Hard times for E-ZPass

Trenton Times Friday, May 03, 2002


TRENTON - Despite the rosy picture the state once painted, it was unrealistic to believe New Jersey's high-tech E-ZPass system would pay for itself, the former Turnpike Authority director acknowledged yesterday.

"The initial (press) releases in connection with this contract and the beginning of construction set forth expectations that were very high," Edward Gross told the state Assembly Transportation Committee. "I think that was a mistake."

Gross said there was always the possibility the five highway and bridge agencies involved in the electronic toll collection system would have to pay for operating and installing the debt-ridden E-ZPass.

"Each member-agency clearly recognized their obligation to pay for the system," Gross said during more than five hours of testimony.

Yet Assemblyman John Wisniewski, D-Sayreville, the transportation committee chairman, read from 1998 state Transportation Department press releases that touted E-ZPass as having no cost to taxpayers.

Officials had said fines from toll violations and money generated by leasing its fiber-optic lines to private companies would pay for the system.

"There was an expectation given by the agencies and the government that this was going to be self-financed, and it was not," Wisniewski said. "That's what has so many people scratching their heads today."

E-ZPass, a toll collection system that uses transponders attached to windshields to collect tolls from either credit cards or prepaid accounts, has become deeply indebted and plagued by equipment problems in New Jersey since it was implemented about four years ago.

The committee is holding hearings to try to determine what caused the problems and who is responsible.

With reports projecting deficits as high as $469 million, Gov. James E. McGreevey has suspended expanding E-ZPass, which is in 360 lanes on New Jersey toll roads and bridges. It was to be installed in about 380 additional lanes.

The state has issued 1.6 million transponders, while agencies in the New York City area have issued another 3.2 million.

MFS Network Technologies was awarded the contract to install E-ZPass. A regional consortium led by the Turnpike Authority borrowed $300 million by issuing bonds, with the remaining $190 million to be collected by leasing the system's fiber-optic lines and through $25 fines from toll cheats.

Instead, the telecommunications industry hit financial troubles, and it cost the state $19.2 million to collect $13.3 million in fines, causing projections of surpluses to turn into estimates of massive deficits.

"That, sir, is a debacle," Assemblyman Reed Gusciora, D-Princeton Borough, told Gross, who resigned in January after McGreevey said he was responsible for the shortfalls.

Gross insisted the plan to pay for the system through toll fines and fiber-optic leases is sound.

"This project is not a failure," he said.

The system, Gross said, will become more manageable once a violations processing center and a means to work with the municipal courts to collect fines is finalized.

"With the passing of time, it should only improve," Gross said. "We need patience."

He did not receive much from the committee members, who questioned the consortium's decision to make New Jersey the only state to rely heavily on toll violators to finance the system.

"Nobody, it seems, is quite sure where the idea came from," Wisniewski said.

Assemblyman Anthony Impreveduto, D-Secaucus, said the plan to pay for the system through toll cheats was irresponsible.

"It sounds to me like it's too good to be true and some used car salesman thought up the idea," he said.

MFS paid the state millions of dollars in fines for missing various construction deadlines. The company was later bought by Adesta Communications, which filed for bankruptcy and sold the E-ZPass contract to WorldCom, which recently has had its own problems.

This week, WorldCom's shares fell more than 28 percent on concerns about its ability to meets its debt, and its debt-rating was cut to two levels above junk status.

Gusciora pressed Gross on why the state did not try to break the contract with MFS and its successors when deadlines and requirements were not met.

"We are better continuing, having continuity rather than stopping the project," Gross said.

He described the financing plan as creative, drawing guffaws from the committee members. "What you call creative I find to be incredulous," said Assemblywoman Linda Stender, D-Fanwood. "I don't know whether it's delusional or incompetent."

Committee members also questioned Gross on numerous complaints from motorists who claim they were fined for violations they did not commit and billed for trips they did not make.

Gross repeatedly defended the system and the financing plan, noting E-ZPass has become even more popular than expected. The complaints accounted for only about 2 percent of the system's transactions, he said.

"It is a good feeling, a warm feeling, to know that E-ZPass has become accepted as the premier method of receiving tolls," Gross said.

The committee asked Gross to be ready to return for further hearings.

"After five hours, I don't think we're any closer to a resolution of this matter," Gusciora said.