PENNSYLVANIA Penn Pike Rakes in Cash & Accounts Oddly for It

PENNSYLVANIA

Penn Pike Rakes in Cash & Accounts Oddly for It

The Pennsylvania Turnpike (PA Pike) increased its toll revenues 4.5% to $351m last year, based heavily on a strong 6.5% rise in truck traffic. Trucks provide 45% of the Turnpike’s revenues. Passenger car traffic (car tolls taken) rose 2.9%. Other income, of which concessions are the largest item, rose by 11% to $12.7m for total revenues of $363m vs $347m in 98, a 4.9% increase.

This puts the Penn pike in the top six US toll agencies – by revenue – with MTA-B&T, NY State Thruway, PANYNJ, the Illinois Tollway, the New Jersey Turnpike.

The annual report says that for the fourth consecutive year the Turnpike “achieved its financial model of managing expense growth at a rate less than revenue growth, thereby ensuring an increase in annual net earnings.”

But grammar aside, (you achieve an ‘objective’ not a model), did they? The annual report does not make that clear.

Operating expenses apart from depreciation soared 15%, as reported (p15 line 4) on an accrual basis from $166m to $190m, making it difficult to understand the claim that expense growth was well managed in a year with negligible inflation. A $24m increase on $166m! Was that the model, err.. objective?

When we inquired about the breakdown of those numbers to see where the rapid growth was occurring, we were told the breakdown was only available on a cash accounting, not an accrual basis. We got those cash basis numbers and they show only an overall increase in operating expenses (excluding depreciation) of 1.6% from $158m to $161m. Indeed, by this metric, growth in expenses was less than revenue growth, and the Turnpike did very well in controlling costs. Toll collection costs were $61.2m vs $60.5m (99 vs 98), maintenance rose from $47.2m to $48.6m, policing from $19.3m to $20.4m, admin actually declined from $19.4m to $19m, customer service costs jumped from $1.8m to $2.4m, info services from $5.6m to $6.2m while engineering and marketing costs stayed constant. Admirable restraint of costs, though unaudited and not in the annual report.

But how to reconcile the huge 15% $24m increase in operating expenses on an accrual accounting in the annual report with the tiny 1.6% $2.6m increase on a cash accounting basis? Beats us.

We got a generalized explanation along the textbook Accounting-101 lines that cash is what is actually paid while accrual reflects what’s due etc. Fair enough theory, but why the huge percentage difference and the $21.4m discrepancy? So far we haven’t got an explanation.

Hey $21.4m! That’s real money, and makes the Illinois Tollway’s missing $180k, well, just nickels and dimes by comparison. IDEA: Maybe a certain shifty US congressman from around those parts got away with it? Just a working hypothesis for the cops.

The Penn pike has a substantial depreciation charge in its accounts – $133m, which is broken down into $108m for its roadway infrastructure, $13m buildings and the rest equipment. Depreciation in total was down from $145m in 98 which is a little hard to understand in an expanding system.

Interest expense on debt was $80m for 99, a substantial rise on 1998’s $59m. That was because bonds outstanding rose substantially from $1,062m to $1,507m – in connection with the financing of the Turnpike’s big capital program. In addition to its earned income (tolls and concessions) of $363m the turnpike got $42m from the state’s oil company franchise tax, about the same as the previous year.

All tallied up, reported net profit was $38m, nearly the same as the year earlier. (And if someone hadn’t gotten away with $21.4m, profit would have surged 55%?!?)

Information Technology

The Turnpike has always been a leader in radio communications. It is developing a new Operations Center using a system it calls Genesis 2001 with a GIS (geographical information system) that enables calls or incidents to be shown by location immediately on dispatchers screens. Emergency units are also tracked so that for each incident location they can be immediately listed for direct contact, and information about likely arrival time. Dispatchers are also getting online access to the National Crime Information Center where driver details and vehicle license data are stored as well as criminal records. The main Operations Center at Harrisburg will be backed up by duplicate equipment at the Eastern Regional Office in King of Prussia outside Philadelphia. The various police troops of the turnpike will be plugged in.

The Turnpike is also upgrading its backbone communications system – microwave – to digital microwave with 18 new towers in its first phase. A new Traveler Information Service will unfold, consisting of more highway advisory radio stations, variable message signs, surveillance cameras and speed sampling of transponder-equipped vehicles. The turnpike’s internal communications system is being taken almost entirely digital wireless, the report says.

Traffic volume

Tolls taken (trips on the ticket portion plus toll passes on the barrier systems) were up quite strongly, from 151m to 156m, 3.4%. For all its rather overhyped talk of moving into the age of ‘Information Technology’ the PA Turnpike could devote some more attention to improving the detail of its statistics as presented in its annual report. It reports “Traffic volume” and has in parentheses “Number of Vehicles.” As long as the PA turnpike system was predominantly a ticket system this traffic volume meant number of trips.

But the PA pike system is shifting steadily from trip tolling to point tolling and with point tolls it has no way of measuring trips (unless an ET system is set up especially to track multiple point passes by an identified vehicle and to construct trips from those point passes, and they don’t yet have ET.). There has long been a point toll at the northern end of the NE Ext in Scranton. The new roads built by the PA turnpike do point tolls (PA-60, PA-66), and point tolling is being introduced in the western end of the East-West Mainline with the trip toll system pushed east to the Pittsburgh area. A single trip in a point toll system can involve multiple toll passes.

So this presents a thoroughly mixed up notion of what constitutes ‘traffic volume.’ In fact it is just measuring toll plaza payment passes, and the nature of the toll passes is changing. The Turnpike is mixing apples (trips) with oranges (toll point passes) and in a changing system it is producing non-comparable numbers from year to year and from road to road.

And there are trips and trips, of course, some just one leg between adjacent interchanges, others covering many legs. Penn Pike could usefully follow the example of the Ohio Turnpike and produce statistics on vehicle-miles traveled which is helpful in gaining insight into traffic volume over the whole system.

If the object is to show the crowdedness of the roadway then point traffic volumes in different legs are relevant, in which case vehicles per lane per hour and average daily traffic volumes for specific legs are needed.

Terminology: Is it a fare road or a toll road? On its outdoor signage the Penn Turnpike uses the word ‘toll’ as in “STOP PAY TOLL AHEAD” but it also likes to mimic a train, bus or airline and elsewhere it calls tolls ‘fares’ as in the statement of revenue in the annual report ‘Net fares’ and in the term ‘fare collection.’ The annual report doesn’t talk about toll plazas but ‘fare collection facilities.’

One explanation we heard was that ‘fares’ sound less objectionable to customers than ‘tolls.’ No one can cite any survey on this. We doubt it fools anyone. Whatever you call it, it’s all money the patrons have to fork over for using the road. But maybe they could change the name to Pennsylvania Fareway. Except people might then mistake it for a golf course? (Contact 717 939 9551x2850 www.paturnpike.com)

Penn Pike to Build ET-only Ramps

The Pennsylvania Turnpike has got at least one of its ET ‘slip lane’ interchanges under way. It hopes for construction to begin this year on ET-only ramps at the Fort Washington office park complex located on the north side of the turnpike Mainline in the northern part of the Philadelphia area. The ET-only ramps will take traffic that wants to exit westbound and take entering traffic westbound. Motorists wanting to use the eastbound lanes will have to continue to go about 1 mile west of the office park to Exit 26.

The Turnpike is looking for other locations for ET-only ramps. In places it will be able to place the ramps on both sides of the turnpike by making use of existing bridges, but it has no present plans for making them into full interchanges with special bridging over the mainline.