Congestion Pricing

Congestion charging is an increasingly popular topic of consideration in cities wrestling with seemingly intractable congestion problems. Congestion pricing means charging fees for road use in a way that reduces demand. Some cities (Singapore, London, Stockholm, Milan and others) have defined a cordon around the city center, and vehicles that cross the cordon pay a fee set high enough to influence people’s trip choices and reduce the number of vehicles entering the city center.

I was uncomfortable with congestion charging when I first heard about it. It seemed inherently unfair to people with limited resources. Since I’m in the business, though, I’ve had to study the problem in detail, and my thinking has shifted. Three points really stand out to me:

•  Every argument about the unfairness of congestion pricing applies equally to our current way of funding roads. Registration fees, insurance, and gas taxes are the same for everyone and burden the poor more than the wealthy.
• Demand-based pricing at least offers the opportunity for progressive pricing through rebates and discounts for the disadvantaged.
• There is an opportunity to use revenues from congestion pricing to improve transport availability and accessibility for the disadvantaged.

If done correctly, congestion charging could be more equitable than our current way of doing things. On top of that, the economic and traffic flow theory showing its power to reduce congestion is a thing of beauty guaranteed to bring a tear to any traffic engineer’s eye. What’s not to love?

But there’s a catch. Two actually:

• Just because the theory is sound doesn’t mean the real-world system will live up to the potential. There are countless details necessary to design a system that is achievable, equitable, and effective. Revenue generated by the program must be used responsibly. How does a city go through the process of figuring all that out?
• The public has to accept it. My journey from opposition to support depended on months of reading case studies, economic analyses, and traffic data studies. Most people probably aren’t going to do that. How do we get to a point where congestion charging is acceptable to most people?

I recently had a lesson on both of those points. I sat in on a virtual public meeting hosted by the San Francisco County Transportation Authority (SFCTA) about their ongoing downtown congestion pricing study. If you’re not familiar with the study, SFCTA is exploring options for fighting congestion by charging a fee to drive into (and possibly out of) downtown San Francisco. The money would be used to fund transit and mobility improvements.

There is a pattern in the rise and fall of public support for congestion charging systems. During the early planning stages support tends to be moderate. Support usually drops steadily until the system is implemented. At that point residents start to see the benefits and support rebounds. Daniel Firth refers to this dip in support as the Valley of Political Death. I was curious to hear what the citizens of SF had to say at this point in the process. 

Anyone who has attended public meetings for transportation projects knows that the input can veer towards the eccentric. I wouldn’t have been surprised by a Parks and Recreation style meeting full of outlandish comments. What I heard instead was a lot of thoughtful, well-considered opinions and questions. There were many different perspectives, and some that I hadn’t anticipated.

What’s the rush?

Some people were not categorically opposed to congestion charging but thought that congestion in San Francisco wasn’t yet bad enough to warrant it. This one really surprised me. Being a transportation professional, I am steeped in anti-congestion culture. I can quote spine-tingling statistics about the scourge of congestion at the drop of a hat. Those numbers though, are mind-numbingly large and based on abstractions which don’t necessarily resonate with the public. Everyone hates traffic, but it’s the devil they know. We should not assume that the public will flock to a solution because we can build a model which shows an incremental improvement in the economic impact of congestion.

Other residents demonstrated an effective way to address this question. They brought the discussion back to quality of life and safety issues. The rush is not to stave off some abstract problem in the future; the rush is to make our cities more livable right now.

Don’t ruin my neighborhood

This came up immediately when the discussion got to the exact location of the proposed cordon, and it generated a lot of passion. Residents were very concerned that putting a charge line through the middle of their neighborhood would severely disrupt the economic and social flow of the area. This one struck a nerve with me. I’ve long been horrified at the damage some transportation projects have done to neighborhoods such as Claiborne Avenue in New Orleans and the Eisenhower Expressway in Chicago.

This is a case where we are simply going to have to rely on more than economic calculations and traffic analysis. We need to be prepared to extend or constrict cordon lines to address social concerns even when the engineering analysis tells us otherwise.

What are the goals?

Congestion charging systems can address multiple goals such as: congestion itself, safety, environment, equity, economic development, etc. These goals are all related but not equivalent. Different approaches will have different impacts on individual goals. As residents reacted to various options, they often cycled back to asking which of the possible goals is primary. This led to some confusion and occasionally frustration for the participants.

It is tempting to throw all the possible goals on the board to make the case that congestion charging solves a bunch of problems. It may be better though to clearly prioritize the possible goals so that when there are tradeoffs between goals the public is not left confused and frustrated.

Follow the money

This may come as a shock, but many people do not trust politicians. SFCTA clearly stated how money raised will be spent, and there was widespread skepticism that all of it would actually be spent as promised. It’s hard to blame people for thinking that especially given that some states already divert gas taxes to things other than roads. Agencies considering congestion pricing will need to establish ironclad rules for where the money goes if they hope to win the confidence of a wary public.

Net economic impact

Concern about impacts to retail businesses inside the cordon was a big issue. Some participants wondered if SFCTA had accurately accounted for the net economic impact of congestion pricing including effects on commerce and the tax base. Some studies in Stockholm suggest that congestion pricing has little impact on retail businesses aside from those immediately adjacent to the cordon, but it is easy to see how people might assume otherwise. Planners should be ready for sophisticated questions about net effects and not rely simply on revenue projections to make the economic case.

Is it a tax?

Many participants wrestled with whether the congestion charge was a tax or a fee. Frankly this one mystified me and initially had me wondering why it mattered at all. But taxes and fees are different things and, more importantly, people feel differently about them. Many people are more likely to accept a new fee rather than a new tax.

One problem we have is that politicians have been blurring the lines between taxes and fees for years. A fee is generally thought of as a charge to cover the cost of a service, and a tax is a charge for generating general purpose revenue. When I get my driver’s license renewed, there are administrative costs associated with that process and I need to cover those costs, but we all know that what I pay exceeds those administrative costs and the rest goes who knows where.

The key to making a reasonable argument that congestion charges are fees is to ensure that all revenue goes directly to mobility services. One can then make an argument that the driver is paying for a service of improved mobility. Even then it will be a challenge because some people will not see a connection between their driving into the city and paying for a bus that they will never ride.

Equity

The plans under study by SFCTA include discounts for low income households. Many people felt the income thresholds for discounts were too low (i.e. people with higher incomes should still qualify for the discount). This is probably a case where some dissatisfaction is unavoidable. If the charges are not high enough to change behaviors, or do not affect enough people to influence the system as a whole, then we will not realize decongestion benefits.

However, it is absolutely true that low income households will pay a higher percentage of their income than high income households without some kind of discount program. Adjusting the dials just right to achieve social equity while still achieving system goals is going to be very tricky and may require iterative refinement of the thresholds.

Fix transit first

Many participants thought the program sounded reasonable but insisted that the transit improvements had to be implemented before the cordon charging began. This is a challenging chicken and egg problem. The money to pay for the transit improvements won’t be available until after charging begins, and the reduced traffic volumes (which help bus speeds) won’t happen until then either. The residents, however, will have to start paying fees even though they won’t see transit improvements for some time. It makes you wonder if it would be possible to sell bonds against the congestion charge revenue to raise money up front to reduce the amount of time to deliver transit improvements.

What is fair?

A frequent theme in congestion pricing literature is that pricing schemes should be as simple as possible. Pricing structures with lots of special cases may lead to a fraud or at least a sentiment that some people are getting over. When you listen to some of the special cases though, it is difficult to ignore the hardship which may inadvertently (and unfairly) fall on some individuals.

The case that got me was shift workers. One resident explained that she works from midnight to eight in the morning (for modest wages). Poor or non-existent transit service at midnight (as well as the safety concerns of a woman traveling alone) mean that she has to drive her car into work, but she has to drive one leg of her trip during the peak period and thus would be charged under most of the pricing options.

There will never be structure that is fair to everyone, but I have a greater appreciation of the complexity of the task.

Conclusion

As the interest in congestion pricing grows across North America the importance of education and dialogue cannot be overstated. The technical design and implementation of congestion pricing systems is easy. The hard part is achieving the goal of enhancing mobility for all citizens by reducing congestion and increasing accessibility and availability of transport options.

I was impressed by what I heard both from SFCTA and the participating residents. SFCTA is educating and listening, and the residents are participating productively. I am optimistic that the process will converge on an equitable design and build public support along the way.