Tolls, Fees, and Fares

Hope Cohen, April 2008

This month the New York State legislature declined to approve a plan to allow New York City to collect fees from drivers entering Manhattan's central business district on weekdays between 6 a.m. and 6 p.m., largely out of concern that it would force drivers of modest means to pay for the right to enter Midtown. The plan's proponents, led by Mayor Michael Bloomberg, had argued that by discouraging driving, a "congestion charge" would aid the environment and the economy—while simultaneously raising funds for an expansion of transportation infrastructure that is essential to New York's future.

Mayor Bloomberg was right to introduce market pricing of a limited resource, the congested streets of Manhattan's central business district. But many saw the entry fee as a discriminatory tax on those who need to access city’s core. In future discussions of pricing, New York should explore methods that offer more choices to road consumers.

ROAD PRICING OPTIONS
Transportation agencies are implementing tolls that vary according to time of day or even real-time traffic volumes. Municipalities are at last addressing the undervaluation of curbside parking by raising prices to levels more competitive with off-street options and by escalating meter rates to spur turnover.

Pricing programs that emphasize driver choice are showing up throughout the country. Most notably, high-occupancy toll (HOT) lanes reserved for buses, vehicles with at least two (or even three) occupants, and those wanting a faster trip already exist on highways in the San Diego, Houston, and Denver areas. The tolls increase and decrease along with the flow of traffic. Such lanes may eventually have a place on the new Tappan Zee Bridge and in the Lincoln Tunnel.

Last summer, Miami and Minneapolis/St. Paul won major grants from the U.S. Department of Transportation, through its Urban Partnership Agreement (UPA) program, to implement HOT lanes. This pot of one-time-only grants is designed to help metropolitan areas reduce traffic congestion by encouraging the use of transit, telecommuting, and tolling/pricing. If the New York State legislature had approved the Manhattan congestion-pricing proposal, bus and ferry service options in neighborhoods that send the greatest number of drivers into the central business district could have received more than $350 million under UPA.

New York's proposal, to impose an entry charge on a particularly congested area of the city, would have been unique in the United States, although similar to a program instituted in London in 2003 (and since expanded and modified). Transportation Secretary Mary E. Peters was very interested in putting an area charge into the experimental mix funded by UPA. New York seems the likeliest American candidate for such an approach, as it has a regional base of people accustomed to paying for access to a borough surrounded by water. But the idea soon ran up against age-old class resentments and inter-borough rivalries. Many Brooklyn and Queens politicians, in particular, portrayed the proposed charge as tribute working people would be forced to pay to elitist Manhattan. The argument of environmental, transportation, and good-government advocates that those who choose to drive would be paying a user fee—as those who take the subway must do—failed to win the day.

PRICING AND CHOICE
Choice is a very important principle to Americans. HOT lanes have been successful because drivers can choose to spend money and save time—or to use the adjacent untolled lanes and save money by choosing to spend more time on the road. Bruce Schaller's 2006 Manhattan Institute study involving focus groups found that New Yorkers would be more receptive to the choice offered by HOT lanes than they would be to tolls and fees, which they perceived as penalties rather than incentives to make different transportation choices.

New York City has had a similar choice system in place for decades: its mix of tolled and untolled East River crossings. The market incentives work; drivers go out of their way to take the "free" bridges, thus clogging neighborhoods like Downtown Brooklyn and Long Island City. The result is distorted traffic patterns, but New Yorkers have a deep-seated attachment to protecting the choice to spend either time or money in traveling between boroughs.

The Traffic Congestion Mitigation Commission, established by the state legislature last summer in response to Mayor Bloomberg's original congestion-charging plan, included East River bridge tolls and HOT lanes in its research agenda of alternatives and supplements to City Hall's proposal. Commission staff found that tolling the Brooklyn, Manhattan, Williamsburg, and Queensboro bridges would yield more money for transit investments than would an $8 daily charge, but would not match the charge's expected impact on traffic in the central business district. The panel's report includes an examination of tolling all Harlem River bridges as well—a policy that would increase revenue and reduce traffic more than an admission fee. Of course, as more crossings are tolled, motorists have fewer opportunities to choose to spend extra minutes rather than extra dollars on their trips.

Commission analysis emphasized static tolls and fees over HOT-lane options. Panel documents tagged high-occupancy tolling's revenue potential as "uncertain" and its traffic impact in central Manhattan as zero. There was no discussion of which roads might benefit from this type of market pricing.

FARE CHOICES
In fact, for most motorists, it is a choice to drive into central Manhattan during prime business hours, given the availability of transportation alternatives. Still, charging people for entering a section of an American city in their cars is a very new concept. It is far more acceptable to price each method differently (use this lane or that, park here or there). The mayor and his allies rightly highlighted the choice for most as being between modes of travel—private car or public transportation. But to those New Yorkers for whom taking mass transit is impractical or impossible, that seems no choice at all.

Those who choose public transportation do pay a user fee. And none of the congestion-pricing opponents, who fought what they perceived as a regressive, redundant fee for the use of city streets, showed any opposition to transit fares. Only the Institute for Rational Urban Mobility, arguing for a much higher congestion premium, advocated free bus and subway service.

The unstated assumption is that it is fair to require users of all types of mass transit—ferry, subway, commuter rail, urban and suburban bus—to contribute to the cost of their rides. A New York City straphanger pays more of the cost of his ride—nearly 2/3—than any other commuter in the U.S.; even with lower farebox recovery ratios for bus and rail riders, the Metropolitan Transportation Authority (MTA) overall has a 40% return from the farebox. But too many in the recent congestion-pricing debate did not appreciate the logic of asking drivers to contribute to the cost of their trips—in wear and tear on the infrastructure they use, and, more broadly, in the economic and environmental harm caused by excessive traffic.

WHAT’S NEXT
Transportation Secretary Peters will reallocate the $354.5 million in UPA funds that New York left on the table. Los Angeles is likely to get $213 million for a program to convert parts of the 10 and 210 freeways to HOT lanes. Other rumored award contenders are Atlanta and Chicago, with HOT-lane and variable-tolling plans of their own. No city is expected to propose an area charge.

At the Regional Plan Association's annual meeting last week, Marc Shaw, former deputy mayor, MTA executive director, and chairman of the Traffic Congestion Mitigation Commission predicted that pricing would return in the "purer" form of tolls on all the East River bridges—arguably just another form of take-it-or-leave-it congestion pricing. A new discussion of fees for road use may be around the corner.

With the loss of a projected half billion dollars annually from congestion charges, New York needs to find other ways to pay for transportation infrastructure. The capital funding gap for the MTA alone is at least $13.5 billion. A blue-ribbon panel, established by Governor David Paterson as soon as the legislature balked at congestion pricing, and headed by former MTA chairman Richard Ravitch (who saved the transit system 30 years ago), is working on recommendations.