EZ Pass Economics

Virginia’s EZ Pass program (arguably one of the most poorly run state programs) recently emailed me to to tell me that they are considering a new $1 per month transponder fee/tax.

A few months ago, I had to call in to VDOT to prevent my account from being cancelled, since I hadn’t used my transponder in 6 months. Why, I am not sure.

Here’s what they say it will fund: The proposed monthly fee would cover costs for:

•       Buying nearly one-half million transponders
•       Implementing a retail program where transponders can be obtained at various stores in Northern Virginia and eventually Hampton Roads
•       Providing service at select DMV locations
•       Upgrading information technology to accommodate the expanded program
•       Account management and processing of toll transactions (managing billing of all transactions)
•       Customer service and the operations of three customer service centers

Noting further, that:

The fee would be regularly evaluated to ensure that the charge is generating just enough revenue to maintain and operate the program without generating excess revenues above expenses.

A few thoughts:

  • Why should I have to help front the purchase of 500,000 new transponders? Build that into the deposit price for new people. Current customers shouldn’t be subsidizing future customers.
  • A retail program is nice, but ultimately unnecessary. People who want transponders will buy them online. That is what I did. I can understand having them for sale at rest stops or certain DMVs, but people buy things on the internet all of the time these days. I don’t think people will be shopping at Giant and go “Oh, you know what I need, honey? I need an EZ Pass transponder.” They are not an item people purchase arbitrarily.
  • As for financing account management and customer service: build that into tolls. As a taxpayer who uses EZ Pass a few times a year, I am sure Virginians would be happier having all toll-road users from all states helping cover these costs, rather than having them isolate the costs to those who purchase their transponders from Virginia.

Maryland, which hasn’t met a tax increase it didn’t love, recently levied a $1.50 per month fee on its EZ Pass transponders. People quit Maryland EZ Pass and bought transponders in other states. People will do the same in Virginia.

And Virginia doesn’t offer its citizens discount pricing for using an EZ Pass purchased from Virginia. All EZ Pass users pay the same for tolls. New Jersey recently examined this possibility.

The point is, the EZ Pass market, so to speak, offers the same product (a transponder) for different rates of deposit and minimum balances. People can, and will, go elsewhere.

Virginia needs to take this fact into serious consideration, or risk losing customers to other states. 

UPDATE: EZ Pass Virginia immediately responded, opening with this line: “Thank you for expressing your concerns on the potential maintenance fee for E-ZPass operations in Virginia.” Clearly this is an auto-response, and they know people will be concerned with this, but are planning on doing it anyway. Sic Semper Tyrannis, they say. To share your comments, click here. You have until June 12.

It should come as no surprise that a government isn’t good at pricing.


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2 Thoughts on “EZ Pass Economics

  1. Totally agree. One week before the vote.


  2. Tom Robert on July 11, 2012 at 12:40 pm said:

    It is a small tax to raise in a recession and for a service.

    Still, it does look like a blunder not to have thought in that first employee-only meeting held about raising money for EZ pass: We should ask the question of how to raise money for EZ pass, in public, to get answers from as many minds as possible.

    If the results of the meeting would be public, why not have thought that the meeting can be public, also?

    The public, if asked, can be trusted to help find answers as well as to oversee results.

    The ideas above are well reasoned. Surely those meeting to calculate costs raised each of these; voted against them; and cited reasons why they were not practical.

    In the next generation, the reasons to reject each idea above will be same-day, on line news and not noted on a meeting minute tablet and filed away.

    It would have been best to post the meeting on YouTube or stream them and thus invite interested Virginians to comment. This will happen when the current officials are retired and replaced by younger officials who were raised with the web. Time for the old generation to retire.

    Give it a generation and the next time the first memo is sent:
    We should raise money with a tax/fee on new transponders
    won’t be an internal memo and will be a tweet.
    Let’s ask how to raise EZ pass revenue

    Today there should be a website where the actual costs and planned added costs – to collect a toll with a toll agent and with a RFID tag are recorded. Then the efficiency of the work may be observable to Vdot cost accountants and those paying for EZ Pass services.

    Every so often, go through the cash lane. That helps one appreciate passing EZ.


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