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Value Pricing Pilot Program: Lessons Learned

3.0 Conclusions and Implications

More than a decade and a half of value pricing demonstration programs and studies has provided a rich body of knowledge about how travelers respond to price, the technology associated with implementing these concepts, the determinants of public acceptance, and other policy considerations. Some of the work done under the program resulted in actual implementation.  Others involved studies that did not result in implementation, but often provided valuable insights into potential user responses and policy issues needing attention. This section ties together the lessons learned from these programs.

This section presents general conclusions and lessons across all the project categories, drawing on the range and diversity of findings in Section 2. The discussion of lessons learned includes the effects of value pricing on: travel and traffic, costs and revenues, equity and the environment. In addition, lessons are drawn relating to the successful adoption of value pricing including: policy and institutional issues; outreach and public acceptance requirements; and issues relating to the adequacy of technology for the administration and enforcement of pricing programs. Lessons pertaining to project monitoring and evaluation are covered next, followed by a review of implications of the lessons learned for federal, state and local planners.

Effects of Pricing

Travel and Traffic Impacts

  • Pricing Does Reduce Congestion and Can Increase Vehicle Throughput

With few exceptions, variable pricing strategies that have been implemented across categories have met their principal objectives of reducing congestion and increasing traffic throughput. Pricing has been shown to cause travelers to change their behavior by changing times, routes, trip frequency, or modes of travel. Travelers have also shown a willingness to pay for faster travel times when an option such as toll lanes is made available. These responses have led to reductions in peak-period traffic congestion, increased vehicle and person throughput in some cases, and more efficient use of highway capacity. The nature and magnitude of impacts on travelers and traffic has been found to depend on many factors including: the pricing concept involved, price levels and schedules, coverage, pricing periods, the existing traffic levels and demographic characteristics.

The HOV to HOT lane conversions in San Diego, Houston, Minneapolis, and Denver have all been successful at making better use of previously underutilized HOV lanes, and providing drivers with a congestion-free alternative. Traffic volumes have increased on the HOT lanes by as much as 140 percent (without loss of speed) to make use of spare capacity on these lanes. Also, there is some, albeit non-conclusive, evidence HOT lane conversions have brought relief to adjoining mixed flow lanes by attracting some traffic away from these lanes. HOT lanes have provided a new high-speed travel option to the public without reduced HOV use. Many users also view HOT lanes as providing safety due to reduced congestion.

The new variably priced express lane project (SR-91 Express Lanes in Orange County, California) has been successful at allowing much higher throughput at significantly higher speeds than adjoining general purpose lanes, and reduced congestion on the overall facility. The priced express lanes with only one-third of the total capacity carry well over 40 percent of the total SR-91 traffic during peak periods, congestion free, at more than 60 MPH, while the general purpose free lanes are heavily congested and moving at very low speeds.

Several existing toll facilities have instituted differential toll rates by time of day with the aim of spreading travel demand out of the most congested times. Variable pricing on Hudson River crossings in the New York City area and in Fort Myers/Cape Coral, Florida have demonstrated that drivers will change behavior even for relatively modest price changes. Variable tolls on existing toll facilities have reduced congestion and led to more efficient use of existing capacity, postponed the need for capacity expansion and generally preserved or increased toll revenues. While the magnitude and permanence of the effects depend on motorists adjusting to congestion levels, economic conditions and general travel costs, key pricing determinants are the magnitudes of tolls and the degree of difference in peak vs. off-peak tolls. Clearly, motorists on toll facilities have chosen to shift their time of travel to off-peak periods to take advantage of lower tolls. 

Regionwide pricing initiatives are undergoing feasibility studies or are in the pre-implementation stage, so no definitive conclusions based on actual experience can be drawn. However, planning studies of region wide networks of priced express lanes in Maryland, Virginia and Minnesota suggest they will mirror the positive experiences of HOT lane conversions and new priced express lanes, and that the sum of individual projects may have a larger impact on travel behavior than individual projects.  These studies are attending to not just the traffic throughput on priced facilities, but on the overall impact on the transportation system, including non-priced facilities and transit.

Field tests and experimental projects involving converting fixed driving costs to variable costs in Oregon, the Puget Sound Region, Minnesota and Atlanta have shown that such pricing strategies do reduce peak period and/or weekend travel by encouraging shifts in travel times and mode. These tests suggest that while shifts in travel patterns are possible even with moderate prices, some drivers and certain trip types are more likely to change behavior than others. 

Carsharing and parking cash out also have been examined in field tests in San Francisco and Seattle, respectively. While the limited experience with carsharing and parking cash out showed mixed or inconclusive results, both show promise as ways of reducing automobile trips and, possibly, automobile ownership, and are deserving of further evaluation.

Cost and Revenue Impacts

  • Pricing Can be an Important Source of Revenue For Transportation

Although the primary rationale for value pricing projects has been to improve mobility and efficiency, revenue from pricing clearly has been of major interest to decision makers. The revenues generated by pricing have been an important source of benefits in most of the projects reviewed in this report. Project revenues have been used to cover operating and enforcement costs, fund additional highway infrastructure, and to improve transit alternatives.

The revenue picture for HOT lane conversions is generally favorable. In all but one of the HOT lane conversions, revenues have been sufficient to support operating expenses, although in the case of the I-394 HOT lanes in Minneapolis it took over a year until revenues exceeded operating expenses. One project, the I-15 HOT lanes in San Diego, is subsidizing transit service with toll revenue in addition to paying for HOT lane operating expenses (support for and emphasis on transit also is important at PANYNJ and will be integral to new managed lanes in Houston). One smaller program (Houston) did not raise sufficient revenue to cover all operations and a long-standing program (San Diego I-15) is starting new fees to cope with declining use and revenues due to the opening of a new nearby facility. Covering the initial capital cost of conversion from HOV to HOT lane operation is more difficult, especially where conversion requires expensive capital outlays, or where a relatively large number of vehicles are allowed to travel free.

The one well-evaluated new express lane project, SR-91 Express Lanes in Orange County, California, shows that a privately owned and operated tollway can be economically viable and can result in savings to the public sector. The success of this one project, however, does not necessarily translate to other projects.  The SR 91 corridor was intensely congested, with no real alternative routes, and the right-of-way was donated by the state. 

Projects where existing tolls are varied to modify travel behavior have a much easier time being financially viable, since they have not been used to finance new facilities, and tolling systems and personnel are already in place.  The revenues from pricing reforms have exceeded costs. Studies have also shown that if variable pricing is successful at reducing congestion, then costly capital improvement can be delayed.

Regionwide pricing initiatives are too new and untested to draw confident financial conclusions, though one study suggests financial feasibility is highly dependent on capital costs of new facilities. With region wide and area wide pricing concepts there is a potential for a large amount of gross revenue.

Experiments with variable driver costs are also too limited for confident conclusions, though user responses suggest these strategies might be able to more than cover costs. Studies also suggest possible acceptance of replacing gas taxes with new variable VMT fees. One carsharing case indicates profit and non-profit operations can be economically viable.

Equity Impacts

  • Equity issues have been less of an issue than many decision makers believe

Equity issues are ever-present, but have been successfully dealt with through project experience. Any change, in the way charges are made for road use, will result in winners and losers. Some road users will value time savings and reliability more than the cost of the toll, others will not. Those who are “tolled off” the priced facility may shift to off-peak times or alternative routes, decide to carpool or switch to a different mode of travel, or simply make fewer trips. Changes in trip making behavior may also change patterns of commerce and affect businesses differently. Like other aspects of value pricing, how all this is resolved depends on a number of factors, including the type of pricing project involved, the level of congestion being addressed, and the policies or programs that go along with a value pricing program. In particular, the perception of fairness also depends on how the revenues are used and what alternative policies are considered as ways of dealing with congestion.

While the array of winners and losers from value pricing does not necessarily fall along income lines, the perception that value pricing is “unfair” to low income drivers has been a concern for many projects.  Since the inception of the pricing pilot projects, equity has been a key program interest, with particular attention given to mitigating possible adverse effects of projects on low-income drivers. However, project experience has shown, particularly with the most common projects funded under the early phases of the federal program, that concerns sometimes raised about perceptions of severe inequities may be overdone.

Equity issues do arise in planning and implementation across several pricing categories, but have not often been sufficient to prevent a project from moving forward. Equity evaluations, though limited in scope, have found some differences in incomes of facility users, but these differences are not dramatic. HOT Lane conversions have encountered concerns in planning about catering to the rich, but usually these have not been sufficient to halt projects. Such concerns tend to diminish among users and the public as operations get underway. User surveys reveal some, but relatively small, differences in incomes of facility users.

New expressways with variable pricing are limited in number but do reveal some differences in use based on income, though little difference in reactions to projects. In one case, use increased over time for all modes across all incomes. A planned expansion case (San Diego I-15 Managed Lanes Project) found strong support with few differences about fairness based on ethnicity or income. 

For pricing on existing tollways, equity issues around income have not blocked programs, but concerns about fairness to those with inflexible work schedules have been expressed. User surveys for this category have been limited, but one case suggests higher income travelers were more likely transponder owners both before and after price changes.

In the region wide pricing category, one project is accounting for impacts across ethnic and income groups by estimating jobs within a travel time perimeter compared to the general population.

Field tests of converting fixed costs of driving to variable costs have not delved into equity issues to any significant degree; nor have the carshare and cash out projects in the final category.

Environmental Impacts

  • Pricing Can Have Positive Environmental and Energy Benefits

Pricing can alter the operating speeds, number and timing of trips or even the mode on which trips are taken. These changes, in turn, may lead to reductions in fuel consumption and consequent reductions in vehicle emissions, resulting either from fewer vehicle trips being taken or smoother traffic flows under less congested conditions, but the results are highly dependent on the specific implementation.

Environmental evaluations of US pricing projects are scarce. A few findings suggest possible positive impacts, but more evaluation would clarify the picture. One HOT Lane conversion (I-15) found growth in emissions but even more growth was found in a comparison corridor. Another HOT Lane project evaluated CO and noise and found no significant changes compared to pre-project.

Only one case of using variable pricing on existing toll facilities attempted a detailed air quality assessment and found existing models to be inadequate for the task.

At this point, evaluation of energy and environmental implications of region wide pricing initiatives has to rely on travel and traffic forecasting models.  The feasibility study findings are still very preliminary. Field tests with mileage and congestion charges shows reduced vehicle miles traveled, however, air quality effects depend on mode shift and degree of shift to household vehicles not priced, a complexity requiring further ongoing study. Likewise, carsharing impacts on VMT across household vehicles and associated air quality implication requires further testing and evaluation.

Feasibility and Implementation of Pricing

A number of factors influence the prospects for successful implementation of value pricing, including policy and institutional issues, public outreach and acceptance programs, and technological factors.

Public Policy and Institutional Issues

  • Pricing Projects Often Call For New Policy and Institutional Arrangements

The nature of policy and institutional issues that arise during implementation and operation of pricing projects depends on the category of pricing project involved.

HOT conversions typically require new policies, legislation, and organizational and operational arrangements. New expressway developments are likewise commonly supported by detailed policy and agreements, especially in the case of private for-profit development. New variable pricing on tollways requires governing authority approval but not new legislation. Regionwide pricing initiatives are likely to follow HOT conversions in the extent of policy and institutional development. Experiments with variable driver costs do not seem to require extensive policy initiatives, but clearly replacing gas taxes with mileage-based pricing or instituting pay-as-you-drive insurance products will entail significant policy initiatives. Voluntary cash out and carshare programs are initiated without significant policy changes, though agreements with cities, employers or developers are required for carshare arrangements. The voluntary cash out program reviewed did not require policy changes but was supported by an agreement between a public agency promoting the concept and employers and/or developers.

Outreach and Acceptance

  • Successful Projects Depend on Effective Outreach, Public Support and Flexible Management

Public opinion is perhaps the most critical determinant of the prospect for successful pricing project implementation. All of the projects in the pricing programs have paid considerable attention to measuring public attitudes and reaching out to the public, stakeholders, and elected officials so that they understand the new concepts in transportation that pricing represent. As described in Section 2, projects typically are initiated after considerable public outreach and stakeholder involvement, and many have made changes in response to public reactions. Outreach efforts as part of initial feasibility studies often find neutral or skeptical opinions, or outright resistance, but this is often followed by acceptance as projects get underway. The outreach efforts, often using focus groups, surveys, and public forums, have resulted in a better understanding of public concerns that have been incorporated into project designs and public education materials. The support of a key stakeholder who was able to influence public opinion also was crucial for the successful implementation of several projects.

HOT lane conversions demonstrate extensive outreach leading to revised or dropped plans, though agency flexibility and responsiveness to public concerns has turned early resistance to acceptance and been important to maintaining acceptance by altering programs in response to user and public reactions. Support from elected officials, advocacy groups and community leaders appears to be vital, and may take many months if not years of effort. New variably priced highway facilities suggest a similar lesson. While public opinion is generally favorable, the public may not understand what expenditure items are being funded from pricing revenues, and support can deteriorate if private sector operations are seen as monopolistic and inflexible. Variable pricing on existing toll facilities again is accompanied by considerable outreach, stakeholder involvement and media relations leading to a successful implementation in one case but not another. In the former, the positions of opponents and supporters remained the same before and after implementation, showing the importance of continuous efforts to maintain an acceptance threshold.

Outreach is part of all ongoing region wide pricing initiatives, although results are yet to be documented. Results from variable cost experiments, as with HOT lane conversions, suggest initial concern about security and technology can change to a favorable response after sufficient time and experience. On the other hand, the cash out program met with stiff resistance which could not be overcome, underscoring how this category of pricing is highly dependent on the transportation, parking and economic environment in which it is attempted. The carsharing case demonstrated traditional marketing techniques can be successful in gaining participation and sustaining market share.

Based on project experience and public opinion studies on value pricing, certain key factors emerge as important to public acceptance of pricing:

  • Congestion must be seen as a major and endemic problem.
  • Besides congestion, pricing should be shown as addressing other important local goals such as the environmental quality and transportation funding needs.
  • Pricing should be portrayed as offering new travel choices to the users.
  • Positive experience with pricing elsewhere needs to be presented to the public; and pricing proposed should be portrayed as a fair and equitable way of addressing the problem.
  • Program management should be responsive to user and public reactions and be prepared to make changes accordingly

Technology

  • Pricing and Enforcement Technologies are Working, but some Challenges Remain

Technology is important the success of most pricing concepts, and the technology has been generally up to the task. The technologies for pricing and enforcement generally are proving reliable and effective, but a few cautions are in order. HOT lane conversions have demonstrated that tolling technology is sufficiently advanced to make fully dynamic pricing feasible, when combined with stationary and mobile enforcement against transponder violations. A remaining challenge in HOT lanes and any other systems with differential toll schedules based on occupancy is that automated methods of detecting occupancy are not yet available, though they are under development. The same encouraging developments and challenge applies to the categories of pricing new express lanes (though limited to one well-evaluated case) and pricing on existing tollways. Two other developments also are progressing to ease pricing applications: open road tolling systems and advanced axle counting equipment to facilitate pricing by axle for trucks. 

While the technology for open road tolling seems to have evolved to the fully operational level and is effectively enabling variable pricing on HOT lanes, new express lanes and on some of the existing toll facilities, the use of variable tolling on a wider scale may have to await further adoption of the latest tolling technologies by existing toll authorities.

The category of making driver costs variable suggests some sensitive technology issues. Reliability of vehicle and fueling station technology was a concern in one program, requiring further tests and assessments. Electronic tracking of vehicle movements is a new and developing technology, technology reliability was an issue in some of the programs.

Privacy of travel data also requires attention. As electronic tolling becomes more prevalent, the right to privacy is expected to continue to be an issue for future variable mileage fee applications. There is an important tradeoff between complete privacy or anonymity and the business need to prove that certain mileage was recorded for billing purposes. The results from the two longest operating programs (I-15 HOT lanes and SR-91 Express lanes) suggest initial mistrust of the technology and doubts about security can be managed. All studies indicated that privacy was a significant concern among participants, but such concerns were alleviated once participants learned more about the technology and were confident about data security.

Evaluation of Pricing Projects

Evaluation programs have dealt well with traffic impacts, project operations, and public and customer reaction, but have paid less attention to equity and environmental impacts. Attempts to distinguish the effects of pricing from outside influences such as gas price or economic swings have been modest at best. Most HOT lane conversions have focused on traffic impacts and public/user reactions, one even attending to business and land use impacts. Less attention has been given to equity and environmental effects. In the most extensive evaluation case, a non-equivalent corridor provided some guard against spurious conclusions about project effects. The category of pricing new express lanes shows broad ranging evaluations across traffic, travel time, accidents, user profiles (in part for equity assessments), user opinions and, in one case, opinions of corridor residents. Two projects compared results to non-tolled sections of the highway or nearby freeways to improve confidence of findings, certainly better than no controls. In one case, attempts to modeling air quality impacts were not able to adequately account for accelerations and decelerations. New congestion pricing projects on toll facilities commonly use only before/after data without comparisons to trends on other facilities. Regionwide pricing initiatives are not far enough along to allow assessment of evaluation methods. Projects in the category of experimental variable pricing have gathered extensive baseline information to compare with travel during the period of the pricing program and will supplement vehicle instrument data with travel diaries. However, comparisons to controls without pricing are not always made.

Implications For Federal, State and Local Planners

Federal Role

Federal Pricing Program managers have many opportunities to foster continued progress in the Pricing program. Key roles include demonstration support of pricing concepts emerging from lessons learned to date as deserving of further implementation; and corresponding support of well structured evaluations of effects and outcomes also emerging from lessons learned as important. Suggested implications by pricing categories follow.
 
While HOT lane projects have matured and demonstrated many useful findings, there is room for further testing and evaluation, giving Federal pricing program managers opportunities to foster continued progress in value pricing. In particular, operational issues of access/egress, lane separation and occupancy checks, as well as the issue of HOT lane effects on mixed flow lanes, deserve demonstration and further assessment. New HOT lane networks deserve encouragement and careful evaluation of traffic, equity, environmental and cost/revenue results. Clearly, HOT networks may offer more substantial and complex impacts than individual HOT lanes. A very critical question is whether new HOT lane networks rather than individual conversions can be financially feasible in a network sometimes demanding sizeable capital outlays. Private sector involvement in such projects also deserves attention as the one private development case evaluated here showed very promising financial results but potential problems of public and political acceptability.

Variable driver cost programs aimed at replacing gas taxes and standard insurance and vehicle lease programs also deserve continued attention and demonstration. To date, these have been small scale experimental tests showing promise for reducing both peak and area wide travel in forms acceptable to participants, but operational and privacy issues remain to be examined fully. Continued testing, with a focus on replacing or reducing gas taxes, while continuing to generate transportation revenues, can address problems associated with greenhouse emissions and potentially provide new revenue sources for transportation. Technological developments for broader application also deserve attention as the technologies employed in the test programs were not as sophisticated or reliable as possible.

New variable tolls on existing tollways deserve further encouragement and evaluation. Demonstrations have shown more efficient use, postponed capacity improvements and preserved revenues. In addition, some ingredients for increased acceptability have emerged and can be replicated. However, there still is room to test, evaluate and document the peak-off peak differential needed to bring significant and long standing shifts in traffic and reduced peak congestion. There is a need to address the apparent reluctance on the part of toll operators to adopt variable pricing on a wider scale.

Carsharing and parking cash out programs present challenges and deserve focused work. Carsharing evaluation is very complex with multiple possible effects needing careful tracing. So far, experimental designs have not been adequate to render clear and confident conclusions. Cash out has been demonstrated as being effective in the referenced literature, but can face implementation challenges identified in the case study evaluated here. Attention needs to be given to finding the best markets for cash out and simplifying the concept for implementation especially for employers with multiple trip reduction programs.

All categories of pricing concepts deserve continued equity and environmental evaluations. Equity evaluations would be helped by attention to more than income of users, including benefits to users across incomes and inclusion of several equity measures. As the cases suggest, perceptions of fairness also pivot around travelers on fixed versus variable work hours, as well as geographic distribution of costs and benefits. Environmental evaluations require the best possible models to account for VMT, speeds, speed variation and vehicle type. Testing various methods of direct measurement also deserves attention, especially where pricing increases throughput and speeds and reduces stop-go travel and idling, either corridor-wide or at specific points (e.g., toll plazas). The full range of emissions should be included, including CO2 emissions in line with interest in global warming.

Federally supported evaluations in conjunction with all pilot programs are important as a means for encouraging comprehensive and well-structured assessments with implications for future directions of pricing. Emphasis on multiple measures should be maintained, across transportation, acceptability, policy and institutional formation, equity, environment, costs, revenues and operations. Opportunities for improvement include attention to controls and statistical tests to insure valid results and to rule out influences of ongoing swings in gasoline prices and economic conditions. Support for preparation and distribution of best practice documents, and technical assistance and guidance to local project partners are all appropriate and needed roles of federal support programs.

Local, Regional and State Roles

Local, regional and state governments can benefit from the various findings and lessons arising from experience to date with value pricing programs. This report provides a resource to encourage implementation of pricing concepts in the most feasible and effective way. It provides planners and managers of new projects a summary of the most extensive and confident results for HOT lanes, new express lanes, and variable tolls on existing tollways. Because there is less experience with other project types, less confidence surrounds region wide pricing, changing fixed into variable travel costs, car sharing and cash out. Specific implications emerging from lessons learned for governments planning and implementing pricing projects follows.

An important lesson for planning and initiating new projects is that careful attention needs to be paid to the extensive outreach activities associated with all project categories. It seems evident that substantial effort involving not just the general public and travelers but other stakeholders and champions is a common ingredient of implemented programs. Ongoing attention to customers and the general public and willingness to make changes as necessary are also evident in implemented programs. Patience and persistence also are important in planning stages since initial opposition often diminishes over time.

HOT lane projects provide the most extensive documentation on planning, impacts, operations, policy development and outreach. Well-designed programs can be expected to increase throughput without diminishing carpooling and perhaps can generate sufficient revenues to support transit expansion. They also provide good models for developing necessary policy, institutional, operational, enforcement and technology arrangements. One caution on the financial side is that projects involving large capital costs, such as new facilities or networks versus conversions of existing lanes, may not be fully self-financing. Flexibility in pricing and fee policies is important not only to maintain congestion reduction but financial viability in the long term. Another caution is in granting private sector operators certain protections against development of new, nearby facilities.

Local, regional and state governments interested in general reductions in VMT as well as congestion reduction will benefit from attention to the category of projects turning fixed into variable travel costs. With global warming high on the agenda of many governments, this category offers promise for affecting a wide range of travel. While this category has developed only to the experimental stage, the results suggest potential effectiveness and acceptability for replacing gas taxes with VMT fees, and, perhaps, replacing standard insurance and vehicle lease programs with variable fees more sensitive to the extent, time and location of travel. Planners interested in these approaches may wish to take the next steps in experiments to date, paying particular attention to the latest and best technologies; ways to best manage privacy concerns (the cases here reveal useful first approaches); the financial implications of gas tax replacement; and the requisite policy, institutional and legislative steps necessary for broad implementation. Solid experimental designs employing controls are also important to documenting impacts and paving a credible path to gas tax replacement.

Based on findings to date, localities interested in parking cash out programs should be prepared to target and fashion parking cash out carefully. They should evaluate carshare impacts for its multiple effects on travel. The cases evaluated here reveal more and less promising applications of cash out based on types of employers, existing TDM programs and parking conditions. Carshare requires impact assessment not only for replaced and new trips associated with carshare vehicles, but impacts on all household vehicle travel. Good controls also are important for specifying results with confidence. Finally, local planners are encouraged to stay abreast of referenced literature on carshare and cash out to complement findings of cases in this study.

Another important general lesson for planning and developing projects across categories is the need to carefully assess the latest technological innovations. For HOT lanes, important issues include pricing using transponders versus license plates, enforcement systems against transponder violations and the latest developments in vehicle occupancy verification. HOT lanes, new express lanes and variable pricing on existing tollways all will benefit from attention to open road tolling systems and, depending on pricing options, truck axle counting automation. Technology is not only important in and of itself. As experience with pricing existing tollways shows, technology upgrades packaged with new pricing strategies may enhance prospects for acceptance. With fast changing technology innovations, localities need to determine which technologies are sufficiently tried to allow for wide scale application versus those requiring further testing and evaluation. Again, several projects documented here provide important starting points for planning considerations.