SB's red light company in financial distress
San Bernardino police's drive to expand red light camera ticketing technology to levels seen nowhere else in the county just got more interesting.
Looking over the SEC filings of Nestor Traffic Systems Inc. makes for interesting reading.
Debt service costs currently exceed operating cash flow (basically, imagine if your credit card interest payments were more than your salary) and the company faces nearly $30 million in debt.
Losses over the last two years exceed $15 million.
Company officials say they have restructured management and streamlined their strategy. They say they'll remain viable.
City officials, including City Manager Fred Wilson and police spokesman Scott Paterson both said they were unaware of the financial health of the company. Chief Michael Billdt, who recommended the city contract with the company through 2010, has not returned calls for comment.
Wilson did note that the proposed contract - about $4.5 million - would not strain the general fund. Nestor's contracts are typically paid by the motorists it photographs violating red lights.
Of course, some critics, including Councilman Neil Derry, have already pointed out that having a company desperate for survival and dependent on ticketing people could incentivize ticketing.
[BYNAME]By Robert Rogers
[BYSOURCE]Staff Writer
[BODY]SAN BERNARDINO — A Rhode Island-based traffic surveillance firm looking to more than double its operations in the city is in the midst of a rocky financial era, federal records show.
Nestor Traffic Systems Inc., which is based in Providence, R.I., but has contracts with dozens of cities across the nation including Los Angeles and San Bernardino, has been beset by operating losses and debt in recent years and may be in danger of dropping off the NASDAQ.
The City Council is expected to consider a recommendation from Police Chief Michael Billdt on April 21 to expand its contract with the red-light camera ticketing company by more than $4.5 million through 2010. The contract would increase the company’s coverage in the city from four intersections to 11.
News of Nestor’s financial challenges may strengthen opposition community and council opposition ahead of Monday’s vote.
“This strengthens my position,” said 4th Ward Councilman Neil Derry, who opposes red light camera expansion. “It’s another reason to question the installation of this equipment with this vendor. The practice is questionable, now so is the vendor.”
The contract stipulates that all of the money paid to Nestor would come from fines paid by ticketed motorists captured by Nestor’s cameras.
Corporate officials said this week that recent struggles have been challenging, but that a new leadership team and renewed focus on core businesses will keep the company viable.
But as of a Dec. 31 filing with the Securities and Exchange Commission, the outlook was significantly more grim.
In that report, the company declared losses of about $8 million and $7.5 million over the last two years. The company also divulged that it carried a “highly leveraged” debt load of about $27.2 million which limits its ability to “meet competitive pressures and withstand adverse economic conditions,” according to the company’s annual report filed with the SEC.
“We expect to continue incurring losses for the foreseeable future due to significant marketing, product delivery, engineering and general and administrative expenses, and those losses could be substantial,” the report reads. “We will need to generate significantly higher revenue, or reduce costs, to achieve profitability, which we may be unable to do.”
Later, the report reveals that debt service costs currently exceed operating cash flow, an unsustainable course for any company.
Billdt, who argues in a backup report that the technology reduces accidents, did not return calls for comment. In Billdt’s report recommending the city expand its contract with Nestor, statistics show substantially reduced injuries and collisions at intersections outfitted with the cameras.
Other department statistics - but not included in the report to the council - show the majority of tickets have been issued for rolling through right turns against red lights, drawing ire from critics who contend the cameras are more about company profits and government revenues than safety.
City Manager Fred Wilson said he was unaware of Nestor’s financial health, but that the proposed contract sheltered taxpayers from risk.
“They’ve been a good vendor, and all the costs are on them,” Wilson said. “Should they not be able to function, we’d go with a new vendor, so I have no cause for concern about that.”
Derry disagreed.
“The city is exposed to risk. If this company is unable to follow through on its commitments, then they’ll have difficulty maintaining their system fairly and properly,” Derry said.
Company officials downplayed the financial reports and pointed to the strategic changes that have the company slashing costs and increasing revenues.
“We have a very talented new management team and we expect to return to profitability in 2008,” said Brian Haskell, the company’s general counsel.
Haskell noted that the company’s revenue grew by more than 40 percent last year and that the labor force has remained steady at about 115 employees nationwide and 25 on the West Coast.
“We’re making huge strides forward,” Haskell said. “We’re not going anywhere.”
Nestor contracts with one other city in the county, Montclair. The company’s stock has languished under $0.30 for more than a week, and company officials admitted the stock could be delisted from the NASDAQ exchange due to its poor performance.
“The stock price is not always reflective of the stability of a company,” Haskell said.
robert.rogers@sbsun.com (909) 386-3855
Look for 2 second yellow lights coming soon so these bogus companies can steal more money from hard working citizens.
Also, don't be fooled if you get a snitch ticket.
You do NOT have to identify the person who was driving your vehicle if you get a bogus ticket in the mail.
The snitch ticket will tell you not to contact the court.
A legitimate ticket will not tell you not to contact the court.
You can ignore a snitch ticket and nothing will happen, it's just a fishing expidition.
If you get a real ticket then you must respond to it, but you still don't have to tell who was driving your vehicle at the time.
Yet again the City of SB uses a company that is more interested in paying itself than marketing a sustainable product. Look at all the $millions that have been spent of our airport that has no flights. Someones getting rich and its not the tax payers. I second the above post, you don't have to identify the driver if you get a ticket in the mail, and its not clearly the registered owner. They look official, and threaten you with legal action if you don't identify them. But it's a bluff by the Cities to have you do their job for them. Remember it is a constitutional right that you do not have to testify against yourself. They are trying to get you to give up your right of self incrimination, what else would you expect from San Bernardino police, who seem to have made a commitment to the citizens of San bernardino that they will ignore the constitution, unless it protects them.