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Auditor General Asks General Assembly to Give PA Governor Veto Power at DRPA
Independent fiscal watchdog details 7 reform ideas DRPA has approved
HARRISBURG, Pa., Sept. 22, 2010 - Auditor General Jack Wagner said today that the General Assembly should give Pennsylvania’s governor the power to veto resolutions approved by the state’s representatives on the Delaware River Port Authority board.
Testifying before the Senate Transportation Committee, Wagner, an ex-officio DRPA commissioner, said that New Jersey’s governor, Chris Christie, possesses such veto power and used it last week to veto resolutions supported by all but one of New Jersey’s representatives on the DRPA board, thereby killing actions supported by all of Pennsylvania’s commissioners. Christie previously vetoed several other resolutions that had passed unanimously.
“It’s about equal authority,” Wagner said. “If the New Jersey governor has such power, then the governor of Pennsylvania should too.”
Wagner, Pennsylvania’s independent fiscal watchdog, told senators that, at board meetings in August and September, the DRPA board passed the following resolutions that he had proposed: prohibiting the DRPA from using its funds for economic development and other projects not directly connected to its assets; review and revise the management compensation system; reviewing and revise the travel expenditure policy; ending the practice of adding last-minute items to the monthly meeting agendas, except in cases of true emergency; and creating citizens’ advisory committees to bring a real world perspective to the decisions made by the board.
“Although much has been accomplished in the last six weeks, there is still much more to do before we can be satisfied,” Wagner said.
The board also passed Wagner’s resolution to require the DRPA to submit to independent performance audits at least every two years, and designated the auditor general as chairman of a new audit committee to help develop an audit plan and serve as the board’s liaison to the auditors.
Wagner has long been an advocate of reform at the DRPA. He has regularly questioned waste and abuse of the authority’s funds, including repeatedly casting the lone vote in opposition to the use of toll revenues for economic development projects.
In February 2008, Wagner voted against a $10 million DRPA grant for a soccer stadium in the city of Chester and in February 2009 voted against grants totaling $11 million for various projects in Pennsylvania and New Jersey. In December 2009, he voted against over $23 million in funding for several more projects.
“It is my firm belief that the authority should focus on its core mission of providing a safe and effective means of travel for the public at a reasonable cost rather than engage in economic development in the region,” Wagner said.
Wagner also reminded the committee that he has been a consistent voice in advocating against the use of interest-rate swap agreements to finance public debt. A swap is a contract between a bond issuer, such as DRPA or other public entity, in which the parties bet on which way interest rates will move. In theory, swaps allow government entities to enter into variable-rate debt financing in order to take advantage of low interest rates and, at the same time, hedge against the possibility of those same interest rates going up.
However, as Wagner has explained, swaps are actually nothing more than a form of gambling with public funds. The party that guesses right wins and gets paid; the party that guesses wrong loses and must pay the other party. How much is won or lost is determined by the size of the underlying debt, how much interest rates fluctuate, and other factors.
Wagner said the DRPA entered into seven swaps in 2000 and 2001 related to over $1 billion in debt. Although DRPA collected $45 million in upfront payments, it has now paid out $68 million so far in termination fees and additional interest costs. The remaining active swaps have a net negative fair value of $248 million, which is the equivalent of a full year of tolls on all four bridges the agency operates.
The board unanimously passed Wagner’s resolution at its Dec. 28, 2009 meeting to prohibit the authority from entering in to more swaps agreements and to require the authority to begin the process of terminating its current swaps.
In addition to his own seven reform proposals, Wagner also joined fellow DRPA Commissioner John Dougherty over the summer in calling for several more reforms, which the board recently adopted, including:
“With the passage of these and other reforms, I believe that the authority can enter a new era of transparency, accountability, fiscal responsibility, and good government,” Wagner said. “The people paying the tolls and being served by DRPA deserve no less.”
Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly. He is the commonwealth’s elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts more than 5,000 audits per year. To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department’s website at www.auditorgen.state.pa.us.
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