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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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assessment process for considering a merger between the mass turnpike and mass highways
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?
slide3
The Turnpike generates a loss from its core operations, thereby requiring the on-going use of one-timers to meet its obligations
the turnpike is an expensive road to run
The Turnpike is an expensive road to run…

Interstate lane miles and Western Turnpike

All state lane miles

Interstate lane miles

yet the turnpike is not a better road
…yet, the Turnpike is not a “better road”

Centerline miles of Interstate Highway

Source: Pavement Management Data report 2001-02.

specific mta and mhd operating costs have been reviewed
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

scale drives significant overhead productivity advantages at mhd
Scale drives significant overhead productivity advantages at MHD

Turnpike

Mass Highways

Overhead cost per lane-mile

Lane-miles per FTE

MHDI-state

MHD

administrative productivity detail
Administrative productivity (detail)

Turnpike

Mass Highways

Total FTE

169

257

benchmarking toll productivity highlights inefficiency
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:

savings are generated by eliminating duplicate overhead not by lower the quality of the road
Savings are generated by eliminating duplicate overhead, not by lower the quality of the road

~$1M

other sources of value
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
summary
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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