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New Jersey Turnpike Authority Looks to Privatize Toll Collection

Harris Kenny
January 12, 2011, 9:00am

Last month the New Jersey Turnpike Authority announced that it plans to release a request for proposals (RFP) to private firms interested in providing toll collection services on the New Jersey Turnpike and Garden State Parkway. The agency expects to release the RFP later this month, seeking bids on a five-year contract for both roads. According to TollRoadsNews.com:

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 [that] are involved in cash toll services. With a total cost of $85m that's an average cost of $127,000/employee.

That $127,000 compares with labor costs (pay plus benefits) of $50,000 to $75,000/year in the private sector for comparable work.

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

Currently, automatic toll collection accounts for 70 percent of toll revenue through E-Z Pass transponders. The remaining 30 percent of toll revenue is done manually. TollRoadsNews.com reported that in 2009 total revenue was $952 million for 634 million transactions. Therefore, manual toll collection done by the Turnpike Authority costs $85 million and generates $286 million in revenue for 190 million transactions, or, $.45/transaction. This is higher than average manual toll collection costs of $.20-$.30/transaction, while automatic toll collection typically costs $.03-$.10/transaction.

Last summer, the New Jersey Privatization Task Force released its final report outlining up to $210 million in potential savings and cost avoidance. The Task Force recommended privatizing toll collection, finding that the state could potentially save up to $42 million a year by privatizing toll collection for the Turnpike and Parkway.

Operations at the New Jersey Turnpike Authority recently came under scrutiny when the Office of the State Comptroller released an audit last October identifying over $43 million in wasteful spending. The bill identified $12.8 million in waste from 2007 to 2010 when the Authority used a private carrier for health insurance instead of the State Health Benefits Program, while never performing a comparative analysis to determine which health plan was most cost-effective. The remaining approximately $30 million was spent on bonuses in 2008 and 2009. Several egregious examples of bonuses include:

In the audit's press release, State Comptroller Matthew Boxer included strong criticism of the Authority saying, "While tolls are going up, the Turnpike Authority is overpaying its employees, overpaying its management, overpaying for its health plan and overpaying for legal services."

With this type of track record, one can only imagine improvements in public service delivery that private operators will be able to bring once the toll collection RFP is released.

Reason Foundation has long advocated privatization and public-private partnerships in transportation. See Reason's 19th Annual Highway report here, and transportation archive here.

Harris Kenny is a research assistant at Reason Foundation


Harris Kenny is Policy Analyst


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