Washington state HOT lane revenues — actual collections versus forecast.
by James A. Bacon
In 2008 the Washington Department of Transportation converted 10 miles of HOV lanes in the Seattle metro region to tolled HOT lanes. If the experiment was successful, the state planned to expand the HOT lane concept around the state. After four years of experience, the verdict is in: People aren’t willing to pay nearly as much to avoid congestion as assumed.
According to Washington DOT data (see chart), toll revenues are coming in at less than half of the worst case forecast. Two factors seems to be at work, sums up Angie Schmitt with D.C. Streets Blog: “People are driving less, and they aren’t as willing to pay their way out of congestion as was assumed.”
Less congestion means less incentive to pay for [Route] 167′s HOT lanes. But there’s more going on than that: Not only are fewer people choosing to use the priced lanes than expected, those who do are paying lower prices than expected. The lanes are dynamically priced, with the costs rising — and falling — based on demand. …
The prevailing theory about HOT pricing is that people would be willing to pay half their hourly wage rate to avoid sitting in traffic. But based on income data from WSDOT, far more commuters earn more than $24 per hour than are opting for the priced lanes.”
HOT lanes represent a real-world test for how much value drivers place on cutting their commuting time. Virginians should pay heed. While everybody complains about congestion, when push comes to shove, they may not be willing to pay much to avoid it.
What it means to Virginia. Virginia and its private-sector partners have made a huge commitment to HOT lanes — both for the recently opened Capital Beltway and the I-95 project under construction. The Downtown-Midtown Tunnel in Norfolk also varies toll prices by time of day.
No one has officially acknowledged it yet but I’m willing to bet that toll revenues on the Capital Beltway express lanes are running below expectations. According to a Public Works Financing newsletter article published in 2007, the project was expected to generate $335,000 daily in toll revenue by 2015. That’s roughly $10 million monthly or $30 million quarterly. While the 495 expressways are still in their ramp-up stage, they have a long way to go.
In their first quarter of reported results, Capital Beltway Express LLC reported total revenue of $828,000. As Washington-area drivers became more aware of the expressway option, traffic volume picked up considerably. The quarter ending March 31, 2013 yielded $2,475,000 in revenues. “Consistent with other express lane facilities, the 495 Express Lanes are still within the expected ramp-up period with both usage and pricing expected to increase progressively over time,” the report stated.
Please note what the report did not say: It did not say that traffic volumes and revenue were meeting forecasts. Revenue must quadruple within two years to meet expectations.
In a possible hint that revenues have proven disappointing, Capital Beltway Express made the express lanes open to drivers for free April 6 and 7. The stated justification: “The free weekend is part of an educational campaign to encourage Beltway drivers to try the new travel option on the Virginia side of the Capital Beltway and see how the Express Lanes can work for them.”
I have been a big supporter of the theory of using dynamic pricing to ration scarce highway capacity and the concrete application of that theory with the I-495 and I-95 HOT lanes projects. Further, from everything I’ve seen, Capital Beltway Express is a highly professional and well-run organization. But the situation bears watching as Northern Virginia politicians line up with their pet projects to get a piece of Governor Bob McDonnell’s transportation funding package.
Last year’s debate over transportation funding took place in a reality warp. Even as the special interests and their toady politicians worked themselves into a frenzy over congestion, statewide congestion costs were dramatically lower than they had been five years previously. (See “Can We Have a Reality Check, Please?“)
But even I, as skeptical as I was, missed a critical part of the picture. I accepted the Texas Transportation Institute (TTI) estimate of how much congestion cost Washington-region motorists, which the McDonnell administration routinely trotted out to justify the need for more transportation spending. But what if it turns out that motorists don’t value congestion relief as much as TTI thought they do? What if it turns out that motorists aren’t willing to pay hard cash just to drive a little faster, and they’re just as content to sit in their air-conditioned cars listening to talk radio, NPR or their iPod play list?
The beauty of the 495 express lanes is that it will provide a reality-based B.S. detector. By tracking what Washingtonians are willing to pay in expressway tolls, we can measure how much monetary value they place on reducing their drive time. That information will prove invaluable as the commonwealth — and Northern Virginia in particular — plans billions of dollars on transportation projects that no one would want if they had to pay for them themselves. As Angie Schmitt put it, “If drivers won’t pay to bypass congestion, why should taxpayers?”