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Bacon:
Can you explain how Value
Pricing ameliorates traffic
congestion?
USDOT:
For almost 50 years, economists have been advocating
the concept of variable pricing (in which prices
rise and fall based on available capacity), as the
most effective means to balance supply and demand on
highway systems. They argued that the economic and
social costs of congestion are far greater than any
costs associated with pricing. In addition, they
asserted that pricing allows the diverse preferences
of drivers to be exercised.
The
current approach assumes all drivers have equivalent
values of time and system reliability. This has been
widely disproven. People are different, and they
have different needs from the transportation system.
With the development of technologies, most if not
all, of the administrative and technological
obstacles (long cited as one of the reasons the
"theoretical" could not be pursued in
practice) have been removed. The more
"dynamic" the charge (varying prices
regularly), the more diverse preferences can be
exercised and the more benefits derived. It is a
concept implemented in some fashion by telephone
service providers, renters of vacation homes, movie
theaters, and public utilities.
In
recent years, this theory has been successfully
tested in practice on the highway system both on
individual facilities in the U.S. (SR-91, I-15 in
San Diego and I-394 in Minneapolis) and on an
area-wide basis in Europe and Asia. Two points that
are typically misunderstood about pricing, but are
critical:
(1)
pricing increases the number of vehicles a
facility can serve in a given time period (i.e.
it dramatically increases highway capacity). This is
counter-intuitive to people who believe that pricing
is simply about kicking people off of highways. As
traffic speeds grind to a crawl, a typically
congested facility during peak periods in Northern
VA is handling less than 1,000 vehicles per lane
mile per hour, sometimes as low 800 vehicles. Free
flow facilities can handle approximately 2,200-2,300
vehicles. Pricing can approximate free flow
conditions, meaning that priced lanes can handle more
traffic, not less. The two priced lanes on SR-91 in
Southern Calif. handle more traffic than the four
unpriced lanes combined. The concept extrapolated to
a major metropolitan area will obviously produce a
significant increase in the region's highway
capacity.
(2)
Very small reductions in usage produce huge
reductions in congestion (and increases in
travel speeds). A British study estimates that a 4-8
percent reduction in peak period usage would reduce
congestion by 50 percent. In August in Washington,
D.C., a 5-10 percent reduction (associated with
Congressional recess and increased numbers of people
taking vacation) results in significantly less
congestion.
Related
to that point and also not well understood, on
average, over 50 percent of drivers on an urban area
highway during rush hour are not commuting.
This is not to say that all of these trips are
discretionary, but there is little question that
with the nature of today's workforce, a large enough
percentage of people are capable of shifting trip
times (even 45 minutes to an hour) to make a big
difference) It is also important to understand the
substantial benefits associated with ameliorating
congestion. Growing congestion is not simply a
nuisance. It has become a drain on the economy,
badly impacts families and quality of life, drives
up delivery costs to shippers, increases pollution,
distorts real estate markets and development
patterns, reduces the labor pool accessible to
employers, decreases highway safety, and increases
emotional stress.
Bacon:
How much
money does the Department of Transportation have
available to fund a Value Pricing demonstration project,
and what does the DOT hope to accomplish with that
demonstration project?
USDOT:
There are several sources of
funding the Department has identified as potentially
available for use in a broad scale congestion
reduction demonstration as part of our national
Congestion Initiative. We are seeking to execute
agreements (we are calling them urban partnership
agreements) with a very small number of areas that
would contain the following four elements (the four
"t's"):
There are
two current pots of funding that could be fairly
quickly made available in the event a metropolitan
area or region is willing to participate. Those are:
(1)
Grants under the value pricing pilot program.
This program allows the Department to make up
approximately $9 million dollars in grants a year to
congestion pricing demonstration projects. Those
funds will be available every year through 2009.
Funding priority will given to areas willing to
pursue broad pricing demonstrations. More
description of the program can be found here.
(2)
Grants under the Intelligent Transportation
Systems program. The Department is currently
assessing how much of the approximately 90-100M-a-year program to make available. Much will depend on
the level of interest and potential scope of a
possible demonstration. The program does have other
important commitments, so the full amount would not
be available, but the Department's highest levels
are committed to promoting a major congestion
reducing demonstration. These funds also would be
available through 2009. In addition to these funds,
the Department has also proposed giving priority
rating in the Small Starts transit program. This new
program was intended to fund smaller scale projects
such as express bus/BRT. Up to 75M per project can
be allocated under this program.
Finally, if a Small Starts project is proposed as a
significant element of a comprehensive congestion
reduction strategy in general, and pricing, in
particular, this information should also be reported
to FTA as an "Other Factor." Inclusion of
this information as an "Other Factor" will
result in a project's rating being increased. The
Department also has substantial flexible lending
capacity in something called the TIFIA program. Over
$2 billion a year in credit assistance is
authorized. The program has been used effectively by
toll road developers in other parts of the country
and may be utilized on the 495 HOT lanes project.
Here is a brief overview of the program:
Overview:
The Transportation Infrastructure Finance and
Innovation Act of 1998 (TIFIA), enacted as part of
the Transportation Equity Act for the 21st Century
(TEA-21), established a new Federal program under
which the U.S. Department of Transportation (USDOT)
provides credit assistance to major surface
transportation projects of national or regional
significance. TEA-21 authorized up to $10.6 billion
in TIFIA credit assistance over the FY 1999-2003
period. This was continued at a rate of $2.4 billion
per year prior to the passage of SAFETEA-LU in
August 2005. SAFETEA-LU continues the TIFIA credit
program established under TEA-21.
The TIFIA program
provides Federal credit assistance to nationally or
regionally significant surface transportation
projects, including highway, transit, and rail. The
program is designed to fill market gaps and leverage
substantial private co-investment by providing
projects with supplemental or subordinate debt. A
total of $610 million is authorized through 2009 to
pay the subsidy cost of supporting Federal credit
under TIFIA.
Finally, a new provision of
Federal law allows private investors to benefit from
the same tax exempt treatment as the public sector
in connection with public use highway projects. The
Department has up to $15 billion in authority to
allocate nationwide under this new provision. A
lengthier description can be found here.
Bacon:
Does Virginia have a good shot at getting money
for a demonstration project in Northern Virginia? Or
is there a lot of competition among states? Are
there hurdles that Virginia needs to address in
order to qualify?
USDOT:
We believe there is a tremendous
opportunity in Northern Virginia given the severely
high congestion levels, the importance of the
region's economy, and the growing experience of
transportation officials in the state with pricing
and system management concepts. We are also talking
to other major metropolitan areas across the U.S.
who may be interested. We stand ready to work with
any state and metro area willing to consider such a
demonstration. The technology hurdles have been
eliminated. The main hurdle that remains is interest
in conducting such a demonstration given the
magnitude of the undertaking.
Bacon:
Cities like Stockholm and Singapore have shown that
Value Pricing (congestion pricing) can work. But is
the strategy transferable to Northern Virginia? Do
the right conditions exist there? (I
think, in particular, of the major investment both
Stockholm and Singapore had made in mass transit bus
systems, providing commuters an alternative to
driving in cars. NoVa's mass transit service is not
nearly as good.)
USDOT:
We do believe the right conditions exist in Northern
VA to pursue a demonstration. To the extent there
are gaps in public transportation services (some
places obviously have very good service, other
places not so extensive), we believe targeted
commuter bus services could be expanded at a
relatively modest cost (as was done in Stockholm).
We believe that people will be far more willing to
utilize bus services on highways that are close to
free flow (people don't like sitting on a bus in
traffic any more than sitting in their car).
We
have stressed that pricing is an idea that can be
implemented in a multitude of fashions. Our main
objective is a regional implementation, not simply
an individual facility. There are four to five
different ways one could implement pricing (low tech
and high tech) in Northern Virginia, ranging from
conversion of HOV lanes, varying the prices of
existing toll roads more effectively, pricing just
arterials, pricing all roads, etc. Stockholm pursued
a true cordon charge, whereas London implemented an
area-wide charge. Singapore has pursued a blend of
cordon charging and arterial charging.
The
nature and scope of any demonstration will be driven
largely by state and local experts. We do not
pretend to know more about Northern VA
transportation systems than those who own and
operate those systems every day.
--
September 25, 2006
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