Congestion Pricing. Has It Worked and Can It Fix New York?

(Bloomberg) -- The handful of cities around the globe that charge motorists a premium to drive in congested areas at peak times have seen traffic go down and revenue go up. New York City’s need for both has become a crisis. The Metropolitan Transportation Authority faces near-rebellion from riders and a $40 billion estimate to repair or improve its trains, subways, buses, bridges and tunnels. To raise the cash, New York Governor Andrew Cuomo won passage of a congestion-pricing plan that will tax access to Manhattan’s priciest parts to encourage people to get around underground. Critics of the plan see it as a new round of tolls rather than a program that’s innovative and eco-friendly.

1. What’s the idea behind congestion pricing?

Economists call it a demand-side solution. Jack up the price for almost anything and demand will fall -- meaning clearer streets and cleaner air. Raising the price to create a revenue stream makes things a little tricky, though. Charge drivers too little, and you’ll make money but still have jams. Charge too much, and you risk turning off too many drivers -- great if you’re going for bike- and pedestrian-friendly, not so hot if you really need the cash, too.

2. Where in the world do people pay extra just to drive?

Singapore has charged since 1975, Stockholm made a trial run permanent in 2007 and Milan’s Area C came in 2012. Fees have been in effect in central London since 2003.

3. How well has that worked?

In London, charge-zone traffic was down 15 percent in the first year; over three years, air particulates fell 24 percent and nitrous oxide, a greenhouse gas, was 17 percent lower, according to Transport for London, the agency overseeing metropolitan area transportation. It hasn’t been a total success, though. While car volume in the charging zone dropped from 2012-15, London still was the most congested European city in 2014-2015, according to Inrix Inc.

4. Did they raise a lot of money?

Carve-outs caused problems in Stockholm, where revenue fell 14 percent short of projections due to so many exempted vehicles. Revenue also disappointed officials in London when reduced traffic resulted in fewer motorists’ paying fees, according to Citizens Budget Commission data published March 19.

5. What’s the New York proposal?

The city already charges passengers of yellow cabs $2.50 and Uber Technologies Inc.-type services as much as $2.75 per ride to drive south of 96th Street in Manhattan. The new congestion-pricing plan, which was also supported by Mayor Bill de Blasio, will add fees by 2020 for all private vehicles traveling south of 61st Street, an area that includes midtown office buildings and tourist-heavy sites like Times Square, the Theater District, World Trade Center and Greenwich Village. Many details remain to be worked out, but studies have recommended once-a-day charges of about $11.50 per car and $25 per truck.

6. How much money are they expecting?

The city and state estimate that it would raise about $1 billion a year, enough to finance $15 billion in bond issues toward transportation improvements. Though the mass-transit system has come a long way from 1970s and 1980s peak filth and danger, it’s once again fallen victim to neglect and inadequate investment. Cuomo wants to reorganize the state-run transit authority and fund its capital improvements partly with congestion proceeds. That money -- collected electronically, of course -- would be dedicated to mass transit.

7. Does the New York plan have exemptions?

Carve-outs and other details have yet to be decided. Suburban lawmakers want discounts or free access for motorists paying bridge tolls approaching the city. Advocates for the disabled are pushing for exemptions for those who must travel into the city by car.

8. Who’s a fan? Who’s not?

Environmentalists and urban planners love congestion pricing. Even Uber and Lyft Inc. -- whose drivers would pay once a day, if not be exempted -- support it. The companies say it may reduce the number of their cars sitting in traffic and might compel drivers to ditch their own cars and use their services instead. Efforts to enact congestion pricing failed in 2018, 2015 and 2007. One barrier was political pushback from the city’s outer boroughs, which have fewer mass-transit choices. And the American Automobile Association, the influential travel and motorist lobbying group, says the plan “offers no benefit for drivers while using them as the sole source of revenue for the bailout of the MTA.” Still, with millennials’ choosing cities over suburbs, congestion pricing may be on the brink of its U.S. moment. Carbon Free Boston in January recommended a $5 charge for private cars in Longwood, the Back Bay, Downtown and Seaport areas. Los Angeles’ mass-transportation agency in February voted to examine the fees, and Seattle is evaluating a charge on app-based rides.

The Reference Shelf

  • New York City commuting news.
  • A discussion by CityLab of an economist’s calculations of the pros and cons of traffic and congestion pricing.
  • Boston’s big ideas to be carbon-neutral by 2050.

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