Massachusetts Governor proposes to detoll Turnpike outside Boston

October 18, 2006
By Peter Samuel
Gov Mitt Romney
Gov Mitt Romney
Tolls would be ended west of the 'X' on the map at MA128/I-95
Tolls would be ended west of the 'X' on the map at MA128/I-95
Gov Romney's website today focuses on Lt Gov Kerry Healey - she is running for governor
Gov Romney's website today focuses on Lt Gov Kerry Healey - she is running for governor
Mass Turnpike inside Rt 128
Mass Turnpike inside Rt 128
Boston Globe picture of Gov Romney and then-Turnpike chief Matt Amorello after the fatal ceiling collapse in the summer
Boston Globe picture of Gov Romney and then-Turnpike chief Matt Amorello after the fatal ceiling collapse in the summer
Amorello's political antics included these Turnpike signs
Amorello's political antics included these Turnpike signs
Operating costs of $290m revealed to consume 86% of toll revenues of $336m this year - the Amorello Turnpike published no accounts
Operating costs of $290m revealed to consume 86% of toll revenues of $336m this year - the Amorello Turnpike published no accounts
Evidence of substantial thievery by a toll colelctor
Evidence of substantial thievery by a toll colelctor
MTA benefits pumped up vs state employees
MTA benefits pumped up vs state employees
Toll collection costs
Toll collection costs
Democrat Deval Patrick the likely next governor hasn't endorsed or dissociated himself from the de-toll proposals, so the future of tolling in Massachusetts will probably be decided by him
Democrat Deval Patrick the likely next governor hasn't endorsed or dissociated himself from the de-toll proposals, so the future of tolling in Massachusetts will probably be decided by him

Massachusetts Governor Mitt Romney is proposing to abolish tolls on the state turnpike over most of its length. Tolls would only remain within the Boston Extension and the three tunnels under Boston Harbor, and a task force report suggests Boston Extension tolls also be abolished.

The new Turnpike Authority board had met hours earlier and given tentative approval to the Governor's plan, pending legal and financial advice on its feasibility. A formal decision on detolling west of Boston will be taken at the Nov 15 board meeting.

That is after the election which is presently thought likely to result in Democrat Deval Patrick being elected. He has said merely he will "seriously consider" the detoll proposals.

Romney rhetoric

"All tolls west of the Rt. 128 toll plaza will come down, subject to final approval by the Turnpike Authority's board of directors. The repayment of the Western Turnpike debt will be made through a combination of reserves and by securitizing service plaza revenues. The state Highway Department will assume control of the road," Romney said in a statement today (2006-10-18).

Romney proposes that tolls west of Route 128 end on June 30 2007, an action he says can be accomplished by the MTA board of directors. Toll abolition on the Boston Extension requires legislation.

Gov Romney said: "The Turnpike Authority is a mess, with an expensive cost structure and no ability to sustain itself except through higher and higher toll increases in perpetuity. This is not fair to the residents who live west of Boston and are bearing a disproportionate share of the cost of the Big Dig. It's time we start to dismantle this highly inefficient system."

Gov Romney appeared jointly making the announcement with his deputy Lt Gov Kerry Healey - an attractive blonde lady who is the Republican nominee for governor in the election this Nov to succeed Romney who is term limited out of office. Healey said: "Turnpike drivers have been paying too much, for too long, for too little in return. Knocking down the tolls west of Rt. 128 and eliminating this unnecessary cost burden on commuters is long overdue."

Turnpike "cannot be fixed" - Gov's task force

Gov Romney and Lt Gov Healey were endorsing a report by a Turnpike Task Force (TTF) he had appointed. A 17-page presentation of the Task Force Report by Eric Kriss, secretary of administration and finance says the Massachusetts Turnpike Authority (MTA) has become "a rule-encrusted institution unable to reduce its own operating costs, integrate with the rest of the state transportation infrastructure, or purge longstanding unfairness and adverse impact issues."

It says: "There is no incremental fix that can effectively alleviate this condition other than elimination of the founding concepts of toll collection and 'independent' operations." The task force goes on to report extraordinary toll collection costs at 29.3% of revenue for manual toll collection and 9.4% for "Fast Lane" the brandname for the Turnpike's transponder tolling. This is compared with a purported 0.7% cost for state tax collection (DOR) and 0.1% for the collection cost share of the state gas tax.

COMMENT: These are ridiculous numbers. TRB Special Report 285 "The Fuel Tax and Alternatives" says: "For the United States as a whole, collection expenses for present state highway user fees (of which gas and diesel taxes are the largest item - TRnews) are 5% of revenue collected." (p5-20). Also see Highway Statistics from FHWA 2004, Table HF-10 puts state gas and vehicle tax collection costs (line 3) for all US state agencies at $2.7b vs $45b raised (line 8) which places collection costs' share of revenue at nearly 6%.

Are we to believe that Massachusetts tax collectors are 50 or 60 times as efficient in collecting the gas tax as the average state tax collectors? Maybe they are 50 or 60 times better at concealing their costs from turnpike task forces?

Tolling claimed to be inherently uneconomic

The task force report lists average manual "yield loss" or toll collection share as 6.3% at the tunnels, 26% at the urban Alston MA128 plaza, 21% at interstates and 39% at all other locations. A total "yield loss" after including transponder tolls is put at about 5% at the tunnels, 19% at the 128 plaza, 14% at interstates and 24% at all other locations.

Resigned to the relatively low usage of transponders and to existing costs, and claiming tax collection costs at a mere 0.7% of revenues they conclude that: "except for isolated locations like airport tunnels, a toll system does not meet any reasonable standard for efficient operation."

Mass Pike's costs

The task force lists some striking examples of the Turnpike overpaying staff with electricians getting $82k vs $49k at the DOT, mechanics $63k vs $50k, and maintenance workers $55k vs $39k.

Under the heading "Overcompensation" the report notes that bank tellers make about $11/hr or $30k/yr and with benefits cost the banks about $41k/yr. MTA toll collectors however get $56k in wages plus $10k in benefits costing $66k/yr. They also get more generous leave at 6 weeks/yr, holidays plus 15 sick days. And they take an average of $3.3k/yr in workers compensation payments.

The report says the MTA negotiated labor agreements that "yielded excessively high cost union contracts burdened by unreasonable work rules" which represented "unprecedented ceding of executive authority."

It charges that the MTA under-invested in internal controls and turnpike repairs to allow "low labor productivity" and "unmanaged benefit growth."

Management driven by patronage, tolerant of theft, neglected to raise tolls...

And it says top management was "driven by a political patronage culture that permitted petty theft and poor performance and cut costs to meet CAT (Big Dig) contributions."

The report says manual toll collection presents many opportunities for theft and that there was a lack of internal controls and a management that failed to establish a culture of integrity. Little or no action was taken even where audits showed likely theft. It gives details of what it calls an example of a single toll collector in one week:

- Aug 13 Collector X is short $165 while reporting only one vehicle ran the lane

- Aug 14 X is $210 short, offering no explanation

- Aug 15 X is $209 short, no explanation

- Aug 16 X is $157 short, no explanation

The report states that no action was being taken and the collector was apparently stealing at a rate of $30k/year.

Board failed to exercise oversight

MTA's board failed to exercise oversight, failing to review a KPMG audit which apparently raised serious issues. Meetings and agendas were surrounded in unnecessary secrecy allowing the board to cede extraordinary power to the chairman. There was a loss of control by the board and a failure to disclose problems known to staff, it states.

The political tactic of delegating politically difficult toll decisions to an independent board failed to work. The board failed to take action to deal with looming deficits.

It concludes that the Turnpike is "burdened with over $2 billion in debt" while "operating at an unsustainable loss."

The task force consisted of Eric Kriss secretary of the revenue department, Peter Schwarzenbach and Brad Crate.

Toll plaza delays

The task force makes a very loose estimate of the cost of delays at toll plazas on the system - 12sec/transaction x 200m transactions - which it values at $22m/yr. But open road tolling - which the task force is apparently ignorant of - with a combination of transponder and video tolling involves zero delay from toll collection.

An implementation plan calls for repayment of the Western Turnpike debt of $199m with $90m of the state's general fund reserves, $22m of debt service reserves, and securitizing or otherwise using service plaza revenues. The Turnpike board could do this and remove tolls west of MA128 by 30 Jun 2007

As for the metropolitan system of MTA the task force recommends removal of all tolls except at the tunnel, the state to issue new bonds to repay debt, and transfer control to the state DOT, and toll collection to the state department of revenue run by the turnpike task force's head Eric Kriss. This would need legislation and if enacted in early 2007 tolls on the Boston Extension would be removed 31 Dec 2007.

The plan is claimed to save $69m to $105m a year in cutting overlapping operations costs, toll collection costs and debt service.

The presentation claims the longterm impact on the state is "modest" though a table shows net impact on state budget as running $118m in 2008, $110m 2009, $107m 2010 and $94m 2011.

Tunnel toll revenue is put at $90m/yr in 2008 rising to $95m in 2011.

Current toll revenues at the Turnpike are $334m, so apparently about $244m/yr are to be lost by abolition of tolls on the turnpike proper (rural plus Boston Extension). For the first time - the Turnpike has published no financial report in years - we have an accounting of the Turnpike which shows appalling costs.

Against this year's $334m the Turnpike is incurring expenses of $270m for an operating income of only $64m. The task force projects expenses as rising steadily with rising health insurance costs a major factor while toll revenue grows a feeble 1.5%/yr and an operating deficit occurs in 2008. On top of capital commitments a so-called structural deficit grows from $9m this year to $70m in 2008. Debt service costs are due to soar 40%.

Turnpike debt is referred to as being $2b, and there is no indication how this is proposed to be defeased.

The task force reports that MTA made a risky bet in interest rates in a hedge that MTA staff didn't understand. It also refers to "opportunistic asset sales" and dubious accounting for a $76m real estate sale to Harvard U. Also air rights over the Turnpike were seriously overvalued in the Turnpike's balance sheet.

Criticism of sacrificing important revenue stream

Michael Widmer, president of a state Taxpayers Foundation and a member of the governor's Transportation Finance Commission yesterday deplored the proposal to end tolls calling it the sacrifice of an important revenue stream. He said that at a time when the transport system in the state is "desperate for more resources" this is "a major step backward."

Favorite to be elected governor is Deval Patrick, the Democrat. Polls show he has a double digit lead over Healey. Patrick said yesterday the detoll proposal was suspect coming 3 weeks before an election but did not denounce it or endorse it, saying merely it deserved "serious consideration."

The chairman of the house transportation committee Joe Wagner was harsher saying the proposal was "more politics than policy" and promised to give it a full financial analysis and public airing.

Fallout from Amorello defeat

The detolling move follows a protracted battle between the Governor and the Turnpike under chairman/CEO Matt Amorello, and revelations of pervasive incompetence in the Turnpike management of the Big Dig project in downtown Boston. During this bitter fight Amorello refused to call a meeting of the board of directors of the Turnpike. Patronage and corruption under Amorello and other recent Turnpike chiefs compounded problems borne of incompetence in the last years of the Turnpike - which has published no annual financial accounts for several years.

The legitimacy of Amorello's original installation as CEO of the Turnpike in 2002 is in question following revelations this summer that the appointment was never submitted to, or voted on, by the turnpike board. Amorello's predecessor as Mass Pike CEO, Richard Capka, signed over his job to Amorello in a move more typical of transfers of power by a tribal chief or a crime boss than a public authority. Turnpike board meetings were secret.

Tolls value allowed to erode

Tolls on the Mass Pike are among the lowest in the country. Taking the 214km (133mi) from W Stockbridge at the the NY line to South Boston (IC-1 to IC-26) the transponder toll for a car is $4.10 or about 1.9c/km (3.1c/mi) and by cash about 2c/km (3.45c/mi). Excluding the Weld car toll excluded segment IC1 to IC6 the transponder toll rate Springfield to South Boston IC6 to IC26 becomes 3c/km (4.8c/mi) and cash 3.4c/km (5.4c/mi), not as low as the Garden State Parkway but lower than most.

Tractor trailer tolls (5 to 9 axles) the 214km (133mi) IC1 to IC26 are $21.50 or 10c/km (16.1c/mi).

This is the biggest detolling in the US since the abolition of tolls on the Connecticut Turnpike in the mid-1980s. Tolls were abolished there after a tragedy in which a family in a van was incinerated in a fire caused by a rear-end collision at a mainline toll plaza.

On the Massachusetts Turnpike car tolls were abolished from IC6 in Springfield 78km (48mi) west to West Stockbridge at the New York state line by Gov William Weld a decade ago, but commercial vehicle tolls remained.

see announcements http://www.mass.gov/?pageID=gov2homepage&L=1&L0=Home&sid=Agov2

see report http://www.mass.gov/Agov2/docs/10_18_06_turnpike_report.pdf

HISTORY

The Massachusetts Turnpike Authority was formed in 1952 and floated toll revenue bonds to build the turnpike from Route 128/I-95 west to the New York state line, designated I-90. This mainline of 198km (123mi) opened in 1957. In 1958 MTA took over operations of the Sumner and Callahan toll tunnels from the Massachusetts Port Authority (Massport). In the early 1960s it built the Boston Extension, about 18km (11 miles) of 2x3 lane tollroad inward from Route 128 to downtown Boston and I-93 - opened 1965. The Central Artery/Tunnel or colloquially the Big Dig project which began in the early 1990s under the Massachusetts Highway Department was transferred to the Turnpike in 1997. At the same time the Turnpike was divided into two parts, the Turnpike West and the Metropolitan Highway System comprising the Boston Extension and the whole of the Big Dig (i-90, I-93) and the three harbor tunnels.

The Big Dig added about 7km (4mi) to the Turnpike, giving it a total of 222km (138mi).

The first part of the CA/T to be opened was the Ted Williams Tunnel (the "T" in the CA/T), which supplemented the Sumner and Callahan tunnels in providing access to Boston Logan Airport and East Boston. The Williams Tunnel, the only tolled portion, was constructed without unusual trouble or fuss but every other aspect of the $14.6b project has been a disaster, which has now proven to be the downfall of the Turnpike Authority.

Text of Gov Romney/Lt Gov Healey announcement

ROMNEY, HEALEY: TAKE DOWN TOLLS ON WESTERN TURNPIKE

"Governor Mitt Romney and Lieutenant Governor Kerry Healey today endorsed removing all tolls from the western portion of the Massachusetts Turnpike.

All tolls west of the Rt 128 toll plaza will come down, subject to final approval by the Turnpike Authority's board of directors. The repayment of the Western Turnpike debt will be made through a combination of reserves and by securitizing service plaza revenues. The state Highway Department will assume control of the road.

The plan will make possible a substantial reduction in costs, primarily by cutting the toll-collecting workforce and eliminating duplicative highway costs. Operation and maintenance are going to be shifted to the state - approximately $60 million, most of which will be picked up by the capital budget.

The move will save nearly $40 million in administrative overhead and toll collection costs.

"The Turnpike Authority is a mess, with an expensive cost structure and no ability to sustain itself except through higher and higher toll increases in perpetuity. This is not fair to the residents who live west of Boston and are bearing a disproportionate share of the cost of the Big Dig," Romney said. "It's time we start to dismantle this highly inefficient system."

Said Healey: "Turnpike drivers have been paying too much, for too long, for too little in return. Knocking down the tolls west of Rt. 128 and eliminating this unnecessary cost burden on commuters is long overdue."

"The Romney-Healey Administration has made toll relief a priority, and gaining control of the Turnpike Authority several months ago has allowed us to take some creative approaches to realize this goal," said Turnpike Board Chairman John Cogliano. "This is great news for people who ride the Western Turnpike."

The plan to take down the western tolls was contained in a report by Eric Kriss, former Secretary of Administration and Finance, who led a task force that looked at Turnpike operations. His report concluded the Turnpike "cannot continue 'as is' and must implement significant operational and fiscal changes as soon as possible."

After evaluating different options, the report recommended that the Turnpike west of the Rt. 128 toll plaza cease operation as a toll road by June 30, 2007.

The Turnpike Authority board has the legal authority to act on its own, without legislative approval, and today the board voted unanimously to begin the process.

Driving the decision are two main factors: 1) the inefficiency of toll collection, where the revenue collected is not justified by the high costs, and 2) the unfairness of asking western Turnpike toll payers to subsidize the eastern portion, the so-called 'Metropolitan Highway System' that consists of the Central Artery, the airport tunnels and the Boston Extension.

The report also suggests the next Governor and Legislature go one step further and consider ending all tolls east of the Rt. 128 toll plaza, except on the airport tunnels. In that case, the Turnpike Authority would need specific legislation to accomplish what is a more complicated task.

The report noted the economic, public safety and environmental benefits of eliminating tolls. Tolls lead to longer commuting times and more smog through idling. Furthermore, studies show that barrier toll plazas create a higher risk of accidents, putting the public in danger.

"No matter how you look at it, whether from a financial, economic, environmental, safety or equity point of view, there is a compelling rationale for eliminating tolls," said Kriss. ENDS TEXT Gov's statement 2006-10-18

COMMENT

If any tollroad authority in the US deserves to be abolished it is the Massachusetts Turnpike. It is the worst. Abolition of the Turnpike Authority is one thing, abolition of tolls is quite another. It is a retrograde step, pushing costs away from users off onto taxpayers in general.

Of course under the Turnpike Authority toll collection costs are indefensible - at 29% of revenue. To cost that much you have to be world champions at thievery, featherbedding, patronage, and all kinds of malfeasance and waste. Most toll authorities are able to operate with toll collection costing 5% to 15% of revenues.

However the task force comparison of toll collection costs with gas tax collection costs is preposterous. For one thing the numbers at 0.7% for state tax are almost certainly way low. FHWA says the states in aggregate report $2,703m in collection expenses on $45,964m in motor fuel and vehicle taxes in 2004 or 5.9%. (see Table HF-10 lines 8 and 3 at http://www.fhwa.dot.gov/policy/ohim/hs04/pdf/hf10.pdf)

Second if costs of collecting a tax were the gold standard then we should move to a socialist system in which food, clothing, electricity, water, everything was tax-financed and all the country's goods and services were provided free at point of sale. Send all the check-outs, cash registers, electric meters, and billing system to the scrapheap. It's "cheaper" to collect the revenue with taxes. Super-efficient stores like Wal-Mart or Safeway may spend more of their revenue in "toll collection" (checkout) costs than some government tax collector. By the task force logic that's inefficient.

Free goods and services don't work because while they may minimize revenue raising costs they generate waste and shortages and sever the connection between customers and service providers. The Mass Pike will get congested with no tolls and service will decline just as it has at the detolled Connecticut Turnpike and on the Dallas Fort Worth Turnpike.

Free roads are a step backward.

Certainly drastic measures are needed at the Massachusetts Turnpike, but the proper policy is to abolish the existing authority and seek bids for a private sector toll concession. Concessionaires would have every interest in running it efficiently and improving customer service. Properly managed with a combination of video and transponder tolling the toll collection process need not involve any delays to motorists. With the existing tolled portions a concession would bring somewhere in the region $5b to $10b, which would pay down a large slab of state debt.

The task force is correct in pointing up the inequity of motorists paying tolls on the rural sections of the Turnpike in order to subsidize the downtown I-93 Big Dig. But equity would consist in having that paid for by its own users, not by tollpayers elsewhere or taxpayers elsewhere. I-93 should be put out to investor concession too. It is perfectly suited to video tolling and the concession should have the responsibility for fixing the construction job the Turnpike Authority so badly botched. Inner area tolls differentiated by time of day would allow for efficient management of traffic as well as covering costs from users.

Just three weeks before a closely fought election these moves reek of political opportunism. The turnpike task force report, as presented is a mess, obviously slapped together to meet a political deadline. Hopefully the subject will be revisited after the election.

TOLLROADSnews 2006-10-18 REVISED 2006-10-19


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