What happens in the real world of retail business when you have less customers and less sales transactions?
Your revenue goes down. Right? Do you raise prices to make up for the loss of revenue?
No, of course not, you have a sale to create interest and to get more customers into your store. Now let’s look at this from our state government point of view. Turnpike revenue is down because of less traffic. So they say, “Let’s raise the price per transaction to make up for the lost revenue.”
Does this sound logical to you? The answer is blatantly, “Of course not.” Here are the facts: In past years traffic on our state turnpikes has been increasing. From 1983-2008 we experienced a growth rate of 6.6%. Business was good then. In fact, the Turnpike has more than $100 million in surplus.
Did they lower the pike fees to give the tax payers a break? Heaven forbid. How many times do you recall our taxes going down? We all know they did not lower the pike fees. But hold on to your hats! With more traffic on the pikes, it caused the roads to deteriorate. It would only seem logical to raise prices in that case, if there were no surplus. However, an increase in business gave the Turnpike Authority a surplus of $100 million! Pike fees and taxes were still raised.
2009 shows a 13% decline in commercial traffic. What does the Turnpike Authority believe the answer is to fixing the problem? It is big government and higher taxes all over again. That’s their answer.
If higher taxes were the answer to all our problems, then California would not be issuing IOU’s instead of actual checks today! Some of the California banks are cashing the IOU’s for 85% of the value of the IOU. Case in point raising taxes IS NOT the answer to fixing bad management.
Now back to the Turnpike problem here in Oklahoma. If revenue is down 13%, does that mean the roads are not receiving as much traffic as they once were? Of course it does! Less traffic means less road repair, right? Now we are back to square one, and why are they proposing a tax increase when there is a $100 million dollar surplus? Where did the surplus go?
As I speak to you today, the Turnpike Authority is planning on raising the pike fees 10% or passing along a tax increase to the taxpayers.
Would this logic work in the real world? Of course not, then again, we are dealing with the logic of the government. Do we equate ourselves with the logic of California?
Heaven Forbid! Bob
In retail there are three factors to your business profitability – customer count, transaction amount, and margin. You can increase your gross by increasing your customer count as long as you transaction amount stays constant, or you can increase you transaction amount and hope you customer count stays the same or you can increase you margins by reducing your expenses or cost of the product.
So concerning the turnpikes – what is it? Can they cut their cost? Can they increase the toll without loosing customers? Will the raise in tolls make up for the possible traffic loss? I hope they looked at all of them.