International Perspectives on Road Pricing (2005)

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3Committee Findings and Recommendations Immediately after the symposium’s closing session,the conference committee convened to develop itsconsensus findings and recommendations. Consider- ation of the content of the conference presentations, dis- cussion, and resource papers led to the committee’s identification of a series of key findings, recommended topics for future research, and suggested areas for inter- national cooperation. In addition, the committee drew on the resource papers and presentations made through- out the symposium to identify a number of potential policy initiatives that were frequently cited in the dis- cussions. This summary of the committee’s findings and recommendations addresses each of these issues. KEY FINDINGS The state of the practice in road pricing has advanced considerably since the publication of Curbing Gridlock in 1994, at which time congestion-based pricing schemes were largely a theoretical proposition rather than a practice. More recent contributions were the European Commission’s 1998 White Paper on Fair Pay- ment for Infrastructure Use, which made a general call for the phased introduction of marginal social cost pric- ing for infrastructure use, and its 2001 White Paper on European Transport for 2010, which specifically called for the gradual replacement of existing transport system taxes with more effective instruments for integrating infrastructure costs and external costs. Over the past 10 years, many pricing experiments have been implemented in various forms and in several countries. Much of the experience of the past decade has been more successful than anticipated, with fewer adverse impacts and greater public acceptance. This pos- itive experience—which is occurring in the context of increasing financial necessity, diminishing opportunities to add capacity, and advancing technological ability— makes it important for policy makers to continue to enable and learn from further experimentation. Despite expanded use of road pricing in Asia, Europe, and the United States, the pricing structures used in these parts of the world vary. As noted in the resource papers prepared for the symposium, the best- known road pricing projects in Europe and Asia involve cordon or area pricing, typically with drivers paying a fee to cross a cordon and enter a congested central city area during business hours. Alternatively, in the United States pricing projects have tended to focus on drivers’ use of a specific facility, such as a highway, where fees are levied for travel during periods of congestion. Pricing’s transformation from a theoretical construct to a real-world application is underscored by new national policies providing greater official sanction for pricing experiments. These include the European Com- mission’s 1998 call for the phased introduction of mar- ginal social cost pricing for infrastructure use and, in the United States, national legislative proposals to provide state and local officials with broader discretion to use “value pricing” on federally funded roads. While the efficiency gains produced by road pricing projects are largely undisputed, the impacts of pricing initiatives on equity, fairness, and transparency in deci- sion making remain areas of concern. Assessment of the

relative impacts of pricing arrangements on various groups stratified by income, ethnicity, gender, employ- ment status, residential and job location, and other characteristics continues to be a prime area for research. Development of strategies to mitigate inequitable distri- butions of costs and benefits also merits attention. For example, policy makers increasingly recognize that “revenue recycling,” whereby some or all of the rev- enues generated through a pricing project are returned to the public at large either as direct credits or as subsi- dies to public transportation, can help reduce adverse equity impacts. Many at the symposium believed that revenues from priced facilities should be available first and foremost to pay for the operations and maintenance of the priced facility, retire debt for that facility, and potentially offer a return to investors. After these uses, and in part because of concerns over pricing’s equity impacts, many conference participants also suggested that the proper hypothecation (or dedication) of excess revenue is a key ingredient in a pricing project’s success. Views differ on how broadly or narrowly to prescribe the eligible uses of revenue and how best to disperse the revenue in the local corridor or area. Road pricing is still often perceived to be synonymous with traditional turnpike tolling, which leads to the mis- perception that pricing is principally or exclusively a revenue-generating mechanism. Unless the transportation community or others demonstrate pricing’s ability to meet other management objectives, the public and politi- cians will continue to view pricing simply as a revenue tool. Pricing advocates will find real-world examples to be their strongest tool in countering these misperceptions. The City of London’s area pricing program, for example, is achieving greater delay reductions than had been expected. This was the pricing scheme’s goal; it was not concerned solely with raising revenue. Consequently, the pricing scheme was a form of demand management rather than revenue enhancement. Moreover, London’s plan featured an integrated strategy that included road signal improvements, public transportation improve- ments, infrastructure repair, and the adoption of new technologies. The tolling examples in the United States do not exhibit this integrated approach and have mixed results concerning demand management. Cordon pricing such as that used by the City of Lon- don may be less attractive in the United States, accord- ing to resource paper author Martin Wachs, because of the fear that it will drive more people to outlying subur- ban centers. “American downtowns,” he notes, “can be said to fear road pricing much more than they fear con- gestion” (see resource paper by Wachs, p. 69 of these proceedings). As noted by many speakers at the conference and as highlighted in the resource papers, recent experience suggests that citizens’ anxiety about planned road pric- ing projects far exceeds their actual dissatisfaction with pricing once a project is in place. In fact, while resistance to pricing can be a potent barrier to implementation, recent surveys demonstrate unexpectedly favorable atti- tudes toward the implemented project. For example, one recent survey indicated that both users and nonusers of priced lanes typically perceive travel time savings to be even greater than those actually realized. Other surveys indicate that highway users are becoming increasingly skeptical that added capacity can reduce congestion in a sustainable way and are increasingly convinced that efforts to manage demand could be more beneficial. With some of the more difficult implementation questions already tackled, concerns that may previously have been treated as lower research priorities can no longer be ignored. These areas include methods of enforcement; strategies for ensuring privacy; goods movement and pricing; the externalities of pricing; pub- lic participation; and a much more sophisticated under- standing of the distributional impacts of various pricing structures in light of individuals’ income levels, racial or ethnic status, gender, residential location, modal choices, and other relevant groupings. The impacts of pricing on location, land use patterns, and urban form are still relatively poorly understood, not least because of the difficulty of obtaining empirical data. In particular, the potential impacts of pricing on economic activity in the affected and surrounding areas remain a concern. Some initial data are available on impacts in particular pricing locations, but additional data and study are needed. Effective tools for communicating with and educat- ing both policy makers and the public are still needed. In the United States, resistance to raising the fuel tax and concern about the resulting transportation funding shortfall need to be addressed during the coming decade. Especially at a time when physical constraints make it harder than ever to build new capacity, pricing presents one promising alternative to the fuel tax. In light of pricing’s success in ad hoc, project-specific appli- cations throughout the world, it holds promise for inclu- sion as part of a broader and systemic solution to the coming funding situation. In Europe, the contrary problem of far higher but uneven rates of fuel taxation has led the European Com- mission to advocate a greater standardization of trans- port financing through direct pricing of roads. The commission policy also notes explicitly that introduc- tion of road pricing can either raise more net revenue by supplementing existing fuel taxes or raise an amount of revenue equivalent to that under the existing finance system through the use of tax rebates or refunds. Under either approach, road pricing is an effective means of managing demand on the road network. 4 INTERNATIONAL PERSPECTIVES ON ROAD PRICING

POTENTIAL U.S. POLICY INITIATIVES FOR FURTHER DISCUSSION AND CONSIDERATION A number of potential policy initiatives were identified and discussed during the conference and in committee deliberations. Among those raised most often, the com- mittee endorsed the following ideas as being worthy of further investigation and consideration; many are under consideration in pending legislation to reauthorize federal surface transportation programs: • Providing broad permission for state and local offi- cials to pursue pricing on new and existing federal-aid roads, including conversion of existing high-occupancy vehicle lanes into high-occupancy toll lanes. • Continuing to house within the Federal Highway Administration a value pricing office or program to serve as an ongoing catalyst for research into pricing’s poten- tial under a range of conditions. The office or program would receive both funding to support and authority to award grants for preimplementation activities (e.g., traf- fic studies, surveys, and public education initiatives) and for the systematic evaluation of completed projects. • Providing state and local officials with discretion to use revenues collected from pricing projects on federal-aid roads, bridges, and tunnels for any trans- portation improvement along the corridor or in the area in which the pricing in question has been applied. • Permitting toll lanes or facilities on federal-aid routes dedicated to truck traffic and permitting longer combination vehicles to operate on these dedicated lanes or facilities with provision of adequate barrier or facil- ity separation, subject to approval by the state and affected metropolitan planning organization. • Establishing a special commission to examine means for funding transportation infrastructure through a long-range alternative to the fuel tax and con- sider the capacity of such an alternative to encourage efficient use of the existing surface transportation infra- structure. The commission’s work would be expected to build on the findings of the ongoing Transportation Research Board Study of the Long-Term Viability of Fuel Taxes for Transportation Finance. • Treating the federally tax-exempt status of park- ing and public transit subsidies equally and requiring employers who provide these subsidies to give employ- ees who do not take advantage of these subsidies the nontaxable cash equivalent. RECOMMENDED TOPICS FOR FUTURE RESEARCH Ongoing research in the area of road pricing should include further consideration of the following topics: • Pricing’s impacts on the level of economic activity, land use patterns, and urban form of affected areas. • Improved pricing structures for corridors and urban areas, especially with regard to pricing structures based on marginal cost. • The impact of road pricing on freight movement, with such research based on surveys and analysis of implications not only for truckers but also for ports, ter- minal operators, and other parties participating in the logistics management chain. • Empirical information on the distributional effects of pricing projects, with a focus not only on the inci- dence of the charges (i.e., who pays) but also on the rel- ative distribution of benefits to individuals within a range of income levels, residential locations, racial and ethnic groups, and other relevant categories. The inves- tigation should place such equity impacts in the context of the distributional outcomes created by the existing (i.e., largely tax-based) system for funding surface trans- portation infrastructure. Policy-based investigations of strategies, such as revenue recycling, to mitigate adverse distributional impacts are also recommended. Empirical evidence on locational and economic impacts should also be sought. • Decision-making processes and constituency- building approaches that facilitate the implementation of pricing programs, including (a) consideration of the factors that influence various constituencies’ and deci- sion makers’ views and (b) the impact of alternative institutional arrangements, including those involving the private sector, on the success of pricing projects. • Successful practices through which transportation planners factor alternative pricing structures into an integrated transportation strategy, especially with respect to how the interaction of pricing structures with other elements of the overall strategy can help identify the optimal pricing strategy. • The implications of increasingly widespread use of pricing on the development and adoption of appropriate technologies (e.g., toll collection procedures based on global positioning systems rather than dedicated short- range communications), with attention to both privacy considerations and the capacity of various technologies to maximize pricing’s effectiveness. • The range of existing and possible enforcement strategies to ensure compliance with toll provisions and high-occupancy vehicle requirements and an evaluation of their effectiveness and administrative feasibility. RECOMMENDED ACTIVITIES TO PROMOTE INTERNATIONAL COOPERATION In the area of international cooperation, the committee identified a number of initiatives designed to take advan- 5COMMITTEE FINDINGS AND RECOMMENDATIONS

tage of the knowledge gained across the world in pricing projects: • Encourage United States research institutions and the European Commission to pursue coordinated and, ideally, parallel research projects. • Treat this symposium as a launching pad for simi- lar international pricing symposia in the future to be held at regular intervals and to address a regularly updated agenda of topics. • Create a centralized web-based repository of information on worldwide pricing projects. Possibly to be created and maintained by the Transportation Research Board, this website would include a regularly updated roster of priced facilities, the essential factual information about these facilities, and published papers and evaluations. • Through a partnership between the Transporta- tion Research Board, other U.S. institutions, the Organisation for Economic Co-operation and Devel- opment, the European Conference of Ministers of Transport, and other national governments and orga- nizations throughout the world, sponsor a series of site visits to prime international examples of priced facilities. The visits should be directed to influential decision makers and convey the feasibility of such projects and the lessons learned throughout their implementation. 6 INTERNATIONAL PERSPECTIVES ON ROAD PRICING