Sunday, 27 February 2011

Apologies

Sorry for the break in service, I have been moving home at the same time as work has become more like 60 hours than 40 hours, so in the midst of all that, there has been some neglect of this project.   On top of that, home broadband service has been delayed for two weeks.

Friday, 11 February 2011

Florida toll bridge nearing bankruptcy

Approaching the long causeway type bridge
Garcon Point Bridge links Interstate 10 and Pensacola Beach in Florida. It was commissioned by the Santa Rosa Bay Bridge Authority for US$95 million in 1996, and is a privately owned concession, but traffic volumes have not matched forecasts. In fact they are less than half the predicted 7500 vehicles a day (itself a ridiculously low volume for most toll roads). Consultancy URS undertook the forecasts and understandably doesn’t include the project in its portfolios. The question is whether consultancies that make such mistakes get sued for the losses due to reliance on forecasts that don’t prove correct?

According to the Wall Street Journal if the bridge authority can’t make the interest payments, the bridge could be turned over to its bondholders or taken over by the state. Both of those actions could happen through bankruptcy proceedings.

What’s best is the note on the website of the bridge:

“Executive Director: Vacant-no funding available”

If you can't afford an Executive Director, then surely it is a matter of weeks.

Thursday, 10 February 2011

Maryland's new toll road a step forward in two ways

The Maryland Intercounty Connector is a new 7.2 mile toll road opening on 22 February between Interstate 270 in Gaithersburg and Georgia Avenue in northern Silver Spring according to the Washington Post.

The new road is the first stage in what will be called Route 200, which will be an 18.8 mile 6-lane highway which will ultimately connect Interstate 270 with Interstate 95 at Laurel. Yet it is still half the length of the original project conceived for this corridor.   Travel time along the corridor will be 70% reduced compared to using existing roads.

One significant step forward will be the use of all electronic free flow tolling. Technology well established over a decade ago in Toronto, Canada (Route 407) and Melbourne, Australia (Citylink) and used in multiple toll roads across the world.  This will avoid congestion at toll booths and will mean drivers paying either using an on board tag with an account (EZ Pass) or billed according to their number plates. The latter will include a US$3 service fee, incentivising users to establish EZ Pass accounts.

More important from an economics point of view is that tolls will vary according to demand. There will be three tolling periods:

Peak 0600-0900, 1600-1900 (weekdays only)
Offpeak 0500-0600, 0900-1600, 1900-2300, (0500-2300 weekends)
Overnight 2300-0500 (all days)

Charges vary considerably according to the schedule by time of day, with peak times having a 26% surcharge over off peak, and overnight being a nearly 48% discount on offpeak for cars. Similar variations exist for heavier vehicles.  The full toll schedule is here.

However, the intention is to change pricing periods dynamically. This means any charging period could start or finish up to one hour earlier or later depending on demand, with that variation happening with 10 days notice. So it wont be real time dynamic changes, but rather monitored changes in performance.   It has parallels to Singapore's Electronic Road Pricing system which regularly changes prices to maintain free flow conditions.

The difference that makes should be dramatic. Though it will be interesting to see if at times of low demand, peak periods shrink significantly, and overnight periods also increases to respond. Conversely, some motorists will not be happy if they choose to drive at off peak periods near the peak and find within a month or two they are paying the peak price because of congestion at those times.

Of course without increases in prices, there may still be congestion if the peak charge remains too low to manage demand.

Yet this is a really important display of applying market oriented pricing signals to the supply of road capacity. It both helps to manage congestion, but also should mean motorists notice the discounts they get from travelling at different times.  So overall, a valuable piece of new infrastructure, with modern tolling technology and the application of efficient pricing principles to help manage congestion.

May it be an example to future projects in the US.

Wednesday, 9 February 2011

Greek toll road boycott threatens future concessions

As has been reported in TollRoadsNews, the economic crisis in Greece has had one unfortunate impact on toll road concessionaires in the country - they have become the target of protests against privately owned toll roads. The protests appear inspired by the relatively strong communist political movement in Greece (it is notable that the third largest political party elected to the Greek Parliament is the Communist Party with just over 8% of the vote in 2009). 

Greece’s economy is particularly hard hit by recession, primarily because Greece has had decades of budget deficits that resulted in the country facing a sovereign debt crisis. The Greek government response has been to significantly cut public spending, which is having a major short term effect on the pay and employment of many people. Some are taking it out on the country’s toll roads by simply refusing to pay.  The situation has been exacerbated by some toll increases.

Three major concessionaires agreed in 2007 to engage in a major construction programme to expand the country’s motorway network, but in recent months more and more motorists are simply refusing to pay, making the road concessionaires engage in debt collection and court action.

The percentage of drivers refusing to pay tolls has jumped from 3 to 14 percent of total users in less than a year, an official with one of the operators told Reuters

Protests started in late 2010, as there were initially pickets at toll booths, followed by protestors taking over toll booths and raising barriers to let motorists pass free according to the Greek Reporter.

This was followed by the Mayor of Stylida, Apostolos Gletsos who used a bulldozer to destroy a barrier to open an access road parallel to the Athens-Lamia national highway at the Pelasgia toll booths. He wanted his residents to be able to use the road free of charge, after a discount card that allowed 1000 residents to use the road for only 0.50 euro expired in January.   The issue being that a relatively short trip within his district requires use of the toll road, a point that a concessionaire should be able to have flexibility over (but should be a commercial decision). 

Some protestors don't simply want to pay less, but want renationalisation of the roads, partly motivated by the steep recent increases in fuel taxes (which motorists reasonably think might go on paying for roads, when it is general revenue used to reduce the budget deficit).  The call to renationalise the roads is based on the idea that the roads were already "paid for" (because the capital is not expended and never needs replenishing), which for most of these roads is simply not true.   It parallels a campaign to boycott paying public transport fares after fares were increased by up to 180% as subsidies were drastically slashed as part of the austerity measures.

One report indicated up to a third of drivers had regularly refused to pay tolls.

The Greek government response has been to play the populist card, calling on concessionaires to half toll prices.  The concessionaires have said in response "extend our concession periods then".  Discussions are continuing, but the government has also keenly been enforcing violators.  The concern being that widespread evasion could spread to taxes - then government starts to worry (although tax evasion has widely been seen as a national sport in Greece).

Sadly, with far left activists, attention is being misdirected to toll road concessionaires which are delivering value to motorists, when the real problem should be with excessive other road taxes, and such taxes not being used on roads.  These activists are ideologically opposed to private enterprise owning and operating roads, so are opposing tolls because of ideology, not economics.  Note they are also boycotting utility charges and hospital fees.   

I sympathise with Greeks who are undergoing massive economic upheaval because governments have been overspending for decades, spending beyond tax revenue and deluding a generation or two that a borrowed lifestyle can be sustained.   However, private investors and concessionaires have helped Greece build significantly improved motorway infrastructure, and should not be chased away by radical leftwing activists who, if they had their way, might have had Greece go the way of its northern neighbours who have tried Marxism and moved on!

Greece needs more new highways in coming years, the last thing it needs is for future concessionaires (and existing financiers and owners) to see the country's toll road sector as being risky for revenue because of people who don't believe in property rights.

Electronic free flow tolling raises questions in South Africa

Gauteng province toll road network
The  South African National Roads Agency Limited (SANRAL) is recognised by the World Bank (and my own experience) as being probably the best national highways agency in the developing world, certainly the best in Africa.  It runs as a company, contracts out as much as it can to maximise value, treats motorists as its customers and has extensively involved the private sector in its core business.  It has also had relatively free reign to use tolls when insufficient funds were available for major projects.  It has rigorously used economic analysis to optimise maintenance expenditure over new works, and preferring small high value projects to major projects.  In short, there are plenty of countries that could learn from South Africa, including more than a few developed ones.

In Gauteng province, SANRAL decided to move forward to converting all of its toll roads to fully electronic free flow open road tolling from later this year, but controversy has arisen from the proposals.  DSRC based tolling (tag and beacon) is to be the preferred technology, with users with cars expected to pay an average 44c per km and those without (detected by Automatic Number Plate Recognition) at 66c per km.  Unlike most toll systems I have seen, there will be a discount scheme for heavy users, primarily because most highways are not congested.  This will mean those with DSRC based accounts will pay less if they drive beyond a certain frequency.  According to iOL, "Because Sanral's discount system is based on the amount spent the previous month, it is variable, but you can expect to get between 15 percent and 37.5 percent slashed off your monthly bill."

Yet whilst tolls are not new in South Africa, questions of fairness have arisen for some users, who are unhappy with the need to have a DSRC account to get discounts, and who think motorists can get away with no paying if their number plate if fraudulent.

Criticism has arisen for those who will pay more for not having a DSRC tag, because it is 25% cheaper to use DSRC.  An online toll calculator is here, is quite sophisticated and demonstrates exactly the wide variation in rates depending on usage and charging technology.  The other fear is that stolen and fraudulent number plates will mean that dishonest people will evade the toll in a way they could not do so while barriers remain in place.   That causes media reports like this one to be produced about how open road tolling wont work.   The truth is that if number plate fraud or inaccuracies are over about 15% it is a serious issue, and need to be addressed.  Certainly electronic free flow is technically workable, but it needs an accurate and updated number plate database to be maintained.

The AA and other motorist advocates say that motorists pay taxes for roads and do not believe it is fair, as the price of fuel increases tolls are seen to be another imposition.

The wider concern appears to be simply cost. A backlash has started to appear because of inflation, and tolls are seen as an imposition that does not apply on other roads.

However, SANRAL is now being more conservative with electronic tolls. It has been reported that SANRAL has announced that eventually all of its toll roads will have electronic tolls, but as an alternative to manual tolls, not to replace them.   

Certainly, the number plate issue should be addressed and tolls should be seen as delivering value.  However, it is not SANRAL's fault that other motoring taxes do not all go on roads.  That's a matter for the government , and returns to the key issue for tolling everywhere - motorists need to see value for whatever they pay for using roads, and tolls are a part of that.  At times of economic difficulty they are an easy target for those who think they are being unfairly charged, but transparency about what tolls are used for, and what the alternative are would go a long way.

News briefs on tolls Jan/Feb 2011

South Devon Link Road will not be tolled: According to ThisIsSouthDevon, the Torbay and Devon County Councils have decided to use higher local property taxes rather than tolls to progress the A380 South Devon Link Road, contrary to earlier reports that tolling was being considered.  An extra £20.5 million will be contributed, and the capital cost is being reduced by scaling down the project.  The rest of the cost is to be sought, again, from central government on the basis that it is a high value project with a far lower central government contribution.

Sale of shares in Portuguese toll road company: According to Reuters, "Spanish savings bank Nova Caixa Galicia said it had sold its entire 2 percent stake in toll road operator Brisa for 68.4 million euros ($93.37 million). Brisa's other shareholders include Spanish road operator Abertis, which holds 15.2 percent of its Portuguese counterpart and has said the stake is a financial holding. Abertis recently sold its 6.7 percent stake in Italian toll road operator Atlantia".  Given the recession in Portugal, I am not surprised at the desire to bail out of toll roads when demand in that economy is deeply depressed.  Toll roads on the Iberian peninsula are likely to be

Filipino toll road network continues to expand according to major concessionaire: ABS/CBN reports that Metro Pacific Tollways Corp (MPTC) will press ahead with Segments 9 and 10 of the North Luzon Expressway Phase 2 project.  Segment 9 will connect the McArthur Highway in Valenzuela all the way to Nlex while segment 10 will link the same highway to Port Area in Manila. The cost will be 10 billion Filipino peso (US$229 million).

The two projects span 8.5 kilometers. Segment 9 aims to ease access to McArthur Highway, the old route to central and northern Luzon while Segment 10 will dramatically speed up the transport of goods to and from Manila’s North Harbor.

MPTC controls the concession to the 84-kilometer (km) Nlex and holds the contract to operate and maintain the 94-km Subic-Clark-Tarlac Expressway.

Tolling has been a key source of funding of the Filipino highway network and there appears to be little let up in the appetite for, and viability of new toll roads in the Philippines.

Manila Skyway toll restructure: Manila's major urban elevated highway, the Skyway toll road is to get its toll schedule restructured to better reflect distance travelled on its segments.  The Philippine Daily Inquirer reports that the concessionaire, Citra Metro Manila Tollways Corp, will be increasing some and reducing other tolls on the route. Last year, the company opened a new three-kilometer section of Skyway from Bicutan to Sucat. Motorists have been allowed to use the new section for free up till now.

Finnish government opposes Helsinki congestion charge but..

The City of Helsinki has been investigating congestion charging for the past couple of years, with a comprehensive study undertaken two years ago (here).   Now a new report has been released by a Finnish central government working group saying the fairly obvious, that a Helsinki congestion charge could reduce congestion, improve traffic safety,  reduce air pollution and increase patronage of public transport.   As a city with an excellent metro, suburban rail, tram and bus network, and a downtown bounded by a major ring motorway and water, it seems clear the potential is there. 
Helsinki city showing ring roads around CBD


Yet the response of the Transport Minister, Anu Vehviläinen of the Centre Party, according to the Helsinki Times, has been to oppose the idea for two reasons:
- The mode-shift would require extensive increases in public transport capacity, and there is insufficient funds to pay for this;
- The system proposed is extremely risky.

The public transport issue is real, but one might ask whether this is exaggerated, because a significant part of the change in behaviour will be time shifting and consolidation of journeys.  In addition, what is often ignored is that peak time public transport use is typically underpriced, which is why there is never sufficient funding to provide adequate capacity.  Yet a congestion charge that also increases peak public transport fares would be doubly unpopular.  One solution would be to borrow against future revenues, using that revenue to make improvements to roads or public transport capacity.   

The risk issue arises from the proposed solution, which is to use a GNSS-based distance charging system.  That would mean all vehicles in Helsinki needing an On Board Unit to measure distance correlated by GNSS signals against an on board map.  This has parallels to the German and Slovak heavy vehicle tolling systems.  Technically it could work, but the risk of a government driven programme to do so are not low.  In addition, the key barrier is the cost of retrofitting vehicles with On Board Units of this sophistication.

Of course, for Finland it is about politics, as it is elsewhere.  Finnish Parliamentary Elections are this year, and the   YLE reports how the Helsinki Region Chamber of Commerce is sceptical, which of course means that the big issue - what to do with the revenue - would need to be addressed. 

The current Finnish government is a four headed coalition led by the Centre Party, the liberal centre-right National Coalition Party, the leftwing Greens and the liberal Swedish (yes Swedish) People's Party.  The Greens favour congestion charging, and polling currently shows a threeway split between the Centre, National Coalition Party and the opposition centre-left Social Democrats.   

After the election, there might be some sense about this issue, and I hope Helsinki and Finland can find a way forward that delivers net benefits to the city and transport users.  Getting a politically palatable solution will be a lot of work.

It will be about getting pricing right, about investing in transport bottlenecks and about being creative about technological solutions.   Motorists will need to see net benefits in reduced congestion, other transport users will benefit from less congestion on networks, and the potential for greater viability for other modes.  Overall, it could make Helsinki more competitive internationally.   The key is to apply lessons learnt from elsewhere.

Monday, 7 February 2011

UK to introduce time based heavy vehicle charging

The coalition agreement for the UK Government between the Conservative and Liberal Democratic Parties agreed to develop a road charging system to charge foreign lorries using UK roads, whilst ensuring domestic lorry operators do not have to pay more. 

The key concern being that foreign truck operators drive to the UK, with full fuel tanks and buy little of the very highly taxed UK fuel whilst undertaking work before returning to the Continent.  British truck operators say this is unfair because such trucks are not paying to use British roads.  Of course the British haulage industry pays annual vehicle licence fees and fuel tax both of which are high.

As a result, there has been substantial support among the British trucking sector for a charge for foreign lorries, as long as British operators do not have to pay more.

A report in the Daily Telegraph suggests some details of the proposed scheme, although many questions remain unanswered. 

The proposal is for a vignette, or time based licence, which could be bought in increments.  The article talks of a daily charge, but vignettes in other European countries are available for week, month or annual periods.  In essence it is a right to use highways (or all roads) in a country for a set period.   As such, it is simple to understand and requires no technology on board the vehicle.

There are two possible countervailing tax changes possible.  Whilst fuel tax could be refunded,  this would be complicated as it would not readily distinguish between light and heavy diesel vehicles.

The more likely compensation for British heavy vehicle owners is a significant reduction in annual vehicle excise duty (known as road tax) which is currently set at steeply increasing rates according to weight bands (although cheaper if there are more axles for a set weight).  Such a reduction is expected to mean that, when an annual vignette is purchased, British truck owners will pay no more than they currently do. 

EU law requires all Member States to be non-discriminatory.  So UK operators cannot have an advantage over foreign ones, but the matter of annual ownership taxes is a national consideration, so it is acceptable to impose a new charge on all heavy vehicles, but cut an existing tax for national ones.

There are a lot of EU Member States with similar schemes.  Belgium, Netherlands, Luxembourg, Denmark and Sweden have a common "Eurovignette", whilst Poland, Lithuania, Hungary, Romania and Bulgaria have their own ones.  Germany, Austria, Czech Republic and Slovakia have distance based tolling schemes for heavy vehicles, whilst France, Poland, Belgium and Sweden are developing similar schemes at various stages of development.

The government will be refining the scheme details this year, with a major consultation exercise and legislation to come.  One of the key issues will be the scope of the fleet to be covered, which could be only those over 12 tonnes or all vehicles over 3.5 tonnes.

Those with memories will note that the previous attempt to charge lorries was called LRUC (Lorry Road User Charging) and intended to charge all vehicles over 3.5 tonnes on all roads by distance, differentiated by vehicle type, road type and time of day.  That programme collapsed for fears of cost, IT risk and analysis indicating net revenue from foreign vehicles would not offset the cost of introduction.

It is hoped that UK Vignettes will be cost effective, derive net revenue from foreign hauliers and be a modest improvement on pricing at the moment.  Time based charging makes little difference for national operators who buy annual permits anyway, so little behaviour change is likely there (except perhaps incentives to have cleaner engines), but it will have an effect on levelling the market across borders.  That in itself is reasonable.

My bigger question is whether the vignette's revenue will be hypothecated, so that there is a relationship between what is paid for using roads and that money actually being used on roads.  Given that local roads are facing a pothole crisis due to budget cuts (and the Soviet style method of funding roads in the UK), a big difference would be made if that revenue was at least guaranteed as a pool of funds for road maintenance (it wont be near enough, but the principle would make a big difference to acceptability).   However, the UK Treasury will resist that on an almost ideological level.

Thursday, 3 February 2011

San Francisco's other congestion pricing plan

The proposals for a cordon pricing scheme for San Francisco have now been widely distributed and are under consultation.  It has been reported on this blog here.  Yet, in parallel to this has been progress to reform the tolls on the Bay Area bridges in several ways that effectively also reduce congestion.  None of this is a co-ordinated plan, but the impact will be complementary.

Bay Bridge congestion pricing
The San Francisco-Oakland Bay Bridge has a toll collected westbound only which is used to pay for maintenance of the bridge, the major seismic upgrade work now underway and to subsidise public transit services parallel to the bridge.  The tolls are collected with manual toll booths and Fastrak tag and beacon activated toll booths.   With tight budgets, it was decided that more revenue was needed to support the seismic retrofit project.    It was decided that for the Bay Bridge, this would mean the introduction of congestion pricing from July 2010.   A US$2 higher toll is charged between 5am and 10am and from 3pm to 7pm on weekdays (it is US$4 other times on weekdays, yet US$5 on weekends).  Rates are higher for trucks, and high occupancy (3+) vehicles have a 50% discount.  The results of this have been positive, with a reported 15% reduction in delays, although another report compares the intended reduction in traffic (which is not the same thing) of at least 20% with an actual 11% reduction.  It is important to note that it is quite plausible to have an 11% traffic reduction reducing delays by a far higher margin.

Still, it appears to have been a success.

Golden Gate Bridge to go all electronic

It isn't purely a price related change, but the announcement that the Golden Gate Bridge is to be converted to full electronic tolling in 2012 is partly about reducing congestion and partly about reducing operating costs.  Hopefully it means fully electronic free flow tolling ala Route 407 Toronto, Citylink Melbourne, so that traffic need not slow down, although TollRoadsNews reports " it will remain for the time being a lane-based - rather than an open road (ORT) - toll system. Being lane-based and with the heritage of old islands and booths remaining, travel through the toll point will probably be signed for 15mph."  This would be very disappointing.  There is no need for such a dated approach to electronic tolling in 2011.  Nevertheless, it will be positive and hopefully a prelude to considering congestion pricing on this bridge as well, which has been mooted for some years.

San Mateo and Dumbarton Bridges

The San Mateo County Times is reporting that there is now a push to introduce congestion pricing on the San Mateo and Dumbarton Bridges in San Mateo County, south of San Francisco city.  It is only being floated by officials, notably Rich Napier, executive director of the county's congestion management agency.   Congestion is not so severe on either of these crossings, but as you can see from the map to the right, it would be a logical step in managing congestion on key routes in the county.

Conclusion

The cordon proposal for San Francisco may or may not proceed, but in the meantime a combination of more efficient pricing and fully electronic free flow tolls will show how modern toll technology and targeted pricing can enhance the value of the roads tolled.   Congestion pricing will come one way or another, and it is economically rational and beneficial (and environmentally beneficial) to price the crossings to optimise utilisation, and to abolish manual toll collection.

Tuesday, 1 February 2011

Orange County toll roads and lanes see demand slump

Orange County California has two sets of toll roads, a 51 mile network run by transportation corridor agencies, and the well known 91 Express lanes.  Both were built as a response to congestion and ever growing demand, but according to the L.A. Times the recession has hit demand on both sets of routes.

Some former users are more concerned about saving money instead of time, preferring to use money to buy fuel and food, instead of time.  The report states:

From the beginning of the economic decline in 2007 through the fiscal year that ended in June 2010, trips were down 19% on the San Joaquin Toll Road, the portion of the 51-mile system known as California Highway 73. On the system's Foothill and Eastern toll roads, which include California Highways 241, 261 and 133, trips declined 17% in the same period, according to the Transportation Corridor Agencies.

Still none of this means that the roads are a failure, just that the value of time drops when both congestion on other routes declines and the need to save money offsets saving time.   It is like demand for other goods and services, but the key issue here is that there are untolled alternatives.