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Merger of Mass Turnpike and Mass Highways

Merger of Mass Turnpike and Mass Highways. January 22, 2004. Assessment process for considering a merger between the Mass Turnpike and Mass Highways . Quantify on-going operating savings. Identify one-time revenues liberated by merger. Assess budgetary and debt service implications.

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Merger of Mass Turnpike and Mass Highways

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  1. Merger of Mass Turnpike and Mass Highways January 22, 2004

  2. Assessment process for considering a merger between the Mass Turnpike and Mass Highways Quantify on-going operating savings Identify one-time revenues liberated by merger Assess budgetary and debt service implications • Do functional duplications exist within both organizations? • Are MassHighway operations more efficient than Turnpike operations? • Can equipment and facilities be be shared? • Can restricted reserves be liberated? • Can outstanding debt be refinanced? • Can redundant land and facilities be sold? • Is it prudent for the Commonwealth to absorb $2.5 billion in existing Turnpike debt?

  3. The Turnpike generates a loss from its core operations, thereby requiring the on-going use of one-timers to meet its obligations

  4. The Turnpike is an expensive road to run… Interstate lane miles and Western Turnpike All state lane miles Interstate lane miles

  5. …yet, the Turnpike is not a “better road” Centerline miles of Interstate Highway Source: Pavement Management Data report 2001-02.

  6. Specific MTA and MHD operating costs have been reviewed Overhead Executive, planning, development, HQ supplies & general expense, custodial, HQ utilities • Administration CFO, budget, audit (non-toll), purchasing, insurance admin, cash mgt., credit union mgt. • Finance Civil rights, personnel admin, employ. relations, benefits, training, worker’s comp admin, pension admin, payroll, occupational safety, T-passes, credit union • HR IT services, information systems, computer aided design • IT Community relations, advertising, tourism and marketing, community services, patron services, • Marketing Legal • Legal O&M • Engineering Field engineering, engineering services, communications, environment engineering, highway engineering, research and materials, construction engineering, right of way • Maintenance Field personnel and OT, facilities mgt., highway operations, maintenance admin., district utilities, fleet mgt. and maintenance, service area maintenance, signage, carpentry, striping, litter, landscaping, machine shop Excluded Costs • Tolls Toll collection, toll equipment, toll audit, toll training and logistics, ETC enforcement • Police Public safety administration, police patrol, special details • Special projects All CA/T related costs, tunnel utilities, tunnel maintenance, Route 3 north project • Parking Parking operations • Snow & Ice All snow and ice operations

  7. Scale drives significant overhead productivity advantages at MHD Turnpike Mass Highways Overhead cost per lane-mile Lane-miles per FTE MHDI-state MHD

  8. Administrative productivity (detail) Turnpike Mass Highways Total FTE 169 257

  9. Benchmarking toll productivity highlights inefficiency Required toll collector FTE’s MTA FTE reductions 3.3 FTE’s per 16 hour lane and 4.96 per 24 hour lane; fully loaded employee cost of $70.7K; 7.5 working hours per day, 5 weeks annual vacation. Assumptions:

  10. Savings are generated by eliminating duplicate overhead, not by lower the quality of the road ~$1M

  11. Capital avoidance for Research and Materials Lab • $5 million Other sources of value • Closure and sale of overlapping facilities and depots • $1-2 million • Equipment and machine shop sharing • $3-5 million

  12. Up to $300M in funds could be liberated by a merger of the Turnpike and Mass Highways

  13. Summary Merger Rationale Financial Distress $20M Annual Savings Insufficient Accountability • Cash flow negative • Non-strategic, short-term decision making to address financial problems • Risky financial transactions • Disposition of critical infrastructure assets • Ratings downgrades • Eliminating duplicate overhead • HR, finance, Admin, legal • Toll collection optimization • Staffing levels • Complete the transition to electronic collection • Increasing facility and equipment utilization • Critical transportation assets are not controlled by the Commonwealth • Capital spending and asset management is outside of Commonwealth control • The state needs to control transportation infrastructure • Surface artery park restoration is too important to be built and run by an independent authority

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