TMF Frequently Asked Questions

Q: Why is the Traffic Mitigation Fee (TMF) Charged?

1. The TMF provides an incentive to use the night shifts; and
2. The TMF provides necessary funding for night shifts.

Q: Is PierPASS Inc. making money from the TMF?

• No. PierPASS Inc. is a not-for-profit organization and makes no profit or loss from operating the OffPeak program.
• All fees collected, minus the administrative and overhead costs incurred by PierPASS to implement and manage the program, are allocated to the terminal operators to finance the labor and operational costs of the five additional OffPeak program shifts.

Q: Are the terminal operators making money from the TMF?

• No. As shown in more detail below, the revenue from the TMF is not covering the added costs of operating a second shift. This has been determined through a semi-annual review of terminal costs by an independent third party analyst.

Q: What is the cost of running the OffPeak program, and what are the TMF revenues?

• Periodic cost studies of the OffPeak program have been conducted by Palazzolo & Associates, Inc., maritime industry experts in financial consulting and reporting.
• Palazzolo & Associates determined that the net cost to the terminal operators of operating the late shifts for the 2005 OffPeak program was an annualized $196.9 million, or $79.5 million for the five months of OffPeak operation in that year. In comparison, gross TMF revenues for 2005 were $42.6 million.
• For the 2006 operating year, Palazzolo & Associates determined a net cost of $203.6 million for the OffPeak program. In comparison, gross TMF revenues for that period were $117.5 million.
• For the 2007 operating year, Palazzolo & Associates determined a net cost of $202.8 million for the OffPeak program. In comparison, gross TMF revenues for that period were $125.5 million.
• For the 2008 operating year, Palazzolo & Associates determined a net cost of $173.5 million for the OffPeak program. In comparison, gross TMF revenues for that period were $114.2 million.

Q: What are PierPASS’s administrative expenses?
 
• Expenses of administering the program totaled $11.3 million, $9.5 million, $9.8 million and $5.2 million for the 2008, 2007, 2006 and 2005 fiscal years, respectively.
• For all periods, expenses consisted of administration costs, bank and professional fees, and the OffPeak program’s computer systems and software. The OffPeak program’s computer systems and software are used to collect TMF payments and manage the notification of TMF payment status to the terminal operators.

Q. What is the per TEU cost to run the OffPeak program?

• In the fourth quarter of 2008, the actual cost of OffPeak gates was $79 per TEU compared to the fee of $50 per TEU.

Q: How frequently has the amount of the TMF been increased, and by how much?

• Since the OffPeak program began in July 2005, the amount of the TMF has been increased only once, in April 2006.
• From July 2005 through April 2006, the TMF rate was $40 per TEU (20-foot equivalent unit). On April 24, 2006, the TMF rate was adjusted to $50 per TEU.

Q. Will there be a change in the TMF?

• At this time, there is no plan to change the TMF.

Q: How are net proceeds from the TMF distributed among terminal operators?

• Net proceeds of the TMF are allocated according to container volume at each terminal.

Q: Is the TMF a subsidy for inefficient operations at the terminals? If the terminals are being reimbursed for their costs of running the night shifts, isn’t that an incentive for the terminals to let their costs keep rising?

• Not at all. Net proceeds of the TMF are allocated according to container volume at each terminal, not according to their individual costs. The more efficient the terminals are, the more likely they are to avoid operating their night gates in the red.

Q: Why not just let market demand drive the supply of night shift operations?

• That was the situation before the OffPeak program began, and it wasn’t working. The large majority of shippers wanted to pick up their cargo during peak hours and built their business models around that. It was only when a general program was established by all the terminal operators – with a fee component as an incentive – that many shippers were motivated to move their cargo deliveries to off-peak hours.
• Community and political leaders demanded that the terminals operate a full-service second shift, and that all terminals be open for the full second shift.