Why Busy Cities Are Trying Congestion Pricing for Cars

Photo: Flickr user joiseyshowaa//Creative Commons

In August of 2017, New York Governor Andrew Cuomo declared to a New York Times reporter that “congestion pricing is an idea whose time has come.” In the face of a subway crisis, historically slow bus speeds, and epic gridlock worsened by the proliferation of for-hire vehicles like Lyft and Uber, getting around New York City had truly reached a breaking point.

Now, a year and a half later, New York appears poised to pass some version of congestion pricing in the next state budget, even though we still don’t know any important details about it. Politics!

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That being said, the very idea of congestion pricing is poorly understood, both by elected officials and the general public. Is it a tax? A surcharge? A toll? Should it apply to all vehicles and drivers? Who will be most impacted? Does it work? What is it supposed to accomplish, exactly? And what cities besides New York are trying it?

What Is Congestion Pricing?

There are several different variations of congestion pricing, but the core principle is a surcharge for drivers entering a dense urban core. Some proposals feature variable pricing depending on the time of day to encourage drivers to either not drive into the city at peak hours or shift their journey to another time of day with less traffic.

The current proposal in New York is to establish a congestion pricing charge in what’s known as the Central Business District, or CBD, which is the part of Manhattan south of 60th St down to the Financial District.

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Drivers are expected to pay about $12 to $15 per trip into the CBD (only once per day) and trucks about double that. To give context, coming into Manhattan from the Brooklyn–Battery Tunnel costs about $5.76 currently.

In all likelihood, the payment will use the same toll technology deployed at the region’s bridges and tunnels which scan E-ZPasses or, if a car doesn’t have one, snaps a picture of the license plate and sends the registered driver a bill.

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It is also widely assumed that this charge would already take into account tolls levied on bridges or tunnels so drivers aren’t double-charged the same day.

Where Is Congestion Pricing Currently Used?

Three cities already use congestion pricing: London, Stockholm, and Singapore. The FixNYC panel report, published last year, details all three. In short:

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  • London has had congestion pricing since 2003. Entering what’s called the “cordon zone” from 7 a.m. to 6 p.m. initially cost drivers about $7.50, but that has more than doubled since and the zone has expanded by eight square miles. (The city is also implementing an “Ultra Low Emission Zone,” which will affect a smaller area than the congestion charge, but will be an extra $16.50 or so on top of the congestion price if your vehicle does not comply with certain emissions standards. But this is more of a polluters tax than a congestion charge.)
  • Stockholm implemented a congestion pricing pilot program in 2006 that varies the cost by time of day, ranging from $1.33 to $2.67. In 2007, a public referendum to make the congestion pricing fee permanent easily passed.
  • Singapore might be the least relevant to current congestion pricing discussions because it’s had some form in effect since 1975. Vehicles are charged $2 per crossing.
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Does It Work?

In short, it can, but it depends on what the goal is for that particular city.

Congestion pricing works at reducing traffic and raising some amount of revenue (ie; not costing more to implement than it brings in). But the degree of its success depends on what the goals politicians—and the general public—want to achieve and the specifics of how they plan to do it.

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In London, congestion immediately reduced by 25 percent and vehicle speeds increased 30 percent within the cordon zone, according to a 2008 Federal Highway Administration study of various congestion pricing schemes. CO2 emissions dropped 20 percent. But the city only collected $98 million in revenue the first year despite setting a target of double that.

In the first 14 years of congestion pricing, London received a net revenue of £1.3 billion (roughly $2.17 billion at the average daily exchange rate during that time). Notably, taxis and for-hire vehicles are exempt from the congestion charge in London. With Uber’s rise, as you might guess, this resulted in some congestion returning to the cordon area.

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Stockholm saw similar gains, with a 25 percent increase in vehicle speeds and a 25 percent reduction in congestion. The program currently yields approximately $100 million per year in revenues.

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But... Why?

The idea behind congestion pricing is that road space is currently too cheap. For every driver on the road, the city as a whole incurs costs in the form of more traffic, pollution, and so on. It’s a classic case of what economists call a negative externality. The idea is that right now, transportation options in New York are wildly out of balance. Some bridges cost upwards of $15 to enter the city, others cost nothing, and there’s no real rhyme or reason why other than historical bullshit. Congestion pricing will help to even things out.

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Take Manhattan, for example. It’s one of the most expensive real estate markets in the world, yet someone can drive from Brooklyn into Manhattan for free. As one prominent congestion pricing researcher found in 2009, “Driving a car into Manhattan on a weekday causes about $160 of negative externalities to everybody else.” This is why it’s called congestion pricing, because it’s about making drivers pay something approaching the actual cost of the road space they’re utilizing.

In turn, that money can go towards making more efficient forms of transportation better, something desperately needed in a city like New York, which is why Cuomo suddenly decided congestion pricing’s time had come in 2017 despite aggravating gridlock being a fixture of our fair city for decades.

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I’m A Driver. I Don’t Want to Pay More For Driving Into the City. I Should Oppose Congestion Pricing, Right?

I’m not going to tell you what to think on this, but I will urge you to resist the reflexivity of “why should I pay for something I currently get for free (or, at least, less)” logic. Hear me out.

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Driving in Manhattan is an objectively terrible experience. It’s not so bad if you do it in the dead of night when traffic is much lighter, but in general, it’s not what you picture when you imagine great driving. Ever.

New York City’s Department of Transportation reported average vehicle speeds in the CBD have fallen from 9.1 mph in 2010 to 7.2 mph in 2016, the latest year for which data is available. The Midtown Core, a part of Manhattan within the CBD, is even worse, with vehicle speeds as low as 5 mph.

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As noted above, one of the key benefits of congestion pricing is that there are fewer vehicles on the road. Therefore, traffic moves faster. Those who do drive should welcome this change, because when they have to (or want to) drive into Manhattan, they will get to where they’re going more quickly.

What About the People Who Can’t Afford the Fee?

There is very little data to support the argument made by some of its opponents that a large number of low income New Yorkers would be subject to the congestion pricing fee on a regular basis. In fact, proponents say most low-income New Yorkers would benefit from it.

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A study by the Community Service Society found just four percent of outer borough residents commute into the CBD by private vehicle, and only two percent of the working poor would be regularly subject to the charge. In contrast, 56 percent of outer borough residents use public transportation to regularly commute into the CBD, which would benefit from the revenue collected and faster bus speeds. The Tri-State Transportation Campaign, a regional transportation advocacy group, likewise found that each state legislature district has, at most, single-digit car commuters into the CBD.

The fact of the matter is, most New Yorkers rely on public transportation to get around and virtually any form of congestion pricing could, in theory, improve service.

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OK, But This is New York. They’ll Screw It Up Somehow, Right?

Oh, hell yes. As mentioned above, the details are still being worked out in the state legislature, and by “details” I mean pretty much everything about who would be subject to the charge and who decides the fee, among other things.

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The biggest potential for New York to screw this up is by making too many exceptions, or carve outs, for who is subject to the charge. One of the key issues with London’s congestion pricing, and one of the reasons why its impact has leveled off over time, is that it has a number of exemptions and discounts which blunt the impact the fee can have.

As noted above, taxis and for-hire vehicles are exempt from London’s fee, and New York for-hire drivers believe they should be exempt as well. Yet, it is precisely the proliferation of for-hire vehicles that have been the main driver of worsening traffic. To exempt them would be to exempt the main group responsible for the growing problem.

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Photo: Mary Altaffer/AP

Similarly, New Jersey politicians are trying to negotiate carve outs for their constituents who commute into the city, even though it’s not clear why New York politicians would grant exemptions to a state that itself has chronically underfunded and mismanaged its own commuter rail service which goes to New York’s Penn Station.

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New York Mayor Bill De Blasio has repeatedly voiced concern about drivers coming into the city for doctor’s appointments and other “hardship” exemptions. Again, there’s no evidence to suggest people coming into the city for medical appointments are more likely to drive than take public transportation or, for that matter, are disproportionately low income. Nor is he (or anyone else) proposing carve outs from subway fares for people going to the doctor’s office.

Carve outs are not inherently ridiculous, but the more carve outs there are, the less effective congestion pricing will be. Aside from collecting less revenue and having more cars on the road, it erodes at the idea that the charge applies to everyone. It would only reinforce other special interests in their belief that they, too, ought to be exempt. It makes the whole concept appear less fair.

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But the issue to watch is why New York is finally passing congestion pricing in the first place. Lawmakers have been very explicit that the primary goal is to generate funds for the Metropolitan Transportation Authority. The MTA is an historically mismanaged and bloated bureaucracy with a $16.7 billion annual budget that is nevertheless projecting operating deficits of almost a billion dollars by 2022 if congestion pricing isn’t enacted (debt payment accounts for 16 percent of the MTA’s annual budget because the city and state have not given the MTA the money they’ve promised for mega-projects that have gone horrifically over budget, which forces the MTA to borrow the money instead). This comes a decade after the state passed a different slew of taxes to solve the MTA’s funding mess, which, spoiler alert, didn’t solve the MTA’s funding mess.

Will Congestion Pricing Solve Traffic Problems in Cities?

Congestion pricing can be an effective way for cities to tackle multiple problems with one policy, but it is not a panacea for any one problem. At its best, it’s a balanced policy that, in conjunction with other measures like pedestrianizing more streets and installing more bike and bus lanes, helps to not only discourage people from driving in dense urban areas but giving them more attractive alternatives.

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Furthermore, some cities like Paris, Oslo, and Madrid have made impressive strides at reducing car usage without implementing any form of congestion pricing. Instead, they simply made parts of the city off-limits for most cars altogether. This didn’t raise any revenue, but it’s worth remembering that New York hopes to raise $1 billion a year through congestion pricing, less than the $1.5 billion a year in a .33 percent payroll tax levied on residents of the MTA region in 2009. There are always other, and more reliable, ways to raise taxes.

Which brings us to the final question about New York’s congestion pricing plan: what if it doesn’t raise enough money? Does that mean it succeeded? Or that it failed? If the congestion fee works too well as it did in London, the MTA will yet again be in another funding crisis.

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In this way, New York is potentially setting congestion pricing up to fail. It will either fail softly by not deterring enough driving so as to get the traffic and environmental benefits—in which case it will simply look like another toll—or it will fail hard by deterring drivers too much and not generating enough money for the beleaguered MTA, leaving us right back where we are now.

Should Other U.S. Cities Consider Congestion Pricing?

Los Angeles and Portland officials have at least floated the idea of possibly considering something like congestion pricing. But it’s dangerous to assume congestion pricing will solve anything on its own. It must be part of a larger toolbox of policies that give people better alternatives for getting around.

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The worst possible outcome for congestion pricing, in New York or elsewhere, is that everyone considers its implementation a job well done. Instead, it’s merely the first step.

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About the author

Aaron Gordon

Senior Reporter, Investigations & Technology, Jalopnik