When I wrote my infamous Pearl Harbor blog a few days after the I-35 West bridge disaster, a debate about the gas-tax and its inability to solve the problem is exactly what I predicted. This, from Mary Peters, U.S. Secretary of Transportation, is perfectly argued (italics mine).
...in the aftermath of this tragedy, a necessary national conversation has begun concerning the state of the nation's bridges and highways and the financial model used to build, maintain and operate them.
Her opinion regarding higher gas taxes as a solution is clear:
...the gas tax does virtually nothing to reduce the explosion in highway congestion occurring in the past 25 years. Gas taxes are levied regardless of when and where someone drives, creating a misperception that highways are "free." In turn, this encourages overuse and gridlock, often at precisely the times we need highways the most. The Government Accountability Office last month released a report arguing that gas taxes are fundamentally incapable of balancing supply and demand for roads during periods of congestion. We agree.
The GAO, along with almost every expert who has studied the issue, says that direct pricing of road use, similar to how people pay for other utilities, holds far more promise in addressing congestion than do traditional gas taxes.
Secretary Peters has not come recently to this understanding. Indeed it was held by her predecessor Norman Mineta and many in the Department of Transportation long before that. Economist have know this since at least the 1960s. What has stopped this understanding from surfacing is a total lack of political courage, generally at State level. And it is fear of voter backlash that requires a disaster such as the I-35 bridge to permit an informed debate.
President Bush’s famous “we are addicted to oil” speech caused quite a (temporary) stir, back when. I wish he would also say: “…and raising gas-taxes will not solve the problem. Paying for roads as you use them will.” Only then will journalists write less about the necessity to raise the gas-tax and more about the real problem.
Tim Harford might be the most accessible economist alive today. Fun even. His book, The Undercover Economist (2006) has a brilliant and readable chapter dealing with how to think about the externalities of congestion. I may have to put the whole chapter up here and risk suit. But for today, here are the last three paragraphs of this delightful chapter:
Yet you will often hear so-called experts complaining that taxes on driving or on pollution would be bad for the economy. That sounds worrying. But what is “the economy”? If you spend enough time watching Bloomberg television or reading the Wall Street Journal you may come to the mistaken impression that “the economy” is a bunch of rather dull statistics with names like GDP (gross domestic product). GDP measures the total cost of producing everything in the economy in one year-for instance, one extra cappuccino would add $2.55 to GDP – or a little less if some of the ingredients were imported.
And if you think this is “the economy,” then the experts may be right. A pollution tax might well make a number like GDP smaller. But who cares? Certainly not economists. We know that GDP measures lots of things that are harmful (sales of weapons, shoddy building work with subsequent expensive repairs, expenditures on commuting) and misses lots of things that are important, such as looking after your children or going for a walk in the mountains.
Most economics has very little to do with GDP. Economics is about who gets what and why. Clean air and smooth-flowing traffic are part of the “economy” in this sense. It's possible that congestion charging would increase GDP because people would get to work more quickly and produce more, and prices in stores would be lower because of more efficient distribution. But it's perfectly possible that congestion charging would reduce GDP. This does not, in fact, matter in the slightest. We know for certain that it would make us better off in a much more meaningful sense: that we would have many new choices open to us about where we go and what we do. There is much more to life than what gets measured in accounts. Even economists know that.
Thanks for this, Tim.
In my world, Shoupistas are favorite people. These are followers of Professor Donald Shoup, who argues that free parking harms our cities by encouraging driving thereby contributing to congestion and pollution. Shoup is right, of course, and there is ample proof. Get his book, The High Price of Free Parking, and you may even come away thinking that Shoup could solve Global Warming if he had his way.
Shoup’s prescription for street parking (among a catalogue of solutions) has become known as the “15% solution” – price on-street spaces so that a 15% vacancy rate assures that a visitor can find a spot without circling round and round the block (there’s your congestion and the pollution all in one…)
At a guess there are a thousand, maybe two, Shoupistas in the world. Parking does not excite many beyond people in the industry or urban planners.
One of my favorite Shoupistas, beyond the professor himself, is John Van Horn, editor and publisher of “Parking Today” a long-standing US parking industry monthly magazine, and a proselytizer for Shoup’s thinking.
In his print editorial for August 2007, John asked some questions about Mayor Bloomberg’s plan for congestion pricing in Manhattan, that come from such a unique perspective that I am compelled to reply to them. Regarding the Bloomberg plan to charge motorists at an EZPass beacon to enter Manhattan:
But what is really going to be accomplished? It seems to me that this is a plan to collect another tax. Look at it this way. The city can't raise its income and property taxes any higher (they would be pilloried), so they are looking for a tax that doesn't seem like a tax. In this case, it's a tax on drivers. The charge would be $8 a car.
Many cities are indeed desperate to find new tax revenue (my beloved Toronto is a dramatic case in point). While I cannot say how desperate NYC is for new funding, Bloomberg’s intention is clearly to address congestion. When the cost of the collection system and the required additions to transit are taken into account, he will have to raise the $8 just to break even – as happened in London. This is not a tax grab.
People living on the edge of the congestion zone fear that folks will drive into the city, park in their neighborhoods, and then take public transportation to work. Well, of course they will. So [Bloomberg] is proposing a permit program for the area just outside the congestion zone to handle this unintended consequence. The money from the permits will go into the general fund (another tax?), and the amount of the permit costs is going to be discussed later.
I do not know the amount Bloomberg intends to charge for these permits, but most such permit systems are fairly minor revenue generators. The money is made in enforcement of the expected spillover. If a huge amount were to be charged for the permits themselves, then John has a case – that would be a tax-grab.
It seems the city is simply creating a large bureaucracy to collect money to pay for that large bureaucracy. Why not charge market rates for on-street parking in New York? Wouldn't that have the same effect? Wouldn't people think twice about driving into the city if they knew they were going to have to pay $30 or $40 to park on-street? Off-street rates would go up in kind. Legitimate residents could pay a lower fee or whatever. Set the rates so there is a 15% vacancy factor. This could be done with the infrastructure that is in place. A new taxing plan would not have to be implemented. No one would have to pass laws. There would be no need for "congestion police" to go after those who haven't a clue, and we wouldn't be creating a whole new class of lawbreaker.
Seems a perfectly sensible Shoupista viewpoint. But it has a problem. Not everyone is driving in only to park 8 hours. Some are shopping, selling, or servicing. Some have parking paid by their employer (there is a separate solution to that problem). So this form of “proxy taxation” is pretty uneven and while maybe collecting greater revenues with existing infrastructure, it would have less effect on congestion coming into the city. Charging a lot for parking may discourage some from driving in, but has no influence on the amount of driving one is willing to do once in.
But this also carries a bias. We in the parking business would naturally prefer any scheme that raises parking revenue in particular.
This isn't a problem unique to the uninformed who actually want to drive in Manhattan. Gov. Schwarzenegger wants to do something like congestion pricing in California, and other cities are eying the prospect.
Correct, about 30 of them in the US alone, if you count the number of original applicants to the USDoT’s recent Urban Partnership Agreement awards. Worldwide this number is quadrupled. The distant buzzing sound of London and Stockholm congestion charging is about to become a worldwide juggernaut.
To be most fair and effective in a market economy, one would pay for what they use. They would pay fairly for the use of a parking spot – i.e., depending on demand and length of stay. And they would pay fairly for the use of a road – i.e. depending on when, where and how long they use it. That is how market economics work. Otherwise you have the tragedy of the commons, or as some congestion-pricing advocates view it – communism (more).
By these criteria, then, charging a hefty fee for parking is only a proxy to a congestion charge and that proxy will be unfair to some and completely miss others. As well, Bloomberg’s proposed $8 flat fee is also unfair, and indeed it can be argued, that once paid it actually encourages driving.
There is only one effective and fair way to manage traffic congestion in Manhattan or in California (finally something in common between East and West) and that is to charge by the mile and to vary that charge by the degree of congestion. Mayor Bloomberg’s approach although better than continued inaction is nearly as crude an approach as was Mayor Livingstone’s in London. It is for this reason that London continues to seek technology to replace the current system.
John van Horn and my readers should also know that the end-goal of pervasive congestion pricing is to replace the fuel tax. Naturally, one might ask how we navigate from “mostly fuel tax and a few tolls” to “all tolls and no fuel tax”. Schemes to do this involve tax rebates and pay-distance-charges-at-the-pump in the interim, to a full change-over some years from now. The GPS-based German truck-tolling system provides fuel-tax rebates to German truckers (but not foreign truckers).
All of this has mostly been worked out, and will simply take a couple more years and a ton of political will. Bloomberg’s work will seem both pioneering and primitive 15 years from now.
There is no other acceptable solution to congestion and road finance.
I am steamed that the Toronto I love and still live in has been so badly managed financially. Over the past decade, I bought the “feds did it” logic, then the “province did it” excuse. Still do, historically speaking. But now Mr Miller would have me blame Councillor Ashton.
No thanks, Mr Miller, Brian Ashton was right – its your regressive flat tax proposals that are little related to the harmful human behaviours that are choking our city that are at fault.
Even folks on the other side of the Atlantic can see us better than we can ourselves. The Economist (2007.07.26), in a section called “The Americas” (like we’re still a colony, eh?) ran an article about Toronto: “Nice but broke: Canada’s aspiring city state”, echoing this blog:
The city's case for even more autonomy would, however, be boosted if Mr Miller made more effective use of the powers he already has. Road tolls or a congestion charge stand a better chance of winning approval than his current tax proposals, reckons Tom Courchene, an economist at Queen's University. They would reduce pollution and congestion, and scoop up money from out-of-city commuters.
An acquaintance, Justin, ex of Toronto City Hall, commented to me: “905ers [folks living in the Toronto surrounds] and the Greater Toronto Transit Authority will never take the lead on tolling their own citizens to drive in the region. The political make-up and power-base of the GTTA is too suburban to take the lead as Miller suggests they should.”
So Mr Miller, Professor Courchene thinks you should toll roads, The Economist thinks you should toll roads, Justin thinks you should toll roads, and I think you should toll roads. So when will you figure this out?
Many people think building transit takes cars off the road. It doesn’t. Here is a delicious quote from a government study from Lawrence Solomon’s “Sweden proves congestion tolls work” (Financial Post/National Post Saturday 4 August 2007):
It "is not possible to show that the investments in public transport (park-and-ride facilities, expanded bus and rail services) had any visible effect on the total number of trips taken on public transport during autumn 2005, before the [congestion] charges began to apply," a government study states. "Of the 22% decrease in car travel across the charge zone, only 0.1% at the most could have been caused by the expanded bus services."
One of the prerequisites for massive political change is a horrific disaster to permit or push our leaders to take action. Roosevelt needed Pearl Harbor to declare war on Imperial Japan, Bush needed 911 to address (however badly) the growing “terrorist” problem.
The US DOT and most state “xDOTs” have been studying ways to resolve their dual transportation crises of congestion and funding shortfalls for several years now. And since Al Gore’s resurrection the US DOT can now add the burden of emissions caused by congestion to that problem list.
And it’s the same in every other country – sometimes worse.
The general formula for the solution is to move away from fuel-tax dependency and toward road tolling. The ideal endgame is to replace the fuel-tax with a time, distance, and place charge (congestion pricing) on every mile driven everywhere.
While we’re some ways from that, it is being worked on, and the collapse of the Minneapolis bridge is the disaster that will focus motorists and politicians on a closer understanding of the problem.
How many people remember what they were doing when the USS Cole was attacked? Probably six. But how many recall what they were doing when the World Trade Centre was attacked?
Telling motorists that an absolute fuel-tax shortfall causes budget problems or that improving engine efficiency and alternate fuels means diminished relative tax efficacy, or that congestion causes productivity losses and economic harm and that congestion pricing would solve that, or that congestion increases the volume of harmful emissions, generally cause motorists to nod off. However, the notion that lack of funding might be the culprit in the Minneapolis bridge collapse, rather than an engineer asleep on her pencil, gets more attention. (Now we need them to get that the funding model is just as important as actually getting the funding.)
Minnesota and Oregon are two states that have already taken a leadership role in advocating ways to move from fuel-taxes to congestion pricing. This addresses funding, congestion and emissions, while fuel taxes essentially address only funding.
Minnesota’s Governor Pawlenty is a strong advocate of congestion pricing and has work in progress to move in that direction. The bridge collapse will get that advocacy the attention it needs.
What will happen in the short term is that many states that have been trying to increase the fuel-tax, will now be able to do so on the basis of safety – always more important than productivity. Pawlenty, who has resisted that to now (it really is the wrong solution), may have to cave in. There are a lot of good reasons that the cost of driving should rise, but doing it though fuel taxes will have only a minor effect on congestion. Rather it will affect discretionary travel more than commuting – i.e., it will cost motorists more to have less fun, rather than have motorists start thinking about alternate methods of commuting.
Watch for many, many references to the Minnesota I-35W bridge as politicians and transport leaders call for transport funding reform.
I just hope we are smart enough not to simply raise fuel taxes and walk away…
This is about to appear as the future-fantasy context for a parking article running in three publications in the US, UK and Canada.
It’s May already. 2010. My hybrid sits waiting in the lot below my apartment for the drive to my job downtown. I still prefer taking my car some days in spite of the new congestion charges. It's easier when I'm in heels and there is far more parking available now anyway. Ever since the City decided to end the clogged mess of free-parking by charging fair market rates on virtually every street, I have been able to pull up to the curb, pop out, and do my business – all without circling for a spot. And without paying a meter, I might add. You see, back in 2008 I was among the first to install one of those new GPS-type parking meters in my car to save myself the trouble and wasted time of feeding the pay-and-display machine. At the end of each month, I get a bill that is itemized to make expense reporting easier, saving me even more time, not to mention that I always used to lose the receipts! My employer likes it because there is no chance I can pad my parking expenses. My boyfriend got an anonymous meter that he pre-pays, and he can even get a numbered debit account off the web – it doesn’t have his name on it, but his employer believes him, so that’s OK. But for me, I’m just happy to be rid of the whole parking nuisance. Better yet, back in 2009, the city instituted a very cool ‘pay-to-stay’ program: if I do not move my vehicle between 7:30 and 9:30 AM, I get a $3 parking credit which I can use anywhere, anytime in the city. I get another $2 credit if I do not move it between 4:00 and 6:00 PM. So I take transit two or three times per week and try to leave real early on the other days. By the time I add up the credits, I hardly pay any parking at all. And after my employer pays her portion of my expenses, I am sometimes even a little ahead. I wish my boyfriend was that smart … but the really funny thing is, I never thought I could have free-parking by having paid-parking everywhere.
