Monday, 29 November 2010

UK investigates more tolling and private finance

Cambridge News reports on how the UK Department for Transport is to investigate whether tolling can be used to help pay for a proposed new A14 highway.  The £1.3 billion (US$2 billion) A14 widening and realignment project was deferred by the recently elected Conservative/Liberal Democratic coalition government as it cut spending to reduce the UK's burgeoning budget deficit.  Alternative ways of funding the project are being investigated, which if tolling was to be included, would mean building an entirely new route (so that the tolled route would be entirely separate).  This is likely to be part of a wider investigation into whether tolling can be used to fund new routes in the UK.

Odds are it wont make much difference, because the biggest problem the UK has with tolling is the very high price motorists already pay for as a part of road use.  £0.5819 per litre on unleaded petrol (plus VAT) is one of the highest levels of fuel tax in the world, none of which is hypothecated to road spending (and if new road projects were calculated on the basis of revenue generated from their use it would be interesting).  Still there is scope for more toll routes in the UK, the bigger issue is whether the UK can get over the planning barriers, NIMBYism and disbelief in road building that has hindered much highway development over the last 20 years.

Saturday, 27 November 2010

World Bank advocates toll roads for Africa

Bloomberg reports that the International Finance Corp (IFC), the finance wing of the World Bank, is promoting the development of toll roads to help build highway infrastructure in Africa.  This follows from its financing of a Senegalese toll road.  It sees the role of toll roads being particularly on approaches to major urban areas with high volumes of traffic.

Clearly this makes sense, although the key issues with toll roads are:
-  Manual tolling delays.  While cheap and easy, manual tolls do cost in terms of delays on high volume roads;
-  Enforcement.  Free flow tolling is impossible without good infrastructure to detect and fine non-payment.   Similarly manual tolls need careful monitoring to avoid corruption.

African countries will be able to meet these challenges, and if toll roads ensure motorists pay for the costs of infrastructure they use, it can only be good as these economies grow and to help ensure growth in road transport demand can be managed through price, and for price signals to be sent to help guide future investment decisions.

Brisa seeking new toll road investments

Bloomberg reports that Portuguese toll road company Brisa is deliberately seeking new opportunities to diversify its toll road portfolio as it bids for concessions in Turkey and India.   Part of the motivation is to compensate for the expected poor performance in Portuguese toll roads as the economy is hit by recession, government austerity programme and risk of a sovereign debt crisis.  Brisa is cash positive, but sees growth opportunities elsewhere after it sold out from its investment in Brazilian toll road company Cia. de Concessoes Rodoviarias SA.

Consult Australia promotes Brisbane congestion charge to subsidise rail

The Brisbane Times reports that Consult Australia (formerly the Association of Consulting Engineers) is proposing a congestion charge for central Brisbane, in the form of a cordon, with the surplus revenue used to subsidise the proposed Cross River Rail project.   The A$8.2 billion (US$7.9 billion) project involves an 18km underground railway tunnel to shift suburban rail services from existing lines, but is itself financially nonviable. 

The principle is not wrong, and certainly there are strong merits in using pricing to manage congestion and provide a new source of revenue.  The wider report itself is strong on economic efficiency and is a valuable contribution to promoting debate on financing transport improvements and achieving better outcomes for mobility, environmental and financial sustainability.  The principles and idea are worthy.  So should form guidance for future policy.

However, from the point of view of detail it is far from clear to me that such a charge could ever remotely cover more than even a tenth of the cost of the rail project over the long term, given the likely price range viable for Brisbane and the sort of revenue that could be expected.  My estimate is that it would be lucky to get more than A$50 million - A$80 million per annum after costs, depending on location, timing and pricing of a central Brisbane cordon.

More importantly, could it be politically saleable to motorists to be forced to pay an additional charge for driving to downtown Brisbane and for the money to go into an extraordinarily expensive rail scheme.  Once motorists are paying more efficient prices for road use, the case for subsidising parallel rail corridors deteriorates significantly.   It would be far more reasonable to use such charges to fund other road improvements, or offset other charges.   Indeed, the impacts on land use patterns should be assessed, as such a charge will reduce the attractiveness of the Brisbane CBD for some businesses, a point which the rail project is unlikely to fully offset (but which changes in taxes could).

Naturally, any congestion charge will actually benefit any rail operations because the relative price difference will increase patronage by rail.  Yet, the principle of congestion pricing, which is to match peak demand with pricing to ensure efficient utilisation of resources, should also be applied to rail. 

It is also worth noting the mistakes in the Brisbane Times article which said:

"Similar schemes have been trialled in London, Singapore, The Netherlands and tried and rejected in Manchester, Stockholm and New York."

London and Singapore schemes are hardly trialled, being in place since 2003 and 1998 (or 1975 if you take the original Singapore area pricing scheme).  The Netherlands has no scheme and no trial (but a series of attempts thwarted at the last moment due to political imperatives).  Manchester rejected it.  Stockholm DID trial and now has a congestion charge.  New York had proposals, but they too have not withstood political pressure.

How hard is it for journalists to accurately research congestion charging?

Reduce oil dependency by introducing congestion pricing?

The Mobility Choice Coalition has released a report (PDF) that focuses on improving choice and competition in transport, but which also claims that congestion pricing and HOT Lanes could have a dramatic impact on oil consumption.   By 2020 a combination of HOT lanes and congestion pricing in the US is claimed to save 80 million barrels of oil p.a., and nearly double that by 2030 if pricing is even more comprehensive.  The options outlined in the report are basic (cordons, HOT lanes, distance charging and truck toll lanes), but the point is raising the idea in the first place.    It is ranked as the second best option in reducing oil consumption in transport (after a punitive fuel tax) and this neglects the wider economic and environmental benefits of pricing roads more efficiently.

The organisation itself appears to be a blend of free-market advocates, environmentalists and those interested in reducing the US transport sector's dependence on oil.

However, it is notable that more efficient pricing of roads is finally being acknowledged as a way of reducing oil consumption, with the reduction coming both from reduced demand, but also - critically - from more efficient and steady flows of traffic.

Thursday, 25 November 2010

UPDATE: RBS bails out of Brisbane toll road (originally Brisbane's M7 Clem Jones toll tunnel fails to meet forecasts)

The M7 Clem Jones tunnel is Brisbane's (Australia) newest toll road being a A$3.2 billion project to connect (maps here) the near southern suburbs of Brisbane (from the Pacific Motorway) to the northern suburbs on the inner city bypass, bypassing the congested Story Bridge.  In essence it is a 4.8km north-south inner city bypass tunnel (with 2km of approach roads) for Brisbane, bypassing 24 sets of traffic lights and providing an additional river crossing with 2 lanes in each direction.

It is the first privately owned toll road in Brisbane with a 45 year concession owned by Rivercity Motorway Group (a publicly listed Queensland company with no single shareholder holding more than 11% of shares).

It has a fully electronic free flow tolling system using DSRC tags and ANPR (Automatic Number Plate Recognition).   Tolls range from A$1.50 for motorcycles to A$3 for cars and up to A$9.90 for HGVs and buses.   However, since the tunnel opened in February 2010 traffic forecasts have failed to eventuate.  Bear in mind that the global recession has barely hit Australia at all, so the real issue is the optimism around forecasts.    The forecast was around 60,000 vehicles a day, but actual usage only reached 34,705 at best in August. 

The effect of this is that the owner has asked its lenders to give it a two year break, as the Airport Link toll road is expected to increase demand when it opens in 2012. 
A Sydney Morning Herald report gives five reasons for the failure as:
- Flat traffic growth in Brisbane since 2005;
- Significant roadworks on approach roads reducing the attractiveness of the route which will not be finished until 2012;
- Lower value of time in Brisbane compared to Sydney and Melbourne, in short Brisbane motorists tolerate delays more than motorists elsewhere in Australia;
- Other road improvements completed far sooner than predicted (Gateway Motorway duplication, which is the main outer Brisbane north-south bypass, and the Go Between toll bridge which eases congestion in the inner city); and
- Tolls seen to be too high (a 6 month discount period was introduced that recently ended).

Assuming the banks agree (and what choice is there), this tunnel will limp on and the Airport Link project will likely improve its viability.

More widely this road shows the wisdom of letting private investors carry this risk.  The tunnel exists, regardless of what happens to the investors, it will be kept open and operated by any creditors, and so creates a major benefit for Brisbane over the long run.  It removes traffic from busy at-grade corridors, improving environmental conditions and allowing more road space to be free for buses and other traffic approaching the city.  Moreover, the toll ensures not only are the costs recovered from road users but that traffic will remain free flowing over time.  These toll roads are not only financing new capacity and saving taxpayers (and other road users) money (as well as benefiting residents and users of bypassed roads), but also ensuring the new capacity is priced efficiently (too high and the road would be used, too low and revenues will be inadequate and the road gets congested).

UPDATE: One of the largest shareholders in River City Motorway Group, the 78% UK Crown owned Royal Bank of Scotland Group (RBS), has bailed out according to the Courier Mail.  RBS's original stake was worth about A$120 million (US$118 million).   However, by the time of the divestment its value had dropped to $A581,000 based on the sharemarket value.   The divestment has been by donation to a charity for A$1, because a sale would have raised a conflict of interest as RBS was a leading banker to the company. 

UPDATE: Sale of Queensland Motorways postponed (originally Brisbane City Council keen to buy Queensland Motorways)

In a peculiar move, the Brisbane Times reports that Brisbane City Council appears set to bid to purchase the company Queensland Motorways when the Queensland State Government seeks to privatise it in 2011.  Of course this wouldn't be a "privatisation" at all, but rather one group of taxpayers buying a commercial company from another (and the group of buyers are also sellers)!

The intention is to establish municipal control of toll motorways owned by Queensland Motorways in Brisbane, so that tolls can be co-ordinated and the profits of Queensland Motorways channeled into Brisbane municipal projects.   The intention would be to transfer Brisbane City Council owned toll roads to a new company to incorporate Queensland Motorways.

The sale price is estimated to be around A$3 billion.  Queensland Motorways has been a success as a commercial company operating toll roads for the state government.  

Curiously, the council bid is led by Lord Mayor Campbell Newman, from the centre-right Liberal Party and being questioned by Labour Party councillors (who one might think would prefer council ownership to the private sector), showing politics in Australia is not always as partisan as it is elsewhere!

UPDATEThe Australian newspaper is reporting that the Queensland state Government has decided to delay the privatisation of Queensland Motorway Ltd because the market for toll roads is "soft".  Ownership will be transferred to the state government investment company Queensland Investment Corporation.   This is not entirely surprising given the state of infrastructure investment funds, although I personally have noticed ongoing interest that is largely driven by bargain hunting.  The Queensland Government is not needy enough for money to have to engage in a fire sale, so it isn't an unreasonable decision.

Wednesday, 24 November 2010

Time Magazine writes on Atlanta's HOT Lane but

unfortunately doesn't link pricing roads to the effect of pricing other goods and services.  Toll lanes of any kind should not be controversial, as there is a free alternative and people are paying for priority.   To reject this concept you should also reject it elsewhere.  After all, people have been paying more to bypass queues at airports and theme parks for years.   The key point is that road space has value, it is a scarce resource, and when demand exceeds supply, queuing eventuates and its value and efficiency dramatically declines (with other external costs such as increased pollution).

The article, available online as Congestion Pricing: To Skip Congestion, Atlanta Pays Up writes about the proposal to convert HOV lanes in Atlanta  (on the I-85) to HOT lanes, and to increase the HOV threshold from 2 to 3 vehicle occupants.  It makes the good point that it gives users a choice, although gives a little too much credence to the argument that such lanes only "benefit the rich" (presumably wealthy people aren't entitled to pay for things that benefit them), which is not true.   I don't see Time Magazine arguing that because it is not free that it only "benefits the rich" when it could be offering free copies.  

The value is that toll lanes are now being discussed more widely in general news coverage, and the hope is that this reduces controversy about them.  

One argument put forward in the article, that HOT lanes will become congested because they will be too popular, neglects the tools available to prevent this.   The obvious one is to increase the price.  It would not have taken much effort for Mike Billips (the journalist for Time who wrote the article) to investigate dynamically priced toll lanes elsewhere, (such as Minnesota's I-35W express lanes)  which manage demand effectively.  The second one is to increase the HOV threshold, which at 2 is effectively a free ride for couples.  Increases to 3 or even 4 are more likely to capture conscious car-poolers (as a side point, it would be interesting to see if any economic analysis has been undertaken to value what such thresholds should be, compared to HOT lane tolls).

The article does go off key a couple of other times.  For starters, HOT lanes are unlikely to be serious money spinners.  US$7 million p.a. is useful, but hardly worth getting too excited about.  Certainly this is unlikely to pay for new lanes in many cases, but is not really enough to completely motivate the introduction of such lanes.   Secondly, I don't know who told Mike Billips that the London Congestion Charge is about "noise and pollution".   It was never about noise, and the pollution was seen as a positive, but not the driver.   The single biggest reason for the London Congestion Charge was to reduce car traffic in central London to enable road space to be reallocated, primarily for buses, but also taxis, cyclists and pedestrians.

Saturday, 20 November 2010

Spanish government seeking to assist private toll road companies

Reuters reports that the Spanish government is encouraging the biggest Spanish toll road operators, Cintra and Abertis to take over poor performing toll roads owned by other concessionaires in the country.   
Spain's economy has been hard hit by the recession, with significant property speculation bubbles popping and property prices dropping by as much as 30% in some places.  Unemployment is over 20% and the budget deficit has been a concern.  As a result, there appears to be drops in traffic on some roads affecting revenues.   

The alternative option being floated is a bailout which would cost the government hundreds of millions of euro, although one must ask why this should be necessary.  After all, the road remains and tolls can be set to maximise revenues (and as a result utilisation is optimised).  If a toll road defaults then the banks will pick it up, refresh the finances and sell it on.   However, it is likely that Spain's current socialist government prefers some form of state intervention.   Clearly the scale of the economic crisis is affecting sectors of the economy traditionally fairly immune to economic cycles.

Australian student's congestion charging idea only half right

The Sydney Morning Herald has reported on what a Queensland engineering student has suggested regarding road tolling - he wants to abolish tolls on major highways and introduce urban congestion charging.   This has produced quite a response of support, but unfortunately Jake Whitehead (the student) while observing correctly some of the benefits of urban congestion charging has missed two vital points.

Jake has suggested routes that bypass the city should be free, but driving in the city should be charged.  On top of that the money raised should go on public transport.  In other words he is simply replicating what he saw when he visited Europe,  unfortunately he didn't think carefully about the urban form of European cities compared to Sydney, for they are very different.

The first criticism of his point is the obvious issue that if tolls don't pay for these privately financed motorways, why should those who don't use them pay?  Whilst there are some significant external benefits from using toll motorways compared to surface routes, the key beneficiaries are the road users.  Tolling such routes (which is unknown in Europe) competes directly with rail services, so ensures the long run capital costs of the motorways are recovered by the users, meaning the real infrastructure costs are met by those users, not spread more widely.   The number of motorists likely to use surface streets for such trips are going to be low, except for specific cases like the Sydney Cross City Tunnel.   Arguments for congestion charging are not arguments against properly pricing very expensive pieces of infrastructure.

Secondly, congestion charging does make economic sense and does work, as has been seen in Singapore, Stockholm and London.   However, copying what high density cities, mostly with oldworld urban form (or in Singapore's case, centrally planned, not that Jake studied Singapore) does not necessarily work for new world cities.  After all Sydney is a far lower density city with far more diverse travel patterns than cities which are more CBD centric.   Simply charging the Sydney CBD may do little for congestion.

However, there is no reason why congestion charging, as a concept, can't be applied more intelligently.   For starters, allowing peak charging on tolled motorways would help.  Bear in mind that car commuters over long distances are going to use these motorways anyway.   However, the wider issue of charging for congestion should not be about cordons or area charges, but reform of the whole road charging area.   That means replacing annual ownership charges and fuel taxes with distance based charges.   

Jake isn't an economist, so it is unreasonable to expect him to take an economics led approach, but it shows that whilst observing traffic engineering and planning practices alone is valuable, it isn't enough.

So policy advisors should take partial heed of what has been said, but the answers to Australia's traffic problems wont be found in transplanting European led solutions.

Senegal's first toll road to be built

According to Bloomberg, Senegal is to get a US$315 million toll road built by French toll road operator Eiffage.  The 25km long Dakar-Diamniadio highway is to be financed by the International Finance Corporation (IFC), African Development Bank, West African Development Bank and CBAO (Senegalese bank) with a thirty year concession.  One of Eiffage's highest profile projects was the Millau Viaduct.

What are the different types of road pricing?

The range of terms used to describe road pricing are vast and overlapping.   The main reason for such inconsistency is because road pricing terminology usually combines purpose (e.g. congestion charging), geography (e.g. urban, cordon, area), technology (e.g. electronic free flow, open) and vehicles charged (e.g. HGV only).  The separation I have made on the right hand column is based on geography, mainly because this tends to lend itself to the answers to the other issues as to purpose, likely technology and range of vehicles charged.  So my classification is as follows:

- Toll roads and toll lanes: Toll roads are the most common, familiar and oldest form of road pricing.   They are characterised as being single facilities with one or more tolling points.  Most often bridges or tunnels, but also motorways/grade separated highways.   In all cases the choice to users is to choose that road or crossing, or take an alternative route.   The tolls on these facilities are almost always about recovering the capital costs of the particular road.  Although in a few places such tolls are now being varied between peak and off peak times, to manage demand and reduce congestion, but also offering discounts at times of lower use.  This can be described as a form of congestion charging for that specific route only.  The Sydney Harbour Bridge and San Francisco-Oakland Bay Bridge both have higher peak charges to manage congestion.

Within this category I have included toll lanes, because they are about charging one facility.   This also includes High Occupancy Toll (HOT) lanes.  Toll lanes may be extra lanes added onto a highway, with the toll applied to help fund the new lanes, but also manage demand at peak times.  The Orange County 91 Express Lanes are in this category.

As such it is a form of congestion charging, but with the parallel uncharged lanes as a free alternative.   Toll lanes may also simply be tolls applied to existing lanes.  To date the only example of this are HOT lanes, with the existing lanes already set aside for buses and cars carrying usually 2 (or 3) or more people.  HOT lanes allow single occupancy vehicles to use such lanes at a charge, with the toll essentially managing demand so the lanes remain relatively uncongested.   The I-394 HOT lane in Minnesota is an example of this.

The common characteristic of toll roads, toll lanes and HOT lanes is that, generally speaking, motorists can choose other routes to make the trip (or other lanes).   The tolls are focused on the single facility, and are usually set to recover capital costs.  The alternatives may be slower or far more circuitous, but the road pricing component is the single trip on that road.   Some countries have extensive networks of toll roads that make up some of the best highways.  France, Italy, Spain, Japan and increasingly China have well developed national toll road networks.  Yet in all cases it still remains possible to drive long distances using other routes.   Some cities have extensive toll road networks, such as Sydney and Santiago, but still have alternative routes.   The chargeable event for such roads is passing a particular point on the road.

- Urban road pricing: Urban road pricing is distinguished from toll roads in that the tolls are not simply applied to individual routes or crossings.  In that sense, cities like New York (where crossings from Manhattan to New Jersey are tolled) or Sydney (where many main highways are tolled) do not have urban road pricing.   Urban road pricing is when there are no alternatives in driving to a certain part of a city at certain times without paying.   The best known examples of this are congestion charging in London, Stockholm and Singapore (although there are key differences between all three), but also the Oslo toll ring.  In most cases the road pricing is introduced to reduce congestion by managing demand.   In the Oslo case the road pricing was introduced to raise revenue to fund the road improvements and other transport infrastructure.   Cities typically consider forms of road pricing for these two objectives, reducing demand (and congestion) and generating revenue.  The chargeable event being crossing a certain point or movement within a zone.

- Network road pricing:  Network pricing is the unified charging of vehicles across a wide network that goes beyond a city.   Such pricing may only be heavy vehicles (e.g. Switzerland LSVA, German LKW-Maut), or all vehicles (e.g. electronic vignettes in Hungary).  It may be only on motorways (e.g. Austrian ASFINAG tolls), or on all roads (e.g. New Zealand Road User Charges).   Generally speaking, such pricing is about recovering infrastructure costs, but may also be about managing externalities such as congestion and pollution.   It does not include countries where large numbers of highways are tolled when such toll systems are discreet, run independently and unrelated to each other.  Chargeable events may be crossing multiple points, distance travelled or purchase of time to access a network.

The confusion can come from different terminology.  Road pricing can apply to all of these situations.  Tolls can be used to describe them all as well.  Road user charging would tend not to apply to individual toll roads or toll lanes.   Congestion pricing/charging is more about charging specifically to manage demand at peak times. 

So my point is this.  The key to understanding road pricing schemes is:
- Geography (what part of a network is being charged);
- Vehicles (what part of the vehicle fleet is being charged);
- Purpose (why does the charge exist); and
- Chargeable event (what triggers liability for a charge).

Look at that rather than the terminology used.

Wednesday, 17 November 2010

San Francisco may be the USA's first real congestion charging scheme

Tollroadsnews reports that the San Francisco County Transportation Authority (SFCTA) is proposing two options for introducing congestion pricing into San Francisco, both of which would represent the first genuine cordon based congestion charging scheme for the USA.

The SFCTA presentation as part of its public outreach strategy explains the options in moderate detail.  If it comes to pass, it would be a revolutionary step forward in the implementation of more sophisticated road pricing in the United States.   

Road pricing in the USA to date has been most commonly seen in traditional toll roads, almost all with a mix of manual toll booths and electronically controlled toll booths with barriers.   More recently, some toll roads have moved to electronic free flow.  However the shift to pricing roads to manage congestion has to date only really been seen in either toll lanes/HOT lanes (where the user can choose to use untolled parallel lanes) or the implementation of peak time charges on existing tolled crossings (e.g. Golden Gate Bridge).   No US city to date has dared put a cordon around the CBD to force charges for all vehicle entry beyond that point at fixed times.  

What are the proposals?

Peak time charges of US$3 between 0600 and 0900, and 1500-1900 across the proposed cordon options, although it is unclear whether the charges apply in one direction only (reversing AM/PM) or both directions at both times.

A tight Northeast cordon around downtown San Francisco would allegedly result in 12% less car trips and annual net revenue of US$60-US$80 million p.a.  A far larger "southern gateway" at the county's southern border would reduce trips by 5%, and generate net revenue of US$60 million p.a.

Now there are a few issues with all of this.  Firstly, SFCTA has no legislative authority to impose any charges anywhere, so would need a mandate to do so, but secondly, there will be a real need to do some due diligence on the financial assessment.

Why?

Having had some experience in these matters, I'd question the costs (not just lost revenue) for the long list of discounted and exempt vehicles.  While taxis, buses and emergency vehicles are not difficult to exempt, discounts for "low income" drivers will be fraught with administrative costs because of the potential for fraud.  "Disabled drivers" have a similar, though smaller scale issue.   There are also no costs for changes to the road network which are necessary when a cordon is placed, and motorists will approach it and want to divert around it.   This is a risky business, and it is important to get the costings right, particularly in the set up phase, because costs will decline significantly after a few years.  An interesting dimension completely ignored is revenue from enforcement, because it would be politically unpalatable to suggest that maybe 1 in 20 users will be fined.   The claim that collisions will drop tends to ignore that higher speed collisions usually cost more in terms of injuries and deaths, a key error in some very basic evaluations of road pricing.

Another point is whether any free through-routes are needed, given the proposal includes the Bay Bridge and presumably through traffic using the Bay Bridge and associated freeways to bypass downtown San Francisco.   A case could be argued either way about that.

Still, notwithstanding these and some other issues (the claim the London Congestion Charge has reduced congestion in London by 33% is a wild misuse of a statistic.  The actual statistic is that it reduced car traffic in the charged area by 33% when it opened, which does not correspond to a reduction in congestion across London, as the charged area is small), the proposals are radical for the US.  

If I was to choose one of them, I'd pick the Northeast one, if only because cordons are very blunt tools and really only suitable for CBDs where the public transport (and active mode) options are realistic for most of the users.   A county boundary charge with a residents' discount would nullify the impacts and impose a far more artificial boundary than one which largely corresponds to central San Francisco commercial activity.  Consideration should also be made about the charging periods and perhaps shoulder periods to avoid pre/post peak rushes.

However, a key element to any success will be how the revenue is used, and how the implementation is managed.  No US city has implemented anything remotely like this, so experience from outside the US will be essential.   Also, whilst the temptation will be to use the money mostly for public transport, it is critically important for motorists to see that they get something in return - which in this case ought to be, at least, far better maintained road surfaces, signage and improvements in traffic signal phasing.   Motorists ought to see some of the financial benefit from the charge, which can also include small scale works on improving intersections and improving pedestrian facilities downtown (which motorists also use).

Good luck to San Francisco.   A lot of detailed work will be needed to determine exact system design, product design, procurement approach, governance (who sets and reviews charges, on what basis, how is the revenue managed), enforcement, test phasing and the communications strategy for implementation.   Where New York once thought it might pioneer, San Francisco may actually get there if it does the work thoroughly, (peer reviewed) and gets buy in from motorists and businesses. 

There are probably few US cities that could implement such a cordon and have a significant positive impact on traffic and mode shift, without also encouraging businesses to relocate outside the cordon.   It is, after all, a fairly blunt implementation of congestion pricing.   However, the potential is there to have more disaggregated pricing at different times and directions.   

Then it can be said that the first real congestion pricing scheme (not just lane pricing) in the US will have been implemented in San Francisco, and other cities and states will be watching carefully.   If it succeeds, it wont fix congestion throughout the Bay Area, it isn't a magic bullet, but it should make a worthwhile difference.

Tuesday, 16 November 2010

More HOT lanes for Los Angeles?

According to the L.A. Times, the Los Angeles Metropolitan Transportation Authority has produced a study recommending further investigation into converting HOV (High Occupancy Vehicle) lanes on five sections of highway into HOT (High Occupancy and Toll) lanes.  

Demonstration projects for HOT lanes are being implemented already on two stretches of highway (14 miles of I-10 from Alameda Street to the 605 and on 11 miles of the 110 from Adams Boulevard to the Artesia Transit Center at 182nd Street).   

The philosophy is simple, it is about getting better use out of under-utilised HOV lanes.

For the uninitiated, HOV lanes are lanes set aside for vehicles with multiple occupants, otherwise known as carpool lanes or transit lanes.  The economics behind this being that it is a more efficient use of roadspace for a vehicle to carry 2 or more people than simply one, and if there were efficient road pricing, the value of time of occupants of such vehicles would tend to give them priority.   The problem with HOV lanes is that many HOV trips are opportunistic, in that people will do them anyway.  Couples, families and taxi trips are not car journeys undertaken by people who would otherwise have taken two cars in many cases.   Real carpooling remains very much a minority activity.

As a result, many HOV lanes have excess capacity which can be utilised if converted to HOT lanes.  Single occupancy vehicles can be tolled to use the lane (to ensure it remains free flowing) dynamically using DSRC (Dedicated Short Range Communications) technology, whereas multiple occupancy vehicles can still travel "free".

Let's be clear, congestion charging it is not, but it is pricing a lane for certain users, which is positive as it provides choice and comparison between what pricing can do and what "unpriced" lanes are.   By offering a free flow corridor it is an improvement, and provides a choice.

The interesting part of the LA experiment will be that lanes will be priced dynamically, so the price will go up as demand increases, so that free flow conditions are maintained. 

LA Streetsblog has looked at the official report which indicates that "Every corridor was rated on connectivity, constructability, transit benefits and revenue potential" which would appear to mean not only practicability of introducing free flow tolling on the lanes, but also some money could be made from it.

I wouldn't be surprised if there was some surplus revenue, taking into account operating costs and the capital costs of tolling in the first place.   However, the revenue will not be significant on this scale.   The real benefit is economic, in allowing existing road space to be better utilised it could form the basis for a wider network of such lanes. 

Of course the longer term question with HOT lanes is whether they are sustainable in the face of rising demand.   Tradeoffs will need to be made between increasing prices, tightening the HOV rules and providing additional capacity.  At what point will it be that higher prices are such that second people are carried in vehicles just to avoid the toll (so the HOV threshold should be raised to three), and ultimately when do such lanes end up having to be toll only (which by any measure of rational economics, they should be).

UPDATESan Gabriel Valley Tribune gives a lukewarm endorsement to toll lanes, but fears privately owned toll highways.  The question that could be asked is whether it would object to them if they were new roads.

Australian report opposes private toll roads

The ABC (the taxpayer funded state broadcaster of Australia), has reported on a study by Australian economist Dr Nicholas Gruen, which essentially claims that private investment in roads is poor value for money for motorists.  He claims that governments can borrow more cheaply, that the transaction costs in PPP concessions add cost and that such toll roads can be hugely profitable for governments.  Another of his concerns is that such PPP contracts constrain planning decisions (presumably that they sometimes restrict expansion of competing corridors).

From the perspective of a developed country, he has some valid points.  Some of the main benefits of private investment in roads in developing countries is bringing expertise and accountability to highway management that may not be to a high standard in government owned bureaucracies.  However, there are some counter arguments to his points.

Governments can generally borrow more cheaply than the private sector, although some countries with particular sovereign debt problems (not Australia) may be more questionable.  The reluctance of governments to borrow when they have excessively high public borrowing already might be understandable.

However, some of his chief concerns are more a factor of allowing private investment into individual pieces of infrastructure and the difficulties and risks involved when governments own the competing infrastructure.  The problem for private investors being that it is all very well to be allowed to collect tolls on a new road, but if governments effectively subsidise competing routes that are untolled, it can seriously affect the viability of the new route.  

The ways of getting around this are either to privatise a whole network (spreading the risk and control) or to introduce pricing across a network (so diversion is not considered a real risk).   

Roads are often profitable either from tolls or from other charges/taxes collected from the use of roads (e.g. fuel taxes and roadside parking fees),  yet the lack of transparency of this seems to make private toll roads seem like "profit" that is unseen elsewhere.   In fact, such "profit" is seen in government revenues from all those other taxes, which are not linked to roads or necessarily spent on roads.

Finally, one of his examples demonstrates a key risk that private investment in toll roads takes away from the public sector - optimism bias.   The Cross City Tunnel in Sydney was one of those.  It was built, tolled, did not generate enough revenue and went into receivership.   However, the tunnel remains, the receivers are operating it more efficiently than before, and motorists have the benefit of the road, but the state government  (and taxpayers who mostly do not use the road) do not carry the debt burden.   For all of the examples of successful private toll roads, examples like Cross City Tunnel emerge from time to time to show how much can be saved by the private sector taking the risk.   

Indeed, the Cross City Tunnel actually helps to moderate expectations of motorway forecasting in Sydney.

So whilst Dr Gruen has some valid points, they should not be used (as the ABC has done) to completely rebut policies of allowing private sector investment in toll roads.  Indeed, if the private sector is willing to take on the risk, build the road, charge users directly, then it is a shining example of capitalism and entrepreneurship.   Australia has certainly demonstrated itself to be one of the world leaders in successful private investment in toll roads, particularly new motorways in major cities.

Monday, 15 November 2010

Toll road builders face loss of contracts for abandoned projects

According to the Jakarta Globe, the Indonesian Ministry of Public Works has threatened to nullify the contracts of eight contracting companies responsible for building toll road concessions in the country.  It has been reported that the projects have been idle since 2005, as the contracting companies argue that the projects have become too costly due to material costs and land acquisition issues.   

The problem appears to be that the companies underbid for the contracts or did not adequately take out hedges or insurance against price inflation of inputs.  Given the Indonesian Government's strong interest in developing intercity highways through toll financing, it is likely the projects will proceed, but that procurement processes will be significantly strengthened.  Due diligence of financing requirements and tighter legal commitments for progress towards milestones would seem to be some of the measures that the Indonesian Government might take for future such contracts.

Congestion Charging advocated for Melbourne

Allan Fels, Dean of the Australia and New Zealand School of Government  has said in the Australian newspaper that congestion charging would be one of the best measures to improve economic efficiency in the state of Victoria, Australia.

Victoria has already investigated traffic congestion and congestion charging before, in a comprehensive report by the Victorian Competition and Efficiency Commission.   The response of the Victorian government was to embrace many of the proposals around new infrastructure and public transport services, but to sidestep urban congestion pricing.  Given Melbourne's extensive CBD centred public transport network, pricing road access to the CBD (which already exists on two tolled corridors) does not appear unreasonable, but is politically difficult.  Although parking is effectively priced and rationed in a way that forms a second-best proxy to congestion charging.  Yet urban CBD charging alone would only address some of Melbourne's congestion problems given the very large area of the metropolis and high usage of cars for trips that do not focus on the CBD.   This suggests that wider reform of road charging policy (replacing fuel taxes and ownership taxes with distance based charging) may have more applicability.

Yet the mere fact it is being discussed in Australia is progress on its own.   Simply building roads and building public transport networks in themselves does not address the fundamental problem with not efficiently pricing roads - when demand exceeds supply, queuing eventuates.

It follows on from reports earlier this year that Infrastructure Australia is supporting congestion charging to make cities more sustainable, and to raise revenue to improve transport networks.

Introduction - Road Pricing Blog

Welcome!  The purpose of this blog is to provide a repositary for global news and commentary about the field of road pricing.

Why?

It's simple.  There is information and commentary about road pricing across the internet, but no single site dedicated to the issue on a global scale.  There is one website which concentrates almost entirely on US tolling news, but none which give equal coverage to events elsewhere in the world.  Even Wikipedia does a poor job of summarising the facts around these issues, partly because of the wide range of terminology which has been used.

I have spent the last ten years working in road infrastructure policy, including road user charging with projects in the UK, USA, continental Europe, Hong Kong, Australia and New Zealand.  It includes managing transitions towards free flow tolling, urban congestion charging and distance based charging.

I hope this blog will have guest commentaries and present different regular columns and insights into current issues.   As you can see, the column on the right has a long list of websites covering a wide range of types of road charging, including links to existing systems.

So what is road pricing?  Well if you are familiar with any of the overlapping terms below, it is ALL of those in relation to charging for road use:

Tolls/tolling
Road user charging (RUC)
Congestion pricing
Congestion charging
HGV charging
HGV tolls
Electronic fee collection
Electronic road pricing
Electronic road user charging
Time Distance Place (TDP) charging
Cordon charging
Cordon pricing
Mobility pricing
Toll lanes
High occupancy/toll (HOT) lanes
Road pricing
Road charging
Vignettes
Electronic free flow tolling
Value pricing
Area pricing
Area charging
Eco charging
Access charging

I wont be attempting to narrowly define any of these, except that I will be attempting to distinguish between a few key types of road pricing, based on geography and chargeable event.  What matters is not so much terminology as clarity of understanding about what is meant.   So when I describe a road pricing system as a "toll" or "road user charge" or "congestion charge" there will be an element of the system that lends itself to that term.  I will prefer to use the official titles where possible, even though they do not always capture all of the key characteristics of the system.

In any case, welcome to this blog.  It will carry regular updates about major developments in road pricing, including new systems, major changes to existing ones, and debates about introducing new ones.   If you have any comments or suggestions that are not appropriate for individual posts, please email them to rationaltransport at yahoo dot com.

Regards

Scott Wilson
Rational Transport