regular board meetings to the press.

In the long run, public opinion must be the force that controls authorities, and as long as authorities can conceal the facts, public opinion cannot operate as it should.