National Road Pricing Conference

Proceedings
SESSION 2
Can Pricing Be a Win-Win Congestion Strategy?

Moderator: Lee Munnich, Humphrey Institute of Public Affairs

I have been involved in congestion pricing since the early to mid 1990s. In Minnesota (MN) pricing is used as a tool to manage congestion and generate revenue for the transportation system. When I first started working on pricing, I read a study that the FHWA Policy Office conducted on the potential for congestion pricing (CP) in US. The study concluded that the economists were right and that CP would work to manage congestion and that the technology existed to implement CP in a variety of different forms; the only obstacles were political and institutional. My work has been to address these political and institutional issues.

CP can be a win/win strategy. We know there are benefits, but how do you get there? A chart from the FHWA International Scan report displays public support for CP. The chart (found in the PowerPoint slides) shows 40-60 percent support for CP when first introduced to the public. However, when CP is closer to implementation opposition begins to develop; but when the public sees CP working, as in Stockholm and London or HOT lanes in the U.S., public support begins to rise again. In the political view, people hate CP until they see it work. Edinburgh, Scotland, and Manchester, England, tried to implement CP through a referendum process and got blown out of the water with negative opposition. So how do you get support?

Minnesota has been working through a grass-tops method. A grass-tops method is contacting political and transportation leaders to get them to understand the benefits of CP and work with them on defining the proposals.

The Minnesota Department of Transportation (MnDOT) has supported exploration of CP since the mid 1990s; however, Minnesota initially faced political opposition to proposed tolling and pricing projects. HOV lanes had been built on I-394 in the early 1990s, but the public was frustrated because the perception was that the HOV lanes were being underutilized even though there were a lot of people being transported in the lanes on buses and carpools. Some legislators wanted to open up the lanes to all users but MnDOT and FHWA did not want to do this. In 2003 legislators in the corridor agreed it was a good idea to open it as a HOT lane. The bill to implement a HOT lane passed with strong support of legislators and no significant public opposition.

The second Minnesota project was developed through the Urban Partnership Agreement (UPA) process. MnDOT proposed MnPASS Lanes (the brand for electronic toll collection) on I-35W for the second project. The process was discussed with mayors within the corridor who wanted bus rapid transit (BRT) in corridor; however, BRT was at least 12 years out. The federal government offered them $133 million to improve transit if CP was adopted, allowing BRT plans to progress much earlier than they would have without the UPA funds. The MnPASS lanes moved forward because the public saw that they were working on I-394.

It is not just the benefits of CP that are important but how CP works with other strategies that affect livability through transit, land use, community and economic development. We still need to understand what sustainability is and how we continue into the future. Another big issue is the equity or fairness of CP. Access must be improved for all who might need it and not just for people who can pay for it.

Carpools, Transit and Pricing: A Comprehensive Strategy
Samuel Johnson, San Diego Association of Governments

I am the Chief Technology Officer for the San Diego Association of Governments' (SANDAG) Intelligent Transportation Services Division which focuses on bringing innovation in the way transportation systems are managed and how services are delivered to customers. Current responsibilities include strategic planning, implementation and operation for the systems management, traveler information and electronic payment programs. These programs include multi-modal management systems for highways, arterials and transit. I also work with the region's 511 traveler information system, the region's fast track program, smart parking and the compass card.

San Diego HOT Lanes can and do work. San Diego is lost in congestion. How can San Diego improve mobility without increasing facilities? Everyone wants to get traffic flowing and get home easily. SANDAG must meet challenges, naysayers and others that do not want to move forward because of current and past issues or just because they hate the concept. San Diego needs sustainability, livability, and equity to make this tolling work in the area.

Pricing alone does not bring sustainability, livability and equity but it helps. The San Diego model for pricing has been about mobility management, choice and transit benefits. The San Diego concept includes pricing but always includes choice. It is important to never let the main lanes lapse because this would take away choice from everyone that cannot pay. The HOT lane concept creates competitive service among carpools and transit directly in the corridor. The I-15 Express Lane is similar to the Katy freeway using connections to park and rides but it also provides connections to housing developments. It is a comprehensive solution using transit service, carpool facilities, allows single occupant vehicles (SOVs) and congestion pricing. Leaders made proactive investments and SANDAG has proved pricing can work. The FasTrak program has the following goals:

• Increase use of express lanes from less than 9,000 to 22,000 per day mostly through carpool usage. After implementation of pricing carpool usage grew 110 percent.
• Provide funding for transit services in the corridor. Provide $1 million per year for two new express lanes in the corridor and cover 85 percent of the operating costs for the Inland Breeze (BRT).
• Improve throughput in the corridor and improve overall congestion in main lanes which allows more traveler choices.

The pricing program began in 1998 and the following benefits have been realized from the program:

• Express lanes carry about 2,800 vehicles per lane per hour on a two lane facility; about 5,600 people per hour which creates 2-3 lanes of congestion relief to main lanes.
• Growth in carpools with implementation of pricing program. Opening of dynamic pricing lanes increased FasTrak usage and increased BRT and HOV usage.

SANDAG has found that the travelers in the region are smart. If time and money are saved when carpooling, travelers will continue using the HOT facility.

SANDAG continued the system's expansion by adding eight miles on the facility. In 2005 SANDAG opened a new east/west corridor, SH 56. The opening of SH 56 led to a change in travel patterns which resulted in 40 percent reduction of travelers on I-15 and the express lanes because the users had an alternative route to use. Yet, when the facility was expanded, it brought new users to the I-15 corridor and the facility is now back to the original numbers due to new growth in HOV use. Due to new users, transit funding has been increased to $2 million for the corridor.

The San Diego model is about the ability to manage traffic in the corridor. In 2009 San Diego made $ 2.5 million in revenue on the facility with 79 percent going to cover operations on the facility include tolling itself and contribution to the California Department of Transportation (CALTRANS) to help maintain the facility (signage, sweeping, etc.). Twenty-one percent of the revenue still goes to transit.

The SANDAG program is about mobility and keeping prices low on the facility. SANDAG runs the tolling program as a business but does not want to make too much money because the main focus is on efficient transit operations. Pricing is a minimum of $0.50 and a maximum of $8.00 and has historically remained low. In the past the average trip charge was around $0.75 but now is an average of $1.30. Ridership has grown (17 percent) most likely due to increases in gas prices but also likely due to the expanded facility and travel time savings.

Public support for "managed lanes" has grown in San Diego because the public sees the system working. In 2002 (last major public outreach) there was high approval by FasTrak customers and other users such as carpoolers, transit riders, and main lane users. This outreach included:

• 25 stakeholder interviews with staff and community leaders;
• focus groups with I-15 main lane and express lane users, and transit users;
• random dial telephone surveys; and,
• intercept surveys at park and ride lots.

Overall, the surveys suggested broad support for express lanes and pricing lanes. 88 percent of FasTrak users and 66 percent of the general public supported pricing lanes. Stakeholders and legislators want to see this success repeated in other corridors.

When asked the question "is pricing an effective tool to keep lane free flowing", 71 percent of telephone survey respondents said yes. SANDAG believes that since the majority of the general public sees a benefit to the service that translates into equity for all potential users. When SANDAG compared demographics, it was found that there were similar approval ratings among different age and ethnic groups. In 2004, voters approved expanding the transit sales tax by a 2/3 vote (67 percent approval). The increased sales tax provided $7 billion dollars to complete the I-15 express lanes and duplicate the model on I-805 and I-5 which are some of the state's most heavily congested corridors. So all-in-all, SANDAG has seen CP work as a part of a comprehensive approach and it has been a win/win situation.

Options for Non-Banked Customers
Jim Wilson, TransCore

I believe most roadway patrons know that there needs to be a reduction in roadways usage to help out with congestion and they know CP is a good strategy. Patrons recognize the need for the cutback and know it is good for livability and stability of the system and are fine with congestion pricing as long as they have a choice.

There are benefits to CP even to those who do not use a facility on a regular basis. There must be a win/win situation that allows congestion pricing to be acceptable to all. First, there must be a benefit for both the agency introducing it and the patron using it. It is important that there is an option for all customers that does not exclude cash customers. In the tolling business it is important to pay attention to cash customers because electronic toll collections (ETCs) only account for 80 percent of customers and 20 percent will not join a toll collection program. Legislators will be concerned with the cash paying patron. Legislators hold an agency accountable for cash paying customers and make it an issue when the agency tries to implement or expand a tolling program. Generally cash paying customers are associated with a lower income population but this is not always true. Politicians may make this correlation and make this an issue for their constituents. Cash customers are good because there are no credit card fees associated with them. Additionally, the toll system may need cash customers to sustain revenues.

There are several reasons customers remain cash only patrons. TransCore's experience in Puerto Rico was that many people did not have bank accounts or credit cards. Puerto Rico is behind the times with most people cashing checks and spending out of pocket. Moreover, credit is not cheap anymore due to increasing rates. Fees associated with credit cards (yearly fees and interest rates) are increasingly more expensive. Some customers like to remain anonymous due to a fear of "big brother". Some cash customers will be from out of state or they do not use the system on a regular basis, so there is no need for these travelers to join an ETC program.

There are plenty of options for cash collections. In Puerto Rico 40 to 50 percent of customers are cash customers and reverse debit gave them access to the system. TransCore offers external options in Puerto Rico through retailers, bank systems, and security firms. TransCore partnered with Texaco using a reverse debit card where an account can be opened by purchasing a "kit" and patrons can replenish tags. The kit contains instructions, windshield sticker tag and a magnetic striped card. When the customer goes to Texaco and purchases the kit, the clerk activates the card and the windshield sticker is available for immediate use. There is no registration or vehicle information required for the purchase of a kit. Now in Puerto Rico there are 140 retailers participating. Before in-lane replenishment (ILR) was available, retailers handled 42 percent of sales and allowed a third of all replenishment to be handled in cash.

Internal options such as walk-in customer service centers, toll plazas and kiosks are available, and the ILR lanes can provide in lane replenishment. Similar to an ETC lane, the driver pulls into the ILR lane and their tag account information is displayed for the booth attendant. Patrons can hand over amount to add to account and it is immediately added to the account. The cash is put into a safe immediately inside the booth. Fifty-one percent of patrons prefer cash as their payment option. These patrons either need or want to pay with cash.

In 2004, 45 percent of Puerto Rican patrons were cash customers. By 2008, the number of cash patrons declined due to inconvenience of going to Texaco and an increase in gas prices. There are currently eight locations with ILR booths that represent 46 percent of sales. Fourteen more ILR booths are planned because patrons prefer this convenience.

The overall message is that CP is only a win/win situation if cash customers are included. By allowing cash paying customers agencies can increase revenue and create equity.

Synergy between Managed Lanes and Bus Rapid Transit
Marty Stone, Tampa Expressway

Most people think you cannot build your way out of congestion. I believe you can build your way out of congestion if it is done in a smart way. A bus toll lane is a win/win solution in terms of congestion and revenue. A bus toll lane is a transit project that happens to be a toll highway at the same time.

The three current buzz words in the industry right now are equity, livability and sustainability. I define equity as having transportation choices both public and private (because the private sector has a lot to offer). Equity is about being affordable and accessible and opening up transportation facilities to everyone. In truth, many HOT and managed lane projects are exclusionary in one form or another. The toll industry must open up to cash users and occasional users. The toll industry needs to look to create affordability which can be achieved when everyone pays because then the price is lower for everyone. Livability is the quality of life both economical and environmental for individuals and the community. Livability comes when the toll industry can provide significant long term congestion relief. Sustainability is being able to provide a way to maintain environmental and financial conditions to fund new capital improvements including public multi-modal transit systems.

The bus toll lane itself can achieve all three of these things (equity, livability and sustainability) by combining the operational and economic strength of transit and tolls. The bus toll lane is a true transit project which employs the best of BRT, electronic toll collection, video toll collection, managed lanes and variable CP. SR 91 (in California) made everyone aware of the benefits of managed lanes and set the tone for projects that are being undertaken now.

The Selmon Expressway in Tampa is 10 miles of elevated express lanes that run from a bedroom community into downtown. Last year FHWA awarded the Selmon Expressway the Best Structures project award which is a big achievement for a project that received no federal funds. The Selmon Expressway helped the Tampa Hillsbourough Expressway Authority (THEA) develop the idea for a bus toll way. It is a funding and operation partnership between transit agencies and the local and regional toll authorities. The physical concept is not new, it is a new exclusive lane (new capacity, not conversion of HOT/HOV) dedicated first to public transit through BRT and express bus. This project will be guaranteeing transit capacity and reliability for BRT and is about making transit a competitive choice. If you want to increase the numbers of people on your highway, you need to move a lot of people through public transportation. After guaranteeing the capacity for BRT, the toll authority will sell all the remaining capacity. It is a true managed lane. THEA will not give away capacity because when you give away capacity, you give away the ability to control congestion and in long term maintain sustainability of the project. The key concept to operating a project like this is about making the project sustainable through the long term and then using variable pricing to make sure the lane ensures free flowing traffic.

A bus toll lane is a new partnership between transit and toll agencies to fund construction and operation of the lanes. It is a public partnership that combines all our resources to fund new capacity. The concept differs by suggesting that transit should be an equity owner in the highway system. A bus toll lane takes advantage of what transit and toll agencies both bring to the table. Transit providers know how to buy and operate rolling stock; there is no need to create a new agency to do that. Toll agencies know how to collect tolls and run back offices and maintain highways. Transit providers should have an equity ownership of lanes because it is an equity-based model that provides true public sustainable funds for operations of public transportation. Transit must have equity because the bus toll system is an equity revenue system that is sustainable. Transit can get great FTA grants to build but have problems generating enough revenue to maintain operations. The bus toll lane will take funds from fare box and net toll revenue off a bus toll lane to provide an inflation sensitive sustainable revenue stream for public transit. There has to be a serious change in policy to do this within the US DOT at all levels.

Concerning equity, livability and sustainability the bus toll lane will first provide attractive, competitive, quality, affordable transportation to the people. Second, it will provide long term reduction of traffic congestion and the benefits associated with that such as air quality improvements. Congestion will always be manageable if the price is managed properly (congestion insurance). This helps the commuter that has to change their trip have congestion insurance by paying a toll. Additionally, there is a positive impact on the community as we are not only moving people, but goods and services which is critical to local economies. Lastly, bus toll lanes would be putting toll revenue back into public transportation. Excess system revenues could provide more services and improvements.

I believe Houston has the most innovative system in the country and would like to see Houston use revenues to build and enhance public transportation system. The whole purpose of this presentation is to push the idea of bus toll lanes to solve problems and to encourage FHWA and FTA to consider more public partnerships to enhance systems.

Audience Questions

• The highway trust fund is broke and there are no funds from FTA or FHWA. Where is money going to come from to build these lanes?

  Stone: FTA still has grants available and revenue (tolls) from equity partnership. The transit agency doesn't have to put up all the funds. The transit system can put up 50 percent and then sell revenue bonds, like in Houston and after operation costs are paid split the revenues 50/50. Currently the transit agency puts up the capital investment to buy capacity and toll agency gets all the net revenue. Toll agencies know how to get net revenue because that is what they are good at doing. Our problem is to get money up front. Put a partnership together and this can create a synergy that works.

• Most of you have read the FTA administrator's recent speech in Boston suggesting that transit agencies need to look more carefully at the potential of the bus as a cost effective alternative. I strongly suggest getting Marty Stone's presentation in front of him.

  Munnich: During the UPA solicitation process the USDOT discussed how to combine transit with highway and CP it was a big incentive as to how MN approached its project. I am just wondering if transit people could see the great benefit from this partnership.

  Stone: Regional FTA administrators think highway folks are trying to steal our money. We want them to understand this is an equity ownership of the lane, no different than them building the lanes and selling capacity and receiving the benefits of the revenue. No different than CSX building rail and selling off excess capacity and let others use it for what they want to use it for to transport what they need. We are saying to FTA, own the guideway, lease the guideway and get the long term economic benefits of the guideway.

• Sam, what do you think of the use of transit as an equity partnership and development of toll facilities? SANDAG has a direct transit benefit from their service. SANDAG is the only agency that operates both the toll and the transit in a region, right?

  Johnson: Great idea – San Diego did win an UPA award to get this type of implementation on the ground, a bus on shoulders project to create a dedicated bus lane on 805 which will be a 20 mile corridor with a dedicated bus lane with ITS components. The second key component of the project is to sell off excess capacity but our project was not highly publicized. FHWA and FTA are very supportive of our project.

  Stone: This is much easier in agencies that do have both capacities. There are other agencies that do have both capacities such as Metropolitan Transportation Authority (New York) and Jacksonville Transportation Authority (Florida) which are responsible for both tolling and transit, but it is harder to get both the stand alone agencies with traditional funding together.

  Johnson: It wasn't easy, SANDAG does not operate transit, they have their own funding. We are still trying to get this project off the ground. We are hoping for success.

  M. Stone: When we present this concept to local transit agencies in FL they love it. All the transit agencies want to know how to make it happen.

• Are there other states thinking about this approach? Anyone else using a BRT/Tolling approach?

  Swank: We have been doing this in Houston for 25 years with METRO giving funding to HOV lanes which were dedicated to transit first. Now the lanes are being converted into HOT lanes. The initial project was only six lanes that were created as bus only lanes but over time they have been converted to include other vehicles.

• It appears that the HOT model is for all transit to go free. It seems that transit agencies putting in an equity investment to build lanes and waiting for telling revenues to be realized is not as good as getting use of the facility for free. Why would a transit agency want to take this route?

  M. Stone: I suggest looking harder at the tolling business. The Texas toll project is a good example as it has been around for a long time. We can manage price and ensure we can pay our debts and costs of operation and maintenance and use excess revenue to improve transit systems and expand. Florida has not built a new highway in a long time. The tolling agencies have been building them. States are looking at tolls and transit should be a part of it because most transit agencies are fortunate to have 25 percent of operating fees from fare box and they are subsidized. The other 75 percent has to come from some place and it should come from those willing to pay.

• California, Florida and Texas must be exceptions. Most toll agencies I know struggle to meet net service costs. I find it strange for transit to prefer investing instead of free usage of facility.

  M. Stone: It would be their facility. They would invest and sell the excess revenue and using price management to always keep these lanes flowing at speeds of 55mph or higher. No more than 1,800 vehicles per lane and sell to everyone, this way you keep the toll down, much more equitable system because it opens access to everyone, especially if you use technology like video tolling.

• From Jim's example in Puerto Rico, if 20 to 30 percent of customers are unbanked, how can you get these people to pay? Can they use mobile phones to pay? The cell phone industry seems to have almost 100 percent penetration in this unbanked population; are we not looking beyond the box enough to get to this unbanked population and payment systems?

  Wilson: We don't always need to think outside of the box, other people have already done that. I don't think we need to, there are enough alternatives. We have not have a lot of visitors in Puerto Rico to see our program. Customers could potentially stop and pay for five tolls about every fifth time they drive through but they chose not to do that. In the Middle East they are very comfortable with SMS payments. They have established pay accounts via SMS. We also communicate with them via SMS when their accounts get low. Don't necessarily have a credit card but have an established account for SMS. I disagree that we need to think more outside of the box because there are alternatives out there that are being used.

  Samuel Johnson: It is a great idea to look at making it more accessible to more users. Is there a market for allowing alternative payment technologies on our facility? In San Diego it is a true choice facility. If we have a true cash-based customer base, will we get our investment back by implementing facilities for cash users? We don't have the infrastructure (physical ability) to put in the in-lane replenishment lanes.

  Marty Stone: In a complete managed lane environment where there are no carpools, you do not have to worry about counting occupants or HOVs or motorcycles or hybrids. Everyone gets tolled, so there is no need to worry about occupancy. It is difficult and expensive to enforce occupancy requirements. Eighty percent of our revenue comes from 20 percent of our customers. That is the bottom line. We have a lot of casual users (once or twice a month) on toll roads. A high percentage of users on HOT lanes do not use the facility every day. Somewhere between 15-30 percent of your customers use the lane everyday; but the majority are occasional users. These occasional users are being excluded if you do include those who do not have a credit card or are unbanked. There are over four thousand sites in Florida where people can pay their utility/phone bills and they will be able to pay their toll bills there too. Want to make open toll lanes usable for everyone. Florida could use the cash approach to having a transponder, working to make cash replenishment sites available for prepaid accounts. We also want to make it available for post accounts (where we read license plates and send bills) to pay cash.