New Jersey Turnpike to seek bids for toll operations in Dec, other reforms under way

October 26, 2010

The New Jersey Turnpike Authority will be formally seeking bids for toll collection and cash handling services in December to replace some 700 high-cost salaried employees. James Simpson the chairman of the Turnpike Authority and state commissioner of transportation said this after an authority board of directors meeting today.

"It has become a monopoly," he said of toll collection referring to its high costs and labor union dominance.

Simpson said the Turnpike needs to "get real with work rules" that presently make it impossible to deploy staff efficiently. Other operations and maintenance will also be bid out in an effort to reduce costs at the Turnpike Authority - which includes the Turnpike and the Garden State Parkway.

A May 31 report to the Governor by a Privatization Task Force estimated that $35m to $42.5m a year could be saved at the Turnpike's two tollroads by privatizing manual toll collection.

Manual toll collection at the Turnpike Authority employs around 520 toll collectors. Approximately another 150 are involved in supervision and support of the toll collectors for a total of about 670 employees are involved in cash toll services. With a total cost of $85m that's an average cost of $127k/employee ($85m/670) .

That $127k compares with labor costs (pay plus benefits) of $50k to $75k/year in the private sector for comparable work.

Government tollers in Florida, Texas, Colorado and southern California tend to outsource toll collection and enjoy these lower costs by privatization.

45c/transaction costs

We reported earlier that 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 are high.

Privatization of toll collection seen as interim to AET

The Governor's privatization report noted that the Atlantic City Expressway and other tollers are going cashless - all-electronic tolling.

It suggested privatization of manual toll collection on the Turnpike as an interim step:

"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." (p38)

earlier report:

Board unanimous on cuts in perks

At their meeting today the Turnpike board voted unanimously to eliminate toll free travel for employees using the Turnpike as their commute to work - effective Jan 1, 2011. They also voted to eliminate what a statement called "unnecessary perks" listing:

- annual cash-out of unused sick and vacation time by non-union employees immediately, union employees when contracts expire

-  future increases in longevity payments to non-bargaining employees for years of service; and

-  separation payments made to non-bargaining employees who retire with ten or more years of full-time service

Turnpike Authority Chairman James Simpson said in a statement today: "We promised real reform, and we are delivering.  Governor Christie's charge has been clear from the day he took office - root out and eliminate wasteful and abusive spending practices. The reforms we adopted today are an important step in a process that began 10 months ago and will continue until we've met the Governor's call to ensure that every dollar we spend is spent wisely."

The Turnpike implemented new processes to review bills and control costs, including fees for outside counsel.

They plan to advertise for new outside counsel and general engineering services by early next year, and the RFP, they say "will be structured to give the Authority more control over fees."

An outside firm was hired through a competitive process in July to analyze the Authority's employee health benefits in order to find more cost-effective ways of providing them.

Salary structures are being reviewed to bring them into line with the executive branch.

The Authority says it has also been working to improve its procurement processes across the board so it ceases to overpay for goods and services.

Procurement of bond underwriting services has been done in conjunction with the state Treasury for the next big bond sale.

"In addition to the reforms already adopted, the Authority will eliminate in all union contracts as they expire in 2011 sick and vacation cash-ins, future longevity payments and separation bonuses, as well as bonuses for birthdays, anniversaries, snow duty and holidays," executive director Veronique Hakim is quoted.

"We are turning over every stone as we search for ways to run our business more efficiently and more transparently."

TOLLROADSnews 2010-10-26

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