Lentis/Congestion Pricing

Congestion Pricing is the practice of charging motorists during peak demand hours to curb traffic congestion. By shifting rush-hour traffic away during peak times, pricing enables traffic to flow much smoother⁵. Such policy arouses public indignation as the charge transfers wealth and power between social groups.

Problem

A Federal Highway Administration report said, "In 2003, congestion in the top 85 U.S. urban areas caused 3.7 billion hours of travel delay and 2.3 billions gallons of wasted fuel, for a total cost of $63 billion." "In the 10 most congested areas, each rush hour traveler "pays" an annual "congestion tax" of between $850 and $1,600 in lost time and fuel and spends the equivalent of almost 8 workdays each year stuck in traffic" ⁵.

Technology

Efficient congestion pricing is made possible by technology. Vehicles may be equipped with transponders or "tags" which automatically register at the electronic toll booth as the vehicle passes at highway speeds ⁵. GPS systems allow tolls to be collected anywhere. Cameras identify vehicles without tags or GPS systems. Cameras also deter violators through video enforcement ⁵.

Analogy from History: Parking Meters

Parking meters have been called "The Congestion Pricing Controversy of 1932"¹⁰. Like roadways, parking spaces were a common good in which demand exceed supply:

Parking on city streets today is a cinch compared with the 1930s, when free, unlimited parking was considered every American's constitutional right. Just as their grandparents had tied their horses to the general store's rail, American drivers expected handy curb space for their cars when they went to town. By the 1930s, however, there were too many cars and too few curbs" ³.

Despite the parking shortage problem, not everyone supported the installation of parking meters. "This is just a combination of an alarm clock and a slot machine which is being used for further socking the motorist, who is already paying enough in taxes," argued William Gottlieb of the Automobile Club of New York³. Despite public resistance, "by the early 1940s, there were more than 140,000 parking meters operating in the U.S."³. Today, Chicago alone had 36,000 parking meters⁷.

Scope

Our scope for this topic is restricted to land traffic. As we are part of the land use section of the Lentis book, we felt that examples of congestion pricing in air and ship travel were outside of our topic's range. More specifically, we are looking at congestion pricing examples, the social groups that are important to the examples, and the experts opinions on the topic and examples.

Places

Stockholm

Stockholm ran a congestion trial period from January to July of 2006. As a result of the trial, public approval ratings rose from 30% to 55%. Measured benefits included a 22% drop in trips, decreased travel times, 9% more bus ridership, and a 14% reduction in emissions. On September 17, 2006, a public referendum permanently reinstated congestion pricing⁵.

Singapore

Singapore introduced pricing in 1975, resulting in a significant reduction in congestion. In 1988, electronic road pricing and cameras fully automated the process and enabled variable pricing throughout the day. The system has reduced traffic by 13 percent and increased average vehicle speed 22%⁵.

Germany

In January 2005, Germany began collecting autobahn tolls from trucks weighing in excess of 12 tons. GPS systems are installed all trucks and charge them a rate per mile driven. The GPS systems cost each trucker $500, but provide additional benefits to the trucking industry such as improved navigation and fleet management. Revenue collected is allocated towards funding for transportation infrastructure⁵. Annual registrations in the 10- to 12-ton class soared from 4,946 units in 2003 to 7,381 units in 2008, presumably to avoid charges⁸.

California

On the State Route 91 express lanes in Orange County, California, traffic during rush hours moves at over 60 mph, while the traffic in adjacent lanes crawls at average speeds of 15 mph or less⁵. Since 1998, the I-15 has included HOT lanes, where tolls vary dynamically throughout the day in 25-cent increments⁵.

London

London implemented a congestion pricing policy on February 17, 2003. Motorists were charged 8 pounds per day to travel within the designated zone during business hours. The effect was a 15% reduction in traffic volume and a one-third reduction in waiting time on buses. The system is enforced by cameras which view vehicles' license plates without requiring them to stop⁵. "When London introduced a congestion-charging zone in early 2003 (charging five pounds per day to drive into the city center), after a year, car rides fell by a third." 15% more bus rides, 20% more motorcycle rides, 30% more bicycle rides, 25% drive around congestion zone, 55% switch to public transport, 20% use bicycles, carpool, or telecommute²^,⁶.

New York City

Michael Bloomberg, mayor of New York City since 2002, tried to implement congestion pricing in his city but failed to gather the necessary political support. After its failure, he wrote the next day:

Our City Council approved congestion pricing last week. And it had the support of four of the five top leaders in our state: Governor Paterson, who submitted a congestion pricing bill, the majority and minority leaders of the State Senate, and the minority leader of the lower house of the State Legislature, the Assembly.¹⁴

Richard Brodsky, democratic majority leader of the Assembly, did not agree with the policy out of sympathy for the poor:

The revenues raised by the mayor’s proposal disproportionately and unfairly target people of low and moderate income, especially those who live in the Bronx, Queens and Brooklyn.¹⁵

Because Bloomberg failed to rally necessary political support, the congestion pricing policy failed to be implemented in New York City. His words the next day, citing poor leadership on their part:

But unfortunately, as most of you know, yesterday the majority caucus in the Assembly chose not to bring the governor’s congestion pricing bill to a vote – effectively killing it. They complained about the inconvenience – even though most New Yorkers don’t drive. They said it hadn’t been studied enough – despite an entire years’ worth of analysis, following a process they had established. And ultimately, they didn’t even have the courage to vote on it – they just killed it in a back room. That's not leadership.¹⁴

Social Groups

The poor

Congestion pricing has come under assault as it is often interpreted as a regressive tax that disproportional burdens the poor more than any other social group. Matt Yglesias of Think Progress believes congestion pricing will benefit those with lower incomes. "..what kinds of people need to be at work on time. For a normal professional, that isn't a big deal. But for shift workers, who tend to be further down the economic totem pole, showing up late will get you fired."¹³ His argument centers around the fact that lower amounts of congestion on widely-traveled roads will allow people with lower incomes the ability have a higher probability of getting to work on time. William Vickery, who is considered to be the father of congestion pricing, agrees with Yglesias thoughts. He believes that it is those with low income who will receive the biggest benefit. He agrees that the lowering of congestion will benefit non-users as well as users. In addition, he thinks that congestion pricing will lower the taxation required to support the roadways and cost of living through lower shipping costs, both benefiting the poor¹¹.

Only 1% of Manhattan residents would lack a viable alternative to paying a congestion fee or toll

Commuters

Commuters are the social group affected the most by congestion pricing because they are directly affected by an increased price to use a road.

A worker in Los Angeles county wrote a letter to an editor on the blog Eschaton: "I work in LA county and commute to Irvine [Distance is approximately 2 hours during traffic]. Without good public transportation, how would congestion tolling not favor the wealthy." The owner of the blog responds that "...there's too much congestion", which is indicative by the commute from Los Angeles to Irvine. He also suggests that people are already paying in time so adding a tax will add efficiency to the current infrastructure.

In London a commuter advocacy group, The Driver's Alliance, express their feelings on the congestion charge. When commuters unite, there is more pressure on the legislature to reexamine and/or change current policies.

Government

City governments tend to favor congestion pricing as a means to solve troublesome congestion issues, raise revenue, and appease environmentalists. Ken Livingstone, Mayor of London from 2000 to 2008, was the chief proponent of the city's congestion charge. "Congestion charging", he said, "has produced millions of pounds worth of benefits to London"¹⁶. New York City's PlanNYCis a comprehensive governmental response to the failed congestion pricing strategy and is proposed by Mayor Bloomberg. His plan suggests improvements in efficiency and accessibility of public transportation as well as a congestion charge during rush hour. With the changes in public transportation, the government hopes to quell the cries of social groups who feel negatively affected by the higher price of driving. The plan should be finished in 2030. Federal governments tend to support congestion pricing for the same reasons. The United States Federal Highway Administration advocates pricing. They claim drivers and businesses will benefit through reduced delays and guaranteed reliable trip speed and travel time⁵.

Businesses

Businesses risk losing business as a result of the reduced traffic volume. Such a case occurred along Oxford Street, London. Retailers claim to have lost 5.5% of sales¹⁶. "A 5pc drop in sales is significant for any retailer, particularly smaller businesses, and the mayor needs to take the concerns of retailers seriously when considering further changes to the scheme", said Sir Stuart Rose, executive chairman of Marks & Spencer¹⁶. This is in contrast to a survey done by Guardian correspondent Andrew Clark which polled 500 London business firms and found that they thought the impact of congestion charges on their business was neutral. In addition, 57% of retailers believed that the congestion charge had improved London's reputation¹.

Expert Opinions

Economists

Economists tend to support congestion pricing as a market-based tool to alleviate congestion. In his book The Undercover Economist, Tim Harford argues that congestion pricing is the best solution to road congestion⁶. He contends that reduced congestion will increase productivity, lower shipping costs, and consequently, boost GDP. Jonathan Leape, professor at the London School of Economics agrees with this stance, contending that the revenues generated from pricing offset any initial implementation costs, make it a sound choice from the perspective of government budgets⁹.

"Well-designed congestion charges, for instance, are the most efficient way to achieve an given reduction of road use... Congestion charging would increase GDP because people would get to work more quickly and produce more, and prices in stores would be lower because of more efficient distribution." - Tim Harford

Congestion-Pricing Debate

A useful link for pros and cons of congestion pricing (approximately 40 minutes)

Felix Salmon provides an overview of the 40 minute debate. Below are three different views on congestion pricing¹².

Charles Komanoff asserts that a city's residents and visitors can benefit in subtle ways. In New York City, for example, enhanced transportation may increase demand for Broadway plays. He also contends that the most congested cities also tend to have the best transit access, so public transportation is a feasible substitute to driving.

"Even though it’s true that congestion pricing needs to have subways and very dense cities and preferably large cities, the idea of per-mile road pricing, in urban areas and in metropolitan areas, is extremely viable. The average person who has a car is making 1,500 trips a year. It’s not as though every one of those 1,500 trips has equal value to that person. So as we impose the per-mile charges, everyone will prioritize his or her own trips." - Charles Komanoff¹²

Corey Bearak stresses alternative modes of transportation if congestion taxes are implemented. Komanoff agreed alternatives are essential even though the subway use in London dropped after congestion charges were implemented¹².

Skymeter's Kamal Hassan has a different view on congestion pricing because they use "Financial-grade GPS" to charge tolls. He would like to see a per-mile charge that changes gradually to solve boundary-effects. Kamal also suggests alternative ways to influence traffic patterns and flows: parking charges and parking policies. Skymeter is concerned about the business aspects of congestion charges¹².

Moral

In general, when any policy proposal shifts power between social groups, conflict will arise between stakeholders. Those who stand to lose power will cling to the status quo, while those who could profit will push for change. A policy that may have a net benefit to society can be thwarted by a single dissenting social group. Full political support is required before government can implement a radical new policy.

In the case of congestion pricing, Stockholm's successful negotiation of the political terrain was paramount to its success. New York failed because it could not rally legislators, who were defending the interests of the poor.

References

1. Clark, A. (2004). London companies learn to love the congestion charge. The Guardian. February 16, 2004.

2. "Congestion Charging Six Months On." Transport for London, October 2003.

3. Crossen, C. (2007). When Parallel Parking Was New and Meters Seemed Un-American. Wall Street Journal. Retrieved from http://online.wsj.com/article/SB118574808780081653.html?mod=hps_us_editors_picks

4. Eschanton (2009). On the merits of Congestion. Eschanton Blog. Retrieved from http://www.eschatonblog.com/2009/03/on-merits-of-congestion-tolling.html

5. Federal Highway Administration. (2006). Congestion Pricing. Washington, DC: Office of Transportation Management, HTOM. Retrieved from http://www.ops.fhwa.dot.gov/publications/congestionpricing/congestionpricing.pdf

6. Harford, T. (2005). The Undercover Economist. UK: Little, Brown.

7. Joravsky, B. & Dumke, M. (2009) Fail, part one: chicago's parking meter lease. Chicago Reader April 9th, 2009.

8. Knorr, A., Heinemann, A., & Eisenkopf, A. (2010). Germany's Autobahn Toll for Heavy Goods Vehicles after Four Years: Experiences and Perspectives. Retrieved from: https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=serc2009&paper_id=49

9. Leape, J. (2006). The London Congestion Charge. Journal of Economic Perspectives. (Vol. 20., No. 4, pp. 157-176)

10. Naparstek, A (2007). "Parking Meters: The Congestion Pricing Controversy of 1932". Streetsblog.org Retrieved from http://www.streetsblog.org/2007/07/30/2250/

11. Vickery, W. (1968). Congestion charges and welfare. Journal of Transport Economics and Policy 2(1), 107-125.

12. Slamon, F. (2010). The congestion pricing debate, cont. Reuters. Retrieved from http://blogs.reuters.com/felix-salmon/2010/06/04/the-congestion-pricing-debate-cont/

13. Yglesias, M (2009). "L.A.'s "Congestion Pricing" Gaining National Attention." Thinkprogress.org Retrieved from http://yglesias.thinkprogress.org/2009/03/distributional_consequences_of_congestion_pricing_in_los_angeles/

14. Bloomberg, M. (2008) "Mayor Bloomberg Delivers Keynote Address at Newsweek's Second Annual Global Environment Leadership Conference." News from the Blue Room.

15. Brodsky, L. (2007) "An Inquiry into Congestion Pricing as Proposed in PlaNYC."

16. Muspratt, C. (2004) "Congestion charge cost 300m, says Oxford St. traders", The Telegraph April 22nd, 2004.