International Perspectives on Road Pricing:
Report of the Committee for the International Symposium on Road Pricing
Conference Proceedings 34

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PREFACE
BACKGROUND AND TERMINOLOGY
COMMITTEE FINDINGS AND RECOMMENDATIONS
SETTING THE STAGE
- Welcoming Remarks and Charge to the Conference
- Road Pricing in Context: The Efficient Allocation of a Limited Resource
KEYNOTE ADDRESSES
- Central London's Congestion Charging Scheme: Has It Achieved Its Objectives?
- Out on a Limb: Pricing Futures
SPECIAL TOPICS
RESOURCE PAPERS
- Then and Now: The Evolution of Congestion Pricing in Transportation and Where We Stand Today
- One Step Forward, Two Steps Back? An Overview of Road Pricing Applications and Research Outside the United States

Preface

In November 2003, approximately 160 people assembled in Key Biscayne, Florida, to participate in the International Symposium on Road Pricing. Fifteen countries were represented, and the exchange of information on policies and approaches adopted throughout the world was one of the symposium's most noteworthy features. The conference also benefited from the breadth of sectors represented; participants and speakers included members of academia and researchers, public officials from all levels of government, consultants, interest group and association representatives, and individuals from financial and legal firms. The conference was a collaborative effort of the Transportation Research Board (TRB), the Florida Department of Transportation, the Organisation for Economic Co-operation and Development (OECD), and the Federal Highway Administration.

The symposium was conducted under the auspices of TRB's parent organization, the National Research Council (NRC). In cooperation with OECD, a specially appointed NRC committee developed the symposium to explore American and international applications of road pricing strategies in various governmental and socioeconomic settings. The participants discussed the rationale and motivations for implementing pricing strategies, the use of pricing revenues, and project outcomes. Drawing on resource papers, presentations, and symposium discussions, the conference committee evaluated the current state of practice, assessed future directions and opportunities, and identified research and information needs.

BEYOND CURBING GRIDLOCK

This conference built on the foundation established in Curbing Gridlock: Peak-Period Fees to Relieve Traffic Congestion, a 1994 report developed by TRB in conjunction with NRC's Commission on Behavioral and Social Sciences and Education. That publication included recommendations on the potential role of market pricing principles as a tool for congestion management, guidelines for the assessment of impacts of congestion pricing experiments, and fruitful areas for further research, demonstration, or experimentation.

The program for the Key Biscayne gathering was designed in recognition of the significant extent of experimentation with road pricing since 1994. While Curbing Gridlock and meetings leading up to its publication focused largely on the rationale for testing road pricing, the organizers of this conference sought to develop a program that would provide a detailed look at case studies of applications throughout the world and the results of research focused on specific pricing projects. To that end, the conference committee commissioned two resource papers, both of which appear in this document. One of the papers dealt with the evolution of pricing, with special attention to the state of the practice today. The other also focused on the state of the practice, with special attention to pricing initiatives outside the United States.

By the time the conference was over, participants had learned from the speakers, resource papers, and each other about the successes realized to date and the challenges that accompanied specific projects' implementation. To round out the session, the conference committee invited top-level policy makers or advisers from around the globe to point out any continuing concerns and offer their visions for how road pricing will or ought to evolve in the coming decade.

ACKNOWLEDGMENTS

This conference would not have been possible without the financial and institutional support of the Florida Department of Transportation. Special thanks are extended to Lowell Clary, Assistant Secretary of the department, forhis vision and assistance. Thanks also go to Jon Williams of TRB, who played a key role in developing the concept of the symposium, and to Martine Micozzi of OECD for facilitating that organization's involvement in this project.

The committee acknowledges the work of many individuals who contributed to the conference and the development of this report. Claire L. Felbinger, Transportation Policy and Management Specialist, worked with the committee and coordinated with the OECD Working Group for the International Road Pricing Symposium (see box) to plan the conference, under the guidance of the committee and the supervision of Mark Norman, TRB's Director of Technical Activities. Suzanne Schneider, Associate Executive Director of TRB, managed the report review process. The committee also thanks Reginald Gillum, Meetings Coordinator, who coordinated registration and the on-site logistics for the conference, and Mary Kissi, Senior Program Assistant, who provided administrative support throughout the project. Thanks are extended to Miriam Roskin, Roskin Consulting, for her work in assembling and preparing this report under the guidance of the committee.

The presentations, discussions, and summaries of the views expressed by conference speakers, panelists, and participants are intended to provide a record of the conference. The views expressed do not necessarily reflect those of the conference planning committee, TRB, NRC, or the sponsors of the conference.

This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by NRC's Report Review Committee. The purpose of this independent review is to provide candid and critical comments that assist the institution in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process.

The committee thanks the following individuals for their review of this report: Thomas F. Barry, Post, Buckley, Schuh & Jernigan, Orlando, Florida; Shama Gamkhar, University of Texas at Austin; Jacquelyne D. Grimshaw, Center for Neighborhood Technologies, Chicago, Illinois; H. David Prior, Dellard Sphar, Philadelphia, Pennsylvania; and William Stockton, Texas A&M University System, College Station. Although these reviewers provided many constructive comments and suggestions, they were not asked to endorse the report's findings and conclusions, nor did they see the final draft before its release.

The review of this report was overseen by C. Michael Walton, University of Texas at Austin. Appointed by NRC, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.

OECD WORKING GROUP FOR THE INTERNATIONAL ROAD PRICING SYMPOSIUM

Maurice Abeille, CERTU, France
Edward Bunting, Department for Transport, Local Government, and the Regions, United Kingdom
Patrick DeCorla-Souza, Federal Highway Administration, United States
Mike Goodwin, Department for Transport, Local Government, and the Regions, United Kingdom
Przemyslaw Gorgol, Ministry of Transport and Maritime Economy, Poland
Thierry Gouin, CETE, France Mark Harvey, Land and Environment Branch, Australia
Kinji Hasegawa, Ministry of Land, Infrastructure, and Transport, Japan
Marja Heikkinen-Jarnola, Ministry of Transport and Communications, Finland
Jari Kauppila, Ministry of Transport and Communications, Finland
Marek Krawczyk, Ministry of Infrastructure, Poland
Gunnar Lindberg, VTI, Sweden
Anthony May, Institute of Transport Studies, University of Leeds, United Kingdom
Maria Meiner, Road Directorate, Denmark
Noriyoshi Nakamura, Traffic Planning Division, National Policy Agency, Japan
James Odeck, Public Roads Administration, Norway
József Palfalvi, Institute for Transport Sciences, Hungary
Erna Schol, AVV Transport Research Center, Netherlands
Jiri Sira, Transport Research Centre, Czech Republic
Katalin Tánczos, Budapest University for Technology and Economics, Hungary
Pascal Vincent, CERTU, France

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Background and Terminology

In any discussion of road pricing, one of the first challenges is to clarify definitions. The conference committee was charged with organizing a symposium to explore American and international applications of road pricing strategies in various governmental and socioeconomic settings. Although they are often used interchangeably, the phrases "road pricing," "congestion pricing," "value pricing," and "variable pricing" can have different meanings to different users. This document typically uses the phrase "road pricing." Under a road pricing strategy, road users are charged a fee that reflects the cost of their use of the road more fully than do existing fees and taxes, and thus pricing can serve as a public policy tool to help manage demand for a limited resource– road space. Because of its role in managing demand, road pricing is often referred to as "congestion pricing," particularly in cases where the charge rises at peak travel times and falls or is eliminated entirely when demand is low.

As with any other genuine pricing system, road pricing allocates road space to those most willing to pay for it, provides guidance in the revenues collected as to where capacity expansion is needed, and creates one source of money for paying for investment. Pricing a road is thus different from traditional turnpike tolling, which aims merely to produce revenue to recover costs and plays no reallocative function. While the term "road pricing" generally suffices as a shorthand phrase to indicate the allocation of scarce road space through the use of charges that vary with the level of congestion on a road, other, more specific vocabulary has emerged in the road pricing community as well. The following are some examples:

Value pricing. The term "value pricing" was proposed in place of the term "congestion pricing" by the U.S. Department of Transportation during the development of pricing legislation to convey the benefits ("value") of using pricing to reduce congestion. However, some choose to limit the term's meaning to charging for use of additional road lanes that offer premium service alternatives to unpriced highways.
Cordon. A ring around an area (typically a city center) with a series of charging points at all entries. Both Singapore and London use a cordon approach.
Area charging or licensing. A variant of cordon charging in which the charge is levied to use a vehicle within a defined area, rather than just to enter it.
Distance-based charges. In contrast to cordon or area-based charges within a defined area, distance-based charges represent fees that vary depending on the distance traveled.
Managed lanes. A lane or lanes designed and operated to achieve stated goals by managing access via user group, pricing, or other criteria. A managed lane facility typically provides improved travel conditions to eligible users.
High-occupancy/toll (HOT) lanes. A variant of the high-occupancy vehicle (HOV) carpool lanes commonly used throughout the United States, HOT lanes are managed lanes that provide free (or reduced cost) access for transit and other vehicles carrying the required number of passengers and charge a fee to other vehicles not meeting occupancy requirements. Emergency vehicles are typically exempt from the fee.
An alternative to HOT lanes that has been mooted but is untried is the concept of FAIR (fast and intertwined
regular) lanes. If implemented, FAIR lanes would divide currently free, general-purpose traffic lanes into two sections: fast lanes and regular lanes. Under FAIR lanes, drivers using the regular lanes during peak hours would be compensated with credits that could be used as toll payments on days when they chose to use express lanes. The express lane credits would compensate drivers for giving up their right to use lanes that they "have already paid for" and for any added delays that might result.
HOT networks. This concept expands the idea of HOT lanes to a complete network of premium service lanes offering both congestion relief to motorists and improved transit service. A HOT network would be developed by adding missing HOV lanes and converting the entire operation
to electronic variable pricing. Access would be at no charge to "super-HOV" vehicles (vanpools and buses), which would preregister to use the system and carry transponders granting them passage at no charge. All other vehicles would pay a toll intended to maintain high-speed, free-flow traffic at all times. A seamless network of this sort would provide the functional equivalent of an exclusive busway, since pricing would be used to guarantee a predefined amount of capacity for buses and vanpools.

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Committee Findings and Recommendations

Immediately after the symposium's closing session, the conference committee convened to develop its consensus findings and recommendations. Consideration of the content of the conference presentations, discussion, and resource papers led to the committee's identification of a series of key findings, recommended topics for future research, and suggested areas for international cooperation. In addition, the committee drew on the resource papers and presentations made throughout the symposium to identify a number of potential policy initiatives that were frequently cited in the discussions. 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 Payment for Infrastructure Use, which made a general call for the phased introduction of marginal social cost pricing 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 positive 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 Commission's 1998 call for the phased introduction of marginal 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 decision making remain areas of concern. Assessment of the relative impacts of pricing arrangements on various groups stratified by income, ethnicity, gender, employment status, residential and job location, and other characteristics continues to be a prime area for research. Development of strategies to mitigate inequitable distributions of costs and benefits also merits attention. For example, policy makers increasingly recognize that "revenue recycling," whereby some or all of the revenues generated through a pricing project are returned to the public at large either as direct credits or as subsidies 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 misperception 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 politicians 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 improvements, 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 London may be less attractive in the United States, according to resource paper author Martin Wachs, because of the fear that it will drive more people to outlying suburban centers. "American downtowns," he notes, "can be said to fear road pricing much more than they fear congestion" (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 pricing 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 attitudes 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; public participation; and a much more sophisticated understanding 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 educating 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 applications throughout the world, it holds promise for inclusion 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 Commission to advocate a greater standardization of transport financing through direct pricing of roads. The commission policy also notes explicitly that introduction 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.

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 committee 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 officials 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 potential 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., traffic 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 transportation 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 facility 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 consider the capacity of such an alternative to encourage efficient use of the existing surface transportation infrastructure. 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 parking and public transit subsidies equally and requiring employers who provide these subsidies to give employees who do not take advantage of these subsidies the nontaxable cash equivalent.

RECOMMENDED ACTIVITIES TO PROMOTE INTERNATIONAL COOPERATION

In the area of international cooperation, the committee identified a number of initiatives designed to take advantage 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 similar 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 Transportation Research Board, other U.S. institutions, the Organisation for Economic Co-operation and Development, the European Conference of Ministers of Transport, and other national governments and organizations 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.

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Setting the Stage

Welcoming Remarks and Charge to the Conference

Participants were welcomed to Key Biscayne by the Honorable Bob Oldakowski, Mayor of Key Biscayne. He noted that the incorporation of Key Biscayne 12 years ago initiated a trend toward incorporation throughout Dade County and created a greater sense of autonomy and accountability for local decisions and recognition of their impacts. In keeping with the principle of responsible and beneficial policy choices, he wished the symposium's organizers and participants a successful conference.

Lowell Clary, Assistant Secretary of the Florida Department of Transportation, placed the charge to the conference attendees in the context of Florida's experience. The state has an extensive network of toll roads. More recently it has been examining pricing not only as a means of raising needed revenue but also as a tool for meeting other policy objectives, including managing congestion, optimizing the network, and addressing an array of concerns regarding the distribution of costs and benefits of the transportation system. He indicated that the state and the nation would need to undertake an extensive study of the gasoline tax within the coming decade to examine whether it ought to remain the backbone of the system for funding surface transportation investment or be supplanted by another mechanism for raising revenue. Given pricing's capacity not only to raise revenue but also to address other policy objectives, he said he thought it likely that pricing already has and will retain an important place in the overall system for funding and managing the transportation network.

Representing the Federal Highway Administration (FHWA), Sherri Alston described the congestion pricing pilot program established under the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and continued as the value pricing pilot program under the Transportation Equity Act for the 21st Century. She noted that the pilot has brought pricing experiments to 36 projects in 15 states and is thus providing a wealth of information to help guide future policy decisions. She acknowledged several FHWA staff who had been particular leaders in the field, including Patrick DeCorla-Souza, and thanked them for their efforts in this area.

Robert E. Skinner, Jr., Executive Director of the Transportation Research Board (TRB), referred conference attendees to a 2003 publication on megaprojects (Mega-Projects: The Changing Politics of Urban Public Investment, Alan A. Altshuler and David Luberoff) and noted that one of the greatest challenges for jurisdictions undertaking these projects is to bring together diverse interests and develop a consensus concerning a common set of objectives and a plan for implementation. He noted that successful implementation of congestion pricing requires a similar harmonization of diverse interests and objectives, a short list of which includes the creation of new capacity, revenue generation, traffic calming, and environmental improvements. He said that he was pleased that TRB was revisiting the seminal Curbing Gridlock study and noted that the time is ripe for a fresh look at pricing.

Finally, Martine Micozzi, representing the Organisation for Economic Co-operation and Development, welcomed the many participants who had traveled from overseas to attend this symposium. She noted that this conference had an especially high level of international participation, with overseas participants representing 15 countries from Finland to Australia. She noted that broad participation and the resulting cross-fertilization between various nations' experts on pricing would result in a much richer conference.

Following these welcoming remarks, Steve Heminger, Executive Director, Metropolitan Transportation Commission, Oakland, California, and conference chair, provided a brief overview of developments in road pricing since 1991. Starting with the U.S. experience, he noted that while ISTEA provided the first opportunity in the United States for limited experimentation with Interstate tolling and congestion pricing, most pricing successes have been in the area of high-occupancy toll (HOT) lanes, with projects under way in two California counties and Houston, Texas. While the San Francisco area was one of the early entrants into the federal congestion pricing pilot program with a proposal to institute peak pricing on the San Francisco-Oakland Bay Bridge, that project stalled for political reasons by 1994. Today, New York City has been able to do what San Francisco could not, with higher peak-hour tolls in place on the Hudson River tunnels and bridges into Manhattan.

The pricing provisions appearing in the Bush administration's proposal for reauthorizing the nation's highway and transit programs make incremental progress in a national policy that supports pricing, since they would allow local officials to institute HOT lanes anywhere on the Interstate highway system provided that the level of service is maintained for carpools and vanpools. Even in San Francisco, where officials have studied pricing without a single success, a HOT lane proposal for Interstate 680 may finally prove to be a winner. These trends largely bear out the findings and recommendations of TRB's Curbing Gridlock report, published in 1994, which concluded that road pricing was technically feasible and would produce a net benefit to society but had uncertain political viability.

Pricing seems to have fared better abroad, said Mr. Heminger. He named Singapore, Canada, France, the Netherlands, Norway, and England, with its exciting central London pricing project. It is also noteworthy that these applications generally involve "pure pricing," under which every motorist pays a fee, as opposed to the "choice pricing" of U.S.-style HOT lanes or express lanes, under which motorists can avoid the fee if they choose the free, slower lanes.

Providing the charge to the conference, Mr. Heminger called for a healthy exchange of ideas on all facets of road pricing, including technical feasibility, economic and social equity, and political viability. He concluded that the symposium provides an excellent opportunity for U.S. and international experts to learn from one another. He added, however, that in the area of pricing, the United States likely has far more to learn from abroad than vice versa.

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Road Pricing in Context
The Efficient Allocation of a Limited Resource

Martin Wachs, Institute of Transportation Studies, University of California, Berkeley
Anthony May, Institute for Transport Studies, University of Leeds

The symposium began with two stage-setting presentations on the past, present, and anticipated future of road pricing.

THEN AND NOW: THE EVOLUTION OF TRANSPORT PRICING AND WHERE WE ARE TODAY

Martin Wachs

Obviously road pricing is nothing new–it has been around for at least 80 years. But has it yet entered the mainstream? Not quite, but pricing is at a critical juncture in North America and the United States.

In the United States, the first motor fuel tax was instituted in 1918, in the state of Oregon. The legislature had preferred a toll-based system of finance, but at the time it was rejected because of the cost of constructing booths and collecting the tolls. So a practical limitation, rather than a policy-based one, dictated the starting point for our system of paying for road infrastructure. This practical limitation has now been largely obviated by the advent of electronic tolling, which is one of several reasons for this being a watershed moment for congestion pricing.

Another factor contributing to the current state of affairs concerns the long-term viability of the fuel tax as a means of financing transportation. Road pricing was first suggested by the economist A. C. Pigou in 1920 and was expanded on by Frank Knight in 1924. In the 1960s and 1970s, the economist William Vickrey built on Pigou's and Knight's work and became an advocate of applied congestion pricing. However, the proposal could gather no momentum because the need for a stable funding base was already answered by the existence of the fuel tax. This condition may be changing, however, as the fuel tax's capacity to generate revenues gradually erodes because of climbing fuel efficiency and the reluctance of public officials at all levels of government to raise fuel or other taxes. Another key factor that may support greater use of pricing as a tool for managing demand rather than expansion of road supply is the frequent and potent opposition to plans for increasing road capacity through new construction. Environmental concerns and sticker shock from the high cost of new construction are forcing a more serious look at strategies for wringing the most mobility from the road infrastructure already in place.

In a way, the United States and Europe find themselves in a sort of "back to the future" situation, with revenue shortages and a view of user fees as a reasonable and appropriate pricing system hearkening back to the 1920s. The salient difference is the availability of technology today to make the pricing system almost invisible to motorists. The ability to charge for road use without cumbersome toll plazas and attendant traffic slowdowns and, more important, to vary charges on the basis of congestion levels has finally made true demand-responsive variable pricing a practical possibility.

Since the publication of Curbing Gridlock almost a decade ago, the United States and Europe have both pursued greater use of road pricing, but in quite different ways. In the United States facility pricing is most common, and we see it in the congestion pricing applications on California's State Route 91 and Interstate 15. Some argue that many U.S. initiatives fall short of "true" congestion pricing in that they primarily add new options for motorists who choose to pay for premium service in lieu of establishing a consistent pricing system for all users. This approach, however, is consistent with and probably makes sense in the context of the decentralized transportation system in the United States. With the exception of older cities like New York and Boston, the United States does not have the same center city densities or geographic limitations that make cordon-style area pricing feasible in Europe.

While Europe's experiments have included a few facility-based applications, it is more common to find area pricing applications that target center city areas. These differing approaches in the United States and Europe will probably carry forward into the future. While we in the United States may well be on the brink of value pricing's entry into the mainstream, we should continue to heed lessons learned to date on conditions for successful implementation. The presence of widespread benefits and narrowly defined costs is one important factor for success. The proper use of revenue is essential to the public's understanding of a pricing project's impacts on equity, and dedication of at least a share of the revenue to public transport can counter the impact of road pricing on those with lower incomes. Finally, successful implementation of pricing programs almost always depends on the assembly and mobilization of diverse groups with shared interests to join public officials in championing the approach.

ONE STEP FORWARD, TWO STEPS BACK?
AN OVERVIEW OF ROAD PRICING APPLICATIONS AND RESEARCH OUTSIDE THE UNITED STATES

Anthony May

Road pricing is indeed coming into its own, and as Marty Wachs says, we are at a key juncture in its evolution. This is illustrated, in part, by evidence of more road pricing activity taking place in the past 10 years than altogether in the three decades before that. Thus, today, just 10 years after the Curbing Gridlock conference, we are in a position to structure a symposium around not only theory but also practice.

A review of European and Asian developments in road pricing since 1975, when Singapore established the world's first area pricing system, reveals three major approaches: (a) urban applications through area pricing in center cities, (b) priced toll rings surrounding urban areas, and (c) distance-based pricing on intercity roads. A look at the projects that have been proposed and implemented in the past 10 years in each of these three categories can be instructive for where we are now and where we are going.

Area pricing. Singapore and London provide the oldest and newest examples of pricing entry into center cities. Despite London's system being new, it has been in the making for decades. Indeed, the Smeed report, published in 1964, set forth many of the criteria for success that still hold true. Subsequent phases in the evolution of London's consideration of road pricing included a "supplementary licensing" proposal in 1974; publication in 1988 of a congestion pricing strategy; a government- commissioned study from 1992 through 1995 of various charging schemes; and, ultimately, in 1999, the act that gave London's mayor the authority to establish a road charging system.

Toll rings. In contrast to the cordon-based systems that charge fees for passage into a city center, tolls (to cross cordon) that encircle an urban center have taken hold in Norway. Tolls were introduced for the sole purpose of raising revenue and, as such, do not represent congestion pricing schemes but simply tolls. Norway is unique in that its system includes existing roads and charges at all entry points. While Norwegian officials are considering whether to convert to congestion pricing, it is doubtful that the current design can be adapted to demand management purposes.

Distance-based charging. Seeking to combat congestion on intercity routes, Austria, Germany, and Switzerland are developing and implementing pricing systems that address the number of kilometers logged on major motorways. To date, these systems focus on heavy goods vehicles, partly in response to the continuing growth in freight traffic following the development of the single European market. Thanks to technological developments, Germany's system is currently shifting from a point-to-point assessment to a true distance-based pricing system. By the end of this year, the system will likely evolve from simple window stickers to the use of automatic vehicle identification through onboard units that will transmit the position of the vehicle, company and vehicle data, and the distance traveled on charged roads. Despite, or perhaps because of, the tremendous progress of the past decade, several areas are ripe for further research. I'd like to suggest four in particular.

Public acceptability, particularly with respect to the impact of the design of the particular pricing scheme on public opinion. One study found, for instance, that acceptance ratings for a proposed pricing scheme rose from 35% to 55% once the scheme included a commitment to dedicate the revenues to stated transportation uses rather than the general public coffer.
Continued examination of various road pricing schemes' impacts on "vertical equity," which refers to impacts stratified by income group, and "horizontal equity," which refers to impacts by geographic area and type of activity.
Pricing's impacts on local economic conditions and land use patterns, for which there is little empirical evidence to date, in part due to measurement difficulties. While businesses tend to warn that pricing will produce job and income losses, the limited evidence we have to date suggests only minor impacts. Further evidence to refute or corroborate businesses' fears about road pricing would be most useful.
The role of certain design features in different types of pricing programs. For example, when point-based pricing is considered, it could be useful to examine design features that may minimize diversion to alternative routes. Recent research in Edinburgh has shown a strong correlation between the benefits derived from pricing and the placement of charging points.

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Keynote Addresses

Central London's Congestion Charging Scheme
Has It Achieved Its Objectives?

Derek Turner, Derek Turner Consulting

On some occasions, a simple question–has the London charging scheme achieved its objectives?– can produce a simple answer, which in this case is yes. Since its implementation on February 17, 2003, the program has met all expectations, and the latest figures show that 60,000 fewer car movements per day are entering the center city charging zone, and about 110,000 people per day pay the congestion-based charge. Interestingly, 1 month after its implementation, Mayor Ken Livingstone, who was the program's tireless proponent, was receiving approval ratings 25 points ahead of his nearest rival.

The program was successfully implemented for a number of reasons, including political commitment, strong public relations, strong project management, and an effective procurement strategy. Equally important, the congestion charging scheme was put forth as one element of a much broader strategy that included signalization improvements, public transportation improvements, infrastructure repairs, and technological innovations; together these worked to demonstrate the government's commitment to the supply side of the transport equation, as well.

Once it was clear to public officials and the public at large that these supply-side investments were not sufficient to combat the choking congestion in central London, demand management became an obvious consideration. It is remarkable that the system, as eventually implemented, is not so different from the proposals that emerged from the Smeed commission back in 1964. Some 40 years later, we have found that congestion charging is one of the few policy proposals that can truly unite the left and the right, which in itself makes one of the strongest arguments for how essentially correct the proposal must be.

The benefits realized thus far are impressive. Journey times to, from, and across the priced zone are down by 14%. Time spent stationary or traveling at less than 10 kilometers per hour is down by 25%. Benefits are evident on the public transport side as well, with excess bus waiting times for routes serving the charge zone down by 33%. And in a side benefit that few made specific mention of early on, we are seeing fewer road accidents.

Revenues for 2003 and 2004 are projected at £68 million, and the mayor is using these revenues to boost investments in public transport, and especially bus service. In this way, congestion charging creates one of those rare but delightful virtuous spirals in which the consequences of one action create benefits that continue to build on themselves. This stands in stark contrast to capacity expansion, which serves only to create more demand and an ongoing cry for more and greater investment.

Because of the demand-side benefits that are so evident in the London program, I believe it is time to stop talking about fees, taxes, and tolls and instead start referring to demand management, variable pricing, and congestion charges. Above all, the London experiment has demonstrated that enthusiasm and a can-do attitude can deliver what is commonly viewed as an impossible project.

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Out on a Limb
Pricing Futures

Kenneth Small, University of California, Irvine

The experience of the past 20 years has produced two major forms of congestion pricing: systems that focus on city centers and systems that target express traffic. Both forms of pricing can be shown to solve an array of problems. Congestion itself is the most obvious problem that road pricing addresses, but pricing can also be beneficial to public transit and can combat urban sprawl and related land use problems. Muddling through is, of course, an alternative to pricing, since congestion is at some point and by definition self-limiting. However, the costs exacted by a muddling-through strategy would be high indeed; as public officials and the public generally begin to understand these costs, road pricing can become more politically viable just as it is becoming more technologically viable.

The expanded use of pricing in the past 10 years can be attributed to several factors, including a growth in technical expertise and a keener understanding of the merits of the program itself. Lessons learned from past mistakes are also critical to making today's pricing proposals more viable than those of the past. As we examine the various applications of both forms of pricing, four major lessons emerge that can help inform the approach for the future.

First, as we look ahead, congestion pricing proposals are likely to develop as niche strategies. They will take advantage of differences among users in order to offer a type of service that appeals to particular segments of the population. The importance of such strategies is supported by recent research showing that user heterogeneity greatly affects the welfare evaluation and optimal design of value pricing schemes.

Second, additional pricing experiments can be expected in cases where the level of congestion is widely considered to be unacceptable. People are learning that there are no other feasible options for solving congestion. Solving congestion is not strictly necessary because it tends to be self-limiting; it is disliked and inefficient but not necessarily a problem of highest priority. In the United States, most experiments are likely to be incremental: changes in toll policy on existing toll facilities or addition of high-occupancy toll lanes or FAST¹ lanes. Elsewhere more large-scale experiments appear to be politically feasible.

Third, as large-scale experiments unfold, as in London, analysts will turn to measuring and documenting the effects on economic productivity. Some preliminary studies have suggested that a priced area need not necessarily become less attractive to business; theory suggests that how revenues are spent is important to this question. The relationship between congestion pricing and economic conditions is still poorly understood and stands as a prime area for further research.

Finally, where pricing is anticipated or in place as new roads are developed, we should begin to see changes in roadway design. Pricing shifts the trade-off away from the need to provide capacity and toward the desire to maintain aesthetic qualities and conserve scarce urban land. A result might be more parkways or "superstreets" designed for moderate free-flow speeds and moderate capacity. A speculative suggestion is that pricing might be used as a tool for limiting speed to make such road designs safer when traffic is flowing freely.

1 "Freeing Alternatives for Speedy Transportation," a term used in legislation introduced in the House of Representatives in 2003.

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Special Topics

Ah, the Politics of Pricing

Eric Schreffler, ESTC, San Diego, California
John Albion, Lee County, Florida
Jan A. Martinsen, Norwegian Public Roads Administration

HOW POLITICS AFFECTS EVEN GOOD PROJECTS

Eric Schreffler

As part of the federally sponsored evaluation of the Interstate 15 Value Pricing Demonstration Project, ESTC prepared the institutional assessment, which involved interviews with some 40 stakeholders over the 3-year pilot project. Among other lessons learned, this review provides an interesting insight into how politically driven decisions concerning the use of revenue can lead to reasonably good but less than optimal results.

Jan Goldsmith, Mayor of the city of Poway, California, and the political champion behind the project, enabled the San Diego Association of Governments to move the dynamic pricing concept from idea to reality. His support for pricing grew out of his support for a monorail or other high-capacity transit service to solve traffic congestion problems on the main arterial in Poway as well as for expansion of the light rail system into the I-15 corridor. When planners told him that the demand did not exist for this type of service, he embraced the pricing concept as a way to pay for new transit service in the corridor. After moving on to become a state assemblyman, he sponsored the enabling legislation to allow tolls in the I-15 high-occupancy vehicle (HOV) lanes, which were effectively turned into into high-occupancy toll (HOT) lanes. To ensure that the funds would support the new bus service along the corridor, the legislation limited the use of the revenue to transit capital and operating and HOV facility improvements.

The evaluation of the pricing project showed that it improved the efficiency of the facility, did not seem to hurt carpooling, and cross-subsidized new transit service. However, the I-15 corridor bus service that provided much of the political support for the HOT lane approach did not necessarily fulfill expectations. The intent was to attract new bus riders in the corridor in order to remove cars from I-15. Instead, the new bus service attracted reverse commuters and riders who did not switch from driving alone. The service was split into two routes, one a new commuter express service that now attracts about 130,000 annual boardings.

How could the revenue have been spent to better fit the project goals and address congestion in the corridor? One promising alternative to subsidizing the operation of new bus service would be to provide a direct subsidy to the users of any alternative mode, including carpooling, vanpooling, bus, and teleworking. This would increase occupancy in the HOV lanes, which is still the primary purpose of the facility. The revenue could be used for general HOV marketing and to support commute alternatives, such as the county commuter express services. Use of the revenue solely for new transit service may have been a case where opportunity became expectation.

I-15 is widely accepted as a U.S. pricing success story, and properly so. The success is clearly due in part to the presence of a champion in Jan Goldsmith. However, could the project have been even more successful? Perhaps, had the revenue been used to subsidize all alternative modes rather than just a new service that did not meet many of its expectations.

THE BRIDGES OF LEE COUNTY, FLORIDA

John Albion

Lee County is one of Florida's most populous counties and home to several fine examples of value pricing. Several bridges in the county have had tolls in place for years, but gradually we have been developing policies under which the county uses targeted discounts to achieve demand management objectives. Two bridges are in play–the Cape Coral Bridge and the Midpoint Memorial Bridge. One of the key objectives was to encourage greater use of electronic tolling, and thus at nonpeak times drivers get a 50% discount if they use a transponder and pass. Upcoming changes include a 50% discount for vehicles with three or more axles, improved interoperability for the Sunpass and other automatic vehicle identification systems, and an expansion of the express lanes on the Cape Coral Bridge.

As part of this effort, public officials recognized several features that would be critical to successful implementation of the value pricing systems. Development of interoperable electronic tolling systems has been essential. A political champion is essential as well, but it is also important to create a cadre of "citizen politicians" to help spread the word in an enthusiastic fashion. In Lee County, one of our major efforts was to educate and garner support from community leaders before approaching the general public, and to do so in a straightforward manner that addresses basic questions, such as "What's a transponder?" before launching into the demand management philosophy underlying the proposal.

Business advisory committees, driver surveys, stakeholder task forces, and advisory groups were helpful in flushing out and addressing major areas of concern. Such concerns typically related to a full understanding of how electronic tolling works, how privacy considerations would be addressed, and whether value pricing would be effective in reducing traffic. We also benefited by building creative and fun elements into our public involvement strategy. These elements included naming contests and the use of lotteries and other incentives to encourage participation in surveys.

We have found a strong correlation between knowledge and acceptance, and today the system in place has a 70% approval rating. The other numbers generated from Lee County's experiments with value pricing are impressive as well, with estimated annual travel time savings totaling about 30,000 hours and associated financial savings to drivers of about $2.6 million.

WHAT DO POLITICIANS REALLY NEED TO KNOW?

Jan A. Martinsen

For more than 50 years, Norway has successfully employed user charges to supplement regular government funding of road projects. In the past 20 years the use of toll road projects has increased considerably. Today, a good 35% of the total annual budget for road construction comes from more than 40 toll road projects scattered throughout the country. So far, about 100 toll road projects have been successfully realized, and only one has been declared bankrupt. User charges for road infrastructure funding in Norway are therefore considered a true success story.

Tolls are used to finance both urban and interurban road projects. In the three largest cities–Oslo, Bergen, and Trondheim–cordon tolls are the main source of funding for road and to a lesser extent public transport investment programs. In nonurban areas, toll financing is used only for road infrastructure investments.

The Norwegian government recently passed legislation to make congestion pricing possible, but so far it has not been implemented. The main road user charge issue in Norway today is whether cordon toll rings in the main cities can be transformed into congestion pricing schemes. Congestion and delays are well-known problems in some of these cities and represent a significant concern for professional advisors as well as politicians. The crucial question is whether the delays are big enough to be successfully managed through congestion charging. The average delay on selected routes in Oslo during peak hours is less than 10 minutes, with a maximum of more than 20 minutes for the most congested road. The transport professionals are convinced that congestion pricing should be part of future transport policy, at least in Oslo. The task is for these professionals to convince the political decision makers that congestion charging is a good policy.

The experiences in Norway so far offer some lessons for others wishing to implement road use charges. One of the crucial issues in considering the implementation of road user charges is the amount and detail of information that politicians need for their decision making. Of course, what they need to know and what they want to know might not be the same.

Our findings indicate that what the politicians need to know depends on the political level at which the changes are being considered (i.e., whether it is at the local or national level). While local politicians are more concerned with the use of collected funds to finance infrastructure within their localities, national politicians are more concerned with the total government budget and ensuring that only financially sound projects are approved. In Norway, each user charging scheme is approved by the national parliament on the basis of local recommendations. Therefore, what the local politicians need to know is crucial, and our experiences show the following:

Local politicians need to know how road user charges will affect the local community, local business, land use, the environment, and so forth.
They must gain something (e.g., more local transport improvements) from making unpopular decisions. Thus they need to know how revenue collected will be distributed in their local communities, including what percentage should return to road users and what percentage should be used for public transport.
They need to know the costs of not implementing road user charges. For example, they should be apprised of how long they would have to wait for central government funds for the proposed improvements and what mobility consequences would be likely if nothing were done.
They must be able and willing to deal with negative public reaction and to argue convincingly for the benefits from road pricing.
They need to be shown examples of successful road user charging projects.
They need a better understanding of how to interpret advice from transport professionals. At the same time, their advisors should make an effort to translate the economic theory underlying much of road user charges into simple language that everybody can understand.

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A Closer Look
Pricing Across the States

Mark Muriello, Port Authority of New York and New Jersey
Jim Ely, Florida's Turnpike Enterprise
Jeff Buxbaum, Cambridge Systematics, Inc.
Ellen Burton, Orange County Transportation Authority

TOLL ROAD APPLICATIONS: PERSPECTIVES FROM THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

Mark Muriello

The Port Authority of New York and New Jersey operates and maintains six interstate vehicular crossings, three bus terminals, the Port Authority Trans-Hudson (PATH) rapid transit system, the New York and New Jersey airports, and major marine terminals in New York and New Jersey. The authority is financially self-sustaining. It covers the operations, maintenance, and capital investment needs of its facilities through user fees, including tolls at the vehicular crossings.

On March 25, 2001, the authority introduced the Value Toll Pricing Program at the six tunnels and bridges that connect New Jersey with New York City. Since that time, the program has generated incremental revenue to support an aggressive intermodal capital investment program and has produced traffic management benefits to address congestion. The authority's Value Toll Pricing Program represents one of the most aggressive applications of value pricing on existing toll facilities in the United States. The program has generated meaningful steps in addressing traffic congestion through market incentives.

The overall goal of the program was to generate revenue to support a 5-year capital investment program composed of projects totaling $14 billion through a package of interstate tolls and fares sufficient to cover the deficits produced by the PATH transit system and the bus terminals. Five underlying policy objectives were established: (a) encourage traffic shifts to off-peak periods, (b) encourage use of mass transit and higher vehicle occupancy, (c) increase the number of E-ZPass electronic toll transactions, (d) create commercial traffic management incentives, and (e) eliminate frequency-based commuter discount programs.

Toll rates (in dollars) were set as shown in the following table.

	Cash	E-ZPass Peak (Weekdays 6-9 a.m. and 4-7 p.m.; Weekends Noon-8 p.m.)	E-ZPass Nonpeak	E-ZPass Weeknight (Midnight-6 a.m.)
Automobile (eastbound only)	6.00	5.00	4.00	3.50
Truck (eastbound per axle)	6.00	6.00	5.00	3.50

An effective stakeholder outreach and public communications plan was essential in advancing the program. In particular, we found that outreach to newspaper editorial boards paid tremendous benefits in educating the public and shaping opinion.

The program has met its revenue goals through its first 2 years despite the revenue forecast's overprediction of E-ZPass participation. To help refine the projections further, the authority has developed a new toll plaza-specific toll forecasting model to account for differences in markets, vehicle mixes, E-ZPass use, and temporal traffic distribution.

The project also has had some success in meeting its demand management objectives. The hourly percentage distribution of weekday traffic between 5 and 10 a.m. showed as much as a 2.6% increase (2,400 vehicles) in the first hour of the time period, just before the peak toll rates go into effect. There is less evidence that the off-peak discount has been effective in shifting demand to the hour following the 6 to 9 a.m. peak toll period. While similar results are evident during the weekday evenings, the effect is not as strong, which suggests somewhat less willingness to travel off-peak or flexibility in evening schedules. Also, there is little evidence that the off-peak discounts have been effective in influencing weekend travel patterns or overnight commercial movements.

In general, the sluggish New York City economy has dampened travel demand in 2003 in all time periods, and this year we have seen evidence of a shift back to the now less congested peak hours by early-hour off-peak motorists. This suggests that while the $1.00 discount has had some meaningful and sustainable ability to shift travel demand, its effectiveness in shifting demand to off-peak hours is highly correlated to continued levels of peak-period congestion.

Future toll rate adjustments are likely to seek smaller changes targeted by time of day, travel corridor, vehicle type, and managed roadway application. These may be less complicated to advance and provide an opportunity for smoother revenue infusion to sustain future financial needs. Another area for continued refinement lies in interagency coordination, especially given the large number of toll agencies in the New York-New Jersey region. Synchronized peak hours, jointly targeted market segments (autos, trucks), and coordinated E-ZPass customer statements could encourage continued behavioral change and maximize the pricing system's demand management benefits.

In closing, I offer a few observations on the future role for road pricing in the United States:

New pricing projects will embrace a broader transportation improvement agenda, including transit, to create more travel options and customer choice.
More time and resources are needed to help local initiatives take hold. In particular, local agencies will require resources to conduct continued outreach programs, educate the public, and manage opinion.
Technical resources to establish and integrate tolling and charging systems are essential to advance value pricing today and prepare for future national transportation financing systems that are less dependent on the motor fuel tax.
The federal Value Pricing Pilot Program remains critical to pricing's success, and upcoming federal highway and transit legislation should preserve it. The ability to price portions of the Interstate highway system under the pilot program should be maintained.

PLANS FOR VARIABLE PRICING BY FLORIDA'S TURNPIKE ENTERPRISE

Jim Ely

Florida's Turnpike Enterprise, a largely privatized program of the Florida Department of Transportation, operates a 449-mile statewide system of toll roads.

One of the enterprise's most ambitious initiatives has been the development, distribution, and popularization of an electronic toll collection system; this technology is now recognized as a clear prerequisite for effective value pricing. It is also key to the turnpike's goal of broadly deployed "open road tolling," under which charges can be levied without impeding free and full-speed traffic flow.

The turnpike's electronic toll collection system is called SunPass. It is compatible with other electronic toll collection systems across the state. SunPass was recently opened to retail sales at certain drugstores and supermarkets statewide, and the sale of the millionth transponder was recorded in November 2003, just 4 years after the SunPass program's deployment. A key milestone was the achievement of statewide interoperability (E-Pass, O-Pass, SunPass), which occurred in 2001.

We believe that by 2004 more than 50% of system revenues will be collected electronically and that by 2008 participation will grow to 75%. We also anticipate that the turnpike will deploy an open road tolling system by 2008. Another key part the turnpike's plans is the development of a system of "Xpress lanes." These lanes are a new product for us, and the first of the Xpress lanes will be in the Orlando area on I-4. The turnpike is investing $250 million in the I-4 improvements, which will involve four priced lanes in the median. The project is the product of a partnership between the local Florida Department of Transportation office, the Federal Highway Administration, and the turnpike.

An opening date is anticipated for roughly 2015. Relying exclusively on electronic toll collection, the Xpress lanes will require a transponder and be value priced. Toll rates will be reasonable, between $0.06 and $0.20 per mile, and will be set by time of day to maintain Level of Service (LOS) C. Reasonable rates would allow for affordability so the Xpress lanes can be "Taurus lanes" rather than "Lexus lanes." The decision to pursue value pricing was prompted by the recognition that future traffic demand in Orlando will be so great that general use lanes would fail even with the four-lane widening project. In contrast, value-priced Xpress lanes can guarantee LOS C by treating variable tolls as a congestion management tool.

The turnpike is simultaneously conducting a federally funded value pricing study for another project: the Sawgrass Expressway in South Florida. Of special note is that the Sawgrass project will involve a first-time conversion of an existing toll facility to open road tolling. The turnpike also recently completed a value pricing study on the Homestead extension of Florida's turnpike; this study concluded that the public's reaction to value pricing can be favorable if the proposed facility provides new capacity, as is the case with the Xpress lanes.

As we look at the full range of activities under way at Florida's Turnpike Enterprise, it is evident that value pricing holds significant promise as a congestion management tool suited to relieve some of the state's busiest highways.

MILEAGE-BASED APPLICATIONS: MINNEAPOLIS, MINNESOTA

Jeff Buxbaum

The objective of this current research project in Minneapolis is to investigate whether the way we acquire access to a car can influence our driving behavior. Currently, people either own or lease cars and make other significant fixed payments, which encourage them to drive more to get the most from their investment. This project simulates the replacement of some of the fixed costs of ownership/leasing and operation with fees or charges based on mileage and perhaps time-of-day travel, to determine whether this influences their driving behavior.

The consultant team and the Minnesota Department of Transportation investigated the attitudes of the public toward mileage-based leasing products through focus groups. The focus groups indicated a segment of the population that would be interested in mileage-based leases. However, many people had a poor understanding of the cost to them of having and driving a car. Some people also had "big brother" concerns, although many others had no problem with that.

The original scope of work called for a hands-on test case under which a private business partner might be willing to test a new vehicle leasing product that included a mileage component. Ultimately, this approach was not feasible. The targeted partner decided that it did not want to pursue mileage-based leasing at the time, primarily because of concerns over cannibalization of existing lease markets and perceived customer acceptance issues.

The new work plan will take two tracks. The first will build on the work done in the focus groups and involve a comprehensive market research effort to understand who would voluntarily opt for mileage-based leasing or insurance. The goal is to understand the opportunities and constraints for real leasing or insurance products that might be offered by the private sector.

In the second track, the team will recruit a small sample of people who are willing to participate in a real-world experiment. They will simulate buying out the focus group participants' leases and insurance, converting their payments to a fixed component and a variable component, setting up a "budget" that participants can draw down, and paying them the difference between budgeted miles and actual miles.

Participants in the field experiment will be tracked for 10 months. Part of that time will be treated as a control period, during which the participants will receive no feedback on miles driven. An experimental period will follow, during which participants will be provided price signals on a semimonthly basis. The experimental period will test participants' responses to several variables, including total number of household vehicles, the number of vehicles included in the experiment, and variable pricing by time of day. Participants will be surveyed at various intervals in the project to identify shifts in their attitudes toward mileage-based pricing concepts.

This study design will serve two purposes. First, we will be able to compare the behavior of each participant's own control period with that participant's experimental period. Second, the control participants also will serve as a separate control group to those that are in the experiment period in order to identify any general changes in regional driving behavior that occur during the experimental phase. The project is scheduled to end in September 2005.

NEW LANE APPLICATIONS: CALIFORNIA STATE ROUTE 91

Ellen Burton

The Riverside State Route (SR) 91 freeway is considered a land bridge between Orange County and the "Inland Empire" counties to the east. It is the only primary east-west corridor linking Orange County with the Inland Empire. The freeway carries more than 250,000 average daily vehicles, and during peak hours general-purpose lanes are highly congested. The current situation reflects a limited availability of affordable housing in Orange County but a strong job market. Orange County attracts daily work trips. Projections about future housing growth in the Inland Empire, coupled with a continued robust job market in Orange County, indicate that the existing jobs-housing imbalance and resulting transportation patterns will continue into the future.

In 1989, at a time when there was a scarcity of California highway construction, Assembly Bill 680 (AB680) authorized four public-private toll road partnerships. The 91 Express Lanes franchise was initially granted to the California Private Transportation Company (CPTC), and it became the first AB680 project built. The franchise extended from the Los Angeles-Orange County line on the west to Interstate 15 on the east. The franchise agreement included a noncompete provision, which was designed to protect bondholders. The provision constrained the construction of parallel roadway capacity for the 30-year life of the franchise agreement. In 1995, CPTC opened the 91 Express Lanes in the center median of the SR-91 freeway. Since that time, traffic has continued to grow in the express lanes and on the mainline freeway.

The 91 Express Lanes, which drivers may use for a fee, are separated from the general lanes by channelizers. The facility uses electronic tolling and has no intermediate access points. The purpose is to offer customers a choice for a safe, reliable, free-flowing trip. The facility uses variable pricing, which is set by direction, day of week, and hour. The 91 Express Lanes extend 10 miles from SR-55 on the west and the Orange-Riverside County line on the east.

The Orange County Transportation Authority (OCTA), as a county transportation commission, is responsible for planning and funding highway, street, and road projects, as well as delivering bus and rail transit services. In 2001 OCTA identified intercounty travel as one of the most pressing issues. One of the major corridors needing attention was SR-91; however, the noncompete provision that attached to the facility's financing was a significant limitation on any plans to increase capacity. OCTA's board of directors thus decided to pursue the acquisition of the 91 Express Lanes franchise to eliminate the noncompete provision.

In January 2003 OCTA bought the 91 Express Lanes franchise for $207.5 million. The transaction included the assumption of $135 million in taxable debt and the advancement of $72.5 million from internal borrowing. The first public policy change was to allow carpools with three or more persons (HOV3+) to ride free during all but "super peak" hours, Monday through Friday, 4 to 6 p.m. eastbound. During these times, HOV3+ riders pay 50% of the posted toll. Since the implementation of this policy in May 2003, HOV3+ use has grown 40% over the same period last year. Peak average vehicle occupancy has also increased from 1.38 before the policy to 1.48 in August 2003. However, HOV3+ revenue is down an average of $27,000 per week, and it is estimated that the policy will result in a decline of $1.4 million to $1.6 million in toll revenues annually.

OCTA next sought to refinance its taxable debt. To do so, OCTA needed to adopt a toll policy. Working with its legislatively created advisory committee, which is made up of public officials from both Orange County and the Inland Empire, a toll policy based on the concept of congestion pricing was developed. The policy used trigger points to manage peak-hour congestion to keep lanes operating at free-flow speeds. The goals were to optimize throughput while ensuring the financial viability of the facility. Tolls now are adjusted automatically on the basis of volume in the lanes. Since July 2003, tolls in four super peak hours have increased from $4.75 to $5.50 (eastbound Thrusdays and Fridays from 4 to 6 p.m.). Overall, year-to-date revenue has declined from about $2.70 per trip in Fiscal Year 2002-2003 to $2.40 per trip in Fiscal Year 2003-2004 because of the impact of the HOV3+ policy change.

In November 2003 OCTA refinanced its taxable debt and reduced the interest rate from 7.63% to 4.43%. This is expected to result in a present value savings of about $24 million over the life of the obligation. This is important because under state legislation passed at the time of OCTA's purchase of the 91 Express Lanes franchise, any excess revenues after debt service, operating costs, and capital costs are to be used on SR-91 improvements.

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Calculating Costs and Measuring Benefits of Pricing Schemes

Erna Schol, AVV Transport Research Center, Netherlands
Christopher Nash, Institute for Transport Studies, University of Leeds
Jeffrey Zupan and Alexis Perrotta, Regional Plan Association
Andrea Ricci, ISIS, Italy

COSTS AND BENEFITS OF PRICING SCHEMES FOR THE NETHERLANDS

Erna Schol

The Netherlands is currently dealing with the problem of growing traffic congestion. Economic growth, an increase in the number of smaller households, increased participation in the labor market, and limits on funding and physical space for new infrastructure all contribute to the growth of traffic congestion. While we have not yet implemented road pricing largely because of lack of public acceptance, road pricing is back on the national discussion agenda. In my view, it is all but inevitable that by 2010 the Netherlands will have some form of road pricing in effect.

As we renew our investigation into the long-term advisability of various road pricing schemes, a close look at pricing's benefits and costs is interesting. The benefits to be examined include direct benefits for road users, avoidance of external costs, and indirect benefits. Direct benefits include travel time savings due to reduced congestion, less welfare due to reduction of car mobility for system dropouts, and a shift of motorists to urban public transport. External benefits are realized through the avoidance of various external costs, including those imposed by emissions, noise, and traffic accidents and other threats to safety. Indirect benefits can be realized through impacts on the labor, housing, and automobile markets. Costs of a pricing system include the capital cost of the initial investment as well as ongoing operating and maintenance expense.

In a 1997 study the Economic Institute of the Netherlands applied cost-benefit analysis to two variants of road pricing: cordon-based area fees and fees levied on highways anticipated to be congested by 2001. Regardless of the variant, it was assumed that the tariff would be €2.25 and levied on both passenger and freight transport. The study concluded that given the assumptions, the cordon-based approach would yield greater net benefits.

In a Central Planning Bureau cost-benefit analysis conducted in 2001, two other scenarios were identified: (a) a variabilization of fixed costs through a per kilometer charge–essentially a flat rate based on the "pay as you drive" principle; and (b) a flat rate that included a congestion component–a surcharge of €0.10 per kilometer at times and locations of congestion. Both scenarios make use of an onboard unit and global positioning, so no toll collection points are needed. The total effect of the flat rate scenario is around zero, meaning that the costs are comparable with the benefits. The total effect of the congestion charge is positive and comes to about €10 billion by 2020, on the assumption of nationwide implementation of road charges for both passenger and freight traffic. This provides strong evidence that a congestion charge is effective in lowering transport demand and thus congestion. However, even the flat rate can decrease congestion (though to a lesser extent) if simpler, less expensive technology is used.

The broader lessons learned were that costs inevitably increase during the course of a project and that benefits can vary markedly depending on the structure of the pricing scheme, including the tariff level, the potential to vary the charge in response to congestion levels, and the application of the scheme to an urban area generally or to highway travel. Thus, cost-benefit analysis can be a powerful tool for gaining insight into not only the advisability of a stated project but also the impacts of various refinements of a proposal.

WHY REFORM TRANSPORT PRICING? AN OVERVIEW OF EUROPEAN TRANSPORT INFRASTRUCTURE CHARGING POLICY AND RESEARCH

Christopher Nash

In its 1998 White Paper on Fair Payment for Infrastructure Use, the European Commission adopted a clear policy calling for the phased introduction of marginal social cost pricing for infrastructure use. It proposed legislation to implement this for commercial transport of all modes; the policy is confined to encouragement rather than legislation for private vehicles. For rail, the policy was implemented under Directive 2001/14, but for roads, the current proposal to revise the Eurovignette Directive on heavy goods vehicle charging falls short of this principle. It requires differentiation by congestion and environmental costs but ties the average level of charge to average infrastructure and external accident cost only. It is not clear whether this is to be seen as a step on the way to full marginal social cost pricing or as a change in policy.

Implementation of marginal social cost pricing requires that we be able to measure and value its three components:

Marginal cost of infrastructure maintenance and operations imposed on the infrastructure manager;
Marginal cost imposed on other infrastructure users in the form of congestion and accidents; and
Marginal cost imposed on the rest of society, predominantly in the form of environmental costs but also some elements of accident costs.

Among the many criticisms of this approach is the complexity of measurements. A second major criticism is the view that charges should be tied to total costs rather than marginal costs, either for reasons of equity or dynamic efficiency. Several research projects have addressed measurement challenges and sought to clarify the impact of marginal cost pricing on different classes of vehicles and uses.

Participants in the Unification of Accounts and Marginal Costs for Transport Efficiency (UNITE) project estimated the total social cost of road transport for most of Europe and found that costs of congestion, pollution, and external accident costs totaled nearly 3% of gross domestic product, or double the level of infrastructure costs. Thus, charging solely to recover infrastructure costs is likely to lead to charges that are too low. But a further major issue is the inadequate differentiation of charges by vehicle type, location, and time of day; UNITE also undertook case studies to see how marginal social cost could be measured to identify those differences.

A number of projects (including Pricing European Transport Systems and Models for Transport Environment and Energy) have undertaken case studies that have predicted the results of marginal social cost pricing for all modes of transport. As would be expected, these typically show higher charges for the use of roads in urban areas, particularly in the peak period, with a fall in road traffic in the range of 5% to 20%, as well as changes in time and route of travel where pricing systems are sufficiently sophisticated to reflect these factors. For interurban traffic the outcome is more variable and reflects major differences in current charges and levels of congestion. Typically, cars are overcharged and heavy goods vehicles undercharged, but there are similar discrepancies in other modes so that the outcome of transport pricing reform is relatively limited in terms of changes in traffic volume and mode split. Transport pricing reform may thus be more important for interurban traffic due to its impact on vehicle type, time, and route of travel than for its effect on the overall volume of traffic.

AN EXPLORATION OF MOTOR VEHICLE CONGESTION CHARGES IN NEW YORK

Jeffrey Zupan and Alexis Perrotta

Currently 830,000 vehicles enter Manhattan's central business district (CBD) each day, and 78% do so for free. Of the 19 entry points to the CBD, four are tolled tunnels, four are free bridges, and 11 are free city streets and highways. The tolled tunnels are operated by two distinct authorities; both use electronic toll collection and one varies the charges by time of day. The free facilities are operated by the city of New York.

Our organization identified and assessed four pricing scenarios to highlight distinctions between flat and variable pricing, daytime and 24-hour pricing, and pricing at some or all of the entry points to Manhattan's CBD. The scenarios use the sensitivities of drivers who may respond to an added charge by not making the trip at all or by changing destination, mode, route of travel, or the trip's time of day. All four scenarios assume a cashless toll system and one-way inbound tolls:

Toll East River bridges as does the Metropolitan Transportation Authority (MTA): a flat fee on East River bridges set at the level of current tolls of the two parallel MTA tunnels;
Variable pricing on East River bridges, MTA to match: variable time-of-day tolls on East River bridges with MTA tolls modified to match them;
Like London: a pricing system at 60th Street for 13 daytime hours on weekdays with flat East River tolls during the same time period; and
Full variable pricing: variable time-of-day pricing at all entries, including the East River bridges, MTA crossings, and 60th Street.

As modeled, these scenarios produce traffic reductions of 5% to 13%, with an even greater reduction during the peak period in the second and fourth scenarios. Drops in traffic would be higher at the East River entry points, which would likely lead to the virtual elimination of congestion at those crossings and relief on local streets in Brooklyn and Queens. However, such traffic reductions would result in only 0.3% to 1.0% fewer trips into the CBD and 100,000 to 270,000 more daily transit trips. All scenarios would generate substantial revenues in excess of $700 million, which could capitalize anywhere from $7 billion to $19 billion of new construction. Along with overall traffic volume reduction, pricing would provide benefits such as more reliable, stress-free driving; elimination of gridlock on local streets near crossings; faster speeds for necessary vehicles such as buses, taxis, and delivery vans; more space for amenities such as pedestrian boulevards; and funds for the next generation of transportation expansion.

Despite its benefits, pricing's opponents can be expected to raise concerns about economic impacts, geographic and income equity, and fairness to those with poor alternatives to driving. Many will claim that city streets and bridges simply should not be tolled. Pricing is especially politically difficult in New York, since 58% of the city council is from Brooklyn and Queens. Given these dynamics, four mayoral administrations have failed to win over opposition in the past. We suggest that next steps for New York should include agreement on objectives, a concerted effort to obtain support from the Bloomberg administration, further research, involvement from the business and media communities, and the development of a package of short- and long-term transit improvements that focus on Brooklyn and Queens.

RELEVANCE OF PRICING TO EXTERNAL COST CALCULATION: RECENT RESULTS

Andrea Ricci

Externalities are changes of welfare caused by economic activities that are not reflected in market prices. External costs are those borne by those individuals who have not induced them. They remain such until they are incorporated, or internalized, in prices levied on those whose activities produced the externalities.

The European Union takes the view that transport pricing reforms should be based on the "users pay" principle, which would require full internalization of marginal external costs to arrive at the right price.

Two recently commissioned studies are helping policy makers zero in on ways to capture marginal external costs in transport pricing. The Real Cost Reduction of Door-to-Door Intermodal Transport (RECORDIT) project, funded by the European Union, has calculated the external costs of freight transport over more than 9,000 kilometers of network for both road and intermodal services. The UNITE project, also funded by the European Union, has carried out more than 30 case studies covering all modes and situations (urban and interurban freight and passenger travel).

Both projects address the most relevant categories of external costs: air pollution, noise, congestion, accidents, and global warming. RECORDIT has also developed rough estimates of life-cycle costs (e.g., production and disposal of vehicles, containers, and fuels). In addition, both projects address infrastructure costs, or the costs arising from wear and tear of the infrastructure itself, since these are a further component of the social costs to be passed on to the user.

The evidence produced by RECORDIT and UNITE shows the following:

The methodologies currently used to calculate external costs are robust, especially for air pollution and congestion and, to a lesser extent, noise and accidents. Costs associated with global warming still suffer from large uncertainties.
All categories of external costs are highly sensitive to situational factors (e.g., geographic position, meteorology, population density, and time of day). Particularly for congestion, this makes it difficult to transfer values from one context to another.
RECORDIT has produced estimates of the average value of external costs for each European Union member state that take account of the specific characteristics of the national networks, vehicle fleets, and so forth. It has then derived the value of the internalization charge, as discussed below.

For the 16 European Union nations, RECORDIT identified external costs per kilometer imposed by a 40tonne articulated truck. These external costs ranged from €0.24 (Sweden) to €0.54 (Slovenia), with an average of €0.32. The study further identified the extra charge per kilometer (compared with current taxes) that would be necessary to internalize external costs. These ranged from a low of €0.17 (France) to a high of €0.35 (Switzerland), with an average extra charge of €0.21.

It can thus be concluded that the taxation and charging systems currently in place in the European Union do not cover the full social costs of transport infrastructure use, with shortfalls in the range of €0.20 to €0.40 per kilometer. Correcting current distortions in pricing practice requires the introduction of a variable per kilometer charge that could capture all important cost drivers, including vehicle technology and situational factors.

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Role of Pricing Revenue in Financing Projects and Services

Erik Amdal, Norwegian Public Roads Administration
Robert Poole, Reason Foundation
Dario D'Annunzio, Cofiroute

LORD OF THE RINGS, TRONDHEIM, NORWAY

Erik Amdal

Cities all over the world struggle with the same traffic problems: congestion, traffic accidents, and air pollution. This was the situation in Trondheim, Norway's third-largest city, with a population of 140,000. The main traffic problem in Trondheim was the lack of a road system with sufficient capacity to handle traffic demand. This caused traffic problems in the city center and the nearby residential areas. As much as 50% of the traffic in the city center was just going through the center without stopping. Between 1983 and 1987, traffic growth of 25% was registered, and it was easy to predict a total collapse in the near future if nothing was done to reduce the growth and improve the transport system.

In an effort to reduce these problems, in 1987 the city council decided to implement a road pricing or tolling system as one part of a new transport plan for the city. The transport plan covers all types of city transport. After extensive discussions with both local and central authorities, the national parliament approved a plan for extending the present main road system, building new roads around the city center, enhancing the road system for pedestrians and cyclists, and giving priority to public transport. It was agreed that the new investments should be financed partly by implementing a toll ring system around the city.

With an eye to the toll ring, policy makers emphasized the following goals:

The toll or road pricing system should have low operating costs.
The system should be used as a traffic regulation tool, with inbound traffic paying a higher rate during peak hours to distribute the traffic over time.
The system should be based on a no-stop electronic payment system.
The necessary toll equipment should be compressed to be suitable for all types of locations, even in the streets of the city center. The following were key elements of the implemented system:
Provision of free electronic tags to all car users in the Trondheim area,
Operation of 10 unattended toll plazas and one attended plaza,
Weekday operation of the toll ring system from 6 a.m. to 5 p.m., and
Higher charges during morning peak hours.

The system opened on October 14, 1991. The Trondheim Toll Ring Project was well marketed before the opening, and today 95% of the motorists entering the city center use the electronic payment system. The revenues, today around 150 million NKr per year, are being used to finance new road infrastructure, improved public transit, and new facilities for pedestrians and cyclists in Trondheim. The first year after opening, inbound traffic during toll hours declined by 10% and weekday bus travel increased by 7%. In 1998 the system was reworked to cover more traffic in the urban area. The city is now divided into six sectors, and vehicles crossing the sectors have to pay toll.

Today, the main traffic problems are nearly solved, and the traffic situation in the city center is significantly better now than 10 years ago.

More recently, in part because of a funding shortfall resulting from a cost overrun on the last city bypass, we expanded the toll ring again. Key elements of the revision included six new charging points and an increase in the base price. The new system is estimated to produce toll revenue of 200 million NKr per year, operating costs of 17 million NKr per year (representing less than 10% in operating costs), enough toll money to finance the latest round of investments in Trondheim's surface transportation infrastructure in 2005, and, most important, a solution to the city's current traffic problems.

BUS RAPID TRANSIT/HIGH-OCCUPANCY TOLL NETWORKS

Robert Poole

Many high-occupancy vehicle (HOV) lanes lanes throughout the United States are seriously underused; at most times of day, excess capacity exists on these lanes, which are dedicated to the use of vehicles carrying two or more (or three or more) passengers. The Reason Foundation has recently published a report on bus rapid transit systems and the utilization of high-occupancy toll (HOT) networks to reduce congestion and improve urban transit. Such lanes would continue to serve very high-occupancy vehicles, such as buses and vanpools, but would be available to lower-occupancy vehicle drivers who wished to pay a fee for access to these free-flowing lanes.

The report examines eight of the most congested U.S. cities to determine what infrastructure would be necessary to complete a cost-effective HOT network. Pricing on the HOT lanes would be variable, such that the price charged to paying vehicles would be high enough to limit traffic in the HOT lanes to a volume consistent with free-flow conditions. On highly congested freeways, this would produce peak-period, peak-direction toll rates in the range of 30 to 40 cents per mile. Buses and vanpools, as well as emergency vehicles, would use the lanes at no charge.

An analysis of potential revenues that would be generated and the debt that could be supported was conducted for each of the eight potential metropolitan area networks. In addition, the cost of building out the network was estimated by drawing on the long-range transportation plans of the respective metropolitan planning organizations (MPOs), supplemented by the authors. While some long-range plans omit high-cost HOV lane additions, many omit flyover connectors at freeway interchanges because of their high cost. With the availability of a new revenue source, these missing pieces were added to the plans proposed by the MPOs. The analysis showed that bonds backed by the HOT lane revenue alone could cover an average of 67% of the capital cost of constructing the new HOT lanes and interchange connectors needed to create a seamless network.

Put into practice, the concept could offer numerous benefits, including "congestion insurance" available to all motorists; reduced congestion in the general-purpose lanes; and facilitation of speedy, regionwide express bus service (bus rapid transit), all within the context of an infrastructure expansion that could be largely self-financing.

TOLLING THE A-86 TUNNEL IN VERSAILLES, FRANCE

Dario D'Annunzio

The A-86 is a ring road around Paris, the final link of which has yet to be built. Its intended length is 1,100 kilometers, of which about 900 kilometers has been completed. Traffic levels on the road have been rising, meaning that Paris is in much the same situation as most other major cities in developed countries.

The final link of the A-86 is expected to cost about €1.8 billion to complete. It will include two double-decked tunnels, with each level including two traffic lanes and one emergency lane. Charges levied on road users will repay capital costs as well as operations and maintenance expense. The fee structure is consistent with the facility's development and operation by a concessionaire. Total annual revenue is expected to reach €110 million by 2020. This projection is based on an optimal toll schedule that sets separate rates by time of day and day of week and that differentiates between single motorists and subscription motorists.

An opinion poll that surveyed 3,000 people gathered information on perceptions of factors that contribute to well-being and those that cause concern. On the basis of this information, we have developed communication tools that speak directly to the issues that are most important to those in the A-86 community. One of our most successful communication tools has been an A-86 West exhibition; we also publish and mail out an A-86 West newsletter.

In summary, through its development under a concession arrangement, the A86 West project brings to Paris a project that costs nothing to the national or regional government since it is financed wholly by Cofiroute. A flexible toll rate policy will encourage frequency of use and automated toll collection.

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Pricing Goes Global

David LeCoffre, Embassy of France, Washington, D.C.
Marcel Rommerts, European Commission
Gopinath Menon, MSI Global Pte. Ltd., Singapore
Imad Nassereddine, 407 ETR Concession Company Ltd.

VARIABLE ROAD PRICING IN FRANCE

David LeCoffre

France has more than 50 years of toll road experience. Of the 5,000 miles of toll roads in operation, 4,500 miles are publicly owned and 500 miles are privatized. Tolling has always been viewed as a means to pay for construction, maintenance, and operation. The French government is now starting to look at methods for converting traditional tolls into variable charges that could not only cover the cost of infrastructure but also aid in traffic management and cover the external costs (e.g., environmental impacts) imposed by road use. We define variable tolls as fees that are modified according to any number of parameters, including vehicle type, time of day, itinerary, environmental conditions, and the like. These parameters give rise to three special applications that may be useful under special circumstances. They comprise (a) time-variable tolls, which are based on the trip's time of day; (b) itinerary-variable tolls, which vary with the route traveled; and (c) environment-variable tolls, which are based on vehicle emissions levels. The French government views variable tolls favorably. Several principles help guide the approach that the government is considering:

Two users may pay two different toll rates if and only if they are in a significantly different situation;
No revenue increase: any toll rate increases during a time of the day must be balanced by a comparable decrease during another time of day;
Clarity and simplicity: the user must easily understand the implemented system; and
Protection of the public interest: variable tolls may be used to enhance road safety.

Within the context of these principles, France is pursuing a pragmatic, step-by-step approach that is developing and will continue to develop on the basis of lessons learned from individual case studies. The experience of six such case studies, focusing on roads around Paris as well as some alpine tunnels, have resulted in peak-to-nonpeak traffic shifts of as much as 12%. Lessons generated from these and other case studies will prove invaluable as France moves forward with its European partners in forging new public policy by redefining tolls and determining the extent to which variable tolls should be used.

TESTING THE REAL-WORLD ACCEPTANCE AND EFFECTIVENESS OF URBAN PRICING

Marcel Rommerts

The European Commission is the administrative body of the European Union. The European Union has 15 member states and will be enlarged with an additional 10 member states in May 2004. Among its activities are setting common policy frameworks, harmonizing standards, and supporting information exchange and the management of a multiannual research, technological development, and demonstration activities program.

In the field of transport pricing, the European Transport White Paper, published in 2001, defines the following long-term policy objective: "gradually . . . replace existing transport system taxes with more effective instruments for integrating infrastructure costs and external costs." It goes on to identify charges for infrastructure use and the fuel tax as two such instruments. In recent months, the European Commission has presented proposals for directives on the charging of heavy goods vehicles on the trans-European transport network and on electronic charging systems. The last directive intends to move Europe toward satellite-based road user charging.

Over the past 10 years the European Commission has cofinanced a substantial body of research and demonstration projects in the field of urban pricing. The latest of these is the Pricing Road Use for Greater Responsibility, Efficiency, and Sustainability in Cities (PROGRESS) project, which is producing interesting results based on practical experiences. The majority of European cities testing road pricing thus far have not yet fully implemented their pricing schemes, but data are gradually becoming available. The following table shows the European cities that are starting to produce data; participants in the PROGRESS project appear in bold.

Development of Full Scheme	Full Pricing Scheme	Pilot Demonstration Scheme
Trondheim	Rome	Bristol
Oslo	London	Edinburgh
Bergen	Durham	Genoa
	Stockholm	Copenhagen
		Gothenburg

These cities' approaches vary both conceptually and in the technologies applied. Some existing pricing programs (Trondheim, Rome) will be expanded on a trial basis during 2004. The plan in Stockholm is for a full-scale cordon pricing scheme that will be launched early in 2005. The Stockholm population will be able to give its views on the scheme in a referendum in 2006.

The experiences and conclusions of the different urban road pricing research and demonstration projects in Europe thus far can be summarized as follows:

Urban pricing is possible with the use of existing and emerging technology. However, challenges persist. For example, further development of satellite-based technology is needed. In urban areas other technological or nontechnological solutions will need to be part of such systems. The European Galileo satellite network will improve satellite reception. The installation of the onboard equipment is complex, and retrofitting can cause problems.
Pricing measures are effective in changing people's behavior and travel patterns. Experiences with the limited traffic zone in Rome show a 10% reduction of the daily traffic. A test in Bristol showed reductions of 15% to 20% in daily car travel during periods of poor air quality, mainly caused by car drivers switching to public transport. Car users change timing, route, or destination more easily than mode.
By making pricing part of a package of measures, it can be made acceptable. Intelligent marketing and clear political leadership are essential. A lengthy and complex process can be necessary to gain support, and the media play a key role. Proposed approaches should have a clear purpose and well-defined objectives. Exemptions to the scheme are needed for equity reasons, and the management of exemptions can require significant organizational effort.

EVALUATION OF SINGAPORE'S ELECTRONIC ROAD PRICING SYSTEM

Gopinath Menon

In 1975, Singapore introduced a manual (i.e., nonelectronic) cordon-based road pricing system that used area licenses to control congestion in the city area. In 1998, this was converted to a fully automated electronic road pricing system (ERP) that uses a dedicated short-range radio communication system in the 2.40-GHz band. The ERP is in operation at 28 entry points into the city on weekdays from 7:30 a.m. to 7:00 p.m. and at 17 points along congested stretches of expressways and major roads on weekdays from 7:30 to 9:30 a.m.

Given the ERP's intent to charge vehicles for road use when and where they cause congestion, the system functions as a pure demand management measure.

Entry points have overhead gantry signs. All vehicles have fitted an in-vehicle unit, which is a pocket-sized transponder. Payment occurs via a smart card, which is issued by a consortium of banks. It is an active system in that deductions are made instantaneously from the smart card when the vehicle goes under the ERP gantry. The details of the last 25 ERP transactions are held in the smart card. Photographs of rear license plates ensure that drivers of violating vehicles have to pay a fine.

The capital cost of the ERP was S$197 million (US$1 = S$1.76). Annual operating costs are S$16 million, and annual revenue is S$80 million. The system has proved to be reliable over the past 5 years.

Different classes of vehicles pay different charges on the basis of passenger car unit equivalents. ERP rates are reviewed at 3-month intervals and are based purely on prevailing traffic speeds along the roads. The ERP aims to maintain a speed range of 20 to 30 kilometers per hour on city roads and 45 to 65 kilometers per hour on expressways. Rates are increased or decreased when the average speeds for the 3-month period are outside the ranges.

We have found that the ERP has helped to spread traffic flow evenly over the working day and eliminate short, sharp peak periods–though some localized congestion for short periods remains along alternative routes and along the priced route immediately after the ERP stops operations. We have also found that the ERP has encouraged many drivers to consider public transport as a viable alternative.

In closing, I would like to indicate some prerequisites for a successful pricing program:

Development and marketing of congestion pricing and demand management as part of an overall transportation strategy;
Use of reliable and proven technology;
A system that is easy to understand and use;
Wide publicity for the system;
Provision of acceptable alternatives, such as good public transport; and
Special provisions or exemptions for foreign vehicles.

E-407 PROJECT IN TORONTO, ONTARIO, CANADA

Imad Nassereddine

The $4 billion (Canadian) E-407 concession toll road is 108 kilometers (67 miles) long with 39 interchanges. It is located just north of Toronto, Ontario, Canada. The road has open access. No transponders or tags are required except for heavy vehicles (more than 5,000 kilograms), which must have a transponder. If a vehicle does not have a transponder, a video camera records a picture of the license plate and a bill is sent to the registered owner. This is true for all vehicles– even those registered in the United States.

The transponders both read and write, which allows for multiple entry and exit points. The tolls vary with type of vehicle, time of day, and day of the week. They start at C$0.1295 per kilometer for light vehicles. They double for heavy single vehicles and triple for heavy double vehicles.

The E-407 concession agreement allows for rates to be changed with 1 month's notice, but a fixed traffic flow must be maintained. Usage of E-407 has increased steadily from 180,000 vehicles per day in 1999 to 300,000 vehicles per day in 2003.

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"CarTrek"
Integrating Technology with Pricing Schemes

Harold Worrall, Orlando-Orange County Expressway Authority
Kuniaki Nakamura and Nihon Doro Kodan, Japan Highway Public Corporation

TECHNOLOGY AND PRICING: CAUSE OR EFFECT?

Harold Worrall

Are technology and pricing the cause or the effect? The answer is yes! An example of policy affecting technological development is the challenge that President John F. Kennedy made to America to "put a man on the moon and safely return him to earth before the end of the decade." In that instance policy served as a catalyst to a broad range of technologies, including transistors and integrated circuits. In contrast, the technology of radio frequency identification and its practical translation into electronic toll collection (ETC) strategies have served as a catalyst for road pricing in all its forms. As facets of policy and technology interact, new variants of policy and technology are created. The process is iterative.

A policy pyramid was presented that graphically identified the relationship of policy, funding, demand, and supply. Each face of the policy pyramid is interactive with the others, and the results of that interaction may catalyze yet other interactions. Funding policies may include tolling that affects demand and generates revenue, which may affect supply. Congestion pricing to affect behavior may also generate revenue for additional capacity–and not necessarily on behalf of the mode that generated the revenue.

Pricing's economic implications are broad. The long-held belief that public goods should be provided by public agencies may now come into question. The definition of public goods now becomes a question itself. A possible outcome of the new questioning process is the construction of transportation facilities through concession arrangements, much like those that have taken hold in many parts of the world since World War II. Who should pay for technological advances: government, the automobile industry, the insurance industry, or the consumer? Must technology have value for it to become ubiquitous in a free market environment? Information is itself valuable, and those who own the information may generate revenue for either the public or the private sector. What about liability? To what extent should government absorb liability through sovereign immunity?

Social equity is also a consideration in the application of technology. Critical to the success of new applications is the protection of private information in a free democratic society. The perceived threat of "big brother" is a chilling factor to many and can cause the rejection of otherwise reasonable public policy. Should technology be available to all or just those who are able to pay for it? Rawls's theory of justice would say that the protection of the minimum position could be violated by pricing concepts. This leads to the question of whether the disadvantaged, the elderly, and other population groups will benefit from pricing scenarios or be disenfranchised from transportation facilities because of it.

Finally, technological advances may "leapfrog" policies that are based on today's technology. Many lessons have been learned on how to implement technology. Clearly, the business strategy should lead the technological applications rather than the reverse. Politics and jurisdiction are externalities that frequently control the realization of the application of technology and should therefore be considered initially rather than at the end of a project. The implementation of one application, ETC, has resulted in a paradigm shift in the toll industry.

Standards and regulations can also significantly affect the implementation of technology. Standards may also interact with jurisdiction, since the jurisdictional preference is dependent on each area’s historical level and nature of investment.

International Perspectives on Road Pricing: Report of the Committee for the International Symposium on Road Pricing Conference Proceedings 34

CONTENTS:

Preface

BEYOND CURBING GRIDLOCK

ACKNOWLEDGMENTS

OECD WORKING GROUP FOR THE INTERNATIONAL ROAD PRICING SYMPOSIUM

Background and Terminology

Committee Findings and Recommendations

KEY FINDINGS

POTENTIAL U.S. POLICY INITIATIVES FOR FURTHER DISCUSSION AND CONSIDERATION

RECOMMENDED TOPICS FOR FUTURE RESEARCH

RECOMMENDED ACTIVITIES TO PROMOTE INTERNATIONAL COOPERATION

Setting the Stage

Welcoming Remarks and Charge to the Conference

Road Pricing in Context The Efficient Allocation of a Limited Resource

THEN AND NOW: THE EVOLUTION OF TRANSPORT PRICING AND WHERE WE ARE TODAY

ONE STEP FORWARD, TWO STEPS BACK? AN OVERVIEW OF ROAD PRICING APPLICATIONS AND RESEARCH OUTSIDE THE UNITED STATES

Keynote Addresses

Central London's Congestion Charging Scheme Has It Achieved Its Objectives?

Out on a Limb Pricing Futures

Special Topics

Ah, the Politics of Pricing

HOW POLITICS AFFECTS EVEN GOOD PROJECTS

THE BRIDGES OF LEE COUNTY, FLORIDA

WHAT DO POLITICIANS REALLY NEED TO KNOW?

A Closer Look Pricing Across the States

TOLL ROAD APPLICATIONS: PERSPECTIVES FROM THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

PLANS FOR VARIABLE PRICING BY FLORIDA'S TURNPIKE ENTERPRISE

MILEAGE-BASED APPLICATIONS: MINNEAPOLIS, MINNESOTA

NEW LANE APPLICATIONS: CALIFORNIA STATE ROUTE 91

Calculating Costs and Measuring Benefits of Pricing Schemes

COSTS AND BENEFITS OF PRICING SCHEMES FOR THE NETHERLANDS

WHY REFORM TRANSPORT PRICING? AN OVERVIEW OF EUROPEAN TRANSPORT INFRASTRUCTURE CHARGING POLICY AND RESEARCH

AN EXPLORATION OF MOTOR VEHICLE CONGESTION CHARGES IN NEW YORK

RELEVANCE OF PRICING TO EXTERNAL COST CALCULATION: RECENT RESULTS

Role of Pricing Revenue in Financing Projects and Services

LORD OF THE RINGS, TRONDHEIM, NORWAY

BUS RAPID TRANSIT/HIGH-OCCUPANCY TOLL NETWORKS

TOLLING THE A-86 TUNNEL IN VERSAILLES, FRANCE

Pricing Goes Global

VARIABLE ROAD PRICING IN FRANCE

TESTING THE REAL-WORLD ACCEPTANCE AND EFFECTIVENESS OF URBAN PRICING

EVALUATION OF SINGAPORE'S ELECTRONIC ROAD PRICING SYSTEM

E-407 PROJECT IN TORONTO, ONTARIO, CANADA

"CarTrek" Integrating Technology with Pricing Schemes

TECHNOLOGY AND PRICING: CAUSE OR EFFECT?

ELECTRONIC TOL

International Perspectives on Road Pricing:
Report of the Committee for the International Symposium on Road Pricing
Conference Proceedings 34

Road Pricing in Context
The Efficient Allocation of a Limited Resource

ONE STEP FORWARD, TWO STEPS BACK?
AN OVERVIEW OF ROAD PRICING APPLICATIONS AND RESEARCH OUTSIDE THE UNITED STATES

Central London's Congestion Charging Scheme
Has It Achieved Its Objectives?

Out on a Limb
Pricing Futures

A Closer Look
Pricing Across the States

"CarTrek"
Integrating Technology with Pricing Schemes