Construction at the WTC site (photo: Stephen Nessen/WNYC)

(New York, NY -- Bob Hennelly, WNYC) Last week’s audit calling the Port Authority dysfunctional and running up billions of dollars in cost over-runs made eye-catching headlines.

The audit called the bi-state authority a "dysfunctional organization suffering from a lack of consistent leadership." That void, the report concluded, manifested itself in "insufficient cost controls" and "a lack of transparent and effective oversight" when it came to managing the World Trade Center's site's re-development.

But to long-time observers of the Port Authority and many of those involved, it was more like a Captain Reynault moment in Casablanca.

They were hardly shocked to find gambling in this establishment.

Instead, the latest 50-page report from Navigant is just one more critical audit and fact-finding volume in a library generated over decades by state comptrollers by former and current state lawmakers.

This particular audit was commissioned by Governors Andrew Cuomo and Chris Christie, who found themselves in political hot water after backing a toll-hike to pay for rising costs at the bi-state authority. Both men had been elected on platforms that pledged to make government, even independent authorities like the Port Authority, more accountable.

But former Governor David Paterson says the audits findings were hardly a secret to those close to the World Trade Center project.

“The truth has to be told about this," Paterson says. After September 11th there was tremendous political tumult in both states. Sex scandals toppled a Governor in each state. The instability at the top had repercussions.

"Five governors of New Jersey, four governors of New York, changes to the Chair of the Port Authority and the executive director," recalls Paterson. "Every stakeholder, every real estate person within 150 miles wanted to be involved. What started out as a demonstration of vigilance and response to the terrorists turned into a real estate boondoggle."

Paterson says then-Port Authority Executive Director Chris Ward, in an attempt to get the 911 Memorial completed by the psychologically important tenth anniversary, did not sugarcoat the site's overall status.

"In the memorandum written to me by Chris Ward he says there are likely to be cost overruns and delays. And there were," says Paterson.

“While significant progress has been made, that memo said, the schedule and cost estimates of the rebuilding effort that have been communicated to the public are not realistic. In fact, as other reports by the FTA and LMCCC/LMDC have already suggested, the schedule and cost for each of the public projects on the site face significant delays and cost overruns,” the memo said.

"And the whole issue that there could be toll hikes -- all that was discussed before the project was even built," says Paterson. "When we started putting this together we knew that the costs that were assessed were way below what the actual price to build those structures would be."

There was something else driving up costs, the former Governor said. “Every dime that was spent to rebuild the World Trade Center was assessed in the Port Authority Board room as a New York contract for which the New Jersey members wanted equal value. I am not blaming them but it becomes a cesspool driving costs up."

Paterson says the Federal government should have shouldered the entire multibillion dollar burden of re-building the complex not the Port Authority.

"They did not attack the Port Authority on September 11th nor did they attack the states of New York and New Jersey. They attacked America."

Check back soon for Part 2 of this story...how the Port Authoiry, once a national model, found itself adrift in a sea of red ink.