May 2008

Is Congestion Pricing Ready for Prime Time?

A controversial approach comes to the fore.

By Michael Replogle

For decades now, traffic congestion and transportation-related greenhouse gas pollution have been growing in most cities around the world — seemingly as much out of control as the weather. In the U.S., leaders from across the political spectrum — including the mayor of New York, the Bush administration's transportation secretary, and the top official of King County, Washington — have responded with a controversial solution: congestion pricing.

Their model is London, which in 2004 imposed a central area congestion charge. But there are other examples as well, including Singapore, which introduced a similar $3 congestion charge way back in 1975. Oslo, Bergen, and five other Norwegian cities adopted their own charges between 1986 and 2004, both to manage traffic and to finance transportation projects. Stockholm, Milan, Rome, and other cities have similar initiatives.

Meanwhile, political resistance to higher fuel taxes has led to renewed interest in tolls to finance highways. High-occupancy toll (HOT) lanes took hold in southern California in the 1990s as an alternative to public financing, then spread rapidly to Texas, Minnesota, Utah, Colorado, and Virginia. Germany in 2005 pioneered a nationwide system of emission-based truck tolls on its 7,500-mile autobahn network, collected with the help of global positioning system satellites. The tolls raised over $4.5 billion in 2006, cut greenhouse emissions from trucks by seven percent, and doubled the rate at which old trucks are replaced by newer, cleaner models.

Last year, the Dutch government announced it was phasing out charges for owning motor vehicles in favor of motorist charges based on distance driven, with higher rates for using busy roads during peak hours and for more polluting vehicles. The new, GPS-based road charges will start with trucks in 2011 and gradually extend to passenger vehicles.

Closer to home, the Puget Sound region is completing a federally funded study of a similar GPS-based traffic-management system. Preliminary findings are promising: They show that road-pricing incentives caused a sample of Seattle-area households to voluntarily cut their driving by one fourth. A similar result comes from a federally sponsored test of mileage-based fees in Oregon; it suggests that such a system could be phased in over several years to replace motor fuel taxes.

Habits are hard to change

Tolls are being used to finance a growing share of new road capacity worldwide. Increasingly such tolls are higher at times and locations where demand is greatest — the core idea of congestion pricing. But applying such tolls to existing free roads is a lot tougher, even after half a century of promotion by transportation economists.

Even in the U.K., where London is a model of congestion pricing, there is resistance. Last year, 1.5 million people signed a petition opposing a central government plan for nationwide road pricing. In the U.S., proposals for congestion pricing on existing roads face political hurdles in New York, northern California, Colorado, and elsewhere. Throughout the world, the same concerns surface: Will congestion pricing harm the poor? Will it intrude on personal privacy? Is it double taxation for roads? Where will revenues go?

Research suggests that traffic, sprawl, and pollution tend to increase when tolls are used simply to expand roads. In addition, more jobs are put out of reach of the poor. In contrast, low-income households benefit and traffic and pollution are cut when tolls are used to manage congestion on existing roads.

A synthesis of public attitudes on congestion pricing prepared last year by Joanne Zmud of NuStats, an Austin-based research company, found that, while the public generally supports tolling and pricing, populist politics make it harder to implement — and to evaluate — such programs. Effective public education and leadership are needed to raise public understanding of the complex policy issues associated with congestion pricing.

Acceptance is increasing, however, prompted by the growing awareness of gridlock, local governments' well-publicized fiscal distress, and a broadening knowledge of climate change.

The idea is simple enough: Charge fees based on where and when motorists drive, with discounts offered during times of low demand. Used in that way, congestion pricing matches demand more closely to available road space, and boosts the efficiency, reliability, and speed of an area's transportation system. Revenues can be used to increase travel choices.

It works in Singapore. There, electronic toll charges — on the outer ring road, major arterials, and entry roads to both the central business district and a newer commercial center — are adjusted periodically for each location by hour of the week based on what is needed to keep traffic flowing freely at least 85 percent of the time.

Now try putting this idea into practice in the U.S. A major stumbling block is the common belief that inflation-eroded gas taxes have already paid for "freeways" and other roads. For many drivers, the idea of a toll conjures up images of being stuck in a long traffic jam waiting to throw your money out the window.

The debate continues

The HOT lanes that opened in 1995 in the median of southern California's State Road 91 broke new ground in many ways. The project demonstrated that private investment could succeed in delivering road improvements years ahead of the public sector. It significantly boosted vehicle occupancy and traffic flow along the corridor. And it showed how automated time-of-day road pricing could guarantee free-flowing traffic in a congested corridor. All that with no toll booths in sight.

During the most congested hours, SR-91's two managed lanes carry as many vehicles as four adjacent unmanaged lanes, at three times the speed. But getting to that point was not easy.

The contract for SR-91 included a non-compete agreement that barred public investment in parallel transportation improvements by state and local governments. This provision proved so unacceptable to Riverside County that the original agreement had to be renegotiated in 2002, a painful and costly process. Like many other HOT lanes, those on SR-91 were not designed to boost public transportation and actually facilitated sprawl development. After gaining temporary relief from congestion, many drivers were still stuck on clogged freeway lanes. 

In contrast, the I-15 HOT lane project that opened in San Diego in 1996 offered an example of a more transit-friendly approach to managed lanes. The San Diego Association of Governments dedicated toll revenue from the new HOT lanes (created from existing lanes) to improved public transportation. A dynamic pricing system allowed tolls to be adjusted every seven minutes, helping to keep the managed lanes flowing. With polls showing 80 percent approval of the system, San Diego is now building a regional system of managed lanes with express bus services.

Back east

Pressure to introduce congestion pricing has also been building in metropolitan New York — where more than half of all tolls in the U.S. are collected. William Vickery, a Nobel Prize-winning economist at Columbia University, first proposed the idea in 1952. In the early 1970s, he and other civic advocates actually convinced Mayor John Lindsay to try congestion pricing on the East River bridges, but the authority to do so was blocked in court.

In 2000, the political stars aligned just as the Port Authority of New York and New Jersey was set to issue a toll increase. Thanks to the efforts of a civic coalition, the Tri-State Transportation Campaign, the governors of both states supported a staff recommendation to increase peak-period Hudson River bridge and tunnel tolls, while keeping charges the same for non-peak-hour EZPass toll transponder users.

The $1.50 time-of-day toll differential was enough to shift about seven percent of the traffic from peak hour, yielding a substantial reduction in congestion. With nearly half the Port Authority's net toll revenues dedicated to improving trans-Hudson PATH passenger rail service, this initiative became a milestone on the path toward wider congestion pricing. Soon after, modest time-of-day toll differentials were introduced by the New Jersey Turnpike, the Garden State Parkway, and the New York Thruway Authority as new toll increases took effect.

Meanwhile, other states were advancing HOT lanes under the federal Congestion/Value Pricing Pilot Program, which in 1991 opened a door for states to circumvent the 35-year ban on imposing tolls on interstate highways. In the debate over the 2005 federal transportation law, opposition from U.S. trucking interests — long opposed to tolls except to build new roads — was overcome by an unusual alliance of transportation industry, state, metropolitan, and environmental interests. The states won much greater flexibility to add tolls to new or existing roads.

Fast forward to 2006, when a national congestion initiative was launched by U.S. Department of Transportation Secretary Norman Mineta and carried forward by his successor, Mary Peters. One piece of that, the Urban Partnership Agreements, promised federal funding from a dozen discretionary programs to a few cities with the most ambitious implementation plans: congestion pricing of existing roads combined with improved public transportation and traffic management. Thanks to a reduction in earmarking of transportation funds when the Democrats took over Congress, DOT was able to award $852 million to five cities under the initiative — New York, San Francisco, Seattle, Minneapolis, and Miami.

Go-getters

Of the two dozen applications, the most ambitious was the proposal by New York Mayor Michael Bloomberg, who in 2003 submitted a budget to put congestion tolls on East River bridges but was forced to back down because he lacked needed approvals from the governor and legislature.

Last year, Bloomberg made congestion pricing a central piece of his PlaNYC vision for New York — a long-term plan to house a million more residents, enhance livability and public health, cut congestion, and trim greenhouse gas emissions by 30 percent by 2030. Bloomberg sought a green light from the state to implement his plan, which would impose a congestion charge of $8 a day on cars and $21 on trucks ($7 on low-emission trucks) entering the city's central core.

Despite opposition from key legislators, the mayor got approval to further refine the plan. The city also won a $354 million Urban Partnership grant, which it plans to use for congestion pricing, bus rapid transit initiatives, and improvements in traffic operations. But this grant is conditioned on approval by the city council and the state legislature of key planning goals — to cut Manhattan traffic by at least 6.3 percent by 2009 and to raise more than $250 million a year for transit. That condition could make the New York plan a model for future performance-based federal transportation funding.

Months of hearings led to a refined (and simpler) pricing plan that would shift the proposed zone boundaries and exemptions, produce more revenue, and lower collection costs. Polls showed that a majority of city residents supported congestion pricing so long as toll revenues would be dedicated to improving public transportation. A strong campaign by a coalition of business, civic, and environmental groups led to a 30-to-20 vote in favor of the plan by the city council, and support by the governor and state senate leader. But the plan died April 7 in the State Assembly when the deadline for action expired, a victim of election-year politics and failed deal making.

The plan's failure in Albany leaves an  added $4.5 billion hole in the Metropolitan Transportation Authority's $29.5 billion, five-year capital budget, portending higher taxes and service cuts in addition to the loss of  the $352 million federal grant. 

With leadership from Mayor Gavin Newsom, San Francisco also won a matching $159 million DOT grant under the Urban Partnership agreement, conditioned on implementation of congestion pricing. The Bay Area Toll Authority's approval this month of a peak-period toll hike of $1 (to $6) on the bridge should be enough to guarantee the grant, which would help to cover some of the $1.1 billion cost of replacing Doyle Drive, the structurally unstable connector road south of the Golden Gate Bridge.

This is a breakthrough for a region that has for years tried to implement congestion pricing on bridges but been blocked by state legislative leaders. While suburban officials continue to resist the pricing proposal, charging that it amounts to a commuter tax, area transportation planners are making plans to implement new parking, transit, and HOT lanes under the partnership agreement. Planners in the San Francisco region are also studying a central area cordon charge modeled after London, Stockholm, and Singapore.

A third winner was Seattle, where King County Executive Ron Sims and the Washington State DOT have strongly supported congestion pricing. A nearly completed federally supported study estimates that it would cost about $750 million to create a GPS satellite-based tolling system in the region and about $288 million a year to operate it, potentially generating annual revenues of $3 billion and a 6:1 benefit-to-cost ratio.

The study concludes that the technology needed for such toll collection is mature, noting that public understanding and acceptance are the keys to moving forward. In the near term, the region intends to convert State Road 167's high-occupancy vehicle lane into a HOT lane, and plans are proceeding to finance and manage the failing SR 520 Lake Washington bridge with congestion tolls.

Other initiatives for adding tolls to existing interstate highways (restriping lanes and using shoulders, for instance) are advancing in Minneapolis and Miami, which won $133 million and $63 million respectively under the Urban Partnerships program. They have agreements for HOT lane projects on I-35 and I-95, which also support new express bus services.

Other federal grants are expected this year for Congestion Reduction Demonstration pilot projects, which encourage integrated initiatives for transit, traffic operations, and congestion pricing on existing roads. More than 20 regions applied late last year for this latest round of grants. Funding levels depend on the appropriations process and the level of congressional earmarks.

U.S. federal transportation policy is at a crossroads, with widespread perception that the system is both broke and broken as the current federal transportation law expires next year and the highway trust fund runs out of money. With bridges falling down, gas prices soaring, and traffic congestion getting worse, public confidence in the current system is low. Debate is growing about how to fund and focus transportation investments, how to curb transportation-related greenhouse gas emissions, and how to boost system performance and accountability.

With dozens of new congestion pricing initiatives launched across America last year, and even more across the rest of the world, the genie conjured up by William Vickery seems finally to be out of the bottle. But just what will we ask that genie to do?

Michael A. Replogle, a civil engineer, is transportation director for the Environmental Defense Fund and president and founder of the Institute for Transportation and Development Policy.

Images: Top — London, where the signs the the story. Photo Transit for London. Bottom — An electronic road pricing gantry in Singapore. Photo by Michael Replogle.