Highway capacity additions are expensive to provide. Average
construction costs for adding lanes in built-up urban areas amount to 30 cents
per vehicle mile driven on the added lanes during the peak periods that the
lanes are really needed.
Yet variable user charges for highway use in the form of
fuel taxes average only 2 cents per mile. These charges do not vary much based
on when and where the motorist drives. Thus, on many urban highway facilities,
peak period use of highway capacity is heavily underpriced relative to costs to
build additional capacity.
The bargain price charged to motorists for use of this
expensive capacity increases demand, and congestion returns soon after lanes
are added. Value pricing involves adopting market principles to bring
transportation supply and demand into balance.
Value pricing, also known as congestion pricing, harnesses
the power of the market to reduce the waste associated with traffic congestion.
It typically entails fees or tolls for road use that vary with the level of
congestion. Tolls are normally assessed electronically to eliminate delays
associated with manual toll collection. This concept of assessing relatively
higher prices for travel during peak periods is the same as that used in many
other sectors of the economy to respond to peak-use demands.
For example, airlines offer off-peak discounts, and hotel
rooms cost more during peak tourist seasons.
Road-use charges that vary with the level of congestion
provide incentives for travelers to shift some trips to off-peak times,
less-congested routes or alternative modes, or to cause them to eliminate some
lower-valued trips or combine them with other trips. A shift in a relatively small
proportion of peak-period trips can lead to substantial reductions in overall
congestion. And while road-use charges create incentives for more efficient use
of existing capacity, they also provide improved indicators of the potential
need for future capacity expansion and generate revenues that can be used to
further enhance urban mobility.
Value pricing also produces greater financial fairness,
i.e., peak period motorists are made to face the true costs of the added
capacity needed to accommodate them instead of getting a subsidy from off-peak
motorists or other public sources. With existing financing through gas taxes,
for example, off-peak motorists who do not need the expensive added capacity
still share in the cost to provide it.
Types of value pricing
Different types of value pricing projects involving variable
tolls have been implemented or are being considered in the U.S. The new value
pricing concept called FAIR (Fast and Intertwined Regular) lanes was developed
by FHWA to overcome equity concerns that sometimes surround efforts to
implement variable tolls on previously untolled highway capacity. FAIR lanes
involve separating congested freeway lanes into two sections, Fast lanes and
Regular lanes.
The separation may be done with methods as simple as using
plastic pylons and lane striping. The Fast lanes would be electronically
tolled, with tolls set in real-time to ensure that traffic moves at the maximum
allowable free-flow speed. Users of the Regular lanes would still face
congested conditions, but would be eligible to receive credits if their
vehicles had electronic toll tags. The credits would be a form of compensation
for giving up the right to use the lanes that had been converted to Fast lanes.
The credits could be used as toll payments on days when a traveler chooses to
use the Fast lanes or as payments for improved transit or paratransit services
which would be provided on the free-flowing Fast lanes.
Variable tolls on existing toll facilities
On existing toll facilities, tolls varying by time of day
improve traffic flow, provide associated air pollution and energy consumption
benefits and may reduce or delay the need to expand highway capacity. A typical
example is the variable tolls on major toll facilities in New York and New
Jersey.
Both the New Jersey Turnpike Authority and the Port
Authority of New York and New Jersey have launched variable tolling strategies.
The Turnpike’s program began in the fall of 2000, and the Port
Authority’s variable charges went into effect in March 2001. The turnpike
program provides for tolls about 7% lower during off-peak hours than during
peak periods for users of the electronic toll collection system. The port
authority charges off-peak tolls 20% less than peak period tolls on its bridges
and tunnels.
Preliminary data from the New Jersey Turnpike show that
value pricing is working to shift traffic out of the peak period and is
supported by the turnpike’s customers. Most of the recent growth in
traffic on the turnpike has been in the off-peak hours. Due to additional
traffic attracted to the turnpike after the introduction of electronic toll
collection (which eliminated delays at toll booths), total traffic was up by
around 7% over a one-year period.
But morning peak traffic was up by only 6% and afternoon
peak traffic was up by only 4%.
Data from the port authority’s value pricing program
show that some motorists may be shifting from congested rush hours to off-peak
time periods. Overall, daily traffic remained relatively stable over the period
from May 2000 to May 2001. However, after introduction of variable tolls,
during a typical weekday in May 2001 7% more motorists used port authority
bridges and tunnels between midnight and 6 a.m. compared to a similar day in
May 2000. Nearly half of this increase was evident in the 5-6 a.m. period.
Traffic reductions were seen on port authority facilities in the morning peak
period (a 7% reduction) and evening peak period (a 4% reduction).
Variable tolls on added highway lanes
Value pricing on new highway capacity, including new HOT
lanes, keeps the new capacity from becoming congested and provides mobility
options for travelers. An example is the State Route 91 express lanes in Orange
County, Calif. The SR 91 express lanes opened in December 1995 as a four-lane
toll facility in the median of a 10-mile section of one of the most heavily
congested highways in the U.S. The toll lanes are separated from the general
purpose lanes by a painted buffer and plastic pylons. There are eight general
purpose lanes, four in each direction. As of Nov. 1, 2001, tolls on the express
lanes varied between $1 and $3.60 in the westbound direction and $1 and $4.75
in the eastbound direction, with the tolls changing by time of day to reflect
the level of congestion delay avoided in the adjacent free lanes and to
maintain free-flow traffic conditions on the toll lanes. All vehicles must have
an electronic transponder to travel on the express lanes.
Variable pricing successfully maintains free flow traffic
conditions on the express lanes during peak traffic hours.
According to the toll operator, during heavy congestion
periods, 40% of total traffic is carried on the express lanes even though they
comprise only one-third of the total capacity, because throughput is higher under
free-flow conditions.
Conversion of HOV lanes to HOT lanes
Converting existing underutilized HOV lanes to HOT lanes can
increase traffic flow on the lanes and can often reduce congestion on the
parallel mixed use lanes, providing air quality and energy consumption benefits
and making better use of capacity on underutilized HOV lanes.
A typical example is San Diego’s priced express lanes.
Under San Diego’s I-15 value pricing program, customers in
single-occupant vehicles pay a per-trip fee each time they use the I-15 HOT
lanes. Vehicles with two or more occupants ride free. Tolls are collected using
vehicle transponders and overhead readers. The normal toll varies between $.50
and $4. During very congested periods, the toll can be as high as $8. The
unique feature of this pilot project is that tolls vary dynamically with the
level of congestion on the HOT lanes. Fees vary in 25-cent increments as often
as every six minutes to help maintain free-flow traffic conditions on the HOT
lanes. Toll revenues support express bus service in the corridor.
Daily traffic volumes on the express lanes averaged 18,560
vehicles in November 2001, an increase of 102% from the pre-project level of
9,200 daily vehicles, while still maintaining the desired high level of service.
About one-fourth of the vehicles are FasTrak users. The project is
self-sufficient, generating $1.2 million in revenue annually. About one-half of
these revenues are used to support transit service in the corridor.
Successful implementation of dynamic pricing has
demonstrated the feasibility of the concept and has led to acceptance among
users. One of the chief initial concerns about this project was that it would
harm carpooling. However, carpooling has in fact increased, possibly due to
enhanced enforcement leading to lower HOV violations or because the
availability of the priced lanes allows more flexible carpooling arrangements.
Prospects for value pricing in the U.S.
The FHWA’s Value Pricing Pilot Program is an
experimental program authorized by federal legislation to learn the potential
of different value pricing approaches for reducing congestion. The grant
program supports efforts by state and local governments or other public
authorities to establish, monitor and evaluate value pricing projects and to
report on their effects.
Two important findings resulting from the operation of the
early pilot projects are that drivers do alter their behavior in response to
value pricing and highway users are receptive to value pricing if it can be
shown to provide them with improved transportation services. Direct impacts on
highway system operations experienced as a result of operational value pricing
projects include:
• Improved
use of available HOV lane capacity, thus allowing more people to be moved through
the travel corridor;
• Generation
of revenues to support express bus service;
• Shifting
of trips out of the peak- congestion period into the shoulders of the peak,
leading to more efficient use of available capacity; and
• Improved
service for users by maintaining free-flow traffic conditions through the use
of value priced priority lanes.
As the results of pilot project experiments accumulate, one
of the key lessons we are learning is that value pricing projects can make
important contributions to the achievement of strategic transportation goals.
Yet it is also important to recognize that there may often be political
controversy associated with efforts to establish a new way of charging for
highway use. This means that special emphasis must be placed on educational
efforts before value pricing projects are introduced. If a value pricing
project is to be successfully implemented, its benefits must be clearly defined
to users, either directly in the form of reduced travel delay and enhanced
travel options, or indirectly through appropriate uses of toll revenues.
A recent study by this author, published by Transportation
Quarterly, suggests that providing new priced lanes on the approximately 200
miles of severely congested freeways in the Washington, D.C., metropolitan area
could generate as much as $600 million in toll revenues annually, and as much
as $4 billion in net additional economic benefits from reductions in travel
delays and other social costs.
Pursuing pricing strategies can provide as much as $50
billion in additional long-term economic benefits if introduced in conjunction
with capacity expansion on the nation’s 2,780 miles of severely congested
urban freeways. Moreover, revenues from value pricing would not only pay
entirely for the capital and operating costs for capacity expansion, road
maintenance and electronic toll collection, but also provide a surplus of as
much as $3 billion annually nationwide, providing much needed new funding to
improve urban transportation services. On the other hand, continuing
“business as usual” with conventional expansion of free capacity
would result in a shortfall of more than $3 billion annually against the
annualized capital and maintenance costs for the expanded freeways.
Networks of value priced lanes in metropolitan areas could
reduce congestion, improve air quality and provide funding for transportation
needs. Metropolitan areas would do well to consider this promising strategy in
developing their long-range transportation plans.
For more information, check out the Value Pricing website
(www. valuepricing.org). TME
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