Search results for: “road pricing”

• NYC’s congestion relief zone is now on indefinite pause

  Boy, congestion charges are a pain to implement. Back in 2018, I wrote that New York City was considering a congestion charge for drivers entering Manhattan below 60th Street. Then in 2019, about a year later, I followed up with this post saying that the plan could be adopted as early as April of that year!

  That didn’t exactly happen. But I followed up again with a post in 2022 saying that New York City was still considering a congestion charge. And ultimately, it did finally get approved, even if it did take much longer than expected. It was rebranded a congestion relief zone (“relief” sounds a lot less offensive than “pricing”), and it was set to come into effect on June 30, 2024.

  This remained the situation until the first week of this month, which is when NY Governor Kathy Hochul held a surprise press conference and announced that the congestion relief zone would be placed on “indefinite pause.” I think that means cancelled. And it happened less than a month before the state was finally set to start collecting money.

  There is a legal question around whether she actually had the authority to intervene in this way, but let’s put that aside for now. Irrespective of that, this is a disappointing outcome precisely because we know that road pricing works. If you have a traffic congestion problem, price it, and then you will have less of it.

  What’s even more disappointing about this particular instance, though, is that many of us were looking to New York City to show us the way. We were looking for the most walkable and transit-rich city in the US to show people that, hey, road pricing works, and it won’t decimate your CBD.

  It is shocking to me that traffic congestion is allowed persist in the way that it does in our cities, and that there remains zero political will to actually address it. Instead of action, we like to preoccupy ourselves with red herrings. If only we didn’t have streetcars, Ubers, and so many bike lanes, then there wouldn’t be congestion.

  So what hope do we have now that even New York won’t do what is bold and right? Lots, as always. Cities, now is your chance to do what New York was too scared to do. Who will lead?

  2024.06.19

• The price of car ownership certificates in Singapore just hit a record high

  If you were a city-state only slightly larger in area than the City of Toronto, you would think about space very differently. There would be no option to just sprawl further out. And that is the case for Singapore, which is approximately 734 km2 compared to Toronto’s 630 km2.

  So it’s no wonder that Singapore carefully manages how people use and own cars. Not only were they the first country in the world to implement a congestion charge (road pricing), but they also force people to buy 10-year “Certificates of Entitlement” in order to own one.

  These are auctioned off every 2 weeks and the overall supply of them is controlled by the government.

  Currently, the starting price for a COE is S$104,000 (roughly the same in Canadian dollars). This is a record high and up nearly 3x compared to 2020 when fewer people wanted to own a car. However, if you’d like a COE that works on all sizes of cars, that is right now S$152,000.

  It’s hard to imagine a system like this ever flying in a large country like Canada. But if Canada were the size of just Toronto, you can be sure that we would likely have no other choice. That said, this is more or less how we treat new housing: we’ve made it difficult and expensive for new entrants.

  2023.10.09

• Don’t screw it up, New York

  New York City is set to become the first in the US to implement a congestion charge (a form of road pricing). I first wrote about this back in 2018, and then again in 2019, but now it is looking more and more like it may actually happen sometime next year.

  I think all urbanists agree that this is an important step in the right direction. But some are now worried that New York isn’t going about it in the right way. Here is an excerpt from a recent Vice article by Aaron Gordon:

  With all these plans, you could be excused for thinking New York is doing congestion pricing—a potentially transformative policy that would be a first in the nation—right by not only charging drivers to access some of the densest, most valuable land in the world, but also giving them alternatives. Unfortunately, New York isn’t doing that, and in fact looks set to completely screw up congestion pricing so badly it may discredit the policy in a way that makes it harder for other cities to adopt it. Rather than approaching it as a lynchpin to a wide-ranging effort to reshape Manhattan’s relationship to the private car, congestion pricing has become solely about money—specifically, paying off enough of the credit-card bill New York has run up with a variety of ill-conceived and poorly-executed projects that it can get more credit cards.

  You can rightly say that this is decades in the making. Mayor Bloomberg first proposed the idea back in 2007, and I’m sure there were others before him with a similar idea.

  So Gordon raises a valid point: It’s important that NYC gets this right. Otherwise, it’s going to be that much more difficult for other North American cities to even think about implementing road pricing.

  For the full Vice article, click here.

  2023.09.19

• Venice announces new “entrance fee”

  

  Over the weekend, we spoke about using road pricing as a way to correct supply and demand imbalances on city roads and highways. Because it turns out that when roads, or anything else for that matter, are free, people tend to use them a lot more. It’s why when you suddenly submeter utilities in an apartment building, consumption tends to drop off significantly. Now it’s no longer “free”.

  It’s for this exact reason that Venice — a city that has been complaining about too many tourists for many years — has decided to implement a new entrance fee. Starting spring 2024, day trippers will have to pay €5 to enter the “old city” of Venice.

  If you own a home there, you’re exempt because presumably you’re already paying property taxes. And if you’re staying overnight, you’re also exempt, because presumably you’re going to be paying whatever hotel taxes the city levies. But if you’re just coming in for the day, you’re going to need to pay.

  Now, I don’t know if €5, structured in this way, is going to fully address the city’s overtourism concerns. Maybe it needs to be a lot more. But it is a step in the right direction. If you have too much demand for a certain amount of supply, you can generally lower demand by increasing the price. Perhaps the only exception is a Birkin bag. Apparently you can charge any price for these.

  Photo by Martin Katler on Unsplash

  2023.09.13

• Toronto needs money

  For next year’s budget (2024), the City of Toronto is projecting a $1.5 – $1.7 billion budget shortfall. And over the next 10 years, this shortfall is expected to grow to nearly $47 billion if changes aren’t made. This is according to a recent report prepared by Ernst & Young and Strategy Corp. So right now, all of this is being looked at and debated by Council.

  Where are we going to get this money?

  One persistent debate is whether the city actually has a revenue problem, or whether it’s simply an expense/spending problem. I can’t say that I’ve scrutinized the city’s expenses at any length, so I’m not going to get into that level of detail today. For this post, I’d like to focus on two specific things. The first is property taxes.

  Here is a figure, from the report, showing residential property tax rates across southern Ontario:

  

  What you will see is that Toronto has the lowest rate of the 35 municipalities that they looked at. Now obviously there are some nuances to consider. The average home price in Toronto is higher than it is in, say, Sault St. Marie. Toronto also has a large commercial property tax base. But even still, historically speaking, Toronto has tended to increase its residential property taxes at or below the rate of inflation.

  This is a problem. And it is the exact same problem that we have talked about on this blog in regards to residential rent controls. If you own an apartment building where the rents are capped and your expenses are, therefore, growing faster than your revenue, you are (1) highly incentivized not to invest in the apartment (you can’t afford to) and (2) eventually going to hit a financial wall.

  Sound familiar? As far as I can tell, that is, at least partially, what is happening here.

  Secondly, one of the first things that I did when I opened the report was run a search for “road tolls” and “congestion charges”. Regular readers of this blog will know that this is something I feel strongly about. Here’s what I found:

  In 2017, when the City considered implementation of tolls for the Gardiner and the DVP, staff estimated that a $2-per-trip toll would generate $5.6 billion in 10 years. The province has refused several requests to consider these options, with the Minister of Transportation rejecting any discussion of uploading or tolling as recently as December 2022.

  This is also a problem. One of the general rules with taxes is that you should ideally tax the things you want less of. Hmm. So why not tax traffic congestion? There is no question that it works. There’s lots of evidence from all around the world. We just lack the political will to actually do it. Instead, we pay lip service with solutions that don’t work.

  At the same time, if we were to actually implement road pricing, I don’t believe that a flat toll is the way to go. $2 also seems low. The best practice is dynamic road pricing that fluctuates based on actual congestion levels. Meaning, if you’re driving at 5am, expect a low rate. And if you’re driving at 5pm, expect a high rate.

  Virtually overnight, we know this would do at least three things: (1) it would reduce/eliminate traffic congestion (congestion levels would become a function of pricing); (2) it would reduce overall carbon emissions in the city; and (3) it would take a meaningful chunk out of this $47 billion budget shortfall.

  2023.09.10

• Manhattan is still looking at a congestion charge for south of 60th Street

  We talk a lot about congestion charges and road pricing on this blog. Here’s a list of some of those posts. I found 46 that were tagged with “road pricing.”

  I continue to believe that it’s the only way that big cities can effectively solve the problem of traffic congestion. It’s not being caused by the bicycle lanes that were just added to your street. It’s not the new COVID street patios. And it’s not the new apartment that was just built with too many parking spots.

  The problem is mispricing.

  If you want free roads, then you don’t get free-flowing traffic. That’s how this equation works, which is why I have always thought it a good idea to dynamically price roads based on demand, and then to direct those funds toward more efficient forms of mobility — such as transit.

  Despite all this, it’s not a very popular approach in this part of the world. Toronto looked at road pricing back in 2016, but we got nervous and backed away from it. New York City has also been looking at a congestion charge for Manhattan south of 60th Street for at least 4-5 years. But this one appears to still be on the table.

  According to this recent CityLab article, New York’s congestion prices could look something like this (note that this chart includes other pre-existing tolls):

  

  But with some exceptions (I think this is an interesting approach):

  Primary residents of the Manhattan central business district, which is south of 60th Street, and New York State residents with adjusted gross income of less than $60,000 would be eligible for a state tax credit equal to the amount of the new tolls, paid during the taxable year.

  In total, this current pricing scheme is expected to generate an additional $1 billion in annual revenue for the city’s transportation authority. The MTA also plans to bond against this revenue and raise an additional $15 billion for new transit projects.

  This sounds like a reasonable approach to me.

  2022.08.11

• There is no such thing as a free lunch

  Inclusionary zoning has been on my mind this week and so I thought I would revisit some of my old posts on the topic. I wrote about it here, here, here, here, here, and probably in a bunch of other places that I am forgetting right now. A number of these posts go as far back as 2015-2016.

  As well-intended as inclusionary zoning may be, I have never been able to get my head around it. There are lots of cities with inclusionary zoning polices in place and what history generally tells us is that it tends to reduce overall housing supply and increase market rents/prices.

  This makes intuitive sense when you consider that inclusionary zoning is in effect a tax on new development. And one of the only things I remember from my economics classes is that it’s generally good practice to tax the things we want less of. You know, things like cigarettes and carbon.

  This is why I have also been a strong supporter of road pricing over the years on this blog. Traffic congestion is bad (demand also happens to be relatively inelastic). So tax it and redirect the funds toward transit.

  Housing supply, on the other hand, isn’t bad. It’s pretty good and fairly useful. So in my simple mind, I don’t know why we would want to apply a tax to it instead of figuring out way to simultaneously encourage and incent the supply of new affordable housing. Here’s one idea.

  2021.05.14

• A decentralizing or centralizing force?

  I was on two panel discussions over the last week and, as is the case with all real estate panels, the topic of parking invariably came up, as did the impact of autonomous vehicles.

  There seems to be a general consensus that the advent of driverless cars will result in less demand for parking. Every developer I know is trying to build as little parking as possible and is thinking about how – when the time comes – they might convert their parking into something more productive. I have yet to speak to anyone who is building excess parking in order to prepare for autonomy.

  Where there’s a split, however, is whether autonomous vehicles will represent a decentralizing or a centralizing force for our cities. Historically, new technologies have lowered transportation costs and encouraged decentralization. Before the advent of rail, the US population hugged the coasts, because it was cheaper to navigate across the Atlantic than it was to move inland.

  A similar phenomenon also played out with our streetcar suburbs and with our car-oriented suburbs. These new technologies made it possible for people to travel further distances in order to get to work and other places. So it is not at all surprising that many people today are inferring that autonomous vehicles will produce this same outcome.

  But there is a counterargument. 

  We know that the demand for transportation services is highly elastic. Uber and other ride sharing apps have demonstrated this to us. Lower fares translate into dramatic increases in demand. So the opposing argument is that as the cost per kilometer drops – autonomous electric vehicles are going to be much more cost effective to operate – we’re going to see boatloads of induced demand.

  This induced demand will then force us to look toward road pricing and other demand management tools in order to cope, which then begs the question: How much cheaper and more convenient will autonomous vehicles really be? 

  At the same time, it is important to acknowledge that autonomous vehicles should correct many of the inefficiencies currently caused by humans acting like humans. There is also the opportunity to operate these autonomous vehicles more like public transit than as personal vehicles. And that will have a profound impact on urban mobility.

  Still, it is not yet clear, at least for me, that autonomous vehicles will be the decentralizing force that many assume they will be.

  2018.11.21

• Portland is considering whether to solve traffic congestion

  

  Chris Hagerbaumer is the deputy director of the Oregon Environmental Council. She recently delivered the below testimony on “variable traffic-based tolls”, a form of road pricing. This is something we have talked a lot about here on the blog. 

  Oregon is currently looking at implementing this on two freeways in Portland, which is why Chris delivered this testimony. And as many of you know, I am very much in support of this demand management approach. So here you are: why congestion pricing makes sense for Portland (taken from City Observatory).

  ——————————————————–

  The question in front of you is: how do we actually solve congestion, solve it in a way that is the least cost to the taxpayer, and in a way that doesn’t result in more pollution. When we add more supply (in other words, build more roads) we end up exactly where we started when it comes to congestion (due to induced demand), we spend billions of taxpayer dollars (much of which comes from drivers who aren’t the ones demanding more road space), we harm surrounding communities as highways encroach into neighborhoods, and we pollute the air and heat up the planet.

  Induced demand is the fact that when you add freeway capacity it induces longer trips, more sprawl and more driving. Traffic is like a gas, expanding to fit whatever space there is. In one infamous example, Texas spent nearly $2.8 billion expanding Katy Freeway to 26 lanes and congestion has actually worsened.

  Building new roads is a supply-side solution that simply doesn’t work.

  An effective, least-cost, environmentally sound way to address congestion is the proposal before you: congestion pricing to manage demand. Drivers pay an automated fee to enter highly congested roads at peak hours; in return, they travel smoothly and reliably, getting where they need to go on time. Prices are set at the lowest possible level to free up just enough road space to eliminate bottlenecks.

  When you eliminate bottlenecks and get traffic flowing freely, you have—in essence—added capacity. You no longer need to add new lanes, you save taxpayers a bundle, and you reduce dangerous auto and truck exhaust.

  Congestion pricing is a demand management solution that’s proven to work and does so in cities around the world. Drivers opposed congestion pricing at first: no one wants to pay more. But that opposition of 60% or more turned into support of 60% or more after congestion pricing was implemented. People’s opposition turned to support because they now get that it works—they experience the value.

  Equitable application of congestion pricing absolutely requires mitigating diversion to local streets. But note that congestion pricing actually pulls many drivers who were already cutting through local roads back to the highway because those drivers who were stuck in traffic now have an option to get where they need to go, on time, for a small price.

  Equitable application of congestion pricing also requires significantly increasing transit service and other travel options in the corridor and considering other means to make the system work for low-income commuters who must drive during peak hours, such as targeted discounts or exemptions.

  We think of highways as free and we think of driving as freedom, but by investing almost solely in infrastructure for cars over most of the 20th century and into the 21st century, we created a transportation system that is costly not only for our pocketbooks, but for our very health and wellbeing and our region’s economic prosperity, a transportation system that contributes to the existential risk of runaway climate change.

  You have an opportunity to make a decision that will lead to less time stuck in traffic, healthier air, and more economic prosperity for the region and state. We hope you embrace that opportunity.

  Photo by Zach Savinar on Unsplash
  

  2018.07.31

• Lessons in transit success

  

  Dylan Reid of Spacing was recently at the International Transport Forum in Leipzig, Germany and has been publishing some interesting posts related to transit. Here is one about what makes transit systems succeed and fail.

  I really like the point that we too often think about transit projects as culminating with a big opening, while overlooking the importance of operations. It’s a bit like focusing on the wedding ceremony and forgetting that the ceremony is only really there to (hopefully) mark the beginning of a lifelong union.

  One of the reasons why this is important is because, as Reid points out, “fares need to provide a strong and consistent proportion of the agency’s funding.” So you need bums in seats, which means you need to build the right transit in the right locations. In other words, a new subway line through a low density suburb will probably result in an abysmal farebox recovery ratio.

  At the same time:

  “…fares will rarely cover all of an agency’s costs. Hong Kong’s Kam noted that, to be truly autonomous, an operator needs an additional dedicated, independent source of revenue. This cannot be based on additional transit-related non-fare revenue (e.g. advertising) – such revenue is helpful but never significant. It needs to be an external source. In Hong Kong, it is based on the agency’s extensive property ownership, but in other cities it could be a congestion charge, a dedicated sales or income tax, or other mechanism. Only with such a source can the agency have the independence to make its own choices for reinvestment and improvements.”

  This is one of the reasons why I am such a strong supporter of road pricing.

  Another point that Reid makes is that transit agencies should always have a consistent pipeline of new projects, rather than erratic periods of expansion. This makes a lot of sense given what it takes to ramp up for a large infrastructure project. But it’s obviously contingent on having sustainable funding sources.

  Click here if you’d like to read the rest of Dylan Reid’s post.

  2017.06.13