NJPP Monday Minute 8/9/10: Privatizing Transportation Minutia: An Ideological Distraction?


Task forces, study groups and commissions on privatization often result from an ideological belief that private companies have a monopoly on efficiency that government cannot match. New Jersey governors have given lip service to private sector efficiency, often saying its ability to provide services cannot be matched by the public sector. Despite the recent financial services debacle brought about largely by the private sector, Gov. Christie is following past leaders.

The New Jersey Privatization Task Force created by Gov. Christie by executive order on March 11, 2010 was instructed to do a comprehensive review in 81 days of opportunities for privatization within state government. The report identified $210 million in estimated annual savings from 40 services currently provided by public employees.

Transportation Recommendations
Nearly $98 million (approximately 47 percent) of the identified savings come from changes in the way the state manages transportation services. Some of its suggestions include having private companies do car registrations and inspections ($28 million); having the private sector manage or own NJ Transit’s 144 parking facilities (no $ estimate); contracting with more private carriers to operate NJ Transit bus routes (no $ estimate); hiring a private vendor to collect tolls on the turnpike and the Atlantic City Expressway (between $38.7 million and $46.2 million annually); adding to the rest stop services provided by the current private contractors on the NJ Turnpike (no estimate); and selling messaging and naming rights on the AC Expressway ($6 million to $8 million annually).

There is no way to know if the cost estimates of these recommendations reflect reality or if service would improve, but here are a few thoughts.

  • Private car inspections in Pennsylvania often have coincided with repairs – a catch 22 situation. An inherent conflict of interest exists if the same person inspects a car and does the necessary repairs. No reason exists to believe this would be different in New Jersey.
  • Managing 45,000 parking spaces in 144 parking facilities should be a cash cow for NJ Transit and would be a valuable contract for a private (and probably politically connected) operator. The Japanese rail system uses the valuable land and facilities it owns around the train stations to subsidize fares. NJ Transit could do likewise and the benefits should go to the public not a private company.
  • According to the report, NJ Transit contracts with private carriers to provide 67 (34 percent) of its 197 routes. Although the language in the report is confusing, it would appear that in FY 2010, NJ transit paid $46 million of its $601 million to these private carriers. Private carriers are likely to operate some of the most profitable bus routes. It’s unclear what it means that their budgets are 7.6 percent ($46 million/$601 million) of NJ Transit’s bus operations. Clearly those data need more scrutiny or a clearer explanation.
  • Manual toll collection on the New Jersey Turnpike and the Garden State Parkway now accounts for only 30 percent of tolls collected because of the E-ZPass electronic alternative. The South Jersey Transit Authority which operates the Atlantic City Expressway is now installing an all-electronic cashless toll system. The recommendation is to contract with a private vendor to collect manual tolls whose savings would come from cutting salaries and eliminating benefits.
  • Rest and service areas on the Turnpike and the Parkway are currently operated and maintained by a private vendor. The task force recommends that the vendor provide additional and higher quality services, probably a good idea because the private vendor might make more money and the service area would be more attractive. It’s not clear, however, how the state benefits unless that private vendor shares its profits with the state.
  • Finally the report recommends that the South Jersey Transportation Authority generate income by selling to private companies the advertizing space and naming rights on the 13 over head traffic signs it plans to erect along the 44-mile AC Expressway. A good enough idea but one which brings to mind a situation that came to light in May 2003 when two of Gov. McGreevey’s aides used their political connections to increase the value of a billboard company in which they had a financial interest. After arranging advertising contracts with a number of politically connected businesses, they each sold their interest in the billboard company for more than $2.2 million. This incident was investigated by then US attorney Christie and the billboard contracts were canceled by the McGreevey administration.

What Does NJ Really Need?

Whether the recommendations in the task force’s report are smart or even possible, they are a distraction from the real issues at hand.

New Jersey’s transportation needs are massive and the state’s future depends on intelligent management. Billions of dollars are needed and it should be clear to everyone that the itemized $98 million does not address any of the state’s transportation needs.

New Jersey Transit has just enacted the largest fare hike and service cuts in its history with fares for some riders increasing over 40 percent. It predicted it would lose riders, and this appears to be happening faster than predicted. This, at a time when no one wants to cut back on gas and oil consumption; when ozone alert days are more numerous than ever; and news reports show 100 days of oil pumping out of the ocean floor despoiling the environment.

New Jersey’s road, bridge and transit infrastructure is crumbling. The state needs a massive infusion of money to rebuild roads and bridges (not expand them) in order to help the economy and keep people moving. But neither the governor nor the legislature is willing to invest in the state’s infrastructure. None of them are willing to raise the gas tax; levy a sales tax on gas; or come up with any other meaningful way to fund the state’s future needs.

Identifying $98 million in savings and new revenue is meaningless. Whether privatization is good or bad is irrelevant right now. This report is a distraction from the real issues at hand – the future of the state and its real needs. Nothing in this report speaks to them.

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Filed under car inspection, Gov. Chris Christie, New Jersey Policy Perspective, NJ Transit, private sector, Privatization Task Force, transportation fund

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