Penn Pike raising cash tolls only, adding to transponder account advantage

July 25, 2011
By Peter Samuel

The Pennsylvania Turnpike Commission is hiking cash tolls 10% effective Jan 1, 2012 but leaving E-ZPass transponder toll rates unchanged.  The toll hike is expected to gross an extra $23m in tolls or about 3% apparently taking toll revenues to the range $760m to $775m.

3% increases in revenue will be aimed for in 2013 and 2014 the Turnpike Commission decided also last week - though it left the details of how those revenue increases would be obtained for decision closer to implementation.

Roger E Nutt, chief executive of the Turnpike is quoted in a statement about the 2012 cash tolls hike: "Implementing a cash-only toll increase accomplishes two essential goals: It generates the revenue we need to satisfy our annual funding obligation to the Commonwealth of Pennsylvania, and it encourages more travelers to sign up for E-ZPass. At the same time, it helps diminish the economic impact of a toll increase; since nearly two-thirds of turnpike travelers already use E-ZPass, only about a third of our customers will be affected. Cash customers can avoid this increase by signing up for E-ZPass."

Turnpike chairman William K Lieberman is quoted: "Clearly, the commission has both economic and customer-service reasons to encourage customers to switch to E-ZPass, and that's why we decided to sweeten the incentive. Collecting tolls electronically is not only safer, faster and more convenient for customers, but it also reduces the commission's annual operating costs."

The Turnpike says the average cash toll costs about $1.00 to collect compared to "less than 25c" via an E-ZPass transponder.

All IAG members get 1.4 million Penn Pike issued transponders are in use attached to 970k accounts (including that of your editor.) The Turnpike makes the pointed comment - pointed eastward at New Jersey where discounts only apply to locally issued E-ZPass - that in Pennsylvania the discounts apply to "all customers regardless of issuing agency or state in which an account was established."

It adds that: "there are 24 E-ZPass agencies in 14 states, largely in the northeastern US, and more than 20 million E-ZPass transponders in use." ("largely in the northeast" is baloney - 7 of 14 E-ZPass IAG states are in either the midwest or mid-Atlantic: IL, IN, OH, VA, WV, MD, DE.)

Cash tolls going up about 11% with rounding up to nickel above

Although the announcement says cash toll rates will be increased by 10 percent the actual increases will usually be more than that - especially for cars - because of rounding up to the nearest nickel or 5c. Tollers have not dealt in single cents - colloquially 'pennies' for some years now. (Why does the US Mint continue issuing this worthless throwaway coin?)

Thus the most common $1.10 cash toll will rise 13.6% to $1.25 since that is the next 'nickel toll' after the 10% increase to $1.21 (CORRECTION - thanks to eagle eye reader.) Taking a simple average of the ten most common cash toll rates the average car toll increase after rounding-up is 11.1%, not 10%.

Truck tolls being larger have less rounding-up add-on to the 10%. The ten most common Class 5 truck tolls go up on average 10.3%.

Car tolls on the Penn Pike will go to about 11c/mile in 2012 from 9.8c now and an E-Zpass charge of 9.2c/mile. Class 7 trucks in the weight range 62k to 80k pds, 28.1t to 36.3t will pay nearly 60c/mile cash from 53.4c now, and the E-ZPass charge of 50c/mile.

The ticket section of the Turnpike from Warrendale at MP30 north of Pittsburgh 329 miles, 530km to the NJ line at the Delaware River will in 2012 cost$35.50 cash vs $32.25 now and an E-ZPass charge of $30.17.

For a Class 7 truck the cash charge will be $193.25 next year vs $175.65 now, while the E-ZPass charge is $164.44.

Cash tolls were 37.4% of revenue in 2010 but has been declining and the Turnpike says the proportions are now close to a third cash, two-thirds transponder. By our calculation the average E-ZPass discount on cash will now be about 16%. (Without the rounding up to the nearest nickel it would 15%.)

At present it is around 7% after allowing for the nickel rounding up.

The commission board approved changes to the commercial volume-discount program. Effective Jan 1 2012, the present 15 percent volume discount will be eliminated since all commercial carriers with E-ZPass will automatically receive an approximate about 16% off. Post-paid commercial  E-ZPass customers will need to incur $5,000.00 to $10,000 of monthly tolls to get the extra 5 percent off,  and to incur $10,000 or more to receive the extra 10 percent discount.

Since 2009 the Penn PIke has been increasing tolls annually.

Act 44 payments to PennDOT

Major driver of the toll increases is the Turnpike's huge annual contracted payments to the state  DOT. That goes back to 2007 and the politicking around then-Governor Ed Rendell's move to concession-out the Turnpike to Abertis for $12.8 billion. The Turnpike under CEO Joe Brimmeier planned tolls on I-80. Act 44, lobbied for by the Turnpike averted the private concessioning but left it saddled with huge payouts to the state DOT -  $750m in 2008, $850m in 2009 and $900m in 2010. Now that I-80 is not to be tolled the payments to the state drop to $450m a year, although there is an argument with the state in interpreting which year the drop to $450m occurs.

And it is borrowing to finance the annual payments.

Some $3.4b  in new bonds have been issued to make the Act 44 payments to the state and the Turnpike has getting quickly deeper in debt (about as quickly as the US Government!) In FY2010 alone (to end May) Turnpike debt grew from $4.76b to $6.4b or by 34%.

Low interest rates have made the debt apparently viable but the Turnpike's underlying traffic trend is not very strong. Measured by revenue miles, traffic has been slightly in decline since 2003 at 5.83b, going to 5.52b (5.4%)  

Average toll/mile has gone from 7c in 2003 to 13c in 2010.

Truck traffic is off most, growing through 2007 when truck-miles were 1.31b. They are now 1.09b, a drop of 10.6%. Average truck tolls have gone from 22c in 2007 to 28c in 2010.

Car traffic have peaked in 2003 at 4.60b. The low point  was in 2009 at 4.38b car-miles. 2010 was 4.42b, down 3.9% on 2003.

Tolls have gone from 5c/mile average for cars in 2003 to 8c in 2009 and to 9c in 2010.

http://www.paturnpike.com/press/2011/20110721140300.htm

Act 44's huge hit on Turnpike's revenues:

http://www.paturnpike.com/geninfo/1006-1164687%20Pennsylvania%20Turnpike%20Commission%20CAFR%2010-09.pdf

TOLLROADSnews 2011-07-24


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