MTR 298, NJ E-ZPass Consortium Projects Deficit- Big Revenue Shortfall Possible -

Issue 298

December 18, 2000

NJ E-ZPass Consortium Projects Deficit - Big Revenue Shortfall Possible -

At a December 9th press conference in East Brunswick, the Regional E-ZPass Consortium - which includes NJ toll roads, the Port Authority and the Delaware DOT - released revised financial projections that downgraded the system's expected 2008 $35 million profit margin to a $65 million deficit. The unanticipated public enthusiasm in New Jersey for E-ZPass, additional construction work, and the fact that only a small percentage of expected toll violator revenue has been collected this year all contributed to the recalculation. E-ZPass operations on the NJ Turnpike and Garden State Parkway account for the anticipated shortfall.

Initial accounting for the Parkway and Turnpike assumed that only 35% of all highway users would want E-ZPass accounts. Actual demand has already far exceeded this amount: 50% of Turnpike drivers are paying with E-ZPass, while usage is at 41% on the Parkway. Costs of this early success so far is almost $80 million for purchase of additional tags, extra credit card processing fees and significantly, per transaction costs charged by the contractor running the E-ZPass system. The drain has been offset somewhat by a $39 million windfall from the leasing of extra space on the system's fiber-optic cable lines.

Consortium members and NJ Transportation Commissioner James Weinstein assured reporters that the deficit would not lead to increased tolls on either of the big NJ toll highways. The consortium agreement will spell the NJ agencies somewhat, but the Turnpike and the Parkway will bear the majority of the burden.

Observers worry, however, that the deficit will continue to grow. The Star Ledger reported that the consortium budget assumes revenue from toll violators will top $100 million in 2001 and $94 million in 2002. But over the past year only $4 million has been collected, though defenders say the low figure resulted from the belated inauguration of E-ZPass on the Turnpike.

If the budget gap multiplies to hundreds of millions, it is unclear whether the Turnpike and, particularly, the Parkway, whose capital budget is already underfunded (MTR #296), would have the funds for a bailout. Although it would be possible for both agencies to avoid any big financial problems until closer to the end of the E-ZPass contract in 2008, doing so could foist the issue of an E-ZPass bail-out into negotiations over the next round of funding for NJ's Transportation Trust Fund in 2004. A nearer term New Jersey Highway Authority toll increase is likely a better solution that could simultaneously give the Parkway the funds needed to upgrade their barrier-toll plazas to allow non-stop tolling, and join the regional movement towards congestion pricing.