What was once a growing municipal trend may now be on its way out as red light camera manufacturer Redflex Traffic Systems struggles for survival in the face of mounting scandals, lost contracts, and pushback from angry voters who feel that traffic enforcement cameras are a ploy by municipalities to raise revenue, rather than promote public safety. A recent study by Chicago Tribune noted that red light cameras did not produce net safety benefits, but did coincide with a 22% increase in rear-end accidents with injuries.
Voters and legislators in various counties, municipalities, and states have begun pushing bans on red light cameras, with some already having taken effect. Redflex lost its contract to service red light cameras in Chicago after a major corruption scandal was uncovered, and the firm stands to lose contracts in Ohio, where red light cameras face new regulations requiring a live police officer’s presence, and New Jersey, where the use of the cameras is up for review and may be canceled. According to Ars Technica, Redflex Traffic Systems told the Australian Securities Exchange in a filing that it faces a $3.2 million book value loss if those key Ohio and New Jersey contracts do not end up getting renewed. NJ.com notes that New Jersey Governor Chris Christie recently said that his “inclination is not to continue” red light camera enforcement.
According to TheNewspaper.com, Redflex’ new CEO Paul Clark told investors at the end of 2014 that the company may be considering a shift away from the photo ticket enforcement business, at least in the United States. Said Clark, “North America (particularly the US), where the bulk of our asset base, EBITDA and cash flow resides, continues to be a low/no-growth market made more challenging by public pushback against photo enforcement… Redflex needs to be de-risked. Revenue volatility, geographic and product concentration risks, class actions, federal investigations, different technology platforms all create a high risk business. To move into the non-Photo Enforcement market, organically or inorganically.”
Clark also outlined some of the other issues facing his company, “Over just the past three years, this company has seen seven directors leave the organization, has had three chairmen and is on its third group CEO. Seven directors. Three chairmen. Three CEOs. Over three years.” NJ.com notes that Redflex CEO Karen Finley was indicted in August of 2014 on allegations that she bribed officials in an effort to earn the since-lost Chicago red light camera contract. Another federal lawsuit alleges that Redflex executives bribed officials in 13 states in an attempt to obtain taxpayer funding. The company reportedly expects to lose $12 million fighting its legal battles.
Redflex CEO Clark also blamed his company’s troubles on a “negative community reaction driving contract terminations (not new contracts), legislation changes, lower enforcement levels and multiple class actions.”