The Port Authority is an example of an interstate compact because it is a legally binding agreement between two states. The compact creates a separate legal entity, the Port Authority, which has its own powers and responsibilities. The Port Authority is not subject to the laws of either New York or New Jersey, and it is not subject to taxation by either state.
Interstate compacts are often used to create regional entities that can provide services that are beyond the scope of what individual states can provide. The Port Authority is a successful example of an interstate compact, and it has played a vital role in the development and operation of the New York City metropolitan area.