4

Technical and Political Feasibility

The feasibility of congestion pricing will be affected by two types of issues: the technical ones and the political ones. Technical issues include the ability to charge users with minimal inconvenience and intrusion on privacy. Dealing with convenience and privacy is largely a matter of technology, and given the advances in this field, it is not an important barrier to implementation. Feasibility also requires having an institutional mechanism to administer the program. At first glance this probably does not seem like a major concern, but congestion in metropolitan areas often crosses local government and even state lines. The lack of existing institutions bridging city, suburban, county, and state government lines makes addressing regionwide congestion a vexing problem (Downs 1992). Addressed in the first section of this chapter are the availability of (a) technology to price efficiently and avoid privacy concerns and (b) institutional forms to resolve cross-border congestion.

Political feasibility is much more complex. Actually, it is a combination of issues, the most important of which are public acceptance of direct payment for road use, which is widely viewed as a free good, and the fairness to those unable to pay congestion fees without economic hardship. In the second section of this chapter, polling data on the public's willingness to pay to avoid congestion are reviewed, how revenues could be used to ameliorate the distributional impact of alternative congestion pricing



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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion 4 Technical and Political Feasibility The feasibility of congestion pricing will be affected by two types of issues: the technical ones and the political ones. Technical issues include the ability to charge users with minimal inconvenience and intrusion on privacy. Dealing with convenience and privacy is largely a matter of technology, and given the advances in this field, it is not an important barrier to implementation. Feasibility also requires having an institutional mechanism to administer the program. At first glance this probably does not seem like a major concern, but congestion in metropolitan areas often crosses local government and even state lines. The lack of existing institutions bridging city, suburban, county, and state government lines makes addressing regionwide congestion a vexing problem (Downs 1992). Addressed in the first section of this chapter are the availability of (a) technology to price efficiently and avoid privacy concerns and (b) institutional forms to resolve cross-border congestion. Political feasibility is much more complex. Actually, it is a combination of issues, the most important of which are public acceptance of direct payment for road use, which is widely viewed as a free good, and the fairness to those unable to pay congestion fees without economic hardship. In the second section of this chapter, polling data on the public's willingness to pay to avoid congestion are reviewed, how revenues could be used to ameliorate the distributional impact of alternative congestion pricing

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion programs is illustrated, and alternative strategies for building political support are outlined. TECHNICAL FEASIBILITY Available Technologies In the few instances when congestion pricing was proposed in the past, policy makers eschewed it, in part because of the perception that having queues of motorists at toll booths to pay congestion prices would be self-defeating. Advances in electronic toll collection technology, however, are rapidly overcoming this problem (Pietrzyk, Vol. 2; May, Vol. 2). Some toll roads in the United States and abroad are already offering electronic toll collection services. A wide variety of technologies is already in use to charge users automatically as they drive by a collection point. Regular patrons of toll roads can purchase inexpensive electronic tags, which are read by a computer that identifies the vehicle and debits the account of the patron with each use. The tag can be permanently mounted on the license plate or under the car, or placed inside the car on the dashboard; some tags are about the size of a standard credit card and about twice as thick. These electronic transactions can occur at speeds of 88 km/hr (55 mph) or more without delaying motorists (Pietryzk, Vol. 2; May, Vol. 2). Vendors claim that their technologies are over 99 percent accurate; existing technology, which is not as advanced as that to be introduced, has an operating reliability in the range of 93 to 98 percent (Pietrzyk, Vol. 2). Relatively simple tags are of a “read only” design, in which the toll road authority computer reads the identity of the passing vehicle and debits that account with each use. If a prepayment method is used, the patron purchases a certain number of uses in advance, and his or her account is reduced with each use. In a postpayment method, the individual is simply billed. Most users of these systems handle their monthly transactions with a credit card. Privacy can be protected by handling prepayment transactions in cash. A “read/write” tag allows the authority computer to identify the patron and to record transactions on the patron's tag, which gives the patron an independent record of transactions to check against the authority 's billing. These tags are somewhat more sophisticated than those of the read-only design; they require a battery or a connection to the vehicle's battery. Purchases in cash to protect privacy would be somewhat inconvenient. In order to encourage the use of electronic toll collection, some toll

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion road authorities will set up blind accounts in which billings are mailed to post-office addresses. Toll road authorities have great incentives to move toward electronic toll technologies. Electronic toll collection allows for vehicular throughput of 1,200 to 1,800 vehicles per lane-hour compared with 350 to 500 vehicles per lane-hour with conventional attended or automatic toll booths. It also greatly reduces the cost of operation. Capital, operating (including collection and billing), and maintenance costs of electronic toll collection could be only 10 percent of the cost of operating conventional toll booths (Pietrzyk, Vol. 2). A practical problem with automated systems is how to handle the occasional user or traveler from outside the area whose vehicle is not outfitted with the technology. Toll road authorities using automated systems continue to have attended toll booths. Some authorities separate these toll booths from the main traffic flow, which gives users with automatic technology free-flow conditions. Candidate routes and bridges for congestion pricing in urban areas, however, may not have space for such separate toll booths. Costs in these cases would be higher and traffic flow substantially lower if toll booths have to be provided for occasional users. Lack of space to provide an extra lane for occasional users may render some proposals for electronic pricing impractical. Privacy American motorists could be expected to resist toll collection technologies that invade their privacy. Privacy concerns were among the reasons that neighborhood councils in Hong Kong rejected congestion pricing in 1985 (Borins 1988). As mentioned above, however, toll road patrons on routes with electronic toll collection can now set up cash accounts that protect their privacy, and some toll authorities will set up billing accounts in which the identity of the patron is not revealed to the authority. In addition, the further development of technology will soon allow motorists to handle cash transactions through an expanded read/write technology that further protects motorist privacy. Read/write cards can be modified to become memory cards. With this technology, the patron purchases a card that stores the prepayments purchased. When the patron reaches a collection point, the memory card confirms to the roadside computer that sufficient credit is stored on the card for the patron to pass. With each passage, the computer deducts the toll from the card's value. With such a technology

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion there is no need to create a record of when and where individuals traveled on a tolled facility. Enforcement Enforcement also involves privacy issues. Toll road authorities that collect tolls electronically use automatic enforcement, whereby photographs are taken of the license plates of vehicles that do not have transponders or active accounts (Pietryzk, Vol. 2). Most states, however, do not have legislation allowing such evidence to be used in court; those that do may also require that the infraction be witnessed by a policeman (Pietryzk, Vol. 2). Illinois was the first state to convict a driver of a traffic violation on the basis of photographic evidence. On the Dallas North Tollway, however, patrons soon learned that photographic evidence of toll road infractions would not stand up in court. Texas state police currently enforce such infractions as they would any other traffic violation. New York recently passed legislation requiring that toll road violations be witnessed by an “enforcement agent.” Florida has a similar law, but recently passed legislation allowing photographs to also be used as evidence in court. Although the lack of automated enforcement increases costs, this appears to be an area in which law and practice are evolving to adapt to new technology. For example, the state of New York recently allowed the city of New York to use photographic evidence of speeding vehicles in issuing citations against the owners of these vehicles (except in cases where the vehicle had been stolen). Administration Traffic congestion in metropolitan areas is a problem that usually requires regional solutions (Downs 1992). Individual jurisdictions may find it difficult to solve traffic congestion without coordination with neighboring jurisdictions, and even if they manage to reduce congestion on their streets, they may simply shift it to an adjacent community. In most metropolitan areas, there is no appropriate institution for managing a regional congestion pricing or parking management program. Moreover, local governments typically oppose the formation of new regional entities that encroach on their traditional power and influence (Downs 1992). Governmental structures within metropolitan areas are generally decentralized and fragmented. This fragmentation is not surprising. Ameri-

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion cans have always distrusted centralized power and authority. In many metropolitan areas, the movement of people and jobs to the suburbs was quickly followed by the incorporation of entities separate from central cities, and these suburban communities resist encroachment by central city and metropolitan forms of government (Olson, Vol. 2). Aside from the difficulties of creating a regional institution caused by intergovernmental competition, the appropriate form of a regional institution raises complex questions about the proper balance between independent authority and control versus accountability to the populace (Olson, Vol. 2). Such an institution should have sufficient authority and independence from political pressure to set and adjust prices at efficient levels and should be able to prevent the raiding of its treasury by general governmental units during periods of financial difficulties. Sufficient safeguards should be put in place to avoid a “gold-plated” organization with inflated salaries and high costs generally. More important, the institution would need to be sufficiently accountable to the public to ensure that it hews to its mission, but not so accountable that it would be unable to adjust the toll prices with changes in demand. In his review of existing governmental units, Olson (Vol. 2) does not find an ideal form to recommend. Such an institution would have to meet several important criteria, some of which conflict. Accountability and efficiency, for example, are two governmental goals that routinely conflict. In addition, the tremendous variability in governmental structures across metropolitan areas precludes the identification of a single form that would work in all areas. Olson does, however, favor three options: state transportation departments, metropolitan districts, and special purpose local governments. State transportation departments offer several advantages: they have sufficient authority, can operate on a statewide basis, have considerable professional expertise, and are accustomed to administering large sums of money. Like metropolitan districts, however, they are often perceived at the local level to be heavy handed and unresponsive to local concerns (Olson, Vol. 2). Because metropolitan areas are not directly represented within state transportation departments, as they would be in a metropolitan district, there may be insufficient trust at the local level to grant a state agency the power to operate a metropolitan-wide congestion pricing system. Metropolitan districts are generally allowed under state enabling legislation. They are typically nonpartisan, cover an entire metropolitan area, and have broad authority to conduct their tasks. Transportation examples

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion include transit agencies in Chicago, San Francisco, and elsewhere. State transportation departments and metropolitan districts are appealing because their spatial coverage suits them well to metropolitan-wide congestion problems. Special purpose local governments (also referred to as special districts) are smaller-scale versions of metropolitan districts—with the same strengths and weaknesses. Because of their autonomy, they are less accountable than general purpose governments, which has led to some criticism about their being unresponsive to local concerns. Nonetheless, this institutional form may be the closest to an appropriate unit for managing regional congestion pricing that can be achieved (Downs 1992; Olson, Vol. 2). For congestion pricing projects limited in scope to a tunnel, bridge, or highway, an organization with less than a regionwide scope might well suffice (Olson, Vol. 2). In response to budgetary shortfalls in the late 1980s, interest emerged in having the private sector build and operate roads (Gomez-Ibanez et al. 1991). Private intercity toll roads have become more common in Europe in recent years. In the United States, private toll roads are being developed in Northern Virginia, California, and Colorado, and are being considered in other states. Although Olson considers privatization of individual highway links, he dismisses privatization for metropolitan-wide applications because the private entity would be placed in the position of a monopoly supplier. Monopoly suppliers pervade the utility industry, however, and this problem is routinely handled through regulation by independent public bodies. Given that road networks are quite similar to networks of water pipes and networks of local telephone lines, consideration should be given to creating roadway utilities to implement congestion pricing (Roth 1991). Utilities can operate regionwide, routinely manage large sums of money, and could be created with adequate authority to carry out their tasks. The interests of the public could be protected in the same ways that they are protected with existing water, electric, gas, and telecommunications utilities. Such a radical change in the organization of road authorities seems more than existing governmental agencies and the public could swallow in the short run, and having to create new utilities for something as controversial as congestion pricing may not help its feasibility. The regulated utility model may have some appeal over the longer term if congestion pricing gains acceptability with the public. Even so, the evolution of existing transportation entities into regional roadway utilities or the creation of

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion regional roadway utilities would clearly not occur for a long time. The growth in privatization, both for individual facilities and broader networks of roads, involves many uncertainties about the potential efficiency gains, winners and losers, liability, and political feasibility. These would be fruitful topics for further research. During the current period of small-scale experimentation, a variety of institutional forms is likely to emerge, each suited to the specific legal and political conditions in the areas where proposed (Olson, Vol. 2). For regional or areawide congestion pricing, it is clear that some form of regional institution is required because of the many interjurisdictional issues that are raised. Metropolitan special districts or state transportation agencies may work in some areas. The considerable variation in customs, administrative arrangements, and law from locale to locale almost dictates that different institutions emerge. Although no single institutional form appears perfect, there are sufficient existing models to suggest that satisfactory arrangements could be achieved. POLITICAL FEASIBILITY A shift from the current approach to highway finance and management to a congestion pricing approach would represent a significant—even radical—change. The political feasibility of achieving such a change is therefore difficult to assess. Three issues appear paramount in determining political feasibility: the general acceptance by the public of paying for facilities at the time and place used as opposed to paying in the form of taxes on gasoline, sales, and property; the distribution of winners and losers (which includes revenue uses designed to minimize the adverse impacts); and the conditions influencing local coalition building in support of or in opposition to congestion pricing. General Acceptance American motorists are accustomed to using roads without paying for use at the time. Although motorists would be expected to resist increased tolling of any kind, opinion polls suggest a willingness to pay by users confronted with congestion. A national opinion poll found that two-thirds of motorists who experience congestion say they would pay to avoid delay (Apogee Research, Inc. 1990). About 4 in 10 would pay at least $2.00/day

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion and another 2 in 10 would pay at least $0.50. In San Francisco, public opinion surveys in 1988 and 1990 indicated that two-thirds of respondents supported a $1.00 increase to the existing toll on the Bay Bridge as an acceptable price to pay for cleaner air (Dittmar, Vol. 2; Bay Area Council, Inc. and KQED, Inc. 1991). The openness to experimenting with congestion pricing in San Francisco and Southern California stems from several factors. Funds for road building are scarce because of constraints on the ability of the state to raise taxes to support capacity expansions. Significant air quality problems—particularly in the Los Angeles area—coupled with stringent air quality standards and strong neighborhood opposition to new roads limit the ability to expand highway capacity. Requirements in California law to restrict solo driving through regulation may be less appealing than congestion pricing. An analogy about public support for congestion pricing can be drawn from survey research in England. Whereas 57 percent of English respondents responded negatively to a question that asked whether they would favor congestion pricing in the abstract, this opposition was reversed when respondents were asked whether they would support congestion pricing if the funds were used to improve public transportation, reduce accidents, and improve pedestrian and cycling facilities. In response to this question, 57 percent supported congestion pricing (Jones 1991). American voters can be expected to resist congestion pricing if it is perceived as merely another tax, but they may support the policy if other conditions hold, such as severe congestion, support for cleaner air, unpalatable alternatives, and dedication of the revenues to purposes they support. The use of the revenues is a critical feature of any proposal and is closely linked with general public acceptance. This element is discussed in more detail in the next section. Public support is far from guaranteed, however, even when the funds are dedicated to transportation purposes. In Norway, for example, where toll rings are being used in three cities to raise revenues to provide new transportation capacity, a simple majority in support of the toll rings has been achieved only in Bergen (Gomez-Ibanez and Small forthcoming). Support in Oslo grew from 29 percent in 1989 to 39 percent in 1992, and those opposed dropped from 65 to 56 percent. When Trondheim residents were asked in 1991 whether they supported the toll rings given that the revenues would be used to provide specific facilities, opposition dropped from 48 to 23 percent, but those unsure about their support grew from 32

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion to 48 percent. Support increased from only 20 percent to 32 percent of respondents—a plurality in support, but not a majority. Public opinion polls in the United States suggest a receptivity to congestion pricing among motorists confronted with congestion. What people say in answer to abstract questions in polls and how they react to actual proposals may well vary, but the poll data do imply an openness to consideration of the policy. Experience abroad suggests that gaining acceptance will not be easy; dedicating the revenues to purposes the public supports appears to minimize opposition. Distributional Issues As discussed in the previous chapter, all income groups can be compensated from the revenues gained by congestion pricing, but there would still be some adversely affected individual commuters. Although commercial activity on the whole would appear to gain from a more efficient transportation system, some businesses could be hurt. An economic analysis can demonstrate that congestion pricing would make society as a whole better off, but congestion pricing must be approved in a political context where the effects of policies on subgroups have considerable importance. Fundamental to congestion pricing's political feasibility is whether those adversely affected, even if a relatively small minority, would be more motivated and able to garner political support than those who would gain from the policy. A review of the potential winners and losers helps illustrate the issues affecting political feasibility (Gomez-Ibanez 1992). In the case of tolling an existing road or bridge, the potential winners would be1 Motorists with high values of time (the value of their time savings would exceed the cost of the toll), Travelers already using bus or high-occupancy-vehicle services (such users would benefit from time savings and the toll would be divided among several users), Most commercial users of the road system, and Recipients of the toll revenues (as described below, this could include road users, transit users, or taxpayers generally). 1   In this list, Gomez-Ibanez's categories are expanded to include commercial users of the road system.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Among the potential losers would be Motorists with low values of time who stay on the tolled route for lack of alternatives, Motorists with low values of time who shift to an alternative, but less convenient facility, Motorists who forgo certain trips to avoid the toll, and Some commercial users and businesses. In the political context of the debate on congestion pricing, the impact on those who would be “tolled off” among whom are low-income motorists, could have considerable influence on public opinion and political feasibility. The equity of shifting to congestion pricing is complex because the net impact on the poor depends on the equity of the existing system of transportation finance and consumption and how it would be changed by congestion pricing. It can be argued that the existing system is not very equitable, particularly in regions where regressive sales and property taxes are important sources of financing transportation facilities (and where middle-income drivers are the main users of new facilities being supported with sales taxes). Congestion pricing, in contrast, raises revenues directly from those users willing to pay for the service. Determining the equity of the current system and how it would be changed by a shift to congestion pricing requires a detailed assessment of all sources of revenues and all benefits provided, with both contribution of revenues and consumption of services disaggregated by income group. Such an analysis is made difficult by the lack of data on important dimensions of these issues. The Environmental Defense Fund has conducted an analysis that was released after this report entered the National Research Council's peer review process (Cameron 1994). (The committee was briefed on the analysis but did not have an opportunity to review it in detail before its own report began the process of review, revision, and publication.) The committee did not take a position on the equity of congestion pricing. Rather, it limited its analysis to illustrating the change in economic impact across income groups. As outlined in the following sections, the distributional impact of congestion pricing would vary considerably depending on the design of the pricing system and the uses of the revenues to compensate those disadvantaged. Areawide Pricing Congestion pricing could generate substantial revenues. Regionwide congestion pricing for the greater Los Angeles area, for example, could

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion generate over $3 billion annually (Small 1992). The decision about the use of the revenues earned from congestion pricing is critical to achieving the efficiency gains that motivate this policy. Congestion prices alone would dampen demand, which would relieve congestion, but unless the revenues were allocated well, average commuters would be somewhat worse off than before (Small 1983; Hau 1992). As illustrated in the preceding chapter, the fees required to reduce congestion would be larger than the time savings are estimated to be worth to middle- and lower-income motorists. Their time savings would be less than the out-of-pocket cost of the toll. If the revenues are well spent, the average commuter and society as a whole will gain. The choice about how the money is spent depends in part on the goal being sought. If the goal is only to relieve congestion in both the near and the long term, the congestion fee should be set at a level that would be sufficient to provide for expected demand over the long term and the funds can be dedicated to providing the needed additional capacity (Keeler and Small 1977). Dedicating the revenues to maintenance and operation or added capacity, or both, would help convince motorists that the congestion fee is not just a tax that would be used for other purposes. If the primary goal of using the revenues is to alleviate the distributional impacts, the distribution of the revenues could be quite different. One approach would be to use the revenues to offset other regressive taxes dedicated to transportation. For example, the reduction in sales, gasoline, and property taxes could be designed to benefit lower-income groups proportionately more than they would higher-income groups, thereby offsetting the disproportionate impact of congestion pricing on the poor.2 If the disadvantaged groups include residents of a particular area, some part of the revenues could be dedicated to those residents in the form of tax rebates, commuter allowances, or improvements in roads, transit, bikeways, and sidewalks. If retail or commercial interests in specific areas would be negatively affected, specific funds might be targeted to improved transportation services for this group. 2   The financing of transportation, and the burden borne by different income groups, varies widely across the nation. Property taxes are not necessarily regressive; many jurisdictions have some form of property tax credit that reduces tax rates for lower-income individuals. In addition, sales taxes, which do tend to be regressive, are not used to fund transportation in all metropolitan areas. In order to reduce the impact on the lower-income group in regions without regressive taxes, it might be possible to offer cash rebates that would diminish with family income or tax credits on a sliding scale, as is done with federal and state tax credits for child care.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion TABLE 4-1 Revenue Uses from Congestion Pricing Applied in the Los Angeles Region (Small 1992) Program Annual Amount ($ millions) Reimbursements to travelers   Employee commuting allowance ($10/month) 696 Fuel tax reduction ($0.05/gal) 348 General tax reductions   Sales tax reductions (half of transport surcharge) 525 Property tax rebate (eliminate local highway subsidy) 465 New transportation services   Highway improvements 315 Transit improvements 312 Transportation services to business centers 322 Total net revenue 2,983 Collection costs 137 Total gross revenue 3,120 Not everyone would benefit from this example, however. If an average toll of $0.09/km ($0.15/mi) applies for the entire length of a freeway trip, commuters with longer-distance trips will pay considerably more than those with a commute of average length. Roughly one-fourth of commuters in Southern California have a one-way commute of 40 km (25 mi) or more (Giuliano, Vol. 2). Middle-income and lower-income solo drivers with trips of 40 km would be net losers in the foregoing pricing and revenue distribution system (Giuliano, Vol. 2, Tables 7 and 8). However, both middle- and lower-income solo drivers who switch to carpools or transit would become net winners. Although solo drivers making long-distance commute trips might represent a minority of commuters, they might well resist shifting mode and might be vocal in opposition. Facility Pricing As in the case of areawide pricing, congestion pricing on individual facilities should result in net benefits to commuters and an efficiency gain for the local economy. Facility pricing raises issues of political feasibility that

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion TABLE 4-2 Impact of $0.15/mi Congestion Fee in Southern California for Commuters with Average 16-km (10-mi) Trip   Annual Net Benefita   Middle Incomeb Higher Incomeb Lower Incomeb Commuter Status Dollars Percent of Income Dollars Percent of Income Dollars Percent of Income Solo driver before and after imposition of toll 166 0.7 546 1.4 55 0.4 Solo driver to two-person carpool 528 2.2 644 1.6 470 3.1 Solo driver to bus transit 683 2.9 754 1.9 907 5.9 Carpool before and after imposition of toll 531 2.3 784 2.0 397 2.6 Bus transit before and after imposition of toll 906 3.8 1,159 2.9 772 5.0 SOURCE: Based on data from Giuliano (Vol. 2, Tables 7 and 8) and Small(1992), Table 2. aAfter paying toll, valuing time savings, and redistributing revenues. Revenue distribution based on Table 4-1 and data from Giuliano (Vol. 2, Tables 7 and 8). bIncome of wage earners selected to represent annual wages of average, 80th-percentile, and 20th-percentile workers based on hourly wages of workers in the Los Angeles region (Small 1992, footnotes 17 and 18). In annual terms these wages would be roughly $24,600, $40,100, and $15,300.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion are less central in the context of areawide pricing. Pricing on individual facilities, for example, is more likely to have direct impacts on travelers originating from or destined to specific geographic areas. When tolls affect some individual areas or jurisdictions more than others, the local politics of compensating the more affected groups becomes more complex. The issues of raising tolls on tolled facilities serving New York City or placing tolls on some of the free bridges serving Manhattan have become enmeshed in regional political struggles (Zupan, Vol. 2). Commuters originating from specific neighborhoods that use a facility to be priced would be faced with paying the fee, using an alternate route, or making some other arrangements. The shift in traffic from priced to unpriced facilities (and potential increases in congestion on unpriced routes) and the possible diversion of traffic to residential streets would also affect political feasibility. The potential revenues from congestion pricing could be used to provide alternatives for those affected. Preliminary estimates of the revenue gain from a $1.00 toll increase for the Bay Bridge, for example, suggest increased annual revenues of about $8 million, or a 14 percent increase in total toll revenues. Redistributing the funds broadly according to the hypothetical example outlined in Table 4-1, however, would not effectively target those most affected. In the proposal for the Bay Bridge, the funds will be dedicated to improving alternative modes of transportation in the same corridor. Planners are also considering an off-peak discount to provide automobile commuters with the alternative of shifting the timing of their trips. Parking Pricing The potential winners and losers from a regional parking pricing strategy have not been examined as extensively as the winners and losers in the above examples. Such a proposal would probably have distributional consequences similar to those of an areawide pricing strategy for roads. The time savings for commuters, however, would be smaller because parking pricing would not affect through travel (see Table 3-1 and Table 3-2). A variation on parking pricing, a “cash-out” of employer-paid parking, has been proposed that ensures that almost everyone benefits. California has enacted such legislation to require employers who lease parking spaces for their employees to provide commuters with the choice of taking the employer-subsidized parking benefit in cash (Shoup, Vol. 2). The California “cash-out” law would have a limited impact. It applies only to existing leases for parking. Many, if not most, leases combine parking and office space. In order to affect a larger share of parking, the

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion law could be expanded to require property owners to separate office space and parking when leases are renegotiated. The cash-out option is proposed in an attempt to reduce the incentives for solo driving that are incorporated in the federal tax code, which treats employer-provided parking as a tax-exempt fringe benefit. Although the cash-out option is fairly simple in concept, it becomes more complex in implementation. It would be more expedient to simply eliminate the tax-free benefit of employer-provided parking, but this would be difficult to achieve politically. The cash-out option is designed specifically such that it provides net social benefits while taking little, if anything, from anyone, which enhances its political feasibility (Shoup, Vol. 2). Taxing employer-provided parking would probably have a much larger effect on solo driving, but would be more difficult politically because it would be taking away a tax benefit enjoyed by millions of workers. Revenue Use Not all the diverse uses of the funds discussed above as ways of ensuring that all income groups benefit would be allowed in the current congestion pricing pilot program authorized under the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). The legislation limits uses of the funds raised in pilot projects to purposes eligible under Title 23 of the federal code. This effectively limits the funds to specific transportation purposes permitted under federal law (which has been interpreted by the U.S. Department of Transportation to include transit operating funds). This legislation appears to be unduly restrictive. Whereas the seed money made available by the federal government might be appropriately restricted to purposes eligible under Title 23, the funds that are collected in the form of congestion tolls are local funds, and local governments ought to be able to apply them where they are deemed necessary. Indeed, more flexibility may be required in order to give local governments sufficient latitude to form coalitions that support congestion pricing. One can imagine an even broader use of funds than those already discussed. For example, a local government could use some portion of the revenues earned from congestion pricing to help rebuild distressed areas or subsidize the day-care costs of low-income working parents. The federal restrictions were apparently imposed in part to keep highway funds from becoming “cash cows” for local government. There are, however, very practical constraints on how congestion pricing revenues could be used. The voters, almost all of whom are road users, will ultimately decide whether any form of tolling will be put in place, and the feasibility of

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion gaining public approval will be highly dependent upon the uses of the revenues. Public acceptance is most likely to be gained by proposals that would use funds in ways that benefit highway users directly, for example, by maintaining or providing capacity. The public might also accept revenue uses less directly related to their own transportation needs but still applicable to concerns about equity, such as subsidizing special transportation services for specific geographic areas. To the extent that proposals for revenue uses appear to highway users and voters to be supporting general government purposes (such as schools and other social services), there is the risk that the public will perceive the congestion toll as another form of taxation. Of course, if the motoring public approves supporting these purposes from congestion fees, should they not be allowed to pay for them with locally collected revenues? Summary It is possible to use the revenues earned from congestion pricing to compensate the losing groups such that each group benefits. The question of political feasibility depends in large part on how intensely individuals would experience the gains and losses. For example, motorists with high values of time, bus and high-occupancy-vehicle users, and recipients of the revenues may be winners, but since these gains are spread among many individuals, many of whom may receive relatively small benefits, these winners may not be sufficiently motivated to fight for the benefits. Disadvantaged individuals, even assuming some compensation, may still feel sufficiently aggrieved to resist any change forcefully. Politicians are reluctant to espouse policies that will have widely dispersed benefits and highly concentrated costs (Rom, Vol. 2). Although most middle-income users would benefit, some would not, and some could be expected to oppose congestion pricing as a general concept. Giuliano (1992) suggests that middle-income users opposed to paying congestion tolls would use the possible impact on the poor as an argument against the impact on themselves. In a political context, the equity issue could be used by opponents as a wedge to fragment coalitions that might otherwise support congestion pricing. Building Support As with individual opposition, groups opposed to congestion pricing are likely to be more vocal than those that support the concept (Rom, Vol. 2).

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Political feasibility depends on the influence of the opposing groups on the public and elected officials. Political leaders could pursue at least three generic strategies to address the influence of opposed groups (Rom, Vol. 2): (a) narrow strategies, which would design programs to minimize the negative effects on specific groups; (b) broad strategies, which would build support by accentuating the positive consequences of congestion pricing among groups not opposed to congestion pricing to offset the opposition by groups resisting change; and (c) transformational strategies, which would seek common ground among groups. Political leaders could pursue these strategies singly or in combination. Pursuit of a narrow strategy is implicit in the revenue distribution proposals discussed above, in which negatively affected groups are directly compensated. Design measures could also be used to reduce negative effects. For example, resistance to congestion pricing by neighborhood groups concerned about diverted traffic could be minimized by prohibiting through traffic from using residential streets during peak periods or by altering road designs (narrowing lanes) to make passage by through traffic more difficult. A broad strategy would build coalitions among those interest groups that would support some of the benefits of congestion pricing. In California, for example, large employers supporting congestion pricing as an alternative to employee trip reduction programs, commercial developers supporting congestion pricing as an alternative to impact fees, and environmental groups supporting policies to reduce automobile dependence have formed an influential constellation of interests in support of congestion pricing (Giuliano 1992). Transformational strategies would be more difficult in the case of facility or areawide congestion pricing because, despite the net benefits to society, not everyone wins. Cashing out employer-provided parking subsidies is an example of a transformational strategy, because most parties win. Another possibility deserving further research is to have a system of tradable permits for peak-period driving (Rom, Vol. 2). In this approach, all residents would be given permits to travel, which they could then sell to the highest bidders. This would allow motorists to be “bought off” the roads during peak period rather than being “tolled off.” This approach might even be further modified to make it more progressive by providing marketable permits, the nominal value of which would be inversely proportional to family income. Although the idea of tradable permits is intriguing, it raises many questions about how such a system would be

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion designed and implemented. The committee has not attempted to evaluate this proposal. Research is needed. Public education can also play a role in building support by communicating important ideas and values (Rom, Vol. 2). Rather than attempting to restrict choices through regulation, congestion pricing would provide net benefits by increasing economic efficiency and productivity, saving time, and providing motorists with choices about when to drive. Public support is also likely to grow if incremental steps toward congestion pricing prove effective and the experience with early experiments is disseminated widely. The promotion by political leaders of any of the strategies identified above depends upon first gaining their interest and support. Reforms such as congestion pricing require strong constituencies devoted to fighting for change at each of the many points in the American political system where opposing groups can exercise veto power. Without strong constituencies, or without the belief that such constituencies could be developed, political leaders are unlikely to promote congestion pricing on their own. The alliance between an interest group and a political leader is generally a prerequisite to embarking on a campaign for change. Giuliano (1992) has identified three interest groups that have coalesced in California in favor of congestion pricing: large employers opposed to mandates that they manage their employees' commuting behavior, commercial developers, and environmentalists. To this list could be added high-value-of-time highway users and the potential recipients of the revenues. For each of these groups there are reasons to support congestion pricing. Large employers could avoid the cost of employing travel demand managers. Commercial developers could avoid impact fees on new development (which require the developer to contribute to the cost of improving highway facilities). Environmentalists could be attracted to the potentially large changes in emissions that congestion pricing offers relative to other demand management measures. High-value users currently forced to operate under congested conditions could save time and money. Revenue recipients might include transit agencies that are struggling to find a replacement for federal operating subsidies (which are declining in real, if not absolute, terms), those with low incomes who do not drive much during peak hours, state departments of transportation, local governments, and groups opposed to higher property and sales taxes. Whether these groups perceive that they could gain sufficiently from congestion pricing such that they would vigorously support it is a key question in determining political feasibility. Certainly in the San Francisco

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Bay Area, business leaders have strongly advocated congestion pricing through the Bay Area Council, and it is possible that similar support will emerge in the large metropolitan areas required by the Clean Air Act Amendments of 1990 to develop employer trip reduction plans. Similarly, the interest of commercial developers will be conditioned by the presence of less palatable alternatives, such as the imposition of impact fees to provide for new capacity. Although environmentalists have certainly helped revive interest in congestion pricing, the issue could not be said to have widespread support as a policy instrument among the different environmental groups. Some environmental groups find regulatory approaches to dealing with pollution more appealing than marketplace approaches. Some may remember the backlash that occurred in the 1970s when environmental groups supported transportation pricing measures to meet the requirements of the 1970 Clean Air Act. As for high-value-of-time highway users, the question is partly one of whether they have a local organization that would represent their interest on this issue. The local clubs of the American Automobile Association, for example, have long opposed tolling of any kind, as have the various state members of the American Trucking Associations. In contrast, the potential beneficiaries of the revenues, which might include transportation agencies, are well organized and might well be willing to lobby for congestion pricing. Transit agencies in particular might benefit from additional ridership and by local efforts to ensure adequate alternatives for motorists “tolled off” the highway. The support of constituency groups willing to be advocates for congestion pricing is important because the American political system is organized in a way that makes change difficult. Proponents of change must be willing to advocate their cause successfully before state agencies, city and county councils, state legislative committees, and high-level government officials. Opponents of change, however, can stymie, if not block, progress by winning at any of these points. SUMMARY Advances in technology are rapidly overcoming the perception of problems with congestion pricing associated with queues of motorists at toll booths. Innovations in technology are also providing options that would lessen concerns about the invasion of privacy. Although there does not appear to be an ideal institutional mechanism for managing a regional congestion pricing program, workable institu-

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion tional forms exist or could be adapted to this purpose. This does not mean that adoption of regional congestion pricing would be a simple matter. For example, a large-scale distribution of revenues could be required in a regional congestion pricing program. The distribution could also be quite complex because of the cross-jurisdictional flows of traffic and the potential need to compensate motorists who would originate in one jurisdiction but who would be charged a fee in another. The public would need to be convinced that a (potentially new) government agency could successfully and fairly manage a change of this magnitude. Because of the magnitude of the change and the complexities involved in a regional program, the feasibility of pricing individual facilities within the next few years is far greater than that of a proposal for regional pricing. For pricing individual facilities, these institutional forms are likely to vary widely across regions depending on existing local institutions, practices, and laws. Regarding political feasibility, the average U.S. motorist is clearly not prepared for a radically different method of charging for road use, but opinion polls suggest that motorists already frustrated with congestion would be receptive. In parts of California, where funds are scarce, needs to address air quality problems are pressing, and the alternatives to congestion pricing are unappealing, interest is growing. When congestion is severe and the alternatives are unpalatable, certain forms of congestion pricing have become more acceptable. The perception that congestion pricing is unfair to specific groups, particularly those unable to pay without economic hardship, is probably the most significant problem in its political acceptability. Programs can be designed to compensate all disadvantaged groups through specific policies for allocating the substantial revenues that can be earned. Inevitably, some individuals will be disadvantaged. Some of the concern expressed about the impact on the poor, however, may be less a genuine concern about equity than a political strategy by groups opposed to paying congestion fees. Political leaders can pursue different strategies to enhance the feasibility of congestion pricing by minimizing opposition through program design, by maximizing support among interest groups that would support congestion pricing for reasons other than congestion relief, and by communicating essential ideas and values that congestion pricing proposals encompass. Given the nascent state of congestion pricing as a policy instrument, it would be premature to expect local political leaders to champion such a policy. However, in areas with rising congestion, concerns about air quality, constraints on capacity expansions, and a series of unattractive

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion options for dealing with these problems, congestion pricing could gain greater interest and appeal, particularly if the early trials with it are successful. REFERENCES ABBREVIATION DOT U.S. Department of Transportation Apogee Research, Inc. 1990. The Road Information Program (TRIP) National Transportation Survey: 1990 Poll Results. Summary Report. Road Information Program, Washington, D.C. Bay Area Council, Inc. and KQED, Inc. 1991. Bay Area Poll. San Francisco, Calif. Borins, S. 1988. Electronic Road Pricing: An Idea Whose Time May Never Come. Transportation Research, Vol. 22A, No. 1, Jan., pp. 7–44. Cameron, M. 1994. Efficiency and Fairness on the Road: Strategies for Unsnarling Traffic in Southern California. Environmental Defense Fund, New York City, Feb. DOT. 1993. Journey-to-Work Trends in the United States and Its Major Metropolitan Areas, 1960–1990. Final Report. Downs, A. 1992. Stuck in Traffic: Coping with Peak-Hour Traffic Congestion. The Brookings Institution, Washington, D.C. Giuliano, G. 1992. An Assessment of the Political Acceptability of Congestion Pricing . Transportation, Vol. 19, No. 4, pp. 335–358. Gomez-Ibanez, J. 1992. The Political Economy of Highway Tolls and Congestion Pricing. Transportation Quarterly, Vol. 46, No. 3, pp. 343–360. (For summary, see Presentation Summary, In Exploring the Role of Pricing as a Congestion Management Tool, Searching for Solutions: A Policy Discussion Series, No. 1, U.S. Department of Transportation, March.) Gomez-Ibanez, J., and K. Small. Forthcoming. NCHRP Synthesis of Highway Practice: Road Pricing for Congestion Management: A Survey of International Practice.TRB, National Research Council, Washington, D.C. Gomez-Ibanez, J., J. Meyer, and D. Luberoff. 1991. The Prospects for Privatizing Infrastructure. Journal of Transport Economics and Policy, Sept., pp. 259–278. Hau, T. 1992. An Economic Analysis of Road Pricing: A Diagrammatic Approach.Policy Research Working Paper. WPS 1070. The World Bank, Washington, D.C. Jones, P. 1991. Gaining Public Support for Road Pricing Through a Package Approach . Traffic Engineering and Control, April. Keeler, T., and K. Small. 1977. Optimal Peak-Load Pricing, Investment, and Service Levels on Urban Expressways. Journal of Political Economy, Vol. 85, No. 1, pp. 1–25. Lave, C. 1991. Measuring the Decline in Transit Productivity in the U.S. Transportation Planning and Technology, Vol. 15,pp. 115–124.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Roth, G. 1991. Pricing, Financing and Ownership of Roads in a Free Society. Presented at Second International Conference on Privatization and Deregulation in Passenger Transportation, Tampere, Finland, June 16–20. Small, K. 1983. The Incidence of Congestion Tolls on Urban Highways. Journal of Urban Economics, Vol. 100, No. 4, pp. 888–898. Small, K. 1992. Using the Revenues from Congestion Pricing. Transportation, Vol. 19, No. 4, pp. 359–382. Wachs, M. 1989. U.S. Transit Subsidy Policy: In Need of Reform. Science, Vol. 244,pp. 1545–1549.