Wednesday, 29 February 2012

Bloomberg editorial supports tolls and road pricing to fix US federal highway funding crisis

Bloomberg has published an editorial suggesting various approaches to address the looming bankruptcy of the US Federal Highway Trust Fund.  The Fund is facing a crisis because most of its revenue comes from a US$0.184 per gallon tax on fuel (for those of us in the metric world it is only U$0.04 per litre).  As that tax has not increased since 1993, a combination of inflation and improving fuel efficiency has eroded revenues to the point where additional funding is claimed from other sources to try to bridge the difference.

The three main political proposals to address it are all fundamentally flawed. The President wants to use savings from reduced defence spending to transfer to expenditure on highways.  Not exactly sustainable and in effect a subsidy from all taxpayers (and future taxpayers whilst the US remains in budget deficit) to highways.  It is unlikely this could buy more than a few years in any case.

The Senate has proposed a tax on imported vehicles and to raid another trust fund set up to fix leaking underground storage tanks.  This is even more esoteric and unsustainable. 

The House of Representatives bill proposes ending the funding the Highway Trust Fund provides to urban mass transit (to make the Fund last a bit longer) and to get funds from royalties for future oil drilling projects.   It also proposes abolishing "earmarks" (dedication of specific funds for specific projects in Federal legislation, effectively bypassing any processes of appraisal and comparison for such projects).  Again, whilst the first part might buy some time (and raise another issue), the second seems an odd cross subsidy.   However, opposing earmarks is gaining increasing support.

Neither of the main political parties advocates an increase in fuel tax, so the obvious answer is blocked.   The Bloomberg editorial proposes some alternatives which appear to be off the radar at the Federal level, but strongly advocated by some states and think tanks:

- The long term solution proposed is distance charging (vehicle mileage tax or VMT in US parlance), which is widely considered to provide the platform for optimal forms of road pricing.  However, although the article wrongly thinks the technology doesn't exist to do it (it does and it is being used today), the big issue is rolling it out for all vehicles.

- In the shorter term, the article proposes greater use of tolls and congestion pricing, as is already being seen.  

- It also advocates more PPPs for new capital works and governance reform to reduce bureaucracy.

It is good to see more media coverage of the need to develop long term solutions to highways funding in the US.  VMT is an obvious option to replace fuel taxation, but it may be that more private investment could be the way to facilitate that as well.   What's important is that a rational debate proceed on this issue, but it is telling that the level of political debate on this issue remains extremely short-term focused, indicating that neither major party is willing to really move substantively on doing something to make highways financing in the US at the Federal level truly sustainable (and yes, one way to do for the medium term would be to inflation adjust fuel tax every year, although that would not address the issue of improving fuel efficiency and alternatively fueled vehicles).

Would congestion pricing in Toronto be popular?

An article in York Region.com suggests it could be based on two surveys.

A survey conducted by Leger Marketing for the CBC found half of Canadians surveyed said they would pay $3 a day for road tolls. 

Another poll, conducted by Angus Reid for the Toronto Star, showed 37 per cent of Torontonians moderately support and 18 per cent strongly support the idea of a congestion charge.

However, as optimistic as this may look for advocates of congestion charging, I would prefer to be sceptical.  The CBC poll talks of road tolls, but most people see tolls as something paid for on a new road.  Would that many support new tolls on existing roads?  The Toronto Star poll is more compelling, and does seem to give a mandate to look at options in more detail.  The Greater Toronto Civic Alliance seems supportive, as it is seen as one solution to growing congestion and to help fund public transport improvements.   Other opinions expressed are mixed.  However, Toronto does have one advantage - the 407 toll road was the world's first fully electronic free flow toll road in the world.  So silly arguments about technology can be avoided, but what could you do in Toronto?

The city is fairly flat and whilst there are some natural boundaries to the south and east the west and north have no obvious urban boundaries for a city centre congestion charge.   The Google Earth image below shows how the city actually melds from residential to commercial rather organically.  Putting charges on roads to the north and west would be artificial.

This suggest a wider solution is needed, such as distance charging, perhaps as an option at first to replace other taxes.  The problems of Toronto are not unusual, but it still remains that no city has yet implemented distance based congestion charging, primarily because of the cost and complexity of dealing with vehicles from outside the city.  Vehicles not registered or equipped for distance charging still need to be charged.

Hopefully Toronto will take a very open approach to this, but I think the whole province of Ontario needs to take a lead and see this issue as being one of how to charge for road use in the future.  For it would be far more effective to implement distance charging for the whole province than for Toronto on its own.

Tuesday, 28 February 2012

Gauteng tolls to start April 2013

I’ve written before about the controversial decision by the South African government to toll a whole network of upgraded highways in the Gauteng region, to fund the construction of new highways and widening of existing ones. It is controversial because it involves tolling previously untolled sections of highway.

IOL reports that the South African government intends to implement all legislation necessary to let the Gauteng Freeway Improvement Project tolls to come into effect. This includes making non-payment of tolls as civil offences.

Transport Director General George Mahlalela is reported as saying:

improved roads had huge benefits to Gauteng motorists, because instead of the two-hour travel it would take them 30 minutes. He added that other advantages of improved roads were less fuel usage and less congestion.


“What we are saying to the people of Gauteng is that what you lose on the tariffs you pay, you gain back on the other side. In real terms you are not losing much on this toll roads,” he said.

The Sowetan explains the prices:

Prices will be 58c (US$0.08) per km for cars without DSRC tags, but only 30c (US$0.04) for those with tags.  Small trucks will pay R1.45 (US$0.19) per km without tags and R0.75 (US$0.10) with tags.  Heavy trucks will pay R2.90 (US$0.38) per km  without tags and R1.51 (US$0.20) with tags.  There are also tolls for motorcycles.  There will be a cap of R50 per month (US$6.58).

Heavy vehicles can gain a 20% discount if they use the highways off peak.  Buses and taxis will be exempt.

Full details of the Gauteng Freeway Improvement Project are now on its dedicated website.  The tolls are at a lower level than first estimated, as the government has decided to part pay for the highway improvements from general revenue of US$764 million.

The Business Day column in the Independent Online  (South Africa) says the government has taken an "elegant solution" saying it supports user pays:

This sends an important signal to local and international private investors that the government’s handling of infrastructure development allows for the levying of fees, which helps them recoup their investments in such projects.

The user-fee principle is universally accepted and has been applied with great success for toll roads in South Africa and the rest of the world. Most infrastructure projects rely on this user-fee business model to convince investors, like pension funds, to come aboard.

It is pleasing that tolls are proceeding, but the concessions needed to get some degree of public approval have been considerable (and the unions remain unhappy).  It is true the highway improvements will be considerable for South Africa and tolling is an efficient way of paying for it, but I suspect what will be needed is for more off peak rates and peak charges to compensate for that - given that the main beneficiaries of the improvements are peak users that no longer face the congestion the improvements are meant to relieve.

Tolls floated for Hawaii

A bill has been introduced into the Hawaiian House of Representatives that would allow tolling of existing state highways if an alternative route (untolled ) is available according to TV station KHON.



Although in theory this would allow for congestion pricing, DOT Director Glenn Okimoto says he would use it to allow for new roads to be built. Chairman of the House Transportation Committee Representative Joe Souki said that he saw Hawaii as perhaps having no alternative but to allow for privately owned toll roads to be built.

Hawaii has no toll roads at present, so this bill would open up some possibilities for the state. Like others, it faces pressure from declining fuel tax revenues with political difficulties in getting tax increases to make up the difference. It will be interesting to see if this bill gets passed and whether Hawaii joins the tolling world.

Monday, 27 February 2012

News shorts: Bristol, Toronto, Atlantia and two articles mentioning pricing

Bristol

The Daily Telegraph reports that the UK city of Bristol is proposing a levy on parking spaces at workplaces in the city to help fund a bus rapid transit system. The intention is that it can raise £27 million from 10,000- 12,000 parking places. The charge would be effectively a tax of £1 a day imposed on owners of the parking places. Whilst it is driven by revenue, it is also hoped it will encourage a switch to public transport. The bus rapid transit system is estimated to cost £194 million, with £15 million to come from existing local authority funding sources and the remaining £152 million would come from a grant from central government if approved.  The programme this is being considered under was the same one Manchester was seeking to gain funding from if it had voted for a congestion charge (workplace parking levies are seen as a form of demand management like congestion charging).  Whether this controversial measure actually proceeds in Bristol is unclear, although Nottingham has managed to introduce it.   This isn't a form of road pricing, it is a tax on parking, so isn't strictly within the remit of this blog.

Toronto

The big transport issue in Toronto today is the battle between the Mayor and the Council over spending on public transport improvements.  He wants a new light rail line to be underground.  The Council disagrees.  However, one of the options under consideration to pay for any of this is congestion pricing according to the Globe and Mail.

Missouri

TV station KOMU reports that Missouri Senator Mike Kehoe is sponsoring a bill to turn I-70 into a toll road. The story says tolls would charge US$0.10 – US$0.15 a mile with the intention being to fund at least US$2 billion renewals on the road.


North Carolina


Trucking website Landline reports on concerns that tolling I-95 in the state would raise far more revenue than is needed for the proposed reconstruction and upgrade of the highway.

According to documents provided by the state, tolls would last for 40 years and bring in approximately $30 billion. That is nearly double the combined $4.4 billion in reconstruction costs plus the $10 billion to $12 billion in ongoing lifecycle maintenance of the roadway.

This suggests a bit more effort is needed to demonstrate what will happen with revenue beyond that forecast or whether tolls will be adjusted to avoid this.

Atlantia

Bloomberg reports that Italian toll road owner Atlantia has signed an agreement with freight operator Gavio SpA for Gavio to buy Atlantia’s share in construction firm Impregilo (which owns concessions in Argentina and Brazil). It also includes an option to buy Atlantia’s Turin- Savona toll road.  This follows the drop in Atlantia's credit rating which parallels concerns about demand on its main asset - Autostrade - which owns and operates most of Italy's national toll motorway network.  Atlantia is driven in part to expand its shareholding in South American toll roads by gaining control of its subsidiary.

Bloomberg also reports "Gavio’s Societa Iniziative Autostradali & Servizi (SIS) toll-road unit will shift its 45.765 percent stake in Autostrade Sudamerica, which controls Chile’s Autopista do Pacifico motorway, to Autostrade per l’Italia for 565.2 million euros...Autostrade per l’Italia will also buy a further 8.5 percent of Autostrade Sudamerica from Mediobanca SpA (MB) for 104.6 million euros, Atlantia said."

Greenbang claims congestion pricing is traditional

Greenbang claims to be the "smart technology website" so it is understandable when it published an article about a future using intelligent transport systems (although not called that) to better manage traffic.  However to say that in respect of congestion "the traditional response has been to build new roads, expand mass transit or institute congestion pricing" is a little off the mark.  Build new roads and expand mass transit, yes.  However, is congestion pricing traditional?  Maybe in Singapore, as it has been around in one form or another since 1975, but when the number of cities that have implemented it remains less than 10, it is hardly "traditional".  Whilst congestion pricing isn't the silver bullet to congestion, no single policy measure is likely to be more effective, and given the lack of widespread lack of implementation in part because of concerns around cost and technological complexity, I would have thought Greenbang could do better embracing congestion pricing rather than dismissing it (especially since no city other than Singapore has really introduced a sophisticated congestion targeting form of congestion pricing across a network).

New York Times writes about HOV to HOT lane conversions


An interesting article has been published in the NYT about a few of the implementations of HOV to HOT lane conversions in the US.  It writes about the Atlanta I-85 dynamic HOT lanes and moves in California and Virginia to remove the toll exemption for first generation hybrid vehicles.

Vancouver road pricing? Options considered for revenue raising

Vancouver has a problem raising sufficient revenue to meet its aspirations for improved public transport services.  It is seeking to spend an additional C$70 million (US$70 million) per annum on new projects, but can only raise C$40 million of this from a 2c/l increase in fuel tax (so effectively a major contribution from road users).  The rest will have to come from increasing unpopular property taxes from 2013 unless other options are selected.   Public transport fares are already expected to increase 12.5% to reduce demands for operating subsidies.  However, the Vancouver Sun reports that the City of Vancouver is seeking more powers to be granted by the British Columbia government to raise revenue in different ways.

The options are split between short term (such as a carbon tax) and longer term (road pricing).  The longer term option suggested is to toll all untolled bridges and entry points into the city, with variations by time of day and location.  In other words a moderately sophisticated form of congestion pricing.

The Vancouver Sun reports:

A confidential report, Evaluation of Revenue Sources to Support Transportation Improvements in Metro Vancouver, obtained by The Vancouver Sun, estimates a toll of $1.60 per trip at major bridges and tunnels — which are not named — could raise $100 million a year. Another table suggests toll revenue could total between $100 million and $200 million a year.


CBC reports on the options as follows:

A $1.60 toll on vehicles (crossing entry points into the city) would bring in at least $100 million a year...Other options include imposing a toll for each kilometre a vehicle is driven on main roads, suggested at 67 cents per kilometre, or charging vehicle registration fees of $35 and $105.

It is no surprise that a lot of revenue could be raised from such approaches. Without seeing the report, it is impossible to know whether these estimates are fair, especially given that operating costs are likely to be high in initial years.  I'm attracted to distance charging because it is the most disaggregated and least distortionary, but it is also the most complex to implement as it would require vehicles to be equipped to measure distance - and so presents issues for those not equipped.

There are already tolls on the Golden Ears Bridge (C$1.45-$C9.85 depending on technology and vehicle used) and tolls are expected to be imposed on new bridges (replacement Pattulo Bridge and replacement Port Mann Bridge). All are collected or to be collected by all electronic systems using DSRC technology.  (See CTV news report on the Pattulo Bridge replacement debate).

Langley Mayor Peter Fassbender, vice-chairman of the mayors’ council on regional transportation supports region wide tolls. Blair Lekstrom, Transportation Minister is surprised at that and says that any measures should be palatable (which may mean less than tolls). Richmond Mayor, Malcolm Brodie prefers distance based charging to tolls at city access points because he sees it as fairer.

Richard Warnica from Macleans Magazine argues that distance charging could help address urban sprawl by charging those who live furthest away the most.

Another Vancouver Sun report says that Vancouver wide road pricing is the most preferred option, but that it couldn't be implemented in time to meet the 2013 deadline for funding.  It said:

A copy of the document obtained by The Sun says the move to road pricing could be implemented in various ways, including by tolling major water crossings, tolling entry and exit points to defined areas of Metro Vancouver — possibly varying by time of day — or by tracking and charging for total kilometres driven. All these options were given high or fairly high ratings on all four criteria taken into account: the impact on people’s transportation choices, the impact on families and the economy, fairness and transparency, and the ability to generate and sustain revenues.

This indicates a lot of official support for road pricing options.

I welcome the debate about road pricing for Vancouver. Obviously there are options for tolling crossing points around the city (the map below shows the three bridges tolled or to be tolled in blue, red for those others that could be tolled as a simple option), but the city should not be quick to adopt an easy option for revenue generation without thinking about its wider objectives.

Blue is existing and planned new toll bridges
Urban road pricing schemes can be designed to reduce congestion or generate revenue as different primary objectives. However, what is most effective or efficient for one objective may not be best for the other. Tolling crossings is easy as a revenue generator, but not exactly fair or efficient. It could be a first step on the path towards wider charging that could be distance based and help replace property taxes. Here also lies the other key issue – what to do with money collected. Road users will want to see something that benefits them, and the clear options here appear to be:
- Reduce or replace property taxes;
- Reduce fuel tax;
- Fund road improvements;
- Manage demand to reduce congestion.

Whilst some of the revenue collected is likely to be used to enhance public transport, I believe it will be critical to offset other taxes and to deliver a pricing scheme that will reduce congestion so that standards of service are improved for those who do pay.

Certainly it is early days for road pricing in Vancouver, but I look forward to the debate to come as it offers the chance to make a city, already renowned as one of the most liveable in the world, to make a quantum leap forward in transport and environmental outcomes.

UPDATE:  I failed to note the interesting article from Voony's Blog about how to do congestion charging in Vancouver.  I question some of the cost figures and choices made, but it is a considerable addition to the debate

Saturday, 25 February 2012

Salzburg seeks vignette exemption for local motorways

The state of Salzburg, Austria has two major transport policy issues according to the Salzburg Times. You see it borders with Germany. The border is open as both Austria and Germany are EU Member States and signatories to the Schengen Convention, which removed border control among many EU Member States.

In Germany, the state of Bavaria (which borders Salzburg) is unhappy with noise from Salzburg airport, only 2 km from the border. Since 2001, low cost airlines have increased flights there and residents in Bavaria have complained about overflying jets. That issue isn’t a concern for this blog.

Motorways approaching and half circling city of Salzburg


However, it is being linked to the roads. You see the most convenient route to Salzburg is on the autobahn which connects the border to a half ring route to the west of the city. The city is keen on attracting visitors from Germany given its heritage as Mozart’s birthplace, but the autobahn is not free.

Austria’s motorway network is owned and operated by a state owned company called ASFINAG. It charges all vehicles under 3.5 tonnes to access it network by requiring a purchase of a vignette. A vignette enables the vehicle to use almost the entire motorway network in Austria for a set period. The cheapest is 8 Euros for 10 days (ranging to 77.80 for a year). As a result, this puts off visitors from Germany unwilling to pay what appears to be a toll for an occasional visit. Some use the parallel local network increasing traffic through residential areas.

According to Austrian Times, the state of Salzburg is seeking to convince ASFINAG to make the motorways around Salzburg free of the vignette to encourage visitors and remove traffic from parallel routes. The hope is that by making it easier to access Salzburg (and Salzburg airport), it will offset complaints about airport noise from the German side. The state is intending to pay ASFINAG to compensate for the loss of revenue.

It raises a few questions. First, whether ASFINAG will be keen to have the user pays principle eroded for the sake of local political/economic considerations. Setting a formula for revenue replacement could be controversial, as ASFINAG will want some compensation for future growth. Secondly, I assume there is no interest in giving free access to heavy vehicles, which pay a distance based toll on the motorways, as the key point is encouraging tourists.

Thirdly, what sort of precedent does this set for ASFINAG? Will other states or cities seek a similar dispensation (if they pay for it)?

Fourthly, what happens if Germany introduces a vignette or toll for private cars? Would the expectation be reciprocity or would it make such a concession for German visitors controversial for being one sided?

Finally, are there other solutions?

For example, if ASFINAG had a vignette for a shorter period that 10 days, say 4 days or even ideally 1 day, then visitors could pay less than 8 Euros making a short trip more affordable.

Another solution would be to charge a toll rather than a vignette. As heavy vehicles already pay a toll (based on distance using a DSRC system with on board tag), such a system for cars would mean the toll would be low for such a short visit.

ASFINAG is a commercial company with all of its shares owned by the Federal Government, so I suspect it will choose to take a commercial approach. I think a shorter period vignette may be a better approach, as this would address visitors in multiple locations around Austria. This wouldn’t address the airport noise issue, but then that isn’t ASFINAG’s issue – it simply needs revenue to maintain the motorway network.

Wednesday, 22 February 2012

Indonesia to build its longest toll road

Jakarta Globe reports that state toll road operator, Jasa Marga (operator of 531 km of toll roads) is seeking to build a 1,000 km long toll road on Sumatra from Aceh to Lampung across the length of the island. It is estimated to cost $17 billion. 

This comes on top of a series of other announced projects including:
- Medan to Binjai (20 km) 
- Medan to Kuala Namu (and airport) (18 km)
- Pekanbaru to Renggat (202 km)
- Pekanbaru to Dumai (70 km)

This continues Indonesia's practice of building almost all of its intercity highways and many urban motorways as commercially self funding toll roads - an approach that is uncontroversial there, yet considered revolutionary in many developed countries.

Tuesday, 21 February 2012

Arizona denied permission to toll I-15 that runs through corner of the state

Whilst North Carolina, Virginia and Missouri have passed the first hurdle of a Federal programme that may allow states to toll existing untolled Interstate Highways in order to fund upgrades and renewals, Arizona has been denied the chance.

Arizona wanted to turn the 46.5 km (29 mile) portion of the Interstate that cuts the northwest corner of the state from St. George Utah to Mesquite Nevada into a tollway.

It proposed a $250 million upgrade of the highway to be funded from a toll of between $1-$3 per car and $6-$10 per truck. The upgrade was primarily about fixing and replacing bridges on the route and upgrading the pavement. Officials of Utah and Nevada do not deny the need to address funding for the highway, the question being how.

The proposal was strongly objected to by the governor of Utah, who saw that his constituents would be paying the most because of the location of the proposed route.  The Spectrum reported about how pleased Utah officials are with the decision.  In essence the problem is that it appears to be mostly a transit route. The image below from the report on the KCSG TV website clearly demonstrates this, as the highway cuts the corner of the state.

I-15 Arizona - shows clearly how little of the state it goes through
According to Tucson Citizen, "The Virgin River Gorge highway was completed in 1973. It has since become a vital trade route and the key freight link from Los Angeles ports to Salt Lake City. Without the highway, truckers would have to take 200-mile detour to the north on two-laned state highways. " As such very few Arizonans are regular users of the highway. This may be behind why the State Transportation Board refused a recent request for $30 million funding of maintenance for the route ( but approved $15 million).

This situation reminds me of the position of some countries in Europe which face the costs of maintaining highways used by significant numbers of transiting trucks. The solution there has been, in some cases, to impose vignettes upon all vehicles using the major highways, so that a “pass” has to be bought to access the network, imposed equally on locals and foreigners (the locals paying less of other taxes as a result). The passes can be for periods of between 1 day and 1 year. Such a solution may not be suitable for a single road like this, but the logic behind tolling this section of highway is clear.

The calculation I’d like to see is an assessment of the average revenue collected from the road from fuel taxes, albeit that most of that will have been bought out of state. Then there can be a measure of the “gap” in funding which tolls are needed to fill. At least then the argument that people “are already paying” can be adequately considered.

The proposal isn't completely dead, as if one of the states approved so far drops out of the Federal programme then Arizona will have another chance.  Frankly I think the programme itself should be superseded by a detailed set of criteria needed to address Federal approvals to toll across the Interstate network.  This should be the point of debate.  Further delay in advancing states being innovative in tolling is delaying the infrastructure improvements the Federal Government is seeking to advance.

Monday, 20 February 2012

North Carolina seeking to convert Interstate highway into toll road

Hickory Daily Record reports that the North Carolina Department of Transportation has “ received conditional approval to participate in the Federal Highway Administration Interstate System Reconstruction and Rehabilitation Pilot Program”. What this means is that it has to prove that the section of I-95 it is seeking to toll would not be upgraded if it were not for the toll, but that it has passed the first hurdle of a Federal programme that could allow it to proceed.

However, the state does have to ensure that Federal funding for interstate maintenance will not be used as part of the upgrade project. The Federal Government conditions also mean that the tolling must take into account the interests of all travellers. The report indicates this means not imposing tolls excessively on commuters, but I would say this need not necessarily be the key point.

I would have thought ensuring revenues are collected from those who benefit the most from the upgrades would be in order, so that tolling is designed in a way that is proportionate. Electronic tolls are an obvious solution, and the more charging point the better chance there is of being proportionate.

The proposed upgrade includes capacity increases in some sections from six to eight lanes, upgraded interchanges and bridge replacement. The state claims it only has funds to pay 10% of the $4.4 billion cost for the project.
Route of I-95 in North Carolina
The state faces a clear conundrum. The line between new capital investment and maintenance is an artificial one, largely used for accounting and public policy purposes. You see maintenance is always seen as “essential” and “core” whilst capital investment is seen to be “additional” and “discretionary”. The real truth is that roads are depreciating assets that, to continue to operate, always need new capital poured into them. It seems simple to separate the capital for maintaining the road in its current condition, from improvements. Yet what is bridge replacement if it results in a new bridge that can handle heavier traffic or is aligned to allow for faster speeds or safer trips.

I believe the state is deliberately and reasonably mixing improvements with capital renewals because it has to, because the Federal Government persists with the notion that maintenance is separate even though funding for maintenance is inadequate.

The lack of funding available for major construction work such as proposed in North Carolina is raising the profile of tolling across the US like never before. Bear in mind also that other states are considering tolling I-95 as well.   It begs obvious questions about taking a co-ordinated approach so users might be able to have a single account and payment option for use of the entire highway.

Sunday, 19 February 2012

Finding a way to give something back if New York gets congestion pricing

Capital New York reports that Jeffrey Zupan, a senior fellow at the Regional Plan Association of New York, has suggested, as part of a a panel on traffic congestion at the Museum of the City of New York, that for congestion pricing to be politically acceptable for New York "Something has to be given back to people in their cars".

He proposes that tolls on the outer borough crossings be reduced to, in part, compensate for imposing tolls on the East River bridges.  The suggestion being that the Bronx-Whitestone, Throgs Neck and Cross Bay Veterans' Memorial Bridge tolls be reduced so that travel further away from Manhatten is charged less, focusing on the congested area. However, as can be seen in the image below, the three bridges (in blue) are miles away from the proposed additional crossings at the East River (along the red line).   I doubt very much whether this will be seen by most motorists entering Manhatten as making much of a difference.

East River crossings and their relationship to the three other bridges
The concept makes sense, but in practical application that offsetting reduction is not going to mean much to many motorists.  Those tolls should be set based on recovery of long run capital costs and also, if necessary, include a congestion peak component (with offsetting off peak discount).   

However, I think the bigger issue is using some of the money raised from congestion pricing to benefit motorists and the most economically efficient way to do so is to spend money on deferred maintenance - fixing potholes, smoothing surfaces, renewing signs, lighting and upgrading traffic signals.   Yet the problem with this is that the funding framework would mean this would risk a cut in funding for those types of items, without countervailing spending elsewhere.  If the desire is more money for transit, having a way to shift road maintenance funding more towards tolls, and then take such funds to use for transit may make some sense and mean that there is a more sustainable source of funding for maintenance.  Few would argue that New York's roads couldn't do with better standards of maintenance.

I'm encouraged about the debate.  It has long been argued by some that congestion pricing would be great as a way of raising funds for public transport, but I firmly believe that unless motorists get at least some of that money raised recycled in ways that benefit them directly - either by paying for improvements to the highway or by reducing other taxes they pay, it is going to persist in being unacceptable to many, as it wont be seen as "user pays" but just another tax.  True, the biggest benefit for motorists is less congestion, but they will only believe that when it happens - and so it is important that congestion pricing include, at least in part, some revenue being used to benefit motorists.

Saturday, 18 February 2012

Alternative approach proposed for US highways funding and charging

With the US President announcing a $476 billion bill to spend money on transport infrastructure (including, bizarre as it is to those of us who happily operate in a world of commercialised airports, air traffic control systems and pipelines, taxpayer funding for those), the question has arisen as to whether this is the best way to meet the needs of US road users in the near future.  This blog doesn't exist to consider wider transport funding and resource allocation issues, but the approach proposed by the President (and also essentially represented by the separate bills in both houses of Congress) is to increase the separation of the relationship between users of the highway network, what they pay and what is spent on them.

Edward Glaeser, Professor of economics at Harvard, has written at Bloomberg of a different approach across a wide range of issues.  The suggestions of his include:

- Embracing user pays:  "User fees support the maintenance of aging infrastructure. Like all prices, they allocate scarce resources to the people who value them most. Perhaps most importantly, as (Adam) Smith emphasized, user-fee financing discourages white elephants, because projects that can pay for themselves are practically guaranteed to deliver plenty of value."  He supports funding highways through electronic tolls, or failing that, make sure fuel taxes are sufficient to fund highways.  One argument being "we shouldn't be bribing anyone to drive" by diverting general tax money into highways.  He has a point, the real argument should be how one pays.

- Implement congestion pricing: "If you have a scarce commodity, whether groceries or roads, and you insist on charging prices below market rates, the result will be long lines and stock outs, like those that bedeviled the Soviet Union decades ago. Yet U.S. roads are still running a Soviet-style transport policy, where we charge too little for valuable city streets. Traffic congestion is the urban equivalent of a stock out."  Quite simply it is about ensuring a scarce resource is used more efficiently.  What you do with the money is another point, and another debate.

He also argues that the federal government role should be reduced in favour of the states, that maintenance funding should not only be a priority but THE mandatory priority for expenditure on roads, promoting public-private partnerships (with tolls) and pushing for buses ahead of rail (he also wants the Port Authority of New York and New Jersey to be split, largely to promote airport competition).

It is abundantly clear that the politics around the Highways Trust Fund has failed and that the "business as usual" approach of raking in money from whatever taxes exist to dish out funds for highways based on politically/bureaucratically defined criteria, has not delivered.

Road pricing can help put the US highway system on a sustainable financial footing to deal with deferred maintenance and with congestion pricing, it can mean more efficient usage that saves time, reduces emissions, reduces fuel consumption and sends signals as to where future investment should be placed (and helps defer expansion of capacity).   The timeline needed to do this is long, and it cannot be led by a grand Federal Government project.  It requires innovation, devolution and a diversity of approaches that can be harmonised and be interoperable.  

However, beyond anything else it needs motorists to be convinced that it will deliver them positive results.   It isn't about technology, it is about delivering value. 

Friday, 17 February 2012

UK road freight sector support vignettes and calls for fuel tax cut

According to HGV UK, the Freight Transport Association (UK) (FTA) has called for the UK Government to cut fuel tax by 5p/l and scrap the proposed August 2012 increase of 3.02p/l.  

The submission takes a fairly simple view that such a cut in taxation would "boost the economy", in part because it would offset market and currency based increases in fuel prices.  Given the UK Government has already twice deferred increases in fuel duty and cut it by 1p in 2011, the FTA obviously sees a chance to get further reductions.

It also supports introduction of a "vignette" for lorries, as proposed in a consultation document already released (and reported on here) so foreign lorries pay to use UK roads, as long as it is matched by a countervailing reduction in Vehicle Excise Duty (equivalent to annual vehicle licensing fees in other jurisdictions).   This is seen as helping to "level the playing field" with foreign lorries that tend to arrive in the UK full of cheaper diesel bought in continental European jurisdictions, and carry out haulage activities in the UK before returning having bought relatively little diesel (and so not paid for the roads).

The support for vignettes is long standing and not new, and shows how the road freight sector can support forms of road pricing as long as they are seen to be fair and compensated for by other tax reductions.  However, the fuel duty issue is more complex.

Fuel duty in the UK is high at £0.5795 per litre (around US$0.91) for diesel, and if matched (with petrol revenue) against government expenditure on roads, it is around three times the total spent.  So an argument can be made that the road transport sector pays it way many times over in terms of infrastructure costs (or expenditure on road infrastructure is the UK is insufficient).   That debate can be had elsewhere.   However, given the UK's Budget Deficit remains at around 10% of GDP (and is not forecast to slip into surplus until around 2016), the scope and likelihood of such a dramatic reduction in fuel duty is slim indeed.

The wider issue of the sustainability of fuel taxation as a way of charging for road use has yet to be seriously considered in the UK context.

Thursday, 2 February 2012

South Africa revisiting future toll projects

Bizcommunity reports that South African Transport Minister Transport Minister Sibusiso Ndebele has said that tolling urban roads is up for "re-discussion" and the government has effectively slowed down progressing new projects, following the controversy over the Gauteng Freeway Improvement Project.

He said a city or provincial government should never make decisions of such national consequence again, indicating the government is a bit burnt by the political fallout from the issue. Although he insisted that project was essential, the report said: "any further e-tolling proposals would have to be properly discussed so that users understood the implementations and this included the second phase of the GFIP and the proposed Cape Winelands Toll Road."

I would guess that future toll roads that involve tolling existing roads are less likely for now, which suggests that South Africa may have to think about future tolling that is network wide and involves reducing other taxes as well.