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104 Studies of other cost and benefit estimates find a consistent pat- charge system to include the WEZ provides a practical example tern of underestimation of cost and overestimation of benefits as to the effects of changes in scale. With the inclusion of in public projects (Flyvberg et al., 2002). Hence it would gen- the WEZ, the congestion charge area nearly doubled in size, and erally be prudent to acknowledge the risk and tendency to err the total number of vehicles increased by nearly 25%. The year on the side of favorable estimates by producing a range of cost after the expansion, TfL's revenues increased by 30%, while its and revenue estimates. total costs (operating and non-operating costs) increased by 17%. Operating income increased by an estimated 53%, from 89.1 million in FY 2006/07 to 137 million in FY 2007/08. 5.4.4 Cordon Pricing These results are for a single agency. For other agencies, The general principles for undertaking a sensitivity analysis increased costs may be associated with the collection of cus- for tolling can also be applied to cordon pricing systems, espe- tomer payments and enforcement activities, which may exceed cially since these systems use similar methods for collecting the additional revenues generated from an increase in scale. tolls, accepting payments, administering customer accounts, and reducing evasion. This section will examine the sensitivity Cost Impact of cordon pricing schemes with respect to demand elasticity, scale, implementation costs, and enforcement costs to the With the exception of Singapore and Bergen, all of the cor- extent that these factors differ markedly from tolling systems. don pricing systems have been established within the last two decades. Due to their relatively recent establishment, the newer congestion pricing systems primarily use electronic col- Demand Elasticity lection systems and video enforcement technologies. Notably, While the studies are not as extensive as for tolling, a num- Singapore also electronically collects cordon charges. ber of historical analyses have estimated the demand elasticity This reduces the potential range of implementation options, for cordon pricing systems. Analyses that were conducted in the which should provide a narrower range in collection costs. early to mid-1990s estimated that the demand sensitivity for the However, the following should be noted: Singapore and Oslo cordon pricing systems (see references in The sample size for cordon systems is smaller than that for Table 43) was -0.25 and -0.22, respectively. In a more recent toll systems; analysis, TfL found that the demand elasticity for chargeable car The cordon pricing systems in place have differing objec- trips was between -0.54 and -0.31 for all car trips within the tives (revenue generation, congestion relief, and reduced London central charging zone (CCZ). These results refer to an air emissions); increase in the congestion charge of from 5 to 8 rather than The cities with cordon pricing systems provide differing the introduction of new congestion charges. [With respect to levels of transit service, which serve as alternatives to auto- the introduction of congestion charge rates (0 to 8), TfL esti- mobile usage; and mated that the demand elasticity ranged from -1.34 to -2.12 for The cities with cordon pricing systems have different his- the CCZ and from -0.93 to -1.92 for the western extension torical and future growth patterns, geographic constraints, zone (WEZ).] The lower demand elasticity estimate for all car and availability of alternative road routes. trips reflects the exemption of local residents from paying the full congestion charge. Finally, differences in the legal and regulatory framework in each country can also affect congestion charge levels, customer Scale payment options, privacy levels, information security, enforce- ment strategies, and violation penalties. An analysis of the Larger coverage areas can result in greater revenue gener- impact of the legal and regulatory framework across countries ation, albeit with potentially higher implementation and on revenues and costs was outside the scope and intent of this enforcement costs. The expansion of the London congestion study. Table 43. Demand elasticities for selected cordon pricing systems. Facility Estimated Elasticity Sources Menon, Lam, and Fan (1993) Singapore -0.25 Gomez-Ibanez and Small (1994) Oslo -0.22 Jones and Hervik (1992) -0.54 (chargeable car trips) London (CCZ) TfL, Policy Analysis Division (2008) -0.31 (all car trips)