Merger of Mass Turnpike and Mass Highways

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Merger of Mass Turnpike and Mass Highways

• January 22, 2004

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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?

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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

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yet, the Turnpike is not a better road
Centerline miles of Interstate Highway
Source Pavement Management Data report 2001-02.
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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, workers 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

OM

• 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
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Scale drives significant overhead productivity
advantages at MHD
Turnpike
Mass Highways
Overhead cost per lane-mile
Lane-miles per FTE
MHDI-state
MHD
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Administrative productivity (detail)
Turnpike
Mass Highways
Total FTE
169
257
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Benchmarking toll productivity highlights
inefficiency
Required toll collector FTEs
MTA FTE reductions
3.3 FTEs 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
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Savings are generated by eliminating duplicate
overhead, not by lower the quality of the road
1M
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Other sources of value

• Closure and sale of overlapping facilities and
  depots

• 1-2 million

• Equipment and machine shop sharing

• 3-5 million

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