New Partners: Congestion pricing and transportation finance
The panel at the New Partners conference on transportation finance featured NYC's congestion pricing hero Bruce Schaller, and Michael Replogle of Environmental Defense. As David Burwell of Project for Public Spaces said when he introduced the panel: The transportation trust fund is broke—
Since the same committee that has to reauthorize the transportation fund also is the one considering the climate cap-and-trade proposal to auction off CO2 allowances. One program is bankrupt, the other will generate lots of money. Maybe we can use the CO2 revenue to finance the transportation system.
Michael Replogle, Director of Transportation for Environmental Defense Fund: Scientists say we have about ten years to reverse the greenhouse gas emissions or face unpredictable climate change. Our economy is struggling and new economic powers are rising in countries like Asia. How do we align the ways we finance transportation with our public policy goals for performance?
The highway trust fund is headed south, and a few years after that the transit trust fund is projected to go broke. The Transportation Study Commission just recommended a 40-cent gas tax. There's talk from that commission and another to call for more user fees and tolls. At the state and local level, there's an increasing reliance on sales taxes. Public-private partnerships? Shift transit money to highways as the President has recommended (which wouldn't help Smart Growth and climate change)? Or do we do nothing and let the system degrade?
Public-private partnerships have led to new light rail lines, in Portland (where ¼ the cost of the new airport light rail was funded from a development project with Bechtel), or the Hudson-Bergen Light Rail. A toll road in Chicago was paid for by selling a 99-year lease to a private operator, while Indiana used money from that to fund a $100B expansion of its highways. The Beltway in Northern Virginia is adding new HOT lanes under an 80-year lease, and now Virginia wants to add even more lanes with its own money. These can cut either way, and it depends how the deals get done.
Road tolls are growing, from Singapore which created a congestion charge in 1975 and financed better transit, and Oslo in the 1990s; New York congestion prices the Hudson River tunnels and is now considering a congestion pricing charge; and Minneapolis is turning HOV lanes into HOT lanes and using the money to finance a new transit line.
Will this hurt or help Smart Growth? That depends on whether we use the money to manage the roads and transit for higher productivity, cut pollution, and generate revenue for public transportation? Or, will these funds just be used to built more roads faster and spur even more traffic and sprawl, which is the outcome of a lot of our public investment.
If we just add toll managed lanes and use the money to pay for the lanes or for even more lanes, as the Washington Metropolitan Council of Governments wants to do, we just end up with more lanes, not better transit. On England's A1 highway, the private operator's contract ensures their revenue goes up if the congestion goes down, such as if they schedule maintenance during nighttime hours. Why not extend that here and link the operator's revenue to congestion and pollution?
In Singapore, which is competing with America for the best and the brightest in biotechnology and other fields, after 30 years of congestion pricing the trasit share has gone from 40% to 67%. They adjust the charges four times a year to keep speeds at peak productivity. Traffic dropped 45% when they implemented the system and has stayed steady while incomes and auto ownership went up sharply. Germany is doing emission-based truck tolls, charging old dirty trucks, and cut CO2 emissions 7%.
VMT fees were just successfully piloted in Oregon. Even the US Chamber of Commerce supports this, and it's a way to get beyond the gas tax. We protect privacy but charge people more to travel in congested corridors at peak times.
Under the Urban Partnership Agreements, San Francisco is looking at congestion pricing on Doyle Drive (an approach to the Golden Gate Bridge); South Florida is using congestion pricing to clear congestion and raise funds for bus rapid transit to give people a choice. Follow the money, and we can help these instruments serve Smart Growth.
Bruce Schaller, Director for Planning and Sustainability for NYC DOT: Joined NYC DOT in June of last year for implementation of the PlaNYC intiative. PlaNYC began with forecasts that NYC would add 1M new people over the next 30 years. They started by looking at land use, where to put the people, but quickly expanded the focus to a range of parts of the city's infrastructure including transportation. But PlaNYC includes adding housing within walking distance of subways and commuter rail (a change from the way the city has been growing since WWII); ensuring all NYers are within a 10-minute walk of a park; having the cleanest air of any big city. Congestion pricing is just one of 127 initiatives in PlaNYC, but has received most of the attention.
Once you take the status quo out of the option list, then the discussion changes. It's how do you plan for growth, not whether or not you will have it.
City's public space vision is that the streets and sidewalks aren't just about moving from Point A to Point B but that they are a public space as well. They prioritize more effective ways to get people around (transit) over driving, and for its effect on air quality. Finally, they aim to create a funding stream to finance transit improvements.
Quick review of the proposal now on the table, from the congestion pricing commission: The congestion charge will be an $8 daily fee if you enter the zone below 60th Street between 6 am and 6 pm. Trucks pay $21, but clean trucks pay only $7. They removed the internal charge but added a $1 surcharge on taxi and livery fares, increase parking meter fees and partly eliminated the parking tax rebate. This is projected to create a 6.8% reduction in VMT and $491 million net revenue that would be devoted to transit improvements.
Here are potential issues and objections raised with congestion pricing:
- Will the system work as envisioned? They've done extensive modeling on traffic demand and believe it will.
- Will it meet needs for improved transit? Absorbing drivers who shift, and the overall growth of the system? That's where detailed short-term transit improvements come in and a commitment to implement them before the start of pricing.
- Will the funds be used as intended? They've worked hard on the draft legislation to ensure this.
- Are there viable alternatives? Many were analyzed, both pricing and non-pricing alternatives including many modifications of the mayor's plan some of which made it into the commission recommendations.
- Cost to deploy the system? Recent changes by the commission reduce the cost by reducing the numbers of cameras.
- Is it unfair to those who must drive? 80% of drivers have a viable transit alternative according to Schaller's research for TA. That has gone a long way to addressing this issue.
- Economic impacts? Partnership for NYC, the business group, did a study showing the high costs of existing congestion.
- Neighborhood impacts? They've made a commitment to neighborhood parking programs like
- Equity across income groups? Does this hurt the working people? Drivers have 30% higher income than transit users. The legislature may consider a low-income tax credit for low-income drivers into the CBD.
- Regional equity: are different parts of the region paying their fair share? This is interwoven with the offset because people from NJ will get the offset. Their position is that drivers from all areas will contribute to transit subsidies in proportion to the numbers of drivers from those ares, even if the contribution goes to the Port Authority instead of NYC. The legislature may revisit the NJ contribution.
Question: How does the VMT tax pilot program work in Oregon? Replogle: They have a satellite-based GPS that tracks when you drive your car. It doesn't track exactly where you are but what zone you are in: if you are inside the State of Oregon, and whether you are inside or outside the Portland Growth Boundary. If you are inside, it's 10 cents, if outside, 1.8 cents. When you go to the gas station, a device communicates between your car's computer and the gas pump, and if you have the system, it deducts your gas tax from your gas charge and adds the mileage fees back in. The overall revenue is the same as the gas tax.
Question: How did PlaNYC come up with the $8 per day level? Schaller: They looked at several levels, $8 and a couple above that. As you go above $8, you start to find an increased number of trips that aren't taken at all, which could have an economic impact. So part was a concern about suppressed trips. $8 is also the round-trip toll through the Queens-Midtown Tunnel and the Brooklyn-Battery Tunnel, so it's an existing level of charge, and thus more likely to be able to make it through approvals.
Question: How does reducing the carbon footprint sell as an argument for congestion pricing? Schaller: Yes, it's a strong point. A number of fortuitous things brought us to this point, and one is the maturation of the discussion over global warming. In focus groups [Schaller] did for the Manhattan Institute, he was surprised how strongly received the environmental arguments were. In studies in the past, the environmental concerns have not weighed, but now people have gotten there. Replogle: climate is rising as an issue in public consciousness, but it's not the only issue. There are people motivated by asthma and the health impacts, and many are upset that the transit system isn't as good as it needs to be. Schaller: By itself, the environment is not sufficient, and perhaps none are sufficient on their own.
Question: How does NYC plan to increase the transit infrastructure? Schaller: There are a number of large projects, 2nd Avenue Subway, East Side Access, that have been funded to an extent but not fully. There are also short-term improvements; they have two-page summaries of the transit benefits to every Council district, Senate district, and Assembly district in the city.
Question: Strategies used to address equity issues? Burwell: Also what about in cities without alternatives unlike NYC? Replogle: A lot of work to make sure NYC transit improvements that go in place before pricing are ones that serve the neighborhoods without good transit alternatives now. The low-income tax credit Schaller mentioned has also come up in the Bay Area, to create a means-tested lifeline discount for congestion pricing fees. Studies show clearly, across the country, that our current system of financing is highly inequitable. If you introduce congestion pricing, will it help or hurt against the high degree of inequity? The answer depends on what you do with the revenues. If you put the revenues into expanding the roads, it exacerbates inequality and environmeental problems; if you put it into transit, it alleviates the inequity.
Question: Does tolling really finance a whole system, or is it just 10% of the system? Replogle: This is a key public policy question in Congress and state legislatures. There's no single answer. It will be determined by our elected officials if we increase gas taxes or what. But we will need to be much more dependent on user fees if we're going to get control of the system, increase the productivity and effectiveness of the system. There's a growing role for private investment to transform the system into a more effective one. There will be a robust exploration of different options in the next few years.
Question: How far are we from the VMT tax being applied in other communities? Replogle: the National Surface Policy Commission Report says 2025. The minority view signed by Secretary Peters says maybe 2015. He feels we need to be talking about a more rapid transition to VMT fees to measure the traffic on our networks. Now we don't even have a good way of measuring how much traffic there is. We need to know that to tackle reducing emissions. If you can't measure it, you can't manage it. It will also enable a host of market innovations to deliver new safety services like 911, managing traffic intersections to reduce red light running and reduce speeding, to enable pay-as-you-drive insurance, and other innovations.
Schaller: It sounds like a good idea, but don't be too optimistic on how quickly you can move. In England, where London has congestion pricing, the national government moved toward a national road toll program and then backed right back off. People on both sides of the Atlantic need to think about what are the intermediate steps to move toward this in a more organic way, how do we move step by step and show people the benefits of additional pricing programs. Replogle: truck-based emission tolls could be a good intermediate option. We have a lot of old, dirty trucks; they run forever and you can keep rebuilding those engines, and we have no way to push for a replacement strategy. Germany got a buy-in from the trucking industry for their truck-only VMT program to better compete with dirty trucks coming from Eastern Europe.
Question: How do you ensure that the transponders aren't used for surveillance, like enforcing speeding, or knowing who was in a high-crime area? Replogle: This is an important issue that needs to be explored. The Oregon pilot test was specifically designed to only track your zone, not the specific location. Whenever you use your Visa or cell phone your information is given out. We always come to live with a balance.
Question: One opposition to congestion pricing comes from businesses. How did NYC get 135 businesses not to say they'll move to the suburbs? What has been the experience in other cities? Schaller: The business community was a leader in pushing for congestion pricing. Of those working int he CBD, only 16% drive to work, so the huge majority of employees aren't affected. At this point, if you're in business in Manhattan, you're not there by accident, you're there because you want to be in Manhattan, with real estate prices and the cost of doing business. Companies that are in the delivery business have not been as supportive.
Replogle: The experience worldwide is that business leaders recognize that congestion and unreliability in transportation imposes a growing set of costs on their business and their operations that makes it harder to attract workers if they don't have good choices. Congestion pricing is a positive sell to the public and business if it delivers significant improvement in the quality of transportation, reliability, travel time and 2) better travel choices. Better performance and better choice. A lot of small businesses fear if fewer people drive past their shops. Experience in London, Stockholm, Oslo is that there has been no negative impact on commercial activity including small shops. The center city areas have become even more robust by becoming more attractive to pedestrians. Burwell: We used to have minimum parking requirements. In Boston there are now no minimums. In London, now there are maximums. New commercial real estate is limited to 1 space per 12,000 sq ft.
Question: Congestion pricing, are there potential negative effects longer-term? Schaller: There aren't any anticipated; if one returns to basic economics, what congestion pricing is doing is internalizing the external cost people create when they drive. When one person drives they slow down other people behind them, and placing on everyone the cost. These programs are a plus by correcting what is now a missed price signal, and the economic studies have shown there's a large cost to the excess congestion. A certain amount is reflective of economic health; beyond that you have a cost. If you bring down the excess cost you have a better economic environment.
Burwell: the trust fund is broken. There's a new transportation bill at the federal level to reauthorize next year. This is the time to think about transportation financing as a Smart Growth issue. Please get involved in this important debate for next year.
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