Guidebook for State, Regional, and Local Governments on Addressing Potential Equity Impacts of Road Pricing

3.0 Congestion Pricing Equity – Definition and Factors

Section 3.0 provides a comprehensive definition of congestion and road pricing equity and describes the elements or factors that should be considered when evaluating the impacts of road pricing projects on communities and transportation system users.

3.1 Definition of Types of Equity

In simplest terms, equity means treating people of all social groups equally. In order for this definition to be meaningful, a definition of the following characteristics is needed:

• What constitutes equal treatment (called equity type), and
• Which social groupings are being observed (called equity category or unit of analysis).

Because equity is a very broad topic, the scope of equity being discussed should be limited. In addition to equity type and the category or unit of analysis, two further characteristics must be identified: impacts of concern and measures to assess equity impact. Impacts of concern are the aspects of the lives of travelers that are affected by the transportation or pricing project. Typical categories of impacts that are relevant to transportation equity include financial/economic, transportation service, or environmental impacts. Sometimes these impacts of concern are referred to as "social exclusions," which means the transportation system by either price, area of service, or vehicle category is perceived to be biased against a social class, poor neighborhood, or beyond the financial reach of a percentage of the population; for example, a new highway that does not have an interchange at or near the lower income housing area of the urban center. Another example is an electric vehicle that does not pay any fuel taxes but is priced sufficiently high that only the upper economic classes can afford to buy one. This latter example is a new concern as high efficiency and alternate fuel vehicles start entering the overall vehicle fleet.

In order to compare the equity discussions from one project to another, the impacts must be measured in units that allow comparison across projects of different size, passenger utilization, etc. Such measures may be per capita, per vehicle mile, per trip, etc. In terms of "social inequities," for example, the measure to assess equity impacts between an electric vehicle and carbon-based fuel vehicle could be translated to the dollar value of tax paid by one versus the other. Alternatively, one could translate it to the amount of lane miles driven per refill to show the social inequity of a plug-in hybrid versus vehicle versus a conventional carbon-based fuel vehicle. In either example, the measures of comparison must be comparative to show the degree of social inequity of one case versus another.

Economists and social theorists have defined several types of equity that can be applied to transportation projects. At the highest level, the categories are horizontal equity and vertical equity. Every system can be defined in terms of horizontal social equity and vertical equity at any point along the horizontal axis. Typically, social inequity is a horizontal measure while social exclusion is a vertical equity argument.

Horizontal Equity

Horizontal equity, also called fairness and egalitarianism, defines equity as the equal distribution of impacts (costs and benefits) between distinct individuals and groups that are considered equal in ability or need. Horizontal equity means that each group of the same class is treated the same. Horizontal equity makes no claim whatsoever about distribution between different classes. Horizontal equity generally falls into two categories: opportunity equity and market equity. Agencies often achieve horizontal equity by applying principals of both.

Opportunity Equity

Opportunity equity requires that costs and benefits are assigned in proportion to the size of the group without regard to any other group characteristics. In the case of road pricing, opportunity equity means that the costs and benefits of a new transportation project should be divided proportionately among social groups. An example of opportunity equity in road pricing is with respect to geography: each individual pays the same rate regardless of starting point. This means that one-way tolls, such as are used on some bridges in the Northeast, do not exhibit full horizontal equity (though many people using these bridges make round-trips and thus pay an equal toll, there is a small population who do not and thus are exposed to horizontally inequity). Opportunity equity is a type of horizontal equity because it does not consider the resources, socio-economic class, etc., of individuals.

Market Equity

Market equity in road pricing is achieved when the price charged to each individual or group is in direct proportion to the costs imposed and the benefits received by the individual or group. An example of market equity in road pricing would be setting a congestion charge for a driver entering a congested area at a specific time to correspond precisely to the cost of the induced delay the driver imposed upon other drivers—as the amount of imposed delay would vary by the level of congestion, the price would correspondingly vary. Market equity is a type of horizontal equity because it does not consider the resources, class, etc., of individuals—everyone pays the same market-based rate.

Vertical Equity or Outcome Equity

Vertical or outcome equity refers to the distribution of impacts (costs and benefits) across social groups that differ in ability and/or need. The principle of vertical equity is that individuals with less ability and/or more need should bear less of the cost and/or accrue more of the benefits of a project, and conversely, that individuals with more ability and/or less need should bear more of the cost and/or accrue more of the benefits of the project. The minimum statement of vertical equity is that the worst off should be made no worse off. Social groupings used in vertical equity include income or social class, or with respect to mobility need and ability. In road pricing projects, a type of vertical equity with respect to income is achieved by noting that lower income individuals are more likely to use buses or other forms of public transportation. Thus when a flat road charge is imposed by an agency creating more vertical inequity (because the lower income individuals pay a higher percentage of their income for the charge than higher income individuals), the inequity can be mitigated by increasing public transportation service to, from, and within the area subject to the road charge.

Additional Types of Equity

• Spatial Equity – The extent to which benefits and costs are distributed equally over space.
• Intergenerational Equity – The extent to which benefits and losses/costs are distributed to the present or the future.
• Social Equity – The extent to which allocation is proportionate to need.
• Operational Equity – The extent to which benefits and costs are distributed among system users for different operational strategies. With the greater prevalence of dynamic pricing that varies with congestion, the same facility may have prices that vary from day to day in addition to time of day. Thus, a trip at 7:30 a.m. may be priced differently on Monday than it is on Wednesday or even on Monday of the previous week.

Horizontal, vertical, and spatial equities are often considered in road pricing projects. Spatial equity is often cited as a key reason for expanding a toll network to adjacent regions to allow a larger population to benefit from additional travel options, including priced lanes with faster travel times and/or new transit service. Interregional equity is a priority when an agency is considering long-term lease agreements with private companies and may receive a lump-sum payment now, but toll users will pay far into the future. Market, social, and operational equity are addressed or accounted for less often.

Table 3-1: Taxonomy of Transportation Equity

Type	Subtype	Description
Horizontal	Opportunity	Groups/individuals of the same ability/need are given costs/benefits in proportion to their size
Horizontal	Market	Groups/individuals of the same ability/need are charged a cost in proportion to benefits received
Vertical/Outcome	-	Groups/individuals of differing ability/need achieve the same result

These different types of equity often overlap and conflict. For example, horizontal equity requires that users bear the costs of their transportation facilities and services, but vertical equity often requires subsidies for disadvantaged people. Transportation planning often involves making tradeoffs between different equity objectives. State and local government officials will want to understand equity considerations so that they can explain the equity issues to the public on a given road pricing project.

3.2 Equity Units of Analysis

The primary scope of an equity measurement is its category or unit of analysis, the grouping of individuals for whom equity is analyzed. Typical units of analysis for equity include geographic, stakeholder groups, and individuals. Of these units, stakeholder groups are among the most commonly analyzed in transportation equity literature. This section will provide some examples of different types of stakeholder groups as applied to the above types of equity. The guidebook will be used by state and local governments so the team will highlight state and local governments as a stakeholder group, separately from other groups such as the American Highway Users Alliance or other advocate groups.

For horizontal equity analysis, stakeholder groups may be ethnic groups, groups who primarily use one mode of transportation (transit, passenger vehicle, walk/bike), or other groups. A new type of horizontal equity concerns infrastructure payment by various stakeholder groups. This focuses on equity of each class of user of the mobility network paying their own share for the use of the network infrastructure. Payment for infrastructure has long been based on the ubiquitous use of fuel taxes paid into a dedicated (hypothecated) fund (the Highway Trust Fund). The advance of electric, plug-in hybrids, high-efficiency petroleum, and hydrogen fuel vehicles has created new classes of road users. These new classes are not buying fuel and paying proportionate taxes to support the infrastructure they use. Drivers of fully electric vehicles such as the Tesla Roadster and the Nissan Leaf (which sold out its first year model run of 20,000 vehicles) are paying no fuel tax towards highway infrastructure whatsoever. From the perspective of horizontal equity with respect to infrastructure payment, this situation is not equitable, though it may encourage adoption of the use of lower emissions vehicles.

Vertical equity is commonly measured with respect to stakeholders grouped by income or social class: lower income classes should bear less of the cost and/or accrue more of the benefits than upper income classes. An alternative application of vertical equity is achieved by grouping stakeholders according to mobility need and ability. This application says in essence that those who have greatest need for mobility and/or are least capable of accessing transportation should accrue the most benefits and/or pay the least costs for a transportation project. By grouping stakeholders according to mobility need and ability, equity measures the degree to which the transportation system meets the needs of travelers with special constraints and is frequently invoked to justify paratransit services.

Payment Medium Access Equity

One significant stakeholder group affected by road pricing projects are "unbanked" people—people who have no bank accounts, by choice or because they lack the financial means. Some agencies require that users have bank accounts in order to obtain the means to pay the fare on a given road pricing project. Yet the number of unbanked people remains as high as 10-20 percent in many places, and denying these people access to priced road projects can significantly harm equity.⁴ Those tolling projects require users to have transponders, thus preventing the legal usage of the facility by a significant portion of the population, a situation that would be considered inequitable by both vertical and horizontal measures. Many other facilities also allow users to pay video tolling fees (a camera reads the license plate and the owner is billed by mail), which are slightly higher than the EZ-Pass fees, to account for additional costs of processing. While this arrangement allows unbanked individuals to use the project legally, it requires them to pay more than others, which is also inequitable by standard vertical and horizontal measures. Measures to mitigate this equity issue include providing transponders to drivers using cash, and providing cash "top up" stations(kiosks that allow account holders to pay cash to increase their balance) at supermarkets or gas stations; or simply allowing video tolling for the same price as transponder tolling—a measure sure to substantially increase operating costs due to the inherent inefficiencies in video tolling. Maryland's Intercounty Connector is one of several road pricing facilities in the United States that allows payments with an EZ-Pass, which requires users to have either a bank account or to pay by cash.

3.3 Definitions of "Impacts of Concern" by Equity Type and Analysis Unit

"Impacts of concern" refer to the changes in the lives of the traveling public (as divided according to the categories or units of analysis) caused by the transportation project for which equity implications will be observed. There are three main groups of impacts of concern that are observed for road pricing projects:

• Financial and economic user costs and benefits: this group of impacts includes the direct financial and economic costs and benefits of the transportation project to both users of the system and those living in the region affected by the system. User financial costs include direct financial costs (charges) and indirect financial costs (transponder rental, banking costs, costs incurred changing routes or times to avoid the charges). Non-user financial costs may include upfront costs for implementing the system (typically taken from general funds). Financial and economic benefits experienced by both users and non-users include overall greater economic productivity and growth due to more efficient use of the transportation system.
• Transportation system impacts: user transportation benefits may include increased service quality, travel time reductions (decrease in congestion or delays), or increase in trip time reliability. These benefits may be experienced not only by road system users but also by transit users in systems where transit receives funding from road revenues or where transit services utilize the road pricing system (e.g., buses through the tolled region). Transportation harms may include extra traffic on areas bordering pricing regions.
• External impacts: this group includes the impacts that the transportation activity has on all individuals external to the transportation transaction. Specific external impacts may include environmental impacts (such as net CO2 emissions, or emissions of polluting gases such as NOx), safety impacts (increases or decreases in road safety), and congestion/delay impacts (road delay or congestion caused by traveling).

Non-users are potentially important in terms of equity impacts. Affected non-users include travelers using adjacent non-priced facilities, residents and business owners along the priced facility, residents and business owners on the adjacent facilities, existing transit riders that may be affected by a larger number of transit riders and improved transit service, etc. User costs and benefits will include pre-pricing-implementation users of the road that benefit from a road pricing project and pre-pricing users that may accrue non-benefits (detrimental costs) from a road-pricing project and thus may not be able to continue to use the road at their preferred times.

3.4 Definitions of Measures to Assess Potential Equity Impact

The size, scope, and average daily traffic on pricing facilities vary widely. To allow for comparison between projects or between the present situation and the future situation (after the project is built), the equity impacts must employ measures that account for the size of the project. There are several measures to assess equity impacts that allow for comparisons, including the following:

• Per capita: what are the impacts per person using the pricing project? This can further be refined by specific groups: per adult, per commuter, per household, etc. Per capita measures treat all passengers equally, whether they are driving single-occupancy vehicles or riding in large transit vehicles.
• Per vehicle mile: what are the impacts per vehicle mile traveled by any vehicle in the pricing project? This can further be refined by specifying the type of roadway (per highway mile, per arterial mile) and/or the type of vehicle (per bus mile, per car mile). Per vehicle mile measures treat all vehicles equally, regardless of occupancy.
• Per trip: what are the impacts per trip taken? This measure is not the same as per capita, because travelers do not always take the same number of trips per week: some may take 2 per day, while some may take many more. This can be further refined by specifying the purpose or time of the trip: per commute trip, per peak-period trip, etc. Like per capita, per trip measures treat all passengers equally, regardless of their mode or vehicle.
• Per dollar: what are the impacts of the program per dollar paid for the charge? This can be further refined by specifying the type of expenditure: dollar of user fee paid, dollar of tax paid.

Table 3-2 summarizes the main possibilities of the four characteristics that define equity.

Table 3-2: Indicative List of the four Characteristics that Define Equity⁵

Types of Equity	Categories/ Units of Analysis	Impacts of Concern	Measures to Assess Equity Impact
Horizontal Opportunity Market Vertical/Outcome	Income Geographic (location) Demographic (race, gender, etc.) Ability Mode Vehicle type Trip Type	Financial / Economic Price/Fare structure Economic opportunity & development Other Financial/ Economic Transportation Service Delay Reliability Other service quality metrics External Crash risk Induced congestion Emissions Noise	Per Capita Per Trip Per vehicle mile Per Dollar

3.5 State and Local Consideration for Equity Type, Category, Impacts of Concern, and Measures

During the initial phase of project evaluation, agencies should develop a plan to identify the equity factors that should be considered when assessing the impacts of road pricing strategies. As demonstrated in Table 3-2, for each road pricing strategy agencies should answer the following questions:

• What types of potential equity impacts should be evaluated for the proposed road pricing strategy?
• What are the equity categories most likely affected by the proposed pricing strategy?
• What are the likely qualitative and quantitative impacts that would result should the proposed congestion strategy be implemented?
• What measurement units should agencies use to best measure the costs and benefits of the proposed congestion strategy?

The process of incorporating equity analysis into the transportation planning process and the methods to evaluate the impacts of congestion and road pricing strategies are discussed further in Sections 4 and 5.

3.6 Classification of Equity in Congestion and Road Pricing Initiatives – Illustrative Examples

As discussed earlier, the two scenarios identified in Section 2.0 are used in the remaining sections of this report to help demonstrate new concepts and guidelines. These scenarios are intended to be illustrative rather than comprehensive. Each scenario will likely need to address multiple types of equity.

Scenario 1: Agencies considering implementing roadway congestion pricing strategies for the first time

State, regional, and/or local agencies should consider how groups with different incomes are impacted by high occupancy toll (HOT) lanes. HOT lanes are considered relatively equitable since a free alternative is adjacent to the tolled alternative. As an example of equity classification and evaluation, transportation agencies should evaluate the travel time differences of drivers of all incomes and races between taking the tolled lane vs. the adjacent free lanes. This way they can consider what income proportion is used when paying the toll and for how much travel time savings.

Scenario 2: Agencies considering road pricing expansion along their network

State, regional, and local agencies considering expanding an existing toll system should account for the entire network effects of expanding their system. Now that multiple roads are under consideration for tolling, potential geographic impacts, market and societal equity come into play. It may be that drivers from certain communities now have fewer un-priced choices. Evaluation may include estimating tolls by minute of travel time savings offset by additional transit service using the faster tolled lanes.