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Why was EZ Tag airport parking so expensive to operate?

As we know, the program that allows people with EZ Tags in their cars to use them to pay for parking at the airports is going to be shut down because it was losing money. This Chron article that examines the costs of the program raises more questions than it answers.

The Harris County Toll Road Authority has lost more than $3 million in the three years it has permitted its EZ Tag holders to use their passes to pay for airport parking, a Chronicle analysis has found.

[…]

HCTRA officials acknowledged the authority was losing about $80,000 a month to run the airport parking program when it sent the recommendation to Commissioners Court last month.

[…]

There are 1.7 million EZ Tag holders. Spokesman Eric Hanson said the authority projected about 35 percent of those would use the tags at the airports.

Instead, about 80,000 motorists used it at least once in the last year, a little under 5 percent.

Hanson said the authority came up with its projection after sending crews to the airport garages to see how many vehicles there had EZ Tags.

[…]

In both Orlando and Dallas, the airports paid for installation and operation of the equipment that reads the passes. Under its agreement with the city of Houston, which runs the airports, the Toll Road Authority picked up the tab for the EZ Tag system at the garages.

Hanson also noted that the city-run garages where EZ Tags can be used are not the only, or the cheapest, places to park at the airports.

The chief operating cost of the program was bank fees. Amegy Bank was charging the authority $70,000 a month in bank fees for airport transactions because each EZ Tag passing through a garage gate resulted in a charge for using the credit card linked to the motorist’s EZ Tag account. The authority, not the motorists, pays those charges.

According to the previous story, the monthly cost for running this program was $170,000. What was the other $100,000 a month being spent on? I guess maybe some of that was the amortized cost of the equipment, but if so that should be declining over time. I still don’t understand how this could have been so expensive to operate. I mean, surely the EZ Tag readers on the toll roads aren’t comparably expensive, are they?

The flat fee that was being charged for credit card processing was obviously a problem as well, given that it represented nearly 80% of the $90,000 in revenue this was generating each month. Maybe that made sense if you believed the usage projections, but in retrospect a per-transaction fee would have worked better for HCTRA.

And why did those projections fall so far short of the mark? Did they happen to count EZ Tags in the lots at a time when there was a freakishly large number of them, or was it the case that a lot of those folks exited the lots without using their EZ Tags to pay for their parking, perhaps because they didn’t realize it was an option? Was there something they could have done to capture more revenue, or was their model just hopelessly flawed? The two Dallas airports had nearly six times as many EZ Tag-paying customers in 2008 as HCTRA had in the part year. How is this possible?

Again, I don’t get it. This seems like it should have been a no-brainer, and yet it was a complete bust. It deserves more scrutiny to understand why.

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6 Comments

  1. John says:

    It is the Amegy bank fees. I guarantee you it was a no bid contract, the processing fees don’t make sense. I guess the campaign donations from Amegy execs are paying off, plus you should dig in on the monthly fees Amegy gets for toll fees, I have heard (but could be wrong) it is $1mm a month. The only saving grace for those scumbags at Amegy is their stock price has been crushed and will not be rallying anytime soon.

    But also the commissioners approved the contract with Amegy, they get 100% of blame for the no bid contract.

  2. I think the required opt-in and minimal promotion thereof had something to do with it.

  3. Charles, I haven’t reviewed this matter in detail, but it appears clear that the Toll Road Authority got taken to the cleaners in the contract negotiation by the airport authority.

    The clearest indication of that is that the Toll Road Authority underwrote the capital cost of the equipment at the airports. The article notes that other airports have underwrote that cost, which makes sense. That cost alone would substantially impact the ROI of the Toll Road Authority on the deal.

    The bank fees also appear to be questionable, but it isn’t surprising that they were arranged if the Toll Road Authority blew something as basic as who should pay for the equipment.

    A pretty clear example of citizens paying the price in terms of money and convenience for the poor performance of Toll Road Authority officials.

  4. Joe White says:

    Agreed with all the above: still too many puzzle pieces missing, but there is a whole lot of dumbness already apparent. Who did those projections? how much “more” would a per-transaciton contract have been using the projected usage? Why require an opt-in to the program? Did other localities use opt-in? What promotions did the other localities use? What were there usage levels after one year? What structure did they have for bank fees?

  5. Martha Griffin says:

    I use the EZ Tag feature at airports. You have to register for the program, which I guarantee is one reason it wasn’t used. If they had made it to where all EZ Tag owners could use the airport program automatically, that would have been a whole lot easier. As it was, you had to look up your number on your tag, and enter it into a special website to activate it for airports.

    A gate automatically opens up when you enter an EZ Tag garage at the airports and it’s not likely you would forget to exit through an EZ Tag exit – and the gate automatically lifts there, so you wouldn’t pay twice.

  6. […] Chron story about the EZ Tag debacle did mention the processing fees, which amounted to $70,000 a month, as a reason. Looking back at […]