Legislation to restructure New Jersey Transit’s board of directors may carve out a fresh path for the beleaguered agency.

The measure, which was overwhelmingly passed by the state Senate and is also expected to receive Assembly approval, is designed to boost the areas of knowledge represented on NJ Transit’s board and enhance commuter involvement in decisions that shape the future of the nation’s third-busiest rail public transportation system.

Commuters stand at the Frank R. Lautenberg Rail Station at Secaucus Junction to board New Jersey Transit trains in Secaucus, New Jersey, U.S., on Thursday, Aug. 20, 2015.
New Jersey Transit's Secaucus Junction station. Transportation advocates say restructuring the agency's board of directors would improve its direction. Bloomberg News

Janna Chernetz, senior New Jersey policy analyst for the Tri-State Transportation Campaign, is hopeful that the legislature’s move coupled with an audit of NJ Transit ordered by Gov. Phil Murphy will set the stage for an overhaul of an agency plagued by years of deficits and revenue shortfalls.

“This is hopefully the foundation for a stronger New Jersey Transit,” said Chernetz. “NJ Transit is an agency in need of reform.”

The agency provides transit service to a wide swath of New Jersey, running commuter trains, light rail and buses in a network that reaches into New York City and Philadelphia.

The Tri-State Transportation Campaign released a report on June 18 saying that years of mismanagement, financial neglect and low employee morale that accelerated under former Gov. Chris Christie contributed to NJ Transit’s current fiscal struggles while also reinforcing the need for a board with increased professional expertise.

Tri-State said its research found that other Northeast transit agencies of similar size, including the Southeastern Pennsylvania Transportation Authority, Massachusetts Bay Transit Authority and Rhode Island Public Transit Authority, had larger and more diverse boards with stronger qualifications.

Chernetz said a bigger board with more a more diverse makeup in terms of expertise can lead to better transparency and accountability, along with enhancing committees to create better financial oversight.

She said a strong and effective board is essential to implement changes that result from Murphy’s audit.

The Democratic governor, who took office in January, has called for ending past practices of diverting funds from New Jersey Turnpike tolls to fund NJ Transit operations and relying on fare hikes for revenues.

“NJ Transit was severely neglected under Governor Chris Christie’s administration and was also neglected under administrations that preceded him,” said Chernetz. “It’s a good time to re-focus and hopefully get NJ Transit back to the national prominence it once had.”

Among the chief priorities the Tri-State Transportation Campaign wants a revamped board to spearhead is finding new revenue sources, including better management of NJ Transit-owned land.

Another bill supported by Tri-State tackles this issue by requiring NJ Transit to establish an office of real estate, economic development and transit-oriented development. The measure, which passed the Assembly 74-2 on June 21, requires NJ Transit to provide annual reports to the governor and legislature on any revenue received from holding real estate property interests.

“While it's probably not the solution it is for certain a key tool in the tool box to help bring in non-fare based revenue to NJ Transit’s starving operating budget,” said Chernetz, who noted that the agency owns some of the most valuable land in the state located near train stations. “Ideally, this office would play a key role in leveraging those assets.“

A September 2017 report from The Fund for New Jersey said NJ Transit gets only 1.3% of support from dedicated taxes compared to nearly 50% or higher provided to public transportation systems in Philadelphia, Chicago and Los Angeles.

New Jersey’s general fund support for NJ Transit dropped by 90% from the early 2000s to $33 million during the 2016 fiscal year, according to the report. The group has recommended that the state allocate toward NJ Transit tax revenues from motor vehicle licenses and registrations along with real estate transactions or business payrolls in a funding setup that would be similar to New York’s Metropolitan Transportation Authority.

Former NJ Transit Deputy Executive Director Martin Robins, who authored much of the Fund for New Jersey report, said changes to the agency’s board are needed to bring more independence to major decisions. Robins, who helped create NJ Transit in 1979, said the board rubber-stamped most of Christie’s policies, which contributed to much of the agency’s fiscal woes.

“I have observed with some dismay over the last several years, especially under Governor Christie, how ineffective the NJ Transit board of directors has been,” said Robins, who is director emeritus of the Alan M. Voorhees Transportation Center at Rutgers University. “It is time to change the board structure.”

In addition to creating more diversity among NJ Transit’s board members, the Tri State Transportation Campaign also recommends retooling the agency’s committees to focus more narrowly on specific issues such as budgets, public-private partnerships, capital planning and land use.

NJ Transit's current board only has a Customer Service Committee, Administrative Committee and a Capital Planning, Policy and Privatization Committee.

The board of directors is grappling with a myriad of fiscal and infrastructure challenges this year. The board approved a financing agreement on June 13 with the New Jersey Economic Development Authority to issue up to $600 million in bonds for the construction of a new Portal North Bridge over the Hackensack River as part of the multibillion-dollar Gateway project into Manhattan. The bonds will be paid back over a 30-year term from the state’s Transportation Trust Fund.

NJ Transit spokesman Jim Smith declined to comment on the Tri State Transportation Campaign report or the legislation seeking to alter the agency’s board of directors setup. Murphy spokeswoman Alyana Alfaro said “the governor does not comment on specific or pending legislation.”

Murphy’s audit is also studying NJ Transit’s delayed implementation of Positive Train Control, a new system required by Congress to prevent train accidents, which is supposed to be installed by Dec. 31. NJ Transit executive director Kevin Corbett, a Murphy appointee, said in March that he may request that the Federal Railroad Administration push its deadline to install the PTC technology off until 2020 in order to prevent fines.

Murphy proposed a $37.4 billion budget that would increase NJ Transit’s funding by $242 million with $142 million dedicated toward steering finances on a healthy long-term track with more permanent funding sources. He also wants to spend $21 million on upgrades to train and bus facilities and allocate $19 million for increased staffing. A state budget had not been finalized when this story was published.

New Jersey general obligation bonds are the second-lowest rated among U.S. states with only Illinois lower. The Garden State’s debt is rated A-minus by S&P Global Ratings, A3 by Moody’s Investors Service and A by Fitch Ratings and Kroll Bond Rating Agency.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.