Tag: transit

• More on electronic road pricing

  We recently started a Lunch & Learn program at TAS. I did the first one on electronic road pricing and followed-up with the blog post below. Let me know what you think. It’s also cross-posted here on TAS’s website.
  

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  Last week at TAS I kicked started our new Lunch & Learn program with a talk on electronic road pricing. It was based on an HBS case that I had prepared for a pricing class I took at the Rotman School.

  The case is essentially about traffic congestion in Hong Kong and a decision to either build more road (a bypass road running adjacent to the harbour: The Central-Wan Chai Bypass) or implement an Electronic Road Pricing (ERP) system, similar to what was implemented in Singapore in the 70s and in London in 2003.

  My own view is that road pricing makes a lot of sense. And I’ve written extensively about it on my own personal blog. But to quickly summarize the economics behind it all, take a look at this graph:

  

   

  What this graph plots is the marginal cost of products and services with a fixed capacity.  An example of a product or service with a fixed capacity would be a road. Roads can only handle a certain amount of drivers before it becomes unusable (gridlock). What this graph tells us is that once you reach that capacity—variable k in the graph—the marginal cost goes from zero to basically infinity.

  In laymen terms, it’s telling us that at 4am when nobody is on the road, the cost—to society, to productivity levels, and so on—of adding each one additional driver is basically zero. But, as soon as you hit capacity, at say 830am, and traffic is at a standstill, the cost shoots way, way up!

  So how do you solve this problem? Well, you price congestion. This invariably removes or forces drivers to other times of day and makes it so that demand for the road drops below the available supply. Then the road is able to function as it’s intended to. I don’t know about you, but this makes a ton of sense to me. What good are roads if they’re clogged with traffic?

  What I’d like to do now is bring the discussion back to Toronto. For those of you with an interest in transit, you’re probably aware that Metrolinx has a “Big Move” transit and infrastructure plan that’s going to cost the region $2 billion a year to implement. I view this as investment in our region and so I think it’s absolutely the right move.

  However, the billion dollar question is, where is the money going to come from? Earlier this year Metrolinx proposed 4 main revenue tools. They are:

  – A 1% sales tax (estimated to raise $1.3 billion annually)
  – A business parking levy (estimated to raise $350 million annually)
  – A $0.05 fuel and gasoline tax (estimated to raise $330 million annually)
  – And a 15% increase in development charges (estimated to raise $100 million annually)

  What I would suggest is that there should be a road pricing plan in this list in addition to—or instead of—some of the items listed above. Taxes are just taxes. And they discourage consumption depending on the elasticity of the demand for those items.

  However, I would argue that a well executed road pricing model should be considered not as a tax, but instead as an incredibly accurate way to price roads according to actual usage patterns and costs incurred. Think of it like time-of-use utility billing. Do you think of high-peak utility billing as a tax or as simply the price to use the service when demand is the highest?

  The benefits of a road pricing system would be numerous:

  – We’d get a consistent revenue stream for transit investment in the region (instead of having to rely on government hand outs)
  – We’d be helping to decouple transit building from the political process (because Metrolinx would now make its own money)
  – We’d eliminate traffic congestion (yes, it can be done)
  – We’d increase productivity levels across the region (people will actually be able to get around)
  And we’d be reducing our impact on the environment by encouraging alternate forms of transportation

  This is an incredible list of benefits. However, I think one of the challenges with implementing electronic road pricing is that it’s often misunderstood. People just view it as a tax. Hopefully by looking at the economics behind it all, it has become clearer that it’s actually a bit more nuanced than that.

  2013.12.02

• Turning St Clair and Spadina into LRT

  I’ve talked before about how Toronto doesn’t currently have any true light rail transit lines. LRT does not equal what we have on St Clair Avenue. The stops are spaced far too close together. It’s just a streetcar on its on right of way.

  This is better than a streetcar that doesn’t have its own right of way, but it could be better. So here’s an idea for better optimizing some of the transit infrastructure we already have: let’s convert the St Clair and Spadina streetcar lines into true LRT.

  Here are 3 things we could do.

  1.

  First, we need to get rid of some stops. Let’s take the stop spacing being proposed for Eglinton Avenue and apply it to St Clair Avenue and Spadina Avenue. By stopping less, it means performance goes up. Think about how much time is wasted every time the streetcar has to stop for people to get on and off. This is why New York has express trains.

  Alternatively—and instead of actually getting rid of some stops—we could also just operate two types of stops: rush hour stops and off-peak stops. In the case of off-peak stops, the streetcar would simply skip them during rush hour. The cost of implementing this would be signage and consumer education.

  2.

  Second, we finally roll out a better payment system. While tokens do give me a kind of 1960s nostalgia, I hate change and I hate fumbling with microscopic tokens in my pocket. Why isn’t there an app for this?

  But more importantly, if we had a better payment system we could transfer the point of payment from the actual streetcars to the stops themselves. This would mean that you’d need to pay in order to gain access to the stop itself. The benefit of this though is that it streamlines onboarding. Customers can now just walk onto the streetcar, like they do on the subway.

  And if you’re thinking about those times where you give up waiting for a streetcar and just hail a cab, well we could simply make the fare refundable if you leave at the same stop. This type of system would also open up the possibility of distance based fares (see London, Tokyo, etc.)

  3.

  Third, put the LRT lines on the subway map and operate them with the same rigour. Right now the customer experience gap between subways and streetcars is huge. Subways run on time and streetcars are completely hit or miss. There’s an excuse for streetcars that run mixed in with traffic, but I don’t see why we can’t make light rail (using its own right of way) just as predictable as subways. I used to take the LUAS in Dublin everyday and it was a fantastic experience.

  We really need to start taking transit more seriously in Toronto. I don’t know about you, but I’d much rather be known around the world for having the best transit system than for having a debaucherous mayor.

  2013.11.21

• Walking, biking and taking transit

  Almost 70% of commutes in New York City are done by walking, biking or taking transit. That’s the highest of any American city according to Atlantic Cities:

  

  Probably the biggest driver of this is urban density. That’s because walking, biking and taking transit becomes impractical when you live in a sprawling city. If you want to get people out of their cars, pay attention to the urban fabric of your city.

  As someone who used to drive to work (out of necessity), but now relies predominately on public transit, I see one of the big advantages as time. If you’re like me, you probably feel time poor. Taking transit gives me a block of time in which to respond to emails, catch up on reading and generally just think.

  In fact, this blog post was written on the subway.

  2013.10.30

• Transit rant

  Transit planning is absolutely and utterly broken in Toronto. Over the past few years, it has become abundantly clear that our current methods are completely ineffectual. We’re entirely useless at delivering transit infrastructure to the most important economic region in Canada. 

  The process is deeply political, and with all three levels of government involved, as well as countless agencies, we’re getting absolutely nothing done. And when we do manage to achieve some level of progress, such as provincial funding for the Scarborough subway line, it turns out that fact and evidence would suggest we’re actually headed in the wrong direction.

  It’s an unfortunate situation that we’ve gotten ourselves into, because transit and infrastructure have such a profound impact on productivity levels and our economy as a whole. And yet we’re just sitting back while our politicians fight over transit investment according to what best suits their voter bases.

  Politicians should not be making these decisions. At this point they’ve proven their inability to make effective progress and so I believe we need to strip them of this responsibility. Part of the problem is that we have a mismatch of time horizons: politicians need quick wins, while transit investment is a long term game.

  What we need is an entity – ideally one entity – that isn’t reliant on ad hoc funding hand outs. It needs a sustainable funding source and the power to make decisions about where infrastructure investments will be made in our region. We can’t continue to screw this up. Transit is far too important.

  2013.10.14

• Is Hong Kong’s transit model exportable?

  Hong Kong’s MTR (Mass Transit Railway Company) is one of the most profitable transit systems in the world. Rider fares amount to roughly 186% of its operating costs.

  In comparison, Toronto recovers about 70% of its operating costs from fares and New York recovers 57%. This means that in the latter two cases, government subsidies are required to keep the systems in operation.

  On top of this, Hong Kong relies on a unique “rail plus property” model, meaning that they also use the profits from real estate development activities to fund transit expansion. Here’s more on how it works:

  “In a value capture scheme, MTR is granted low-cost land around its future stations [from the government]. It then develops the land and uses the profits to pay for system expansion. Through this system, MTR has managed to build subways and elevated rail lines throughout the islands that make up Hong Kong, largely paying its own way.”

  Overall, this seems to make a lot of sense. Which begs the question, could this model – specifically “rail plus property” – be exported to other cities?

  NextCity asked this question with respect to New York, but came up with 3 problems: first, New York has an operating shortfall, unlike Hong Kong; second, New York doesn’t have the same amount of government owned land; and third, construction costs are way higher in NYC.

  The first thing that comes to my mind is, why are Toronto and New York so bad at farebox recovery? Our infrastructure is not self sustaining; we’re reliant on government handouts.

  Looking at fare pricing, there’s a big difference between the cities. Hong Kong charges based on distance traveled, whereas Toronto and New York charge a flat rate. Intuitively, dynamic pricing makes sense, since you’re then able to capture shorter rides that would otherwise be replaced by walking (or other alternatives) and you capture more value during longer rides.

  The other big difference is the hyper density of Hong Kong, since we know there’s a correlation between urban density and transit ridership. I would assume that the demand for most of their rail lines is fairly high. And it’s for this exact reason that I’m opposed to the new Scarborough subway line here in Toronto. Building subways in areas of the city without the densities to support it will only exacerbate our farebox recovery problem.

  As for the other two points regarding government land and high construction costs, I have to believe that there’s a way to create a “rail plus property” model that circumvents these concerns.

  For one, why does it have to be government land? Could we not reward developers with additional density if they build a subway station in the basement of their new building or contribute to a transit fund? The city already allows additional density near subway stations. Why not do the same for locations where we simply want a station?

  Transit is too important not to get right. I hope Toronto will soon understand that.

  2013.10.02

• Subways – except the downtown relief line

  Politics rewards consistency. Even if you’re wrong, it’s better to be consistently wrong than come across as wavering – however noble and rational the intentions may be. And that’s exactly what happened with Rob Ford and his commitment to subways, subways and subways.

  John Lorinc of Spacing wrote an interesting piece yesterday on how, despite all the debating that went on, Ford is delivering what he said he was going to deliver: a subway. It doesn’t matter that all technical and financial considerations were thrown out the window, he got it funded.

  As I said earlier this week, I think the Scarborough line is the wrong subway to be building and that the downtown relief line is infinitely more important for the region. However, Lorinc makes a good case in his article for why this line will not be funded despite the current focus on subways, subways and subways:

  “Fourth, it’s important to recognize that there will be one notably perverse exception to the foregoing, which is the [Insert Euphemism Here] Relief Line. I do admire Josh Matlow’s advocacy on this front. But Ford will never take up the DRL cause because (i) he doesn’t get the purpose of said extension; and (ii) because the project doesn’t butter his bread, electorally speaking. I’m guessing it will be years before someone with the mayor’s block-headed tenacity emerges to champion a line with a politically inconvenient name and an eye-bulging price tag.

  In fact, the sheer heft of the relief line will allow marginally useful yet politically supported subway projects — extensions in the west end to Sherway Gardens or up Yonge to Richmond Hill – to continue to elbow their way to the front of the line, just exactly as the Scarborough subway project did. Indeed, because we no longer care, at any level of government, about subjecting our transit investment choices to a rational policy framework, the most crucial project in the GTA will always lose out in the funding lottery because it has the most diffuse constituency and the most conceptually complicated purpose.”

  The disparaging thing about these two paragraphs is that it’s a sad reality.

  2013.09.25

• Cost of a car

  Every time I bring my car in for service, I’m reminded of how expensive it is to maintain one. Between car payments, insurance, gas, parking in the city and service, owning a car eats into a lot of disposable income.

  So for cities where the residents don’t need a car to get around, there’s potentially a lot of additional income that can get placed in other sectors of the economy.

  Richard Florida, and others, have argued that we’ve historically been overspending on housing and transportation, and that it restricts capital from flowing into other, more productive, areas of the economy.

  I’d be curious to see a study that compares transportation spending versus other local economic measures. How would a driving city compare to a public transit or biking city?

  2013.08.28