New York news media is buzzing with reports that congestion pricing is about to re-appear as a proposal for New York City. 

The New York Daily News is claiming:  "Politicians are quietly resurrecting plans to charge drivers up to $10 to enter lower Manhattan on weekdays" with rather vague claims that politicians who favour the idea and trying to drum up support for it among boroughs and others who waiver.  WCBS is reporting on it with negative comments from those who believe it would damage the economy, whilst Fox notes it could plug a gap in funding for maintenance.

Those who follow New York and road pricing know the idea isn't new.  As Mayor Bloomberg was within a hair's breadth of proceeding with congestion pricing in 2008, until the New York State Assembly vetoed his plans.  Details were published on Streetsblog here.  At the time he sought to impose a US$8 charge to enter downtown Manhattan between 0600 and 1800 on weekdays, south of 60th Street (with tolls on the New Jersey crossings offsetting the charge in that direction).   The plan was approved by New York City Council but needed State approval to access substantial Federal funding to enable the plan to proceed.  The Governor at the time (David Paterson - D) was supportive.   However, the Democratic Party caucus at the State Assembly was overwhelmingly opposed.  In short, the city wanted it, but the state said no.

New York today has a new Governor, Andrew Cuomo, who comes from the left of the Democratic Party (and is probably best known through his famous father long time Governor Mario Cuomo).  His views are ambiguous, as he appears to not want to nail his colours to one side or the other.

Whilst the Bloomberg plan is no more, the problems which catalysed it remain, but one in particular has become more serious.

Congestion in New York remains chronic, and as there are no funds to expand the capacity of any transport networks, better usage of what remains is going to be critical to make any difference.

Air pollution remains a concern, as New York seeks to improve local air quality and there is interest in making the city more pleasant for pedestrians and cyclists, as well as improving its environmental image.

However, most of all the problem is financial.  Put simply, New York cannot afford to maintain its road network sufficiently, nor can it afford to maintain subsidies with existing low fares on public transport.  It will need radical measures to either cut costs or raise revenue.  As such, congestion pricing is seen by many as a way forward to deliver on all these goals.

So it is inherently appealing to ration road space in New York, bearing in mind that all of the crossings from New Jersey into Manhattan are already tolled.  The logical place to start is to toll the crossings of the East River, although there is a serious issue of diversion at the Robert Kennedy Bridge and the question of access from the north.  

There can be little doubt that if designed well, a New York congestion pricing system can have very positive effects on traffic congestion, improve the environment and provide revenue that can be reinvested in the city's transport infrastructure.   These are points well recognised by advocates of alternatives to private car use.  The big political problems in New York are dealing with:

- Low income motorists;

- Coping with modeshift from motorists who choose not to drive;

- Business fears of losing custom;

- Motorist fears of getting nothing in return.

Whilst these are all legitimate concerns, it raises the bigger issue of how congestion pricing needs to be part of a wider strategy that generates net benefits overall for the city.

What does this mean?

1.  Designing a congestion pricing system that is both easy to understand but also targets congestion effectively, by not just having a single blunt price:  That means that each crossing may have slightly different prices at different times, and may charge starting and finishing at different times, and in different directions.  This is all feasible using DSRC technology (e.g. EZ Pass or similar), and can demonstrate both good faith in being congestion focused, but also reduces the impact of pricing on routes serving areas that are not so congested.  This should benefit motorists AND businesses.   Congestion is the "bad" externality, and focusing on that rather than a blunt charge would put New York ahead of London, and closer to Stockholm (where charges vary by time of day) and Singapore (where charges vary by location and time of day).

2. Give simple easy choices for motorists: That means payment options, but also information about alternative ways to travel.  That means enhanced route planner websites that include cycling and walking.  People should know they have options ranging from driving when they want, to driving at different times or on different routes in some cases, public transit, or in some cases active transport modes. 

3. Focus on having standards of service for motorists:  That means sustaining reductions in congestion.  Prices, management of streetworks and incidents and overall network management and information to motorists must be managed in a way that delivers value.  If people pay to access a network they should gain value from that, and that can be seen in treating the New York street network from a customer service point of view.  That will cost money, but the money will come from those benefiting.

4. Net revenues should benefit those paying and those most disadvantaged:  The temptation is to treat such revenue as handy just to plug gaps in budgets, but this wont do.   The first priority should be a plan over a set number of years to fix, reseal and rehabilitate New York's road network up to the standard of a modern city.  That includes everything from surfaces to signage, traffic signals, lighting, lines and street furniture.  That will deliver enormous value in terms of safety, vehicle wear and tear, fuel consumption and in the image of the city.   Public transport, cycling and pedestrian advocates and environmental groups will not want this to be a priority, but it must be.

The second priority must be to deal to those most disadvantaged.  It may be a discount for the disabled motorist, or a limited number of vouchers for the lowest income workers in locations poorly served by other modes.  Regardless of the approach, this should be addressed.  Apparently the Traffic Congestion Mitigation Commission report stated less than 1% of motorists are in the category of low income workers without alternatives.   Other options are to reduce other taxes and charges that wont distort behaviour inefficiently.

Beyond this, net revenue can be used to target improvements in alternative modes.  However, one key option is not to use the government cashflow approach to spending money on improvements, but a cost accounting approach.  As with London and Stockholm, borrow money upfront to make key improvements in advance, using congestion pricing revenue to repay the debt, and allow continuous financing of improvements.

I'd suggest simple steps like fixing key pedestrian links, new cycling corridors and kickstart key improved bus services.  It should also include reseals and improvements to major roads that are visible to motorists.  Much of this will be new work, and wont fix the fiscal problem, but for people to support what is in effect a new tax, they will want to see value in that.

However, it wont fix the colossal hole in the budget by itself, that will require other steps as well.

What it will do is plug a hole in road maintenance funding, and provide some revenue to address transit and active mode funding.   However, a wider investigation is needed to decide on long-run policies that are sustainable for fares and investment in public transit.  Options such as competitively tendered bus franchises (which have delivered significant value in London), fares that recover operating costs, and linking long run congestion pricing/tolls, parking and fares policies, ought to be investigated.

It is tragic that a great city like New York can be so poorly managed over the long term to see its core infrastructure crumble like a withering third world capital.  The contrast with foreign cities with well maintained roads and public transport systems that are older but cleaner, is stark.  The London Underground is a vastly different experience to the New York Subway, reflecting public investment, but also a fares policy that enables services and maintenance to be sustainably funded.

However, I am hoping a rational, well balanced and informed debate can be had about congestion pricing for New York, that focuses on congestion, and using net revenue to benefit motorists, the disadvantaged and to assist in funding complementary transit improvements. 

Congestion pricing can be economically efficient, it can be beneficial to road users, it can be beneficial to users of other modes by allowing infrastructure improvements and reducing delays on roads they use.  It can benefit business if it resolves severe congestion, and revenue is invested in infrastructure used by its inputs and customers.  It can deliver reductions in emissions and improvements in quality of life.   It is all a matter of design.

What New York needs to achieve this is to focus on the principle and the objectives, then let details be addressed through expertise and innovation.  It wont fix the fiscal hole, but it will make a positive contribution towards doing so, and can, if done well, be beneficial to the economy and the residents.

Transport for London (TfL) has started a publicity campaign about the forthcoming expansion in scope for the Low Emission Zone (LEZ) on 3 January 2012.  The Low Emission Zone covers virtually all of metropolitan London (far beyond the congestion charge zone) and imposes a charge on eligible vehicles that do not meet certain minimum environmental standards.   The range of vehicles to be covered has, to date, been only lorries over 3.5 tonnes and buses/coaches over 5 tonnes.  The scope is widening to effectively cover all vehicles besides private cars, taxis and motorcycles.

The LEZ works by using Automatic Number Plate Recognition (ANPR) cameras to detect vehicles to determine if either they have paid, or to check the UK's Motor Vehicle Registry to determine the environmental classification of the vehicle.  Vehicles that do meet the standard can travel freely.

Vehicles that do not meet the standard have to pay a daily charge to drive in London of £100 (US$159) for minibuses and Light Goods Vehicles (LGVs), or £200 (US$318) for Heavy Goods Vehicles (HGVs), buses and coaches.  The charge applies for a calendar day, so a vehicle driving from 11pm till 1am would have to pay for two days.

Those vehicles that do not pay by midnight the next working day (Mon-Fri) have to pay a penalty within 14 days of £250 for minibuses and LGVs, or £500 for HGVs, buses and coaches.  The penalty doubles after 14 days, and increases by the same margin again after 28 days. 

As was mentioned before, the range of vehicles subject to the LEZ will be expanding and tightening as follows from :

- HGVs (goods vehicles over 3.5 tonnes), buses and coaches will have to meet the Euro IV standard for particulate matter to enter free of charge ( currently they have to meet the Euro III standard).  Those registered after 1 October 2006 automatically meet this standard;

-  Minibuses (over 8 seats) of 5 tonnes or less will have to meet the Euro III standard, those registered after 1 January 2002 automatically meet this standard;

- Motor caravans and ambulances between 2.5 and 3.5 tonnes will also have to meet the Euro III standard;

- Vans, pick up/utility vehicles and 4x4 utility vehicles between 1.205 and 3.5 tonnes will also have to meet the Euro III standards.

Classifications are complicated, as some 4x4 utility vehicles may be registered as cars because they are not designed to move goods or more than 8 people.   Range Rovers and Land Rovers are likely to be caught.

The impact of these changes are significant, as effectively all goods vehicles and all passenger service vehicles, besides taxis, will be subject to these restrictions and charges (it is unlikely to be worthwhile paying £100 a day to regularly use such vehicles in London).   As previously reported, it is part of the Mayor's Air Quality Strategy.   However, as it will capture a lot of private vehicles, early publicity is essential.

More details on the LEZ are on its website, here.

Key events in recent weeks:

London congestion charge changes implemented: As of 4 January 2011, London's congestion charge scheme reverted to its original central zone with the closure of the Western extension, but also with the rise in the price to £10 (and introduction of the detection based accounts).   There has been next to no publicity about it, except for noticing changes in signage.  It is far too early to measure actual impacts,  but the effect will be mixed. The Western zone should see increases in traffic, but the central zone should see the opposite, because of the price increase but also because people who live in the former Western zone will no longer have the 90% residents' discount. 

Former Mayor Ken Livingstone claims the loss in revenue is being paid by bus and underground passengers who have just faced a fare increase of just under 7% on average, although that could arguably be a shift to user pays as most of the congestion charge revenue was used to subsidise public transport.

London Green Party candidate calls for London-wide congestion charge:  The Evening Standard reports that Jenny Jones, the Green candidate for Mayor, is proposing the congestion charge be expanded to all of London, with the central charge being £50.   This means ALL roads within the jurisdiction of the Greater London Authority.   Of course she is almost certainly not going to get elected, and the intention is to penalise car traffic, rather than simply manage congestion, although the effect on congestion would be dramatic - the effect on economic activity would be even more unless other taxes were dramatically reduced (but that is not the policy).

Accountancy firm promoting postponed new bypass to be built as toll road in South Devon.  The A380 South Devon Link Road project is a project of the Devon County Council and Torbay Council, and recently had funding refused by the UK government as part of its austerity programme to eliminate the structural budget deficit by 2015.   The project is a 5km 4-lane highway (dual carriageway) between Penn Inn and the Torbay Ring Road at Kerswell Gardens and would cost about £130 million.  The project has a benefit/cost ratio of over 10:1.  Now no serious investigation has been undertaken of the tolling potential, but I am fairly likely that it wont be enough to toll it on its own, but it could contribute a portion of the cost.   Local authorities would contribute up to £33 million, and were seeking a central government contribution for the rest.

Whilst I wouldn't hold my breath for this being a toll road, it does show how lack of conventional funding starts to stretch imaginations for ways to directly charge road users for new routes that they are likely to see benefiting them.

French toll operations company, EGIS, gets an article in the Philippines Daily Inquirer about its activities on Filipino toll roads that isn't far short of an advertisement.

The Kampala-Entebbe toll road project is a scandal already because of cost overruns on construction, although at US$350 million for 54 km it might be expensive for Uganda, but not by world standards.  Not that many are too worried as it is a Chinese financed and built project which is hoped will be repaid by tolls.  The interesting point in the article by Uganda's Daily Monitor, is the charging technology.  The intention is to embed chips (DSRC style) into Ugandan number plates to make it easier to charge, with monthly bills.  I hope that issues such as accuracy of databases, payment outlets and options are adequately addressed, given how rare electronic free flow tolling is in Africa because of such matters.

Bankrupt California toll road likely to be sold by creditors, as San Diego's South Bay Expressway is expected to come out of bankruptcy protection.  The route has US$510 million of debt, and has performed poorly because of demand not meeting forecasts during the recession.   Demand is a third of projections, and tolls have barely kept pace with debt servicing costs.  SignonSanDiego debates the positives and negatives of a government buy out, given the government gets the road for free eventually when the concession expires in 2042.

Before the financial crisis and recession in the UK, several cities across the UK (outside London) were investigating congestion pricing to raise funds and manage congestion. It was partly because the government of the day was linking new funding for local transport with requirements for local authorities to introduce forms of travel demand management, specifically congestion charging or parking levies.

However, a series of events saw that interest fold. Manchester foolishly held a referendum on its proposals, and voters overwhelmingly rejected congestion charging. Other local authorities lost interest, and as the previous government sought to win the 2010 election, more funding was made available for a range of transport projects without conditions previously discussed. So politics and economics effectively saw discussions of new congestion charging schemes effectively disappear.

Even Cambridge considered a city wide area charge, but it was rejected by the council over a year ago.

However, all local authorities in the UK are legally empowered to introduce congestion charging schemes on their own roads (not national highways controlled by central government or the devolved national executives). With central government budget cuts to local authorities as the newly elected government attempts to abolish the UK’s structural budget deficit in five years, some in local government are seeking ways to make up the difference.

So give Councillor Nichola Harrison (independent, former Liberal Democrat) some marks for bravery in openly suggesting that Cambridge introduce congestion charging, less than two years after it had last been rejected.

Her proposal is for distance based charging, varying by time, place and emissions rating, and for it to generate £120 million (US$191 million) of net revenue for the council. Charging would include off peak periods, and would likely involve options of motorists choosing either GPS based distance charging or prepaying an access charge validated through automatic number plate recognition.

She even set up her own website about her ideas, suggesting a £20 a week cap.

Another £15 million is earmarked for highways maintenance and £30 million would be used for infrastructure projects.”

However there are many opponents. Some believe the roads are “already paid for” as if they are assets that never need renewal. However, a more valid criticism is from those who note that road taxation in the UK (fuel and annual ownership duty) generate many times the money that central government puts into roads. Motorists already feel overtaxed, and like any consumers who believe they already pay too much and don’t get value for money, they will resist paying more.

My view is that it is good to have this debate, it is good to advocate fully funding roads directly from charges from users that vary by time, place and vehicle type. The argument that central government will do nothing in the next few years of budget cuts is a strong one. However, the question is whether motorists are willing to pay more, and if so, on what basis. I doubt that most motorists, already paying 5x what is spent on roads, are willing to pay substantially more. As a result, I doubt that a majority of local body politicians will embrace this in the UK context.

The People's Republic of China has been rapidly building a nationwide motorway network funded by manually collected tolls. However, it has been largely driven at the provincial and city levels, with the national government in Beijing having less of a role than might otherwise be thought.

The official People’s Daily has reported comments from Vice Minister of Transport Weng Mengyong. Tolls are to be used for national motorways and highways, but secondary networks are not to be tolled.

Already tolls on secondary routes are being removed:

“More than 90,000 kilometers of second-class highways financed by government loans in 17 provinces, municipalities and autonomous regions had stopped charging toll fees by the end of last year. In addition, 1,723 tollgates were closed during the period, Ministry of Transport figures released on Tuesday showed.”

What this suggests is a political move to assuage concern about high tolls on roads that most motorists use, and also that Chinese governments at all levels are not lacking the capital to pay for roads.

In addition, regulations will be set to avoid issues such as harsh penalties for failure to pay tolls. A recent case saw a man in Henan Province get life imprisonment for evading US$550,000 worth of tolls (which begs the question as to whether this man has spent his life driving on toll roads!).

However, even the tolls for motorways look like being underpriced:

“Charges will remain low - just enough to pay for the roads' operation and maintenance, Weng said.”

That doesn’t mean recovering the long run capital costs of the roads, but also a bigger concern must be congestion. For the next few years, this wont be an issue, except in major cities, but it does raise the real prospect of China missing an opportunity to use pricing to sustainably maintain high standards of service on its networks.  The lessons of many other countries could be applied in China to the country's advantage.

Secondary routes in China need maintenance too, and heavier vehicles clearly create exponentially higher proportions of road wear compared to cars. Tolling done intelligently can recover those costs efficiently. However, the biggest gains for China in using tolls are in managing demand by charging for congestion (which also means roads are not being underpriced compared to railways), which also sends signals about investment in more infrastructure. In addition, managing congestion helps manage pollution, and tolls can be used to incentivise lower emission vehicles.

I've been to China twice, I've seen the first class networks that have been built, but also the chronic congestion in and around Beijing, and the likely trajectory for China in road infrastructure is for things to become completely unsustainable in the next 10-15 years.  Safety, congestion, pollution and maintaining high standards of service are all the challenges faced today, which will only increase.

In short, China should be congratulated for using tolls so extensively to help build up a first rate highway network, but it needs to apply more sophisticated economics and transport policies to ensure the network remains first rate, and to manage the pressures and demands growth will impose upon it in the next few decades. I fear that scaling back tolls, to address short term local concerns about prices, will be a mistake, at a time when many other countries see road pricing as a way of optimising the management and use of their networks.

South African politician concerned about proposals to introduce tolling on existing roads to fund maintenance. (His concerns are valid if other charges are intended to cover such costs, but tolls can be set to recover long run capital and operating costs, including renewals).

Radio discussion about whether Michigan will embrace tolling, although the key motivation appears to be to toll existing roads to raise money for transport more generally.

New likely bidder for PLUS toll road operator in Malaysia raises share price to record levels.  MMC, a Malaysian private investment company involved in "transport & logistics, energy & utilities and engineering & construction".

New 11.5km toll road to be built in Bali, Indonesia between Sarangan and Nusa Dua, fully toll funded at a cost of 1.6 trillion Rupiah (US$177 million).

Finally, the dreadful floods in Brisbane, Australia have seen construction on the AirportLink toll road suspended, whilst the nearly bankrupt Clem 7 toll tunnel under the flooded city centre remains open (and toll free until Monday).

A new set of tolled lanes has opened parallel to 13km of Highway 1 in Israel between Ben Gurion Airport and downtown Tel Aviv according to the Jerusalem Post.  Buses, disabled drivers and high occupancy vehicles are exempt, but other vehicles can pay according to tolls which vary according to demand.  It will be dynamic, like some HOT lanes in the US, which prices varying between 7 and 25 NIS (New Israel Shekel) (US$1.98-US$7.06).   The target level of service is a minimum 70km/h, with prices highlighted at each end of the lanes so motorists can choose whether they are willing to pay the price.  The lane cost 400 million NIS (US$112.9 million), so it will take some time to recover

The private concessionaire responsible for the lanes is called Shafir Engineering, and it has also built park and ride facilities that connect with an express shuttle bus service.   The capacity is 1,500 vehicles an hour, although initial reports indicate demand being far below capacity (900 during AM peak).  Yet this may simply be a matter of the season and the need to expose motorists to the relative advantages of the new lanes compared to congested existing lanes.  As they get used to the concept, demand ought to lift.

Still, it is a form of congestion based pricing operating in Israel, managed by a private company.  It will be interesting to monitor progress in the coming months and years.

As part of the concession agreements between private companies and the Irish government (through the National Roads Authority - NRA) are rules around when and by how much toll rates must vary according to inflation.  Whilst typically that allows increases, it also requires decreases if there is deflation, which has been the case in Ireland in the past year.   The Irish economy is in serious recession as its property bubble has burst, and the Irish government's public finances have been ruined by a reckless promise to provide 100% state backing for its over-extended banks. 

Five operators have been directed to reduce tolls in 2011, only one has done so and the others face threats of legal action.  According to the Independent of Ireland:

Motoring organisations are calling on motorists to boycott the overcharged roads, yet the problem is fairly fundamental for the private companies responsible for these concessions.   Concessions will have been entered into based upon Ireland maintaining the high level of economic growth it had sustained, fueled by low-interest credit through the Euro, a low tax environment.  With that bubble burst, unemployment has sky-rocketed, along with repossessions of homes, property prices have dropped by up to a third, and with declining incomes have come reduced business, leisure and commuting trips.

Ireland's toll road companies are suffering from declining demand.  This is obviously hurting revenue.  However, those resisting reductions in toll are anticipating that these wont generate enough demand to offset the cut, because the economy means there are low elasticities of demand for the affected roads - which is probably correct.

Yet they have entered into concessions under certain conditions, which are now being legally challenged (as the concession firms believe they are not breaking the law).  Whilst this is likely to be concluded through a combination of negotiations and legal action, the Irish government will not want concessionaires to go bankrupt, nor will it want them to be seen to be profiteering from not fairly applying rules on increases that were agreed to.

However, if they fail, they will simply be onsold to creditors, who will be able to sell the concessions at a major discount.

When Ireland's economy eventually recovers, it will be to the relief of concessionaires, but I doubt if the forecasts for those concessions will remain remotely valid, as they were based on a view of demand that simply is no longer realistic.  Still, Ireland has an excellent, virtually complete motorway network.  They wont get closed, all that will happen is that tolls will vary, and the roads will remain.

While I get back into the flow of what is going on after the break, here are some of the more interesting key news stories in the toll road sector (separate from congestion pricing) around the world in the past week:

Chilean toll road sector sees major ownership change - The Alberta Investment Management Corporation (AIMCo) has purchased a 50% stake in the Autopista Central toll road in Chile from Skanska for SEK6 billion ($885.8 million) according to the Montreal Gazette.  Toll road investments remain interesting to longer term investment funds.

Brisbane's Rivercity Motorway Group has debt sold to hedge funds as future remains uncertain:  As I wrote before, Rivercity Motorway Group is in dire financial circumstances as revenue from its CLEM7 toll road is well down on forecasts due to a number of factors.  The Australian reports that the road generates only enough revenue to cover operating costs, but not to pay interest on the debt.   This is unsustainable, but lenders could well choose to hold out until 2012 when adjoining roads open that will enhance the attractiveness of the route and drive up traffic volumes.

Indonesia to launch major expansion of its toll road network: Trans-Java toll road project is to proceed according to Vivanews.  It is described in this PDF file, and is 1120km in total length.  It is part of a wider infrastructure expansion strategy.  This simply shows Indonesia using tolling as a core means to fund its rapid highway development.

Hope you all have had an enjoyable Christmas/holiday season and New Year's break.  Full service will be resumed shortly.

In London, congestion charge signs have been getting removed around the Western extension and prices updated for the central zone to £10.  However, elsewhere news about tolling has not come to a halt.  In 2011 I expect tolls will continue to grow in popularity to fund new highways, but the bigger questions about moving from fuel taxes to road pricing, and how to manage congestion will remain.  

The technological questions will move towards whether automobile manufacturers should be including IT and communications in new vehicles, which they wont do unless there are market reasons to do so (or it is legally mandated).  In addition, with 3G mobile phone technology including GPS systems and on board maps, the bigger issue will be whether road pricing can actually be implemented using existing consumer equipment.  There may be issues of security, and certification of sufficient accuracy, but these are matters that lend themselves to commercially driven solutions.  I doubt very much if government departments are able to manage the risks and opportunities that arise from this.

One thing to be sure, the technology may continue to develop, but the biggest issue by far is public opinion.  Motorists tend to feel ripped off, ignored or vilified by some politicians, environmental groups and bureaucrats.  Road transport is a critical part of the infrastructure of all countries and cities.  It is about time that the management of road infrastructure faced the incentives and responsibilities that are commonplace with other infrastructure, and moved to the 21st century, instead of being stuck in the 19th century.

The solutions to sustainable funding of road infrastructure, effective congestion management and addressing the external impacts of road transport do not lie in continuing to simply do what has been done before.   It certainly isn't to continually increase fuel taxes by increments and use the money to pay for general government activities.

All the best for 2011 wherever you may be, whoever you may be, as advisor, planner, engineer, lawyer, accountant, politician, bureaucrat, motorist, activist or simply interested observer.

Scott Wilson