New Jersey Turnpike board to consider outsourcing manual toll collection pending AET

The New Jersey Turnpike Authority board are likely to discuss a proposal for outsourcing manual toll collection services at their next meeting July 27.  A task force established by the New Jersey Governor Chris Christie has recommended the contracting-out of cash toll collection as an interim step to cashless all-electronic tolling.

The 5-person group called the New Jersey Privatization Task Force led by a former congressman Richard Zimmer examined possible savings from privatization across all New Jersey state agencies, concluding a total of more than $200m could be saved - of this at least $35m at the Turnpike (Turnpike proper plus the Garden State Parkway which it also runs.)

Their report says that manual toll collection is currently costing the New Jersey Turnpike Authority some $85m/year.

They say: "Based on experience in other states the (NJ Turnpike) Authority is paying between 40% and 50%  more per hour per employee than a private vendor might charge."

"Based on these estimates between $35m and $42.5m annual savings is possible."

Costs on high side

Most public toll authorities pay better hourly rates and benefits to toll collectors than required by the labor market - as evidenced by the fact that even in boom times they don't have to advertise jobs, and often maintain waiting lists. Toll authorities have generally not risked strikes by resisting union demands, so their employees have become very expensive.

Manual toll collection at the New Jersey Turnpike Authority (both the Turnpike proper and the Garden State Parkway) employs around 520 toll collectors (going down to 493 by Sept 19 under a planned trimming of the total labor force from 2285 to 2218.)

If about another 150 are involved in supervision and support of the toll collectors a total of about 670 employees are involved in cash toll collection. With a total cost of $85m that's  an average cost of $127k/employee ($85m/670) - rather typical of unionized public toll authorities. It compares with labor costs (pay plus benefits) of $50k to $75k/year in the private sector for comparable work.

Florida, Texas and southern California tollers tend to outsource toll collection and enjoy these lower costs.

30% of revenue, 45c/transaction

Cash collection at the NJ Turnpike Authority is about 30% of revenue ($952m) and transaction numbers (634m transactions - 2009 data), 70% being  by E-ZPass transponder. So the $85m annual cost relates to about $286m in revenue and 190m transactions.

Manual toll collection apparently consumes about 30% of cash revenue ($85m/$286m) and costs about 45c/transaction ($85m/190m). A conventional wisdom only a couple of years ago was that manual toll collection costs in  the range 20c to 30c/transaction while transponder transactions cost 3c to 10c/transaction. So the NJ collection costs seem high.

(With all-electronic tolling outsourced to large financial institutions there is discussion of costs per transaction of one cent or less.)

One factor boosting manual toll collection costs is declining numbers of cash customers.

As transponder tolling grows in market share it is usually not possible to reduce manual toll collection staffs and costs proportionately, so the unit costs of manual collection rise.

SJTA moving for cashless AET

The Zimmer task force notes that South Jersey Transportation Authority that runs the Atlantic City Expressway is moving to eliminate cash collection with all-electronic tolling (AET). 13 highway speed toll points will use the familiar combination of highspeed transponder readers and license plate cameras.

Their recommendation:

"As a stop‐gap until the Turnpike Authority transitions to all‐electronic, cashless tolling, it should issue a Request for Proposals for a private vendor to assume the manual toll collection function on the Authority’s two toll roads.

"The SJTA should move forward with its cashless tolling plan and share best practices with the Turnpike Authority."

Any moves will be made by the Turnpike board of directors. It comprises eight members, six appointed by the governor, and one each by the speaker of the assembly and the leader of the state senate. The chairman is the secretary of transportation.

The major labor contracts with the Turnpike's unions expire next year so the timing of the move is good. But laying off 600 or so public employees in favor of a private sector contractor would be very controversial. It only seems plausible in the context of a deep fiscal crisis for the state and wide-ranging cuts in costs of all kinds of state services.

That of course could be exactly what's coming down the pike.

One official told us today his guess was that the Turnpike board would "take its direction" from the Governor. At this point anyway public support for Gov Christie is very strong, and few board members would want to oppose him, we were told.

Christie himself hasn't yet said how far he wants to implement the Zimmer report recommendations, but they are very much in line with his themes of reducing the cost of government.

ADDITION: a spokesman for the Turnpike said there will not be any action taken at the next board meeting, although there may well be comment and discussion of the Zimmer commission proposa: "I just want to be clear that no official action is expected."

He says the Governor has not given the Turnpike any direction yet on what followup he'd like.

see p35 of

http://www.nj.gov/governor/news/reports/pdf/70910_NJ_Privatization_Task_Force_Final_Report_(May_2010).pdf

TOLLROADSnews 2010-07-13 ADDITION: 2010-07-14 15:00