In the last three weeks of this blog, we have focused on the issues of interoperability of electronic toll collection and vehicle miles traveled charging. This week, we take a broader look at the world economic situation, its effects on individual companies and transportation agencies, and what you have done to respond in the face of crisis.
It has been nearly 18 months since the onset of the global financial crisis. Many businesses have had to dramatically reduce expenses, layoff employees, cut back on plans for major capital improvements or expansion, and abolish whole departments and business lines. Many toll agencies have seen declines in VMT and toll revenues. The American Recovery and Reinvestment Act (“stimulus”) and similar interventions in other countries around the world have brought some measure of relief to individuals and companies hard hit by the global recession. But much remains to be done before large parts of our world experience the hoped-for recovery.
Since the onset of the crisis, what has happened in your organization and your business? How are you coping? What new approaches and strategies have you embraced that seem to be working? What are the lessons learned? What is the silver lining in the dark clouds? What are your hopes and plans for the future?
Sunday, February 7, 2010
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Posted by Victoria Cross Kelly, The Port Authority of New York and New Jersey
ReplyDeleteThe economic crisis has hit us hard, in terms of reduced activity and reduced revenues, not only for our vehicular crossings, but across the board in our aviation, maritime and mass transit lines of business, as well. At our bridges and tunnels, our traffic is down for the second year in a row but while auto traffic is down slightly, truck volume is down about 10%, which has resulted in a disproportionate decline in revenues, since truck tolls are significantly higher than auto tolls. And looking forward, we don’t expect a rapid return to prior years’ levels. The potential restructuring of the finance sector, which accounts for a large number of jobs in the NY-NJ region, could mean a lot of uncertainty with regard to future employment and discretionary income in our region.
The effect of this has been two-fold – one negative, but one positive. I’ll get to the positive side in a minute. On the negative side, the implications are probably not surprising. We’ve had to defer quite a few capital projects, many of which were major rehabilitations of our crossings, most of which are 75 years old or more. We are patching where we wanted to repave, and we are repaving where we wanted to install a new deck. We are having to make difficult choices to delay the start of some projects, or to progress them more slowly. This is going to have long-term repercussions, since even when the financial picture improves, these major capital projects will take several years or more to design and construct. On the operating side, we’ve cut back on contracts, and on overtime, and are constantly making choices on reduced levels of service, reduced repairs, etc.
But as I noted, there’s a positive side to the budget constraints. We have been forced to do more cost-benefit analysis of our planned expenditures, and we have learned that we can manage with fewer positions and fewer operating dollars than we had previously thought. We do a better job, now, in measuring and evaluating our performance and in analyzing cost-effective ways to improve performance, and those lessons will serve us well for the long term. In addition, the decline in traffic gives us the opportunity to plan for the time when traffic comes back, and to have the policy discussions relating to how we’ll handle traffic congestion in the future. While it may seem somewhat counterintuitive, the decline in congestion gives us a “breather” and allows time for some rational analysis, rather than an overly quick reaction to traffic congestion. We know that traffic will return, and now is the time to plan for that.
-- Victoria Cross Kelly
Posted by Jim Ely, Florida's Turnpike Enterprise
ReplyDeleteManaging in an era of declining revenues is one of the most stressful and challenging periods for any toll agency manager. On one side of the challenge you are doing everything possible to keep your customer service levels high, maintaining a strong debt service coverage ratio to maintain your bond rating and presenting a positive outlook for tomorrow. On the other side of the challenge at Florida’s Turnpike we have had to reduce our external workforce by hundreds of staff, consolidate offices, reduce travel, and squeeze every ounce of efficiency from our program. Doing more with less is our challenge every day. We’re doing the same things that the private sector is doing in this Recession. Some examples of efficiency measures are: reducing the size of the evelope that we use to send out violation notices and capping staffing levels in our SunPass backroom CSR operations even though the number of SunPass accounts have continued to rise. This has been done by maintaining our performance standards but refining the message screens and questions we ask our customers. This has greatly shortened the time it takes to service an account. We have also removed automatic escalation provisions in our consultant contracts which essentially eliminates salary increases. Perhaps most challenging of all is the affect on staff morale. To cope with this we have done more staff activities like Mud VolleyBall competitions and little things like handing out candy in the morning. We created an in-house “Spirit Team” to come up with ideas to improve morale. We also had to reduce our Work Program by half due to the reduced revenues. Many projects were deleted or deferred due to our reduced finances. On a brighter note, the latest traffic and revenue forecasts predicts our revenue reduction will go flat this July and we will begin a slow(around 1%) increase in our annual revenues. I would be happy to share all the efforts we have taken to cope with the Recession.
James L. Ely, DPA
Executive Director and Chief Executive Officer
Florida's Turnpike Enterprise
Florida Department of Transportation
Posted by Antonio Diez de Rivera
ReplyDeleteThe crisis has hit Spain with greater virulence than other European countries: Unemployment nears 20%, the highest in Europe, and Public Deficit represents almost 12% of GDP.
The toll industry has not escaped this situation and traffic declined in 09 by almost 7% with truck volume down by as much as 18%!
The impact in toll concessionnaires has not been the same: mature companies have been able to cope better with the situation, while companies incorporated less than 7 years ago are seriously suffering, specially when it comes to refinance existing debt. Financial institution have tightened credit and are skeptical when it comes to believing traffic projections, something that was never questioned, since declines in traffic were, up to now, unthinkable!
This situation has forced the Spanish Administration to get involved in the problem, and different solutions, such as guaranteeing certain future levels of traffic, are being considered.
The outlook for 2010 is, unfortunately, not brighter. Drastic measures, such as dramatic cuts in public spending, are needed, but the Government does not seem to be willing to pay the political cost involved.
On the positive side, our concessionaires have learned how to cope with the crisis, and contrary to what our public sector has done, substantial reduction in expenses, without lowering the service offered, have been undertaken, and investments not immediately needed, have been postponed. Such measures have resulted in maintainig the level of net revenues.
While the outlook is bleak, the morale is high!
Antonio Diez de Rivera
Executive Director
Spanish Association of Toll Roads (ASETA)
Madrid, Spain
In 2007 Mark Zandi, Chief Economist with Moody's said Austin would be one of the last areas to feel the effects of the recession and one of the first to emerge from it, and his predictions appear to have been right. For the last two years, traffic on our 183A toll road has grown at a rate of more than 10%, but in late 2009 traffic began to slow to an average growth rate of 5%; the result of slowed new home development and commercial construction along the project over the last year. Of course, in some places 5% growth would be considered positive even during boom times.
ReplyDeleteOne good side of the recession has been the opportunity to catch our breath and make some progress addressing the traffic congestion problem here in Austin. We were fortunate to receive money from the American Investment and Recovery Act to fund a portion of our $600 million Manor Expressway project (www.manorexpressway.com). These stimulus funds allowed us to finance the first phase of the project without taking on additional long-term debt, putting us in a better position to finish the entire 6.2-mile project, hopefully at a lower cost than originally projected.
We were also able to fund the 5-mile extension of our 183A project ahead of schedule and before the next wave of development hits. Already, we are seeing early signs of the economy's reemergence. Just a week ago, developers announced plans to build a $360 million Schlitterbahn Water Park Resort just a few miles from our 183A toll road. The 95-acre complex, which will include a hotel with a conference center, is expected to open in 2012, just about the same time our 183A extension is completed.
Like most organizations, we took the recession seriously and watched our pennies closely. But we haven't forsaken our culture of innovation or stopped seeking creative ways to bring mobility improvements to our community. Instead, we continue to invest judicially in the hope that Mark Zandi was right, and we are already on the road to recovery.
Posted by David Machamer, Oklahoma Turnpike Authority
ReplyDeleteManaging expenses against revenues and budgets has always been a challenge without doing the unthinkable, raising tolls. The economic crisis has hit us hard in the Midwest as well. The most unpopular thing a toll agency has to do is raise tolls and most tolling agencies have had to raise tolls just to sustain their revenues; we are no different in Oklahoma. While raising tolls is never a popular thing it is necessary to sustain your business, most importantly your infrastructure. However, it is looking brighter for Oklahoma Turnpikes, we reduced our budget from 2009 without layoffs or furloughs, we do more work in-house and do more with less. While we have always performed benefit analysis we are doing them more. While our truck traffic is down, revenues for January 2010 appear to be higher compared to January 2009. From a period of uncertainty, we are now showing signs of a recovery, thanks to our loyal customers who have stayed with us and travel the turnpikes every day. They too make sacrifices to pay the increase in cost of doing business.
This past year, we have looked for more ways to capture revenue and reduce cost. We have gotten more aggressive in our violations by more aggressively pursuing more out of state violators. We have used innovative ways to process our video images by using State Inmates for video processing. We have challenged our staff to stretch their imaginations in reducing costs and keeping expenses as low as possible. While it could take years before traffic is on the steady growth it once was, lessons have been learned during these times by stretching the dollars.
David Machamer
Director, Toll Operations Oklahoma Turnpike Authority