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

6.0 Strategies To Address and Mitigate the Impacts of Congestion Pricing

Section 6.0 offers transportation planners and decisionmakers procedures and guidelines to help address and mitigate the equity impacts of road pricing strategies.

6.1 Congestion Pricing Remediation Strategies in the Literature

Some earlier papers suggest how revenues gained from road pricing projects should be redistributed to make road pricing more politically viable. Goodwin suggests a "Rule of Three" and distributing revenues to tax relief, new roads, and public transportation.¹⁴ Small provides seven recommendations for how revenue should be utilized.¹⁵ But neither of these emphasize that this revenue distribution is to remediate adverse equity impacts; the larger emphasis is road pricing viability. In contrast to these and similar, earlier papers, the emphasis of Section 6.0 is remediation in response to equity impacts.

TRB Special Report 303¹⁶ cautions that there may be limited funding for remediation measures, especially if the road pricing revenues go to further road construction or debt service. Another report suggests that remediation measures should be assessed by whether they treat everyone equally, whether people bear the costs that they impose, whether they are progressive with respect to income, whether they benefit the transportation disadvantaged, and whether they improve basic access.¹⁷ Also, related to Section 7.0 on communications, stakeholders should be involved early in the process to help identify and target remedies.¹⁸

This section lists many different measures that can be used to remediate negative equity impacts of road pricing projects. There are a number of measures that agencies may employ to mitigate equity effects. These include:

• Use of revenues – judicious use of revenues generated by a pricing project is the single most important way of mitigating equity effects. The European Union's Coordination of Urban Road User Charging Organizational Issues (CURACAO's) road pricing fact sheet reads: "Evidence suggests that the judicious use of hypothecated revenues is likely to achieve a greater improvement in equity than simply reducing the overall charge level." In order to ensure such judicious use, the agency should, foremost, hypothecate or ring-fence revenues from the project for use on transportation. Such uses may include public transportation, but also highway operations and improvements. If the pricing program replaces other taxation sources, the pricing program may increase equity by many measures: Taylor and Schweitzer suggest that using road pricing to finance highway construction, maintenance and operations and thus reducing sales tax, increases vertical equity.¹⁹
• Vary pricing by time of day, type and location of road, vehicle type, etc. – use of pricing that varies by location, road type, time of day, vehicle type, and other characteristics may mitigate some equity impacts of pricing projects.
• Discounts/Exemptions—discounts and exemptions – in essence, varying pricing by person type—are a way of mitigating some demographic equity effects. However, such discounts and exemptions often lead to a greater need for enforcement and high administrative costs, and so should be avoided unless no other means of equity mitigation exists.
• Provide payment means for the unbanked – in order to avoid creating a system where the unbanked are unable to easily participate in a pricing project, the agency should provide a means for them to pay by cash, such as top up terminals in gas stations or grocery stores.

Remediation strategies generally fall under one of three categories listed below:

• Revising existing finance pricing policies;
• Offering exemptions, discounts, subsidies, or rebates to parties adversely affected by the policy; or
• Offering or improving alternative transportation services.²⁰

Table 6-1 provides a listing of potential equity impact remediation strategies. Please note that each of the remediation measures or strategies listed in Table 6-1 is described in further detail Appendix B along with example deployment sites, benefactors, why the strategy is used, additional details, and links to more information. Table 6-2 describes some of the state and local financial as well as technology policies and strategies that might offset the benefits of equity impact mitigation measures.

At the end of section 6.0, we offer illustrative examples of potential remediation measures for each of the scenarios identified in Section 2.0.

Table 6-1: Remediation Measures to Offset Equity Impacts, and Policy Choices that Complicate Remediation Measures

Method	Brief Description	Deployment site Examples
Revising existing finance policies
Credit-based congestion pricing21	Credit-based system to redistribute revenue to individual drivers	FAST miles22
Price Design limitations	Upper limits on road pricing, limits on the number of priced crossings per period for cordon charges, allowances for unlimited use of priced facilities in certain periods (off-peak hours, holidays, weekends, etc.)23	Widely implemented
Increased access to transponders	Allow motorists to apply for and receive transponders at public assistance offices and other sites commonly used by low-income populations. This may include customer service centers	Auto Expreso System in Puerto Rico TxTag in Texas24 SR 520 bridge customer service centers in Washington
Alternative payment options	Offer cash or pay-as-you-go options for motorists who do not have debit/credit cards	Widely implemented (turnpike ticket option, cash for fare card, etc.)
Compensating nonusers	Offering compensation (i.e., toll credits) to drivers choosing to use general-purpose lanes	(Proposed) FAIR lanes25
Geographic system design	Purposefully locating cordon boundaries, exits, etc., in order to maximize equity	London and Stockholm cordon boundaries
Park and ride facilities	Parking adjacent to project or express bus stops to increase carpooling and transit use	I-95 Express Lanes in Broward County, FL I-15 Express Lanes in San Diego, CA
Offering exemptions, discounts, subsidies, or rebates to parties adversely affected by the policy
Discounts/exemptions	Discounts reduce the congestion charge paid; exemptions exclude certain persons or vehicles from payment. May have cost and enforcement consequences	Most priced managed lane facilities exempt transit and emergency vehicles L.A. Metro – Toll Credit Program for low income users including discount and monthly fee waiver
Subsidies	Use a portion of revenue to subsidize toll costs/costs of low-income commuters	Central Texas toll roads (Texas 130, Loop 1, Texas 45N),26 Germany, and France allow taxpayers to deduct commuting expenses from their income tax liability27
Offering or improving alternative transportation services
Revenue redistribution	Redistribute revenues through public spending on specific transportation-related improvements (widely implemented strategy on many priced managed lanes)	I-15 in San Diego (funds to support express bus service)28 Norwegian toll rings (funds to roadway/transit improvement)29
Increased access to alternative transit	Transit, vanpools, paratransit, or other options as alternatives in locations not served by transit	Widely implemented

The selection of remediation measures depends primarily on project objectives and conditions. A project emphasizing congestion reduction may adopt different remediation measures from a project with a revenue maximization emphasis. Similarly, a project with significant Federal funding may make choices differently than a locally funded project. The Los Angeles Metro project has an explicit Toll Credit Program for low income users to receive a credit at program sign-up and a waiver of monthly account fees. The Stockholm congestion charge has succeeded because special accommodations and mitigating measures were made for certain groups who perceived inequities, including the residents of a specific area (Lidingo Island).

Many recently deployed projects include the enhancement of transit options that take advantage of the faster facility. Use of toll revenues to support improved transit service has been one of the most successful strategies at gaining support from lower income groups as it provides mobility options that best serve these communities. However, Manchester, U.K., did not succeed in implementation of its congestion pricing project in part because automobile drivers perceived that a disproportionate amount of the anticipated revenues would be going to support riders of other modes.

More details are provided in Section 6.3 and in Appendix B.

6.2 Post-Implementation Road Pricing Remediation Strategies – Equity Audit Tool

Ecola and Light suggest the use of an "equity audit tool" after implementing a road pricing project. They suggest continuously monitoring the road pricing project and its remediation measures and determining whether the measures successfully address equity differences. If equity concerns are not well enough addressed, then either the road pricing project or the remediation can be modified to better address equity.³⁰

6.3 Road Pricing Remediation Strategies – Illustrative Examples

In the following, the research team presents a potential remediation approach for each of the three road pricing scenarios identified. It is important to note that examples below are for illustrative purposes only; additional remediation methods likely apply to each of these scenarios.

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

Issue: Lack of Internet Access/Stable Address to Receive Mail Potential Remediation Method: Increased access to transponders Description: The tolling agency in county X should attempt to calculate direct and indirect costs and benefits of potential users and non-users in the priced managed lane corridor. Direct costs include the expected tolls to be paid. Indirect costs include transponder acquisition and deposit, obtaining information about travel time differences between the priced and general purpose lanes. Direct benefits include travel time savings for both the priced managed lane users and general purpose lane users. Indirect benefits include not having to travel in a carpool to use the faster lane and improved air quality due to the higher speed of the general purpose lanes.

Scenario 2: Agencies considering road pricing expansion along their network

Issue: Pricing Variations (time of day; miles traveled, etc…) Potential Remediation Method: Discounts/exemptions Description: The expansion of the tolled roadway network near city Y may coincide with a more-complicated tolling structure. Instead of charging just one toll to use the HOT/Express lane (regardless of traffic levels), the toll may vary by time of day and by miles traveled. It may also be possible for certain groups of users to apply for transponders that facilitate a discount. A simpler system follows the Los Angeles Metro example and provides a credit at account sign up and monthly fee waiver to low-income households.