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C O N F E R E N C E P R O C E E D I N G S 3 4

International Perspectives onRoad Pricing

Report of the Committee for the International Symposium on Road Pricing

November 19–22, 2003Key Biscayne, Florida

Sponsored byFlorida Department of TransportationFederal Highway AdministrationOrganisation for Economic Co-operation and Development

Washington, D.C. 2005

www.TRB.org

Transportation Research Board Conference Proceedings 34ISSN 1073-1652ISBN 0-309-09375-9

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The conference was sponsored by the Florida Department of Transportation, the Federal HighwayAdministration of the U.S. Department of Transportation, and the Organisation for Economic Co-operation and Development.

Committee for the International Symposium on Road PricingSteve Heminger, Metropolitan Transportation Commission, ChairRobert D. Bullard, Clark Atlanta UniversityKenneth J. Button, George Mason UniversityDamian J. Kulash, Eno Transportation Foundation, Inc.Kathleen F. Marvaso, AAA National OfficeAnthony D. May, University of LeedsServando M. Parapar, Miami–Dade Expressway AuthorityRobert W. Poole, Jr., Reason FoundationEdward J. Regan III, Wilbur Smith AssociatesMartin Wachs, University of California

Liaison MembersBud Boyd, Florida Department of TransportationLowell Clary, Florida Department of TransportationMartine Micozzi, Organisation for Economic Co-operation and Development

Transportation Research Board and Conference StaffMark Norman, Director, Technical ActivitiesClaire L. Felbinger, Transportation Policy and Management SpecialistReggie Gillum, Meeting CoordinatorMary Kissi, Senior Program AssistantMiriam Roskin, Roskin Consulting, Seattle, Washington

TRB Publications OfficeNorman Solomon, EditorKristin C. Sawyer, ProofreaderJennifer J. Weeks, Senior Editorial Assistant

Cover photograph of the 91 Express Lanes courtesy of the Orange County TransportationAuthority, Orange, California.

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Contents

PREFACE ....................................................................................................................................................ix

BACKGROUND AND TERMINOLOGY .............................................................................................................1

COMMITTEE FINDINGS AND RECOMMENDATIONS .........................................................................................3

SETTING THE STAGE

Welcoming Remarks and Charge to the Conference .................................................................................9Bob Oldakowski, Lowell Clary, Sherri Alston, Robert E. Skinner, Jr., Martine Micozzi, and Steve Heminger

Road Pricing in Context: The Efficient Allocation of a Limited Resource ..............................................11Then and Now: The Evolution of Transport Pricing and Where We Are Today, 11

Martin WachsOne Step Forward, Two Steps Back? An Overview of Road Pricing Applications and Research

Outside the United States, 12Anthony May

KEYNOTE ADDRESSES

Central London’s Congestion Charging Scheme: Has It Achieved Its Objectives? ...................................17Derek Turner

Out on a Limb: Pricing Futures...............................................................................................................18Kenneth Small

SPECIAL TOPICS

Ah, the Politics of Pricing........................................................................................................................21How Politics Affects Even Good Projects, 21

Eric SchrefflerThe Bridges of Lee County, Florida, 22

John AlbionWhat Do Politicians Really Need to Know? 22

Jan A. MartinsenA Closer Look: Pricing Across the States ................................................................................................24

Toll Road Applications: Perspectives from the Port Authority of New York and New Jersey, 24Mark Muriello

Plans for Variable Pricing by Florida’s Turnpike Enterprise, 25Jim Ely

Mileage-Based Applications: Minneapolis, Minnesota, 26Jeff Buxbaum

New Lane Applications: California State Route 91, 26Ellen Burton

Calculating Costs and Measuring Benefits of Pricing Schemes................................................................28Costs and Benefits of Pricing Schemes for the Netherlands, 28

Erna ScholWhy Reform Transport Pricing? An Overview of European Transport Infrastructure Charging Policy

and Research, 29Christopher Nash

An Exploration of Motor Vehicle Congestion Charges in New York, 29Jeffrey Zupan and Alexis Perrotta

Relevance of Pricing to External Cost Calculation: Recent Results, 30Andrea Ricci

Role of Pricing Revenue in Financing Projects and Services ....................................................................32Lord of the Rings, Trondheim, Norway, 32

Erik AmdalBus Rapid Transit/High-Occupancy Toll Networks, 33

Robert PooleTolling the A-86 Tunnel in Versailles, France, 33

Dario D’AnnunzioPricing Goes Global ................................................................................................................................34

Variable Road Pricing in France, 34David LeCoffre

Testing the Real-World Acceptance and Effectiveness of Urban Pricing, 34Marcel Rommerts

Evaluation of Singapore’s Electronic Road Pricing System, 35Gopinath Menon

E-407 Project in Toronto, Ontario, Canada, 36Imad Nassereddine

“CarTrek”: Integrating Technology with Pricing Schemes ......................................................................37Technology and Pricing: Cause or Effect? 37

Harold WorrallElectronic Toll Collection in Japan: A Wide Variety of Tolling Applications, 38

Kuniaki Nakamura and Nihon Doro KodanEvaluation of Active Pricing Schemes: Expectations, Revelations, and Illuminations ..............................39

Lessons Learned from Paying for Parking, 39Donald Shoup

A Look Back: California State Route 91, 40Edward Sullivan

Urban Tolls in Oslo, Norway: Experiences and Conditions for Implementation, 40Kristian Wærsted

A Closer Look at the Real World............................................................................................................42Managing the Streets of London, 42

Derek TurnerFailed Schemes in Pricing, 43

Stephen IsonImpacts of Pricing on Interurban Freight Transportation........................................................................44

Toll Truckways: Using Pricing to Finance New Goods-Movement Infrastructure, 44Robert Poole

Overview of Studies on Heavy Vehicle Charges, 44Tony Wilson

Effects of Pricing on Trucks in the United States, 45Darrin Roth

Tolling Heavy Goods Vehicles on Germany’s Autobahnen, 46Andreas Kossak

Winners, Losers, or a Zero-Sum Game? The Distributional Impacts of Pricing Schemes ........................48Welfare and Distributional Effects of Alternative Road Pricing Policies for

Metropolitan Washington, D.C., 48Peter Nelson

Road Pricing and Equity in Norway, 49Farideh Ramjerdi

Impacts of Pricing on Income Classes, 49Douglass Lee

Urban Freight Transportation .................................................................................................................51Moving the Goods in Los Angeles, 51

Mark GriffinTrucks’ Value of Time: Implications for Congestion and Weight Limits, 52

David LevinsonRoad Pricing and Urban Freight in Europe: Practices and Developments from

the BestUFS Project, 52Martin Ruesch

The Price Is “Right”: Perspectives on Finding It .....................................................................................54Innovative Financing’s Role in Pricing Projects, 54

Genevieve GiulianoExperiences with Active Projects: Interstate 10, 55

Ed ReganInterstate 680 and Other California Projects, 55

Jim BourgartPrice Demand Elasticities and Usage of Houston’s HOT Lanes, 56

Mark BurrisFactoring Pricing into the Planning Process.............................................................................................57

Public Acceptance of Pricing Schemes for the Netherlands, 57Yvonne Need

Pricing Traffic, Pacing Growth, 58Robert Dunphy

Responses to Findings: The Future of Pricing .........................................................................................59Steve Heminger, Emil Frankel, Marcel Rommerts, Anne Canby, and Dan Beal

RESOURCE PAPERS

Then and Now: The Evolution of Congestion Pricing in Transportation and Where We Stand Today.......................................................................................................................63

Martin WachsOne Step Forward, Two Steps Back? An Overview of Road Pricing Applications and Research

Outside the United States ....................................................................................................................73Anthony D. May and A. Sumalee

COMMITTEE MEMBER BIOGRAPHICAL INFORMATION..................................................................................92

PARTICIPANTS ...........................................................................................................................................96

i x

Preface

In November 2003, approximately 160 peopleassembled in Key Biscayne, Florida, to participatein the International Symposium on Road Pricing.

Fifteen countries were represented, and the exchangeof information on policies and approaches adoptedthroughout the world was one of the symposium’smost noteworthy features. The conference also bene-fited from the breadth of sectors represented; partici-pants and speakers included members of academia andresearchers, public officials from all levels of govern-ment, consultants, interest group and association rep-resentatives, and individuals from financial and legalfirms. The conference was a collaborative effort of theTransportation Research Board (TRB), the FloridaDepartment of Transportation, the Organisation forEconomic Co-operation and Development (OECD),and the Federal Highway Administration.

The symposium was conducted under the auspicesof TRB’s parent organization, the National ResearchCouncil (NRC). In cooperation with OECD, a spe-cially appointed NRC committee developed the sym-posium to explore American and internationalapplications of road pricing strategies in various gov-ernmental and socioeconomic settings. The partici-pants discussed the rationale and motivations forimplementing pricing strategies, the use of pricing rev-enues, and project outcomes. Drawing on resourcepapers, presentations, and symposium discussions, theconference committee evaluated the current state ofpractice, assessed future directions and opportunities,and identified research and information needs.

BEYOND CURBING GRIDLOCK

This conference built on the foundation established inCurbing Gridlock: Peak-Period Fees to Relieve TrafficCongestion, a 1994 report developed by TRB in con-

junction with NRC’s Commission on Behavioral andSocial Sciences and Education. That publicationincluded recommendations on the potential role of mar-ket pricing principles as a tool for congestion manage-ment, guidelines for the assessment of impacts ofcongestion pricing experiments, and fruitful areas forfurther research, demonstration, or experimentation.

The program for the Key Biscayne gathering wasdesigned in recognition of the significant extent of exper-imentation with road pricing since 1994. While CurbingGridlock and meetings leading up to its publicationfocused largely on the rationale for testing road pricing,the organizers of this conference sought to develop a pro-gram that would provide a detailed look at case studiesof applications throughout the world and the results ofresearch focused on specific pricing projects. To that end,the conference committee commissioned two resourcepapers, both of which appear in this document. One ofthe papers dealt with the evolution of pricing, with spe-cial attention to the state of the practice today. The otheralso focused on the state of the practice, with specialattention to pricing initiatives outside the United States.

By the time the conference was over, participants hadlearned from the speakers, resource papers, and each otherabout the successes realized to date and the challenges thataccompanied specific projects’ implementation. To roundout the session, the conference committee invited top-levelpolicy makers or advisers from around the globe to pointout any continuing concerns and offer their visions for howroad pricing will or ought to evolve in the coming decade.

ACKNOWLEDGMENTS

This conference would not have been possible without thefinancial and institutional support of the Florida Depart-ment of Transportation. Special thanks are extended toLowell Clary, Assistant Secretary of the department, for

his vision and assistance. Thanks also go to Jon Williamsof TRB, who played a key role in developing the conceptof the symposium, and to Martine Micozzi of OECD forfacilitating that organization’s involvement in this project.

The committee acknowledges the work of many indi-viduals who contributed to the conference and the devel-opment of this report. Claire L. Felbinger, TransportationPolicy and Management Specialist, worked with the com-mittee and coordinated with the OECD Working Groupfor the International Road Pricing Symposium (see box)to plan the conference, under the guidance of the com-mittee and the supervision of Mark Norman, TRB’sDirector of Technical Activities. Suzanne Schneider, Asso-ciate Executive Director of TRB, managed the reportreview process. The committee also thanks ReginaldGillum, Meetings Coordinator, who coordinated registra-tion and the on-site logistics for the conference, and MaryKissi, Senior Program Assistant, who provided adminis-trative support throughout the project. Thanks areextended to Miriam Roskin, Roskin Consulting, for herwork in assembling and preparing this report under theguidance of the committee.

The presentations, discussions, and summaries of theviews expressed by conference speakers, panelists, andparticipants are intended to provide a record of the con-ference. The views expressed do not necessarily reflectthose of the conference planning committee, TRB,NRC, or the sponsors of the conference.

This report has been reviewed in draft form by indi-viduals chosen for their diverse perspectives and techni-

cal expertise, in accordance with procedures approvedby NRC’s Report Review Committee. The purpose ofthis independent review is to provide candid and criticalcomments that assist the institution in making the pub-lished report as sound as possible and to ensure that thereport meets institutional standards for objectivity, evi-dence, and responsiveness to the study charge. Thereview comments and draft manuscript remain confi-dential to protect the integrity of the deliberativeprocess.

The committee thanks the following individuals fortheir review of this report: Thomas F. Barry, Post, Buck-ley, Schuh & Jernigan, Orlando, Florida; ShamaGamkhar, University of Texas at Austin; Jacquelyne D.Grimshaw, Center for Neighborhood Technologies,Chicago, Illinois; H. David Prior, Dellard Sphar,Philadelphia, Pennsylvania; and William Stockton, TexasA&M University System, College Station. Althoughthese reviewers provided many constructive commentsand suggestions, they were not asked to endorse thereport’s findings and conclusions, nor did they see thefinal draft before its release.

The review of this report was overseen by C. MichaelWalton, University of Texas at Austin. Appointed byNRC, he was responsible for making certain that anindependent examination of this report was carried outin accordance with institutional procedures and that allreview comments were carefully considered. Responsi-bility for the final content of this report rests entirelywith the authoring committee and the institution.

x INTERNATIONAL PERSPECTIVES ON ROAD PRICINGx

OECD WORKING GROUP FOR THE INTERNATIONAL ROAD PRICING SYMPOSIUM

Maurice Abeille, CERTU, FranceEdward Bunting, Department for Transport, Local Government, and the Regions, United KingdomPatrick DeCorla-Souza, Federal Highway Administration, United StatesMike Goodwin, Department for Transport, Local Government, and the Regions, United KingdomPrzemyslaw Gorgol, Ministry of Transport and Maritime Economy, PolandThierry Gouin, CETE, FranceMark Harvey, Land and Environment Branch, AustraliaKinji Hasegawa, Ministry of Land, Infrastructure, and Transport, JapanMarja Heikkinen-Jarnola, Ministry of Transport and Communications, FinlandJari Kauppila, Ministry of Transport and Communications, FinlandMarek Krawczyk, Ministry of Infrastructure, PolandGunnar Lindberg, VTI, SwedenAnthony May, Institute of Transport Studies, University of Leeds, United KingdomMaria Meiner, Road Directorate, DenmarkNoriyoshi Nakamura, Traffic Planning Division, National Policy Agency, JapanJames Odeck, Public Roads Administration, NorwayJózsef Palfalvi, Institute for Transport Sciences, HungaryErna Schol, AVV Transport Research Center, NetherlandsJiri Sira, Transport Research Centre, Czech RepublicKatalin Tánczos, Budapest University for Technology and Economics, HungaryPascal Vincent, CERTU, France

1

In any discussion of road pricing, one of the firstchallenges is to clarify definitions. The conferencecommittee was charged with organizing a sympo-

sium to explore American and international applica-tions of road pricing strategies in various gov-ernmental and socioeconomic settings. Although theyare often used interchangeably, the phrases “roadpricing,” “congestion pricing,” “value pricing,” and“variable pricing” can have different meanings to dif-ferent users. This document typically uses the phrase“road pricing.” Under a road pricing strategy, roadusers are charged a fee that reflects the cost of theiruse of the road more fully than do existing fees andtaxes, and thus pricing can serve as a public policytool to help manage demand for a limited resource—road space. Because of its role in managing demand,road pricing is often referred to as “congestion pric-ing,” particularly in cases where the charge rises atpeak travel times and falls or is eliminated entirelywhen demand is low.

As with any other genuine pricing system, road pric-ing allocates road space to those most willing to pay forit, provides guidance in the revenues collected as towhere capacity expansion is needed, and creates onesource of money for paying for investment. Pricing aroad is thus different from traditional turnpike tolling,which aims merely to produce revenue to recover costsand plays no reallocative function.

While the term “road pricing” generally suffices as ashorthand phrase to indicate the allocation of scarceroad space through the use of charges that vary with thelevel of congestion on a road, other, more specific

vocabulary has emerged in the road pricing communityas well. The following are some examples:

• Value pricing. The term “value pricing” was pro-posed in place of the term “congestion pricing” by theU.S. Department of Transportation during the develop-ment of pricing legislation to convey the benefits(“value”) of using pricing to reduce congestion. How-ever, some choose to limit the term’s meaning to charg-ing for use of additional road lanes that offer premiumservice alternatives to unpriced highways.

• Cordon. A ring around an area (typically a citycenter) with a series of charging points at all entries.Both Singapore and London use a cordon approach.

• Area charging or licensing. A variant of cordoncharging in which the charge is levied to use a vehiclewithin a defined area, rather than just to enter it.

• Distance-based charges. In contrast to cordon orarea-based charges within a defined area, distance-based charges represent fees that vary depending on thedistance traveled.

• Managed lanes. A lane or lanes designed and oper-ated to achieve stated goals by managing access via usergroup, pricing, or other criteria. A managed lane facilitytypically provides improved travel conditions to eligibleusers.

• High-occupancy/toll (HOT) lanes. A variant ofthe high-occupancy vehicle (HOV) carpool lanes com-monly used throughout the United States, HOT lanesare managed lanes that provide free (or reduced cost)access for transit and other vehicles carrying therequired number of passengers and charge a fee to

Background and Terminology

other vehicles not meeting occupancy requirements.Emergency vehicles are typically exempt from the fee.

An alternative to HOT lanes that has been mootedbut is untried is the concept of FAIR (fast and inter-twined regular) lanes. If implemented, FAIR laneswould divide currently free, general-purpose trafficlanes into two sections: fast lanes and regular lanes.Under FAIR lanes, drivers using the regular lanes dur-ing peak hours would be compensated with credits thatcould be used as toll payments on days when they choseto use express lanes. The express lane credits wouldcompensate drivers for giving up their right to use lanesthat they “have already paid for” and for any addeddelays that might result.

• HOT networks. This concept expands the idea ofHOT lanes to a complete network of premium service lanesoffering both congestion relief to motorists and improvedtransit service. A HOT network would be developed byadding missing HOV lanes and converting the entire oper-ation to electronic variable pricing. Access would be at nocharge to “super-HOV” vehicles (vanpools and buses),which would preregister to use the system and carrytransponders granting them passage at no charge. All othervehicles would pay a toll intended to maintain high-speed,free-flow traffic at all times. A seamless network of this sortwould provide the functional equivalent of an exclusivebusway, since pricing would be used to guarantee a prede-fined amount of capacity for buses and vanpools.

2 INTERNATIONAL PERSPECTIVES ON ROAD PRICING

3

Committee Findings and Recommendations

Immediately after the symposium’s closing session,the conference committee convened to develop itsconsensus findings and recommendations. Consider-

ation of the content of the conference presentations, dis-cussion, and resource papers led to the committee’sidentification of a series of key findings, recommendedtopics for future research, and suggested areas for inter-national cooperation. In addition, the committee drewon the resource papers and presentations made through-out the symposium to identify a number of potentialpolicy initiatives that were frequently cited in the dis-cussions. This summary of the committee’s findings andrecommendations addresses each of these issues.

KEY FINDINGS

The state of the practice in road pricing has advancedconsiderably since the publication of Curbing Gridlockin 1994, at which time congestion-based pricingschemes were largely a theoretical proposition ratherthan a practice. More recent contributions were theEuropean Commission’s 1998 White Paper on Fair Pay-ment for Infrastructure Use, which made a general callfor the phased introduction of marginal social cost pric-ing for infrastructure use, and its 2001 White Paper onEuropean Transport for 2010, which specifically calledfor the gradual replacement of existing transport systemtaxes with more effective instruments for integratinginfrastructure costs and external costs.

Over the past 10 years, many pricing experimentshave been implemented in various forms and in several

countries. Much of the experience of the past decade hasbeen more successful than anticipated, with feweradverse impacts and greater public acceptance. This pos-itive experience—which is occurring in the context ofincreasing financial necessity, diminishing opportunitiesto add capacity, and advancing technological ability—makes it important for policy makers to continue toenable and learn from further experimentation.

Despite expanded use of road pricing in Asia,Europe, and the United States, the pricing structuresused in these parts of the world vary. As noted in theresource papers prepared for the symposium, the best-known road pricing projects in Europe and Asia involvecordon or area pricing, typically with drivers paying afee to cross a cordon and enter a congested central cityarea during business hours. Alternatively, in the UnitedStates pricing projects have tended to focus on drivers’use of a specific facility, such as a highway, where feesare levied for travel during periods of congestion.

Pricing’s transformation from a theoretical constructto a real-world application is underscored by newnational policies providing greater official sanction forpricing experiments. These include the European Com-mission’s 1998 call for the phased introduction of mar-ginal social cost pricing for infrastructure use and, in theUnited States, national legislative proposals to providestate and local officials with broader discretion to use“value pricing” on federally funded roads.

While the efficiency gains produced by road pricingprojects are largely undisputed, the impacts of pricinginitiatives on equity, fairness, and transparency in deci-sion making remain areas of concern. Assessment of the

relative impacts of pricing arrangements on variousgroups stratified by income, ethnicity, gender, employ-ment status, residential and job location, and othercharacteristics continues to be a prime area for research.Development of strategies to mitigate inequitable distri-butions of costs and benefits also merits attention. Forexample, policy makers increasingly recognize that“revenue recycling,” whereby some or all of the rev-enues generated through a pricing project are returnedto the public at large either as direct credits or as subsi-dies to public transportation, can help reduce adverseequity impacts.

Many at the symposium believed that revenues frompriced facilities should be available first and foremost topay for the operations and maintenance of the pricedfacility, retire debt for that facility, and potentially offera return to investors. After these uses, and in partbecause of concerns over pricing’s equity impacts, manyconference participants also suggested that the properhypothecation (or dedication) of excess revenue is a keyingredient in a pricing project’s success. Views differ onhow broadly or narrowly to prescribe the eligible usesof revenue and how best to disperse the revenue in thelocal corridor or area.

Road pricing is still often perceived to be synonymouswith traditional turnpike tolling, which leads to the mis-perception that pricing is principally or exclusively arevenue-generating mechanism. Unless the transportationcommunity or others demonstrate pricing’s ability tomeet other management objectives, the public and politi-cians will continue to view pricing simply as a revenuetool. Pricing advocates will find real-world examples tobe their strongest tool in countering these misperceptions.The City of London’s area pricing program, for example,is achieving greater delay reductions than had beenexpected. This was the pricing scheme’s goal; it was notconcerned solely with raising revenue. Consequently, thepricing scheme was a form of demand managementrather than revenue enhancement. Moreover, London’splan featured an integrated strategy that included roadsignal improvements, public transportation improve-ments, infrastructure repair, and the adoption of newtechnologies. The tolling examples in the United States donot exhibit this integrated approach and have mixedresults concerning demand management.

Cordon pricing such as that used by the City of Lon-don may be less attractive in the United States, accord-ing to resource paper author Martin Wachs, because ofthe fear that it will drive more people to outlying subur-ban centers. “American downtowns,” he notes, “can besaid to fear road pricing much more than they fear con-gestion” (see resource paper by Wachs, p. 69 of theseproceedings).

As noted by many speakers at the conference and ashighlighted in the resource papers, recent experience

suggests that citizens’ anxiety about planned road pric-ing projects far exceeds their actual dissatisfaction withpricing once a project is in place. In fact, while resistanceto pricing can be a potent barrier to implementation,recent surveys demonstrate unexpectedly favorable atti-tudes toward the implemented project. For example, onerecent survey indicated that both users and nonusers ofpriced lanes typically perceive travel time savings to beeven greater than those actually realized. Other surveysindicate that highway users are becoming increasinglyskeptical that added capacity can reduce congestion in asustainable way and are increasingly convinced thatefforts to manage demand could be more beneficial.

With some of the more difficult implementationquestions already tackled, concerns that may previouslyhave been treated as lower research priorities can nolonger be ignored. These areas include methods ofenforcement; strategies for ensuring privacy; goodsmovement and pricing; the externalities of pricing; pub-lic participation; and a much more sophisticated under-standing of the distributional impacts of various pricingstructures in light of individuals’ income levels, racial orethnic status, gender, residential location, modalchoices, and other relevant groupings.

The impacts of pricing on location, land use patterns,and urban form are still relatively poorly understood,not least because of the difficulty of obtaining empiricaldata. In particular, the potential impacts of pricing oneconomic activity in the affected and surrounding areasremain a concern. Some initial data are available onimpacts in particular pricing locations, but additionaldata and study are needed.

Effective tools for communicating with and educat-ing both policy makers and the public are still needed.

In the United States, resistance to raising the fuel taxand concern about the resulting transportation fundingshortfall need to be addressed during the comingdecade. Especially at a time when physical constraintsmake it harder than ever to build new capacity, pricingpresents one promising alternative to the fuel tax. Inlight of pricing’s success in ad hoc, project-specific appli-cations throughout the world, it holds promise for inclu-sion as part of a broader and systemic solution to thecoming funding situation.

In Europe, the contrary problem of far higher butuneven rates of fuel taxation has led the European Com-mission to advocate a greater standardization of trans-port financing through direct pricing of roads. Thecommission policy also notes explicitly that introduc-tion of road pricing can either raise more net revenue bysupplementing existing fuel taxes or raise an amount ofrevenue equivalent to that under the existing financesystem through the use of tax rebates or refunds. Undereither approach, road pricing is an effective means ofmanaging demand on the road network.


POTENTIAL U.S. POLICY INITIATIVES FORFURTHER DISCUSSION AND CONSIDERATION

A number of potential policy initiatives were identifiedand discussed during the conference and in committeedeliberations. Among those raised most often, the com-mittee endorsed the following ideas as being worthy offurther investigation and consideration; many are underconsideration in pending legislation to reauthorize federalsurface transportation programs:

• Providing broad permission for state and local offi-cials to pursue pricing on new and existing federal-aidroads, including conversion of existing high-occupancyvehicle lanes into high-occupancy toll lanes.

• Continuing to house within the Federal HighwayAdministration a value pricing office or program to serveas an ongoing catalyst for research into pricing’s poten-tial under a range of conditions. The office or programwould receive both funding to support and authority toaward grants for preimplementation activities (e.g., traf-fic studies, surveys, and public education initiatives) andfor the systematic evaluation of completed projects.

• Providing state and local officials with discretionto use revenues collected from pricing projects onfederal-aid roads, bridges, and tunnels for any trans-portation improvement along the corridor or in the areain which the pricing in question has been applied.

• Permitting toll lanes or facilities on federal-aidroutes dedicated to truck traffic and permitting longercombination vehicles to operate on these dedicated lanesor facilities with provision of adequate barrier or facil-ity separation, subject to approval by the state andaffected metropolitan planning organization.

• Establishing a special commission to examinemeans for funding transportation infrastructurethrough a long-range alternative to the fuel tax and con-sider the capacity of such an alternative to encourageefficient use of the existing surface transportation infra-structure. The commission’s work would be expected tobuild on the findings of the ongoing TransportationResearch Board Study of the Long-Term Viability ofFuel Taxes for Transportation Finance.

• Treating the federally tax-exempt status of park-ing and public transit subsidies equally and requiringemployers who provide these subsidies to give employ-ees who do not take advantage of these subsidies thenontaxable cash equivalent.

RECOMMENDED TOPICS FORFUTURE RESEARCH

Ongoing research in the area of road pricing shouldinclude further consideration of the following topics:

• Pricing’s impacts on the level of economic activity,land use patterns, and urban form of affected areas.

• Improved pricing structures for corridors andurban areas, especially with regard to pricing structuresbased on marginal cost.

• The impact of road pricing on freight movement,with such research based on surveys and analysis ofimplications not only for truckers but also for ports, ter-minal operators, and other parties participating in thelogistics management chain.

• Empirical information on the distributional effectsof pricing projects, with a focus not only on the inci-dence of the charges (i.e., who pays) but also on the rel-ative distribution of benefits to individuals within arange of income levels, residential locations, racial andethnic groups, and other relevant categories. The inves-tigation should place such equity impacts in the contextof the distributional outcomes created by the existing(i.e., largely tax-based) system for funding surface trans-portation infrastructure. Policy-based investigations ofstrategies, such as revenue recycling, to mitigate adversedistributional impacts are also recommended. Empiricalevidence on locational and economic impacts shouldalso be sought.

• Decision-making processes and constituency-building approaches that facilitate the implementationof pricing programs, including (a) consideration of thefactors that influence various constituencies’ and deci-sion makers’ views and (b) the impact of alternativeinstitutional arrangements, including those involvingthe private sector, on the success of pricing projects.

• Successful practices through which transportationplanners factor alternative pricing structures into anintegrated transportation strategy, especially withrespect to how the interaction of pricing structures withother elements of the overall strategy can help identifythe optimal pricing strategy.

• The implications of increasingly widespread use ofpricing on the development and adoption of appropriatetechnologies (e.g., toll collection procedures based onglobal positioning systems rather than dedicated short-range communications), with attention to both privacyconsiderations and the capacity of various technologiesto maximize pricing’s effectiveness.

• The range of existing and possible enforcementstrategies to ensure compliance with toll provisions andhigh-occupancy vehicle requirements and an evaluationof their effectiveness and administrative feasibility.

RECOMMENDED ACTIVITIES TO PROMOTEINTERNATIONAL COOPERATION

In the area of international cooperation, the committeeidentified a number of initiatives designed to take advan-

5COMMITTEE FINDINGS AND RECOMMENDATIONS

tage of the knowledge gained across the world in pricingprojects:

• Encourage United States research institutions andthe European Commission to pursue coordinated and,ideally, parallel research projects.

• Treat this symposium as a launching pad for simi-lar international pricing symposia in the future to be heldat regular intervals and to address a regularly updatedagenda of topics.

• Create a centralized web-based repository ofinformation on worldwide pricing projects. Possibly tobe created and maintained by the TransportationResearch Board, this website would include a regularly

updated roster of priced facilities, the essential factualinformation about these facilities, and published papersand evaluations.

• Through a partnership between the Transporta-tion Research Board, other U.S. institutions, theOrganisation for Economic Co-operation and Devel-opment, the European Conference of Ministers ofTransport, and other national governments and orga-nizations throughout the world, sponsor a series ofsite visits to prime international examples of pricedfacilities. The visits should be directed to influentialdecision makers and convey the feasibility of suchprojects and the lessons learned throughout theirimplementation.


Setting the Stage

9

Welcoming Remarks and Charge to the Conference

Bob Oldakowski, Mayor of Key BiscayneLowell Clary, Florida Department of TransportationSherri Alston, Federal Highway AdministrationRobert E. Skinner, Jr., Transportation Research BoardMartine Micozzi, Organisation for Economic Co-operation and DevelopmentSteve Heminger, Metropolitan Transportation Commission

Participants were welcomed to Key Biscayne bythe Honorable Bob Oldakowski, Mayor of KeyBiscayne. He noted that the incorporation of Key

Biscayne 12 years ago initiated a trend toward incor-poration throughout Dade County and created agreater sense of autonomy and accountability for localdecisions and recognition of their impacts. In keepingwith the principle of responsible and beneficial policychoices, he wished the symposium’s organizers andparticipants a successful conference.

Lowell Clary, Assistant Secretary of the FloridaDepartment of Transportation, placed the charge to theconference attendees in the context of Florida’s experi-ence. The state has an extensive network of toll roads.More recently it has been examining pricing not only asa means of raising needed revenue but also as a tool formeeting other policy objectives, including managingcongestion, optimizing the network, and addressing anarray of concerns regarding the distribution of costs andbenefits of the transportation system. He indicated thatthe state and the nation would need to undertake anextensive study of the gasoline tax within the comingdecade to examine whether it ought to remain the back-bone of the system for funding surface transportationinvestment or be supplanted by another mechanism forraising revenue. Given pricing’s capacity not only toraise revenue but also to address other policy objectives,he said he thought it likely that pricing already has andwill retain an important place in the overall system forfunding and managing the transportation network.

Representing the Federal Highway Administration(FHWA), Sherri Alston described the congestion pric-

ing pilot program established under the IntermodalSurface Transportation Efficiency Act of 1991 (ISTEA)and continued as the value pricing pilot program underthe Transportation Equity Act for the 21st Century.She noted that the pilot has brought pricing experi-ments to 36 projects in 15 states and is thus providinga wealth of information to help guide future policydecisions. She acknowledged several FHWA staff whohad been particular leaders in the field, includingPatrick DeCorla-Souza, and thanked them for theirefforts in this area.

Robert E. Skinner, Jr., Executive Director of the Trans-portation Research Board (TRB), referred conferenceattendees to a 2003 publication on megaprojects (Mega-Projects: The Changing Politics of Urban Public Invest-ment, Alan A. Altshuler and David Luberoff) and notedthat one of the greatest challenges for jurisdictions under-taking these projects is to bring together diverse interestsand develop a consensus concerning a common set ofobjectives and a plan for implementation. He noted thatsuccessful implementation of congestion pricing requires asimilar harmonization of diverse interests and objectives, ashort list of which includes the creation of new capacity,revenue generation, traffic calming, and environmentalimprovements. He said that he was pleased that TRB wasrevisiting the seminal Curbing Gridlock study and notedthat the time is ripe for a fresh look at pricing.

Finally, Martine Micozzi, representing the Organisa-tion for Economic Co-operation and Development, wel-comed the many participants who had traveled fromoverseas to attend this symposium. She noted that thisconference had an especially high level of international

participation, with overseas participants representing 15countries from Finland to Australia. She noted thatbroad participation and the resulting cross-fertilizationbetween various nations’ experts on pricing would resultin a much richer conference.

Following these welcoming remarks, Steve Heminger,Executive Director, Metropolitan Transportation Com-mission, Oakland, California, and conference chair, pro-vided a brief overview of developments in road pricingsince 1991. Starting with the U.S. experience, he notedthat while ISTEA provided the first opportunity in theUnited States for limited experimentation with Interstatetolling and congestion pricing, most pricing successeshave been in the area of high-occupancy toll (HOT)lanes, with projects under way in two California coun-ties and Houston, Texas. While the San Francisco areawas one of the early entrants into the federal congestionpricing pilot program with a proposal to institute peakpricing on the San Francisco–Oakland Bay Bridge, thatproject stalled for political reasons by 1994. Today, NewYork City has been able to do what San Francisco couldnot, with higher peak-hour tolls in place on the HudsonRiver tunnels and bridges into Manhattan.

The pricing provisions appearing in the Bush admin-istration’s proposal for reauthorizing the nation’s high-way and transit programs make incremental progress ina national policy that supports pricing, since they wouldallow local officials to institute HOT lanes anywhere on

the Interstate highway system provided that the level ofservice is maintained for carpools and vanpools. Even inSan Francisco, where officials have studied pricingwithout a single success, a HOT lane proposal for Inter-state 680 may finally prove to be a winner. These trendslargely bear out the findings and recommendations ofTRB’s Curbing Gridlock report, published in 1994,which concluded that road pricing was technically feasi-ble and would produce a net benefit to society but haduncertain political viability.

Pricing seems to have fared better abroad, said Mr.Heminger. He named Singapore, Canada, France, theNetherlands, Norway, and England, with its excitingcentral London pricing project. It is also noteworthythat these applications generally involve “pure pricing,”under which every motorist pays a fee, as opposed tothe “choice pricing” of U.S.-style HOT lanes or expresslanes, under which motorists can avoid the fee if theychoose the free, slower lanes.

Providing the charge to the conference, Mr.Heminger called for a healthy exchange of ideas on allfacets of road pricing, including technical feasibility,economic and social equity, and political viability. Heconcluded that the symposium provides an excellentopportunity for U.S. and international experts to learnfrom one another. He added, however, that in the areaof pricing, the United States likely has far more to learnfrom abroad than vice versa.

1 0 INTERNATIONAL PERSPECTIVES ON ROAD PRICING

1 1

Road Pricing in ContextThe Efficient Allocation of a Limited Resource

Martin Wachs, Institute of Transportation Studies, University of California, BerkeleyAnthony May, Institute for Transport Studies, University of Leeds

The symposium began with two stage-setting pre-sentations on the past, present, and anticipatedfuture of road pricing.

THEN AND NOW: THE EVOLUTION OFTRANSPORT PRICING AND WHEREWE ARE TODAY

Martin Wachs

Obviously road pricing is nothing new—it has beenaround for at least 80 years. But has it yet entered themainstream? Not quite, but pricing is at a critical junc-ture in North America and the United States.

In the United States, the first motor fuel tax was insti-tuted in 1918, in the state of Oregon. The legislature hadpreferred a toll-based system of finance, but at the timeit was rejected because of the cost of constructing boothsand collecting the tolls. So a practical limitation, ratherthan a policy-based one, dictated the starting point forour system of paying for road infrastructure. This prac-tical limitation has now been largely obviated by theadvent of electronic tolling, which is one of several rea-sons for this being a watershed moment for congestionpricing.

Another factor contributing to the current state ofaffairs concerns the long-term viability of the fuel tax as ameans of financing transportation. Road pricing was firstsuggested by the economist A. C. Pigou in 1920 and wasexpanded on by Frank Knight in 1924. In the 1960s and1970s, the economist William Vickrey built on Pigou’s

and Knight’s work and became an advocate of appliedcongestion pricing. However, the proposal could gatherno momentum because the need for a stable funding basewas already answered by the existence of the fuel tax.This condition may be changing, however, as the fuel tax’scapacity to generate revenues gradually erodes because ofclimbing fuel efficiency and the reluctance of public offi-cials at all levels of government to raise fuel or othertaxes. Another key factor that may support greater use ofpricing as a tool for managing demand rather than expan-sion of road supply is the frequent and potent oppositionto plans for increasing road capacity through new con-struction. Environmental concerns and sticker shockfrom the high cost of new construction are forcing a moreserious look at strategies for wringing the most mobilityfrom the road infrastructure already in place.

In a way, the United States and Europe find them-selves in a sort of “back to the future” situation, withrevenue shortages and a view of user fees as a reason-able and appropriate pricing system hearkening back tothe 1920s. The salient difference is the availability oftechnology today to make the pricing system almostinvisible to motorists. The ability to charge for road usewithout cumbersome toll plazas and attendant trafficslowdowns and, more important, to vary charges on thebasis of congestion levels has finally made true demand-responsive variable pricing a practical possibility.

Since the publication of Curbing Gridlock almost adecade ago, the United States and Europe have both pur-sued greater use of road pricing, but in quite differentways. In the United States facility pricing is most com-mon, and we see it in the congestion pricing applications

on California’s State Route 91 and Interstate 15. Someargue that many U.S. initiatives fall short of “true” con-gestion pricing in that they primarily add new options formotorists who choose to pay for premium service in lieuof establishing a consistent pricing system for all users.This approach, however, is consistent with and probablymakes sense in the context of the decentralized trans-portation system in the United States. With the exceptionof older cities like New York and Boston, the UnitedStates does not have the same center city densities or geo-graphic limitations that make cordon-style area pricingfeasible in Europe. While Europe’s experiments haveincluded a few facility-based applications, it is more com-mon to find area pricing applications that target centercity areas. These differing approaches in the United Statesand Europe will probably carry forward into the future.

While we in the United States may well be on the brinkof value pricing’s entry into the mainstream, we shouldcontinue to heed lessons learned to date on conditions forsuccessful implementation. The presence of widespreadbenefits and narrowly defined costs is one important fac-tor for success. The proper use of revenue is essential tothe public’s understanding of a pricing project’s impactson equity, and dedication of at least a share of the revenueto public transport can counter the impact of road pricingon those with lower incomes. Finally, successful imple-mentation of pricing programs almost always depends onthe assembly and mobilization of diverse groups withshared interests to join public officials in championing theapproach.

ONE STEP FORWARD, TWO STEPS BACK? AN OVERVIEW OF ROAD PRICING APPLICATIONSAND RESEARCH OUTSIDE THE UNITED STATES

Anthony May

Road pricing is indeed coming into its own, and asMarty Wachs says, we are at a key juncture in its evolu-tion. This is illustrated, in part, by evidence of moreroad pricing activity taking place in the past 10 yearsthan altogether in the three decades before that. Thus,today, just 10 years after the Curbing Gridlock confer-ence, we are in a position to structure a symposiumaround not only theory but also practice.

A review of European and Asian developments in roadpricing since 1975, when Singapore established theworld’s first area pricing system, reveals three majorapproaches: (a) urban applications through area pricing incenter cities, (b) priced toll rings surrounding urban areas,and (c) distance-based pricing on intercity roads. A look atthe projects that have been proposed and implemented inthe past 10 years in each of these three categories can beinstructive for where we are now and where we are going.

• Area pricing. Singapore and London provide theoldest and newest examples of pricing entry into centercities. Despite London’s system being new, it has been inthe making for decades. Indeed, the Smeed report, pub-lished in 1964, set forth many of the criteria for successthat still hold true. Subsequent phases in the evolutionof London’s consideration of road pricing included a“supplementary licensing” proposal in 1974; publica-tion in 1988 of a congestion pricing strategy; a govern-ment-commissioned study from 1992 through 1995 ofvarious charging schemes; and, ultimately, in 1999, theact that gave London’s mayor the authority to establisha road charging system.

• Toll rings. In contrast to the cordon-based sys-tems that charge fees for passage into a city center,tolls (to cross cordon) that encircle an urban centerhave taken hold in Norway. Tolls were introduced forthe sole purpose of raising revenue and, as such, donot represent congestion pricing schemes but simplytolls. Norway is unique in that its system includesexisting roads and charges at all entry points. WhileNorwegian officials are considering whether to con-vert to congestion pricing, it is doubtful that the cur-rent design can be adapted to demand managementpurposes.

• Distance-based charging. Seeking to combat con-gestion on intercity routes, Austria, Germany, andSwitzerland are developing and implementing pricingsystems that address the number of kilometers loggedon major motorways. To date, these systems focus onheavy goods vehicles, partly in response to the continu-ing growth in freight traffic following the developmentof the single European market. Thanks to technologicaldevelopments, Germany’s system is currently shiftingfrom a point-to-point assessment to a true distance-based pricing system. By the end of this year, the systemwill likely evolve from simple window stickers to theuse of automatic vehicle identification throughonboard units that will transmit the position of thevehicle, company and vehicle data, and the distancetraveled on charged roads.

Despite, or perhaps because of, the tremendousprogress of the past decade, several areas are ripe forfurther research. I’d like to suggest four in particular.

• Public acceptability, particularly with respect tothe impact of the design of the particular pricing schemeon public opinion. One study found, for instance, thatacceptance ratings for a proposed pricing scheme rosefrom 35% to 55% once the scheme included a commit-ment to dedicate the revenues to stated transportationuses rather than the general public coffer.

• Continued examination of various road pricingschemes’ impacts on “vertical equity,” which refers to


impacts stratified by income group, and “horizontalequity,” which refers to impacts by geographic area andtype of activity.

• Pricing’s impacts on local economic conditionsand land use patterns, for which there is little empiricalevidence to date, in part due to measurement difficul-ties. While businesses tend to warn that pricing will pro-duce job and income losses, the limited evidence wehave to date suggests only minor impacts. Further evi-

dence to refute or corroborate businesses’ fears aboutroad pricing would be most useful.

• The role of certain design features in differenttypes of pricing programs. For example, when point-based pricing is considered, it could be useful to exam-ine design features that may minimize diversion toalternative routes. Recent research in Edinburgh hasshown a strong correlation between the benefits derivedfrom pricing and the placement of charging points.

1 3ROAD PRICING IN CONTEXT

Keynote Addresses

1 7

Central London’s Congestion Charging SchemeHas It Achieved Its Objectives?

Derek Turner, Derek Turner Consulting

On some occasions, a simple question—has theLondon charging scheme achieved its objec-tives?—can produce a simple answer, which in

this case is yes. Since its implementation on February17, 2003, the program has met all expectations, andthe latest figures show that 60,000 fewer car move-ments per day are entering the center city chargingzone, and about 110,000 people per day pay thecongestion-based charge. Interestingly, 1 month afterits implementation, Mayor Ken Livingstone, who wasthe program’s tireless proponent, was receivingapproval ratings 25 points ahead of his nearest rival.

The program was successfully implemented for anumber of reasons, including political commitment,strong public relations, strong project management, andan effective procurement strategy. Equally important, thecongestion charging scheme was put forth as one elementof a much broader strategy that included signalizationimprovements, public transportation improvements,infrastructure repairs, and technological innovations;together these worked to demonstrate the government’scommitment to the supply side of the transport equation,as well.

Once it was clear to public officials and the public atlarge that these supply-side investments were not sufficientto combat the choking congestion in central London,demand management became an obvious consideration. Itis remarkable that the system, as eventually implemented,is not so different from the proposals that emerged from

the Smeed commission back in 1964. Some 40 years later,we have found that congestion charging is one of the fewpolicy proposals that can truly unite the left and the right,which in itself makes one of the strongest arguments forhow essentially correct the proposal must be.

The benefits realized thus far are impressive. Journeytimes to, from, and across the priced zone are down by14%. Time spent stationary or traveling at less than 10kilometers per hour is down by 25%. Benefits are evidenton the public transport side as well, with excess bus wait-ing times for routes serving the charge zone down by 33%.And in a side benefit that few made specific mention ofearly on, we are seeing fewer road accidents.

Revenues for 2003 and 2004 are projected at £68 mil-lion, and the mayor is using these revenues to boost invest-ments in public transport, and especially bus service. Inthis way, congestion charging creates one of those rare butdelightful virtuous spirals in which the consequences ofone action create benefits that continue to build on them-selves. This stands in stark contrast to capacity expansion,which serves only to create more demand and an ongoingcry for more and greater investment.

Because of the demand-side benefits that are so evidentin the London program, I believe it is time to stop talkingabout fees, taxes, and tolls and instead start referring todemand management, variable pricing, and congestioncharges. Above all, the London experiment has demon-strated that enthusiasm and a can-do attitude can deliverwhat is commonly viewed as an impossible project.

1 8

Out on a LimbPricing Futures

Kenneth Small, University of California, Irvine

The experience of the past 20 years has producedtwo major forms of congestion pricing: systemsthat focus on city centers and systems that target

express traffic. Both forms of pricing can be shown tosolve an array of problems. Congestion itself is the mostobvious problem that road pricing addresses, but pric-ing can also be beneficial to public transit and can com-bat urban sprawl and related land use problems.Muddling through is, of course, an alternative to pric-ing, since congestion is at some point and by definitionself-limiting. However, the costs exacted by a muddling-through strategy would be high indeed; as public offi-cials and the public generally begin to understand thesecosts, road pricing can become more politically viablejust as it is becoming more technologically viable.

The expanded use of pricing in the past 10 years canbe attributed to several factors, including a growth intechnical expertise and a keener understanding of themerits of the program itself. Lessons learned from pastmistakes are also critical to making today’s pricing pro-posals more viable than those of the past. As we exam-ine the various applications of both forms of pricing,four major lessons emerge that can help inform theapproach for the future.

First, as we look ahead, congestion pricing proposalsare likely to develop as niche strategies. They will takeadvantage of differences among users in order to offer atype of service that appeals to particular segments of thepopulation. The importance of such strategies is sup-ported by recent research showing that user heterogene-ity greatly affects the welfare evaluation and optimaldesign of value pricing schemes.

Second, additional pricing experiments can be expectedin cases where the level of congestion is widely consideredto be unacceptable. People are learning that there are noother feasible options for solving congestion. Solving con-gestion is not strictly necessary because it tends to be self-limiting; it is disliked and inefficient but not necessarily aproblem of highest priority. In the United States, mostexperiments are likely to be incremental: changes in tollpolicy on existing toll facilities or addition of high-occupancy toll lanes or FAST1 lanes. Elsewhere morelarge-scale experiments appear to be politically feasible.

Third, as large-scale experiments unfold, as in Lon-don, analysts will turn to measuring and documentingthe effects on economic productivity. Some preliminarystudies have suggested that a priced area need not nec-essarily become less attractive to business; theory sug-gests that how revenues are spent is important to thisquestion. The relationship between congestion pricingand economic conditions is still poorly understood andstands as a prime area for further research.

Finally, where pricing is anticipated or in place as newroads are developed, we should begin to see changes inroadway design. Pricing shifts the trade-off away fromthe need to provide capacity and toward the desire tomaintain aesthetic qualities and conserve scarce urbanland. A result might be more parkways or “superstreets”designed for moderate free-flow speeds and moderatecapacity. A speculative suggestion is that pricing mightbe used as a tool for limiting speed to make such roaddesigns safer when traffic is flowing freely.1“Freeing Alternatives for Speedy Transportation,” a term used inlegislation introduced in the House of Representatives in 2003.

Special Topics

2 1

Ah, the Politics of Pricing

Eric Schreffler, ESTC, San Diego, California John Albion, Lee County, FloridaJan A. Martinsen, Norwegian Public Roads Administration

HOW POLITICS AFFECTS EVEN GOOD PROJECTS

Eric Schreffler

As part of the federally sponsored evaluation of theInterstate 15 Value Pricing Demonstration Project,ESTC prepared the institutional assessment, whichinvolved interviews with some 40 stakeholders over the3-year pilot project. Among other lessons learned, thisreview provides an interesting insight into how politi-cally driven decisions concerning the use of revenue canlead to reasonably good but less than optimal results.

Jan Goldsmith, Mayor of the city of Poway, Califor-nia, and the political champion behind the project,enabled the San Diego Association of Governments tomove the dynamic pricing concept from idea to reality.His support for pricing grew out of his support for amonorail or other high-capacity transit service to solvetraffic congestion problems on the main arterial inPoway as well as for expansion of the light rail systeminto the I-15 corridor. When planners told him that thedemand did not exist for this type of service, heembraced the pricing concept as a way to pay for newtransit service in the corridor. After moving on tobecome a state assemblyman, he sponsored theenabling legislation to allow tolls in the I-15 high-occupancy vehicle (HOV) lanes, which were effectivelyturned into into high-occupancy toll (HOT) lanes. Toensure that the funds would support the new bus ser-vice along the corridor, the legislation limited the use ofthe revenue to transit capital and operating and HOVfacility improvements.

The evaluation of the pricing project showed that itimproved the efficiency of the facility, did not seem tohurt carpooling, and cross-subsidized new transit ser-vice. However, the I-15 corridor bus service that pro-vided much of the political support for the HOT laneapproach did not necessarily fulfill expectations. Theintent was to attract new bus riders in the corridor inorder to remove cars from I-15. Instead, the new busservice attracted reverse commuters and riders who didnot switch from driving alone. The service was split intotwo routes, one a new commuter express service thatnow attracts about 130,000 annual boardings.

How could the revenue have been spent to better fitthe project goals and address congestion in the corri-dor? One promising alternative to subsidizing the oper-ation of new bus service would be to provide a directsubsidy to the users of any alternative mode, includingcarpooling, vanpooling, bus, and teleworking. Thiswould increase occupancy in the HOV lanes, which isstill the primary purpose of the facility. The revenuecould be used for general HOV marketing and to sup-port commute alternatives, such as the county com-muter express services. Use of the revenue solely for newtransit service may have been a case where opportunitybecame expectation.

I-15 is widely accepted as a U.S. pricing success story,and properly so. The success is clearly due in part to thepresence of a champion in Jan Goldsmith. However,could the project have been even more successful? Per-haps, had the revenue been used to subsidize all alterna-tive modes rather than just a new service that did notmeet many of its expectations.

THE BRIDGES OF LEE COUNTY, FLORIDA

John Albion

Lee County is one of Florida’s most populous countiesand home to several fine examples of value pricing.Several bridges in the county have had tolls in place foryears, but gradually we have been developing policiesunder which the county uses targeted discounts toachieve demand management objectives. Two bridgesare in play—the Cape Coral Bridge and the MidpointMemorial Bridge. One of the key objectives was toencourage greater use of electronic tolling, and thus atnonpeak times drivers get a 50% discount if they use atransponder and pass. Upcoming changes include a50% discount for vehicles with three or more axles,improved interoperability for the Sunpass and otherautomatic vehicle identification systems, and anexpansion of the express lanes on the Cape CoralBridge.

As part of this effort, public officials recognized sev-eral features that would be critical to successful imple-mentation of the value pricing systems. Development ofinteroperable electronic tolling systems has been essen-tial. A political champion is essential as well, but it isalso important to create a cadre of “citizen politicians”to help spread the word in an enthusiastic fashion. InLee County, one of our major efforts was to educate andgarner support from community leaders beforeapproaching the general public, and to do so in astraightforward manner that addresses basic questions,such as “What’s a transponder?” before launching intothe demand management philosophy underlying theproposal.

Business advisory committees, driver surveys, stake-holder task forces, and advisory groups were helpful influshing out and addressing major areas of concern.Such concerns typically related to a full understandingof how electronic tolling works, how privacy considera-tions would be addressed, and whether value pricingwould be effective in reducing traffic. We also benefitedby building creative and fun elements into our publicinvolvement strategy. These elements included namingcontests and the use of lotteries and other incentives toencourage participation in surveys.

We have found a strong correlation between knowl-edge and acceptance, and today the system in place hasa 70% approval rating. The other numbers generatedfrom Lee County’s experiments with value pricing areimpressive as well, with estimated annual travel timesavings totaling about 30,000 hours and associatedfinancial savings to drivers of about $2.6 million.

WHAT DO POLITICIANS REALLY NEEDTO KNOW?

Jan A. Martinsen

For more than 50 years, Norway has successfullyemployed user charges to supplement regular govern-ment funding of road projects. In the past 20 years theuse of toll road projects has increased considerably.Today, a good 35% of the total annual budget for roadconstruction comes from more than 40 toll road proj-ects scattered throughout the country. So far, about 100toll road projects have been successfully realized, andonly one has been declared bankrupt. User charges forroad infrastructure funding in Norway are thereforeconsidered a true success story.

Tolls are used to finance both urban and interurbanroad projects. In the three largest cities—Oslo, Bergen,and Trondheim—cordon tolls are the main source offunding for road and to a lesser extent public transportinvestment programs. In nonurban areas, toll financingis used only for road infrastructure investments.

The Norwegian government recently passed legisla-tion to make congestion pricing possible, but so far it hasnot been implemented. The main road user charge issuein Norway today is whether cordon toll rings in the maincities can be transformed into congestion pricingschemes. Congestion and delays are well-known prob-lems in some of these cities and represent a significantconcern for professional advisors as well as politicians.The crucial question is whether the delays are big enoughto be successfully managed through congestion charging.The average delay on selected routes in Oslo during peakhours is less than 10 minutes, with a maximum of morethan 20 minutes for the most congested road. The trans-port professionals are convinced that congestion pricingshould be part of future transport policy, at least in Oslo.The task is for these professionals to convince the politi-cal decision makers that congestion charging is a goodpolicy.

The experiences in Norway so far offer some lessonsfor others wishing to implement road use charges. Oneof the crucial issues in considering the implementationof road user charges is the amount and detail of infor-mation that politicians need for their decision making.Of course, what they need to know and what they wantto know might not be the same.

Our findings indicate that what the politicians needto know depends on the political level at which thechanges are being considered (i.e., whether it is at thelocal or national level). While local politicians are moreconcerned with the use of collected funds to finance


infrastructure within their localities, national politiciansare more concerned with the total government budgetand ensuring that only financially sound projects areapproved.

In Norway, each user charging scheme is approved bythe national parliament on the basis of local recommen-dations. Therefore, what the local politicians need toknow is crucial, and our experiences show the following:

• Local politicians need to know how road usercharges will affect the local community, local business,land use, the environment, and so forth.

• They must gain something (e.g., more local trans-port improvements) from making unpopular decisions.Thus they need to know how revenue collected will be dis-tributed in their local communities, including what per-centage should return to road users and what percentageshould be used for public transport.

• They need to know the costs of not implementingroad user charges. For example, they should be apprised ofhow long they would have to wait for central government

funds for the proposed improvements and what mobilityconsequences would be likely if nothing were done.

• They must be able and willing to deal with nega-tive public reaction and to argue convincingly for thebenefits from road pricing.

• They need to be shown examples of successfulroad user charging projects.

• They need a better understanding of how tointerpret advice from transport professionals. At thesame time, their advisors should make an effort totranslate the economic theory underlying much of roaduser charges into simple language that everybody canunderstand.

Our experiences in Norway show that the implemen-tation of user chargers is more likely to succeed when thefactors described above are considered. Taken together,these principles can create a more productive and coop-erative relationship between politicians and advisors thatis based largely on a common understanding of theobjectives of road user charges.

2 3AH, THE POLITICS OF PRICING

2 4

A Closer LookPricing Across the States

Mark Muriello, Port Authority of New York and New JerseyJim Ely, Florida’s Turnpike EnterpriseJeff Buxbaum, Cambridge Systematics, Inc.Ellen Burton, Orange County Transportation Authority

TOLL ROAD APPLICATIONS: PERSPECTIVES FROM THE PORT AUTHORITY OFNEW YORK AND NEW JERSEY

Mark Muriello

The Port Authority of New York and New Jersey oper-ates and maintains six interstate vehicular crossings,three bus terminals, the Port Authority Trans-Hudson(PATH) rapid transit system, the New York and NewJersey airports, and major marine terminals in NewYork and New Jersey. The authority is financially self-sustaining. It covers the operations, maintenance, andcapital investment needs of its facilities through userfees, including tolls at the vehicular crossings.

On March 25, 2001, the authority introduced theValue Toll Pricing Program at the six tunnels and bridgesthat connect New Jersey with New York City. Since thattime, the program has generated incremental revenue tosupport an aggressive intermodal capital investment pro-gram and has produced traffic management benefits toaddress congestion. The authority’s Value Toll PricingProgram represents one of the most aggressive applica-tions of value pricing on existing toll facilities in theUnited States. The program has generated meaningfulsteps in addressing traffic congestion through marketincentives.

The overall goal of the program was to generate rev-enue to support a 5-year capital investment programcomposed of projects totaling $14 billion through a pack-age of interstate tolls and fares sufficient to cover thedeficits produced by the PATH transit system and the bus

terminals. Five underlying policy objectives were estab-lished: (a) encourage traffic shifts to off-peak periods, (b)encourage use of mass transit and higher vehicle occu-pancy, (c) increase the number of E-ZPass electronic tolltransactions, (d) create commercial traffic managementincentives, and (e) eliminate frequency-based commuterdiscount programs.

Toll rates (in dollars) were set as shown in the fol-lowing table.

E-ZPassPeak

(Weekdays 6–9 a.m. E-ZPass

and 4–7 p.m.; WeeknightWeekends E-ZPass (Midnight–

Cash Noon–8 p.m.) Nonpeak 6 a.m.)Auto-mobile(east-bound only) 6.00 5.00 4.00 3.50

Truck (east-boundper axle) 6.00 6.00 5.00 3.50

An effective stakeholder outreach and public com-munications plan was essential in advancing the pro-gram. In particular, we found that outreach tonewspaper editorial boards paid tremendous benefits ineducating the public and shaping opinion.

The program has met its revenue goals through itsfirst 2 years despite the revenue forecast’s overpredic-tion of E-ZPass participation. To help refine the projec-tions further, the authority has developed a new tollplaza–specific toll forecasting model to account for dif-ferences in markets, vehicle mixes, E-ZPass use, andtemporal traffic distribution.

The project also has had some success in meeting itsdemand management objectives. The hourly percentagedistribution of weekday traffic between 5 and 10 a.m.showed as much as a 2.6% increase (2,400 vehicles) inthe first hour of the time period, just before the peak tollrates go into effect. There is less evidence that the off-peak discount has been effective in shifting demand tothe hour following the 6 to 9 a.m. peak toll period. Whilesimilar results are evident during the weekday evenings,the effect is not as strong, which suggests somewhat lesswillingness to travel off-peak or flexibility in eveningschedules. Also, there is little evidence that the off-peakdiscounts have been effective in influencing weekendtravel patterns or overnight commercial movements.

In general, the sluggish New York City economy hasdampened travel demand in 2003 in all time periods,and this year we have seen evidence of a shift back tothe now less congested peak hours by early-hour off-peak motorists. This suggests that while the $1.00 dis-count has had some meaningful and sustainable abilityto shift travel demand, its effectiveness in shiftingdemand to off-peak hours is highly correlated to contin-ued levels of peak-period congestion.

Future toll rate adjustments are likely to seek smallerchanges targeted by time of day, travel corridor, vehicletype, and managed roadway application. These may beless complicated to advance and provide an opportunityfor smoother revenue infusion to sustain future finan-cial needs. Another area for continued refinement lies ininteragency coordination, especially given the largenumber of toll agencies in the New York–New Jerseyregion. Synchronized peak hours, jointly targeted mar-ket segments (autos, trucks), and coordinated E-ZPasscustomer statements could encourage continued behav-ioral change and maximize the pricing system’s demandmanagement benefits.

In closing, I offer a few observations on the futurerole for road pricing in the United States:

• New pricing projects will embrace a broadertransportation improvement agenda, including transit,to create more travel options and customer choice.

• More time and resources are needed to help localinitiatives take hold. In particular, local agencies willrequire resources to conduct continued outreach programs, educate the public, and manage opinion.

• Technical resources to establish and integratetolling and charging systems are essential to advance

value pricing today and prepare for future nationaltransportation financing systems that are less dependenton the motor fuel tax.

• The federal Value Pricing Pilot Program remainscritical to pricing’s success, and upcoming federal high-way and transit legislation should preserve it. The abil-ity to price portions of the Interstate highway systemunder the pilot program should be maintained.

PLANS FOR VARIABLE PRICING BYFLORIDA’S TURNPIKE ENTERPRISE

Jim Ely

Florida’s Turnpike Enterprise, a largely privatized pro-gram of the Florida Department of Transportation,operates a 449-mile statewide system of toll roads.

One of the enterprise’s most ambitious initiatives hasbeen the development, distribution, and popularization ofan electronic toll collection system; this technology is nowrecognized as a clear prerequisite for effective value pric-ing. It is also key to the turnpike’s goal of broadly deployed“open road tolling,” under which charges can be leviedwithout impeding free and full-speed traffic flow.

The turnpike’s electronic toll collection system iscalled SunPass. It is compatible with other electronictoll collection systems across the state. SunPass wasrecently opened to retail sales at certain drugstores andsupermarkets statewide, and the sale of the millionthtransponder was recorded in November 2003, just 4 years after the SunPass program’s deployment. A key milestone was the achievement of statewide inter-operability (E-Pass, O-Pass, SunPass), which occurredin 2001.

We believe that by 2004 more than 50% of systemrevenues will be collected electronically and that by2008 participation will grow to 75%. We also antici-pate that the turnpike will deploy an open road tollingsystem by 2008. Another key part the turnpike’s plans isthe development of a system of “Xpress lanes.” Theselanes are a new product for us, and the first of theXpress lanes will be in the Orlando area on I-4. Theturnpike is investing $250 million in the I-4 improve-ments, which will involve four priced lanes in themedian. The project is the product of a partnershipbetween the local Florida Department of Transporta-tion office, the Federal Highway Administration, andthe turnpike.

An opening date is anticipated for roughly 2015.Relying exclusively on electronic toll collection, theXpress lanes will require a transponder and be valuepriced. Toll rates will be reasonable, between $0.06 and$0.20 per mile, and will be set by time of day to main-tain Level of Service (LOS) C. Reasonable rates would

2 5A CLOSER LOOK: PRICING ACROSS THE STATES

allow for affordability so the Xpress lanes can be “Tau-rus lanes” rather than “Lexus lanes.” The decision topursue value pricing was prompted by the recognitionthat future traffic demand in Orlando will be so greatthat general use lanes would fail even with the four-lane widening project. In contrast, value-priced Xpresslanes can guarantee LOS C by treating variable tolls asa congestion management tool.

The turnpike is simultaneously conducting a feder-ally funded value pricing study for another project: theSawgrass Expressway in South Florida. Of special noteis that the Sawgrass project will involve a first-time con-version of an existing toll facility to open road tolling.The turnpike also recently completed a value pricingstudy on the Homestead extension of Florida’s turnpike;this study concluded that the public’s reaction to valuepricing can be favorable if the proposed facility providesnew capacity, as is the case with the Xpress lanes.

As we look at the full range of activities under way atFlorida’s Turnpike Enterprise, it is evident that valuepricing holds significant promise as a congestion man-agement tool suited to relieve some of the state’s busiesthighways.

MILEAGE-BASED APPLICATIONS: MINNEAPOLIS, MINNESOTA

Jeff Buxbaum

The objective of this current research project in Min-neapolis is to investigate whether the way we acquireaccess to a car can influence our driving behavior. Cur-rently, people either own or lease cars and make othersignificant fixed payments, which encourage them todrive more to get the most from their investment. Thisproject simulates the replacement of some of the fixedcosts of ownership/leasing and operation with fees orcharges based on mileage and perhaps time-of-daytravel, to determine whether this influences their drivingbehavior.

The consultant team and the Minnesota Departmentof Transportation investigated the attitudes of the pub-lic toward mileage-based leasing products through focusgroups. The focus groups indicated a segment of thepopulation that would be interested in mileage-basedleases. However, many people had a poor understand-ing of the cost to them of having and driving a car. Somepeople also had “big brother” concerns, although manyothers had no problem with that.

The original scope of work called for a hands-on testcase under which a private business partner might bewilling to test a new vehicle leasing product that includeda mileage component. Ultimately, this approach was notfeasible. The targeted partner decided that it did not

want to pursue mileage-based leasing at the time, pri-marily because of concerns over cannibalization of exist-ing lease markets and perceived customer acceptanceissues.

The new work plan will take two tracks. The firstwill build on the work done in the focus groups andinvolve a comprehensive market research effort tounderstand who would voluntarily opt for mileage-based leasing or insurance. The goal is to understandthe opportunities and constraints for real leasing orinsurance products that might be offered by the privatesector.

In the second track, the team will recruit a small sam-ple of people who are willing to participate in a real-world experiment. They will simulate buying out thefocus group participants’ leases and insurance, convert-ing their payments to a fixed component and a variablecomponent, setting up a “budget” that participants candraw down, and paying them the difference betweenbudgeted miles and actual miles.

Participants in the field experiment will be trackedfor 10 months. Part of that time will be treated as a con-trol period, during which the participants will receiveno feedback on miles driven. An experimental periodwill follow, during which participants will be providedprice signals on a semimonthly basis. The experimentalperiod will test participants’ responses to several vari-ables, including total number of household vehicles, thenumber of vehicles included in the experiment, and vari-able pricing by time of day. Participants will be surveyedat various intervals in the project to identify shifts intheir attitudes toward mileage-based pricing concepts.

This study design will serve two purposes. First, wewill be able to compare the behavior of each partici-pant’s own control period with that participant’s exper-imental period. Second, the control participants alsowill serve as a separate control group to those that arein the experiment period in order to identify any generalchanges in regional driving behavior that occur duringthe experimental phase.

The project is scheduled to end in September 2005.

NEW LANE APPLICATIONS: CALIFORNIA STATE ROUTE 91

Ellen Burton

The Riverside State Route (SR) 91 freeway is considereda land bridge between Orange County and the “InlandEmpire” counties to the east. It is the only primaryeast–west corridor linking Orange County with theInland Empire. The freeway carries more than 250,000average daily vehicles, and during peak hours general-purpose lanes are highly congested. The current situa-


tion reflects a limited availability of affordable housingin Orange County but a strong job market. OrangeCounty attracts daily work trips. Projections aboutfuture housing growth in the Inland Empire, coupledwith a continued robust job market in Orange County,indicate that the existing jobs–housing imbalance andresulting transportation patterns will continue into thefuture.

In 1989, at a time when there was a scarcity of Cali-fornia highway construction, Assembly Bill 680 (AB680)authorized four public–private toll road partnerships.The 91 Express Lanes franchise was initially granted tothe California Private Transportation Company (CPTC),and it became the first AB680 project built. The fran-chise extended from the Los Angeles–Orange Countyline on the west to Interstate 15 on the east. The fran-chise agreement included a noncompete provision, whichwas designed to protect bondholders. The provision con-strained the construction of parallel roadway capacityfor the 30-year life of the franchise agreement. In 1995,CPTC opened the 91 Express Lanes in the center medianof the SR-91 freeway. Since that time, traffic has contin-ued to grow in the express lanes and on the mainlinefreeway.

The 91 Express Lanes, which drivers may use for afee, are separated from the general lanes by channeliz-ers. The facility uses electronic tolling and has no inter-mediate access points. The purpose is to offer customersa choice for a safe, reliable, free-flowing trip. The facil-ity uses variable pricing, which is set by direction, day ofweek, and hour. The 91 Express Lanes extend 10 milesfrom SR-55 on the west and the Orange–RiversideCounty line on the east.

The Orange County Transportation Authority(OCTA), as a county transportation commission, isresponsible for planning and funding highway, street,and road projects, as well as delivering bus and rail tran-sit services. In 2001 OCTA identified intercounty travelas one of the most pressing issues. One of the major cor-ridors needing attention was SR-91; however, the non-compete provision that attached to the facility’sfinancing was a significant limitation on any plans toincrease capacity. OCTA’s board of directors thus

decided to pursue the acquisition of the 91 ExpressLanes franchise to eliminate the noncompete provision.

In January 2003 OCTA bought the 91 Express Lanesfranchise for $207.5 million. The transaction includedthe assumption of $135 million in taxable debt and theadvancement of $72.5 million from internal borrowing.The first public policy change was to allow carpools withthree or more persons (HOV3+) to ride free during allbut “super peak” hours, Monday through Friday, 4 to 6p.m. eastbound. During these times, HOV3+ riders pay50% of the posted toll. Since the implementation of thispolicy in May 2003, HOV3+ use has grown 40% overthe same period last year. Peak average vehicle occu-pancy has also increased from 1.38 before the policy to1.48 in August 2003. However, HOV3+ revenue is downan average of $27,000 per week, and it is estimated thatthe policy will result in a decline of $1.4 million to $1.6million in toll revenues annually.

OCTA next sought to refinance its taxable debt. Todo so, OCTA needed to adopt a toll policy. Workingwith its legislatively created advisory committee, whichis made up of public officials from both Orange Countyand the Inland Empire, a toll policy based on the con-cept of congestion pricing was developed. The policyused trigger points to manage peak-hour congestion tokeep lanes operating at free-flow speeds. The goals wereto optimize throughput while ensuring the financial via-bility of the facility. Tolls now are adjusted automati-cally on the basis of volume in the lanes. Since July2003, tolls in four super peak hours have increased from$4.75 to $5.50 (eastbound Thrusdays and Fridays from4 to 6 p.m.). Overall, year-to-date revenue has declinedfrom about $2.70 per trip in Fiscal Year 2002–2003 to$2.40 per trip in Fiscal Year 2003–2004 because of theimpact of the HOV3+ policy change.

In November 2003 OCTA refinanced its taxable debtand reduced the interest rate from 7.63% to 4.43%. Thisis expected to result in a present value savings of about$24 million over the life of the obligation. This is impor-tant because under state legislation passed at the time ofOCTA’s purchase of the 91 Express Lanes franchise, anyexcess revenues after debt service, operating costs, andcapital costs are to be used on SR-91 improvements.

2 7A CLOSER LOOK: PRICING ACROSS THE STATES

2 8

Calculating Costs and Measuring Benefits of Pricing Schemes

Erna Schol, AVV Transport Research Center, NetherlandsChristopher Nash, Institute for Transport Studies, University of LeedsJeffrey Zupan and Alexis Perrotta, Regional Plan AssociationAndrea Ricci, ISIS, Italy

COSTS AND BENEFITS OF PRICING SCHEMES FORTHE NETHERLANDS

Erna Schol

The Netherlands is currently dealing with the problemof growing traffic congestion. Economic growth, anincrease in the number of smaller households, increasedparticipation in the labor market, and limits on fundingand physical space for new infrastructure all contributeto the growth of traffic congestion. While we have notyet implemented road pricing largely because of lack ofpublic acceptance, road pricing is back on the nationaldiscussion agenda. In my view, it is all but inevitablethat by 2010 the Netherlands will have some form ofroad pricing in effect.

As we renew our investigation into the long-termadvisability of various road pricing schemes, a close lookat pricing’s benefits and costs is interesting. The benefitsto be examined include direct benefits for road users,avoidance of external costs, and indirect benefits. Directbenefits include travel time savings due to reduced con-gestion, less welfare due to reduction of car mobility forsystem dropouts, and a shift of motorists to urban publictransport. External benefits are realized through theavoidance of various external costs, including thoseimposed by emissions, noise, and traffic accidents andother threats to safety. Indirect benefits can be realizedthrough impacts on the labor, housing, and automobilemarkets. Costs of a pricing system include the capital costof the initial investment as well as ongoing operating andmaintenance expense.

In a 1997 study the Economic Institute of theNetherlands applied cost–benefit analysis to two vari-ants of road pricing: cordon-based area fees and feeslevied on highways anticipated to be congested by2001. Regardless of the variant, it was assumed thatthe tariff would be €2.25 and levied on both passengerand freight transport. The study concluded that giventhe assumptions, the cordon-based approach wouldyield greater net benefits.

In a Central Planning Bureau cost–benefit analysisconducted in 2001, two other scenarios were identified:(a) a variabilization of fixed costs through a per kilome-ter charge—essentially a flat rate based on the “pay asyou drive” principle; and (b) a flat rate that included acongestion component—a surcharge of €0.10 per kilo-meter at times and locations of congestion. Both scenar-ios make use of an onboard unit and global positioning,so no toll collection points are needed. The total effect ofthe flat rate scenario is around zero, meaning that thecosts are comparable with the benefits. The total effectof the congestion charge is positive and comes to about€10 billion by 2020, on the assumption of nationwideimplementation of road charges for both passenger andfreight traffic. This provides strong evidence that a con-gestion charge is effective in lowering transport demandand thus congestion. However, even the flat rate candecrease congestion (though to a lesser extent) if simpler,less expensive technology is used.

The broader lessons learned were that costsinevitably increase during the course of a project andthat benefits can vary markedly depending on the struc-ture of the pricing scheme, including the tariff level, the

potential to vary the charge in response to congestionlevels, and the application of the scheme to an urbanarea generally or to highway travel. Thus, cost–benefitanalysis can be a powerful tool for gaining insight intonot only the advisability of a stated project but also theimpacts of various refinements of a proposal.

WHY REFORM TRANSPORT PRICING? AN OVERVIEW OF EUROPEAN TRANSPORTINFRASTRUCTURE CHARGING POLICY ANDRESEARCH

Christopher Nash

In its 1998 White Paper on Fair Payment for Infrastruc-ture Use, the European Commission adopted a clearpolicy calling for the phased introduction of marginalsocial cost pricing for infrastructure use. It proposedlegislation to implement this for commercial transportof all modes; the policy is confined to encouragementrather than legislation for private vehicles. For rail, thepolicy was implemented under Directive 2001/14, butfor roads, the current proposal to revise the Eurovi-gnette Directive on heavy goods vehicle charging fallsshort of this principle. It requires differentiation by con-gestion and environmental costs but ties the averagelevel of charge to average infrastructure and externalaccident cost only. It is not clear whether this is to beseen as a step on the way to full marginal social costpricing or as a change in policy.

Implementation of marginal social cost pricingrequires that we be able to measure and value its threecomponents:

• Marginal cost of infrastructure maintenance andoperations imposed on the infrastructure manager;

• Marginal cost imposed on other infrastructureusers in the form of congestion and accidents; and

• Marginal cost imposed on the rest of society, pre-dominantly in the form of environmental costs but alsosome elements of accident costs.

Among the many criticisms of this approach is thecomplexity of measurements. A second major criticismis the view that charges should be tied to total costsrather than marginal costs, either for reasons of equityor dynamic efficiency. Several research projects haveaddressed measurement challenges and sought to clarifythe impact of marginal cost pricing on different classesof vehicles and uses.

Participants in the Unification of Accounts and Mar-ginal Costs for Transport Efficiency (UNITE) project esti-mated the total social cost of road transport for most ofEurope and found that costs of congestion, pollution, and

external accident costs totaled nearly 3% of gross domes-tic product, or double the level of infrastructure costs.Thus, charging solely to recover infrastructure costs islikely to lead to charges that are too low. But a furthermajor issue is the inadequate differentiation of charges byvehicle type, location, and time of day; UNITE alsoundertook case studies to see how marginal social costcould be measured to identify those differences.

A number of projects (including Pricing EuropeanTransport Systems and Models for Transport Environ-ment and Energy) have undertaken case studies that havepredicted the results of marginal social cost pricing forall modes of transport. As would be expected, these typ-ically show higher charges for the use of roads in urbanareas, particularly in the peak period, with a fall in roadtraffic in the range of 5% to 20%, as well as changes intime and route of travel where pricing systems are suffi-ciently sophisticated to reflect these factors. For interur-ban traffic the outcome is more variable and reflectsmajor differences in current charges and levels of con-gestion. Typically, cars are overcharged and heavy goodsvehicles undercharged, but there are similar discrepan-cies in other modes so that the outcome of transport pric-ing reform is relatively limited in terms of changes intraffic volume and mode split. Transport pricing reformmay thus be more important for interurban traffic due toits impact on vehicle type, time, and route of travel thanfor its effect on the overall volume of traffic.

AN EXPLORATION OF MOTOR VEHICLECONGESTION CHARGES IN NEW YORK

Jeffrey Zupan and Alexis Perrotta

Currently 830,000 vehicles enter Manhattan’s centralbusiness district (CBD) each day, and 78% do so forfree. Of the 19 entry points to the CBD, four are tolledtunnels, four are free bridges, and 11 are free city streetsand highways. The tolled tunnels are operated by twodistinct authorities; both use electronic toll collectionand one varies the charges by time of day. The free facil-ities are operated by the city of New York.

Our organization identified and assessed four pricingscenarios to highlight distinctions between flat and vari-able pricing, daytime and 24-hour pricing, and pricingat some or all of the entry points to Manhattan’s CBD.The scenarios use the sensitivities of drivers who mayrespond to an added charge by not making the trip at allor by changing destination, mode, route of travel, or thetrip’s time of day. All four scenarios assume a cashlesstoll system and one-way inbound tolls:

• Toll East River bridges as does the MetropolitanTransportation Authority (MTA): a flat fee on East

2 9CALCULATING COSTS AND MEASURING BENEFITS OF PRICING SCHEMES

River bridges set at the level of current tolls of the twoparallel MTA tunnels;

• Variable pricing on East River bridges, MTA tomatch: variable time-of-day tolls on East River bridgeswith MTA tolls modified to match them;

• Like London: a pricing system at 60th Street for13 daytime hours on weekdays with flat East River tollsduring the same time period; and

• Full variable pricing: variable time-of-day pricingat all entries, including the East River bridges, MTAcrossings, and 60th Street.

As modeled, these scenarios produce traffic reduc-tions of 5% to 13%, with an even greater reduction dur-ing the peak period in the second and fourth scenarios.Drops in traffic would be higher at the East River entrypoints, which would likely lead to the virtual elimina-tion of congestion at those crossings and relief on localstreets in Brooklyn and Queens. However, such trafficreductions would result in only 0.3% to 1.0% fewertrips into the CBD and 100,000 to 270,000 more dailytransit trips. All scenarios would generate substantialrevenues in excess of $700 million, which could capital-ize anywhere from $7 billion to $19 billion of new con-struction. Along with overall traffic volume reduction,pricing would provide benefits such as more reliable,stress-free driving; elimination of gridlock on localstreets near crossings; faster speeds for necessary vehi-cles such as buses, taxis, and delivery vans; more spacefor amenities such as pedestrian boulevards; and fundsfor the next generation of transportation expansion.

Despite its benefits, pricing’s opponents can beexpected to raise concerns about economic impacts, geo-graphic and income equity, and fairness to those withpoor alternatives to driving. Many will claim that citystreets and bridges simply should not be tolled. Pricing isespecially politically difficult in New York, since 58% ofthe city council is from Brooklyn and Queens. Given thesedynamics, four mayoral administrations have failed towin over opposition in the past. We suggest that nextsteps for New York should include agreement on objec-tives, a concerted effort to obtain support from theBloomberg administration, further research, involvementfrom the business and media communities, and the devel-opment of a package of short- and long-term transitimprovements that focus on Brooklyn and Queens.

RELEVANCE OF PRICING TO EXTERNAL COSTCALCULATION: RECENT RESULTS

Andrea Ricci

Externalities are changes of welfare caused by economicactivities that are not reflected in market prices. Exter-

nal costs are those borne by those individuals who havenot induced them. They remain such until they areincorporated, or internalized, in prices levied on thosewhose activities produced the externalities.

The European Union takes the view that transportpricing reforms should be based on the “users pay”principle, which would require full internalization ofmarginal external costs to arrive at the right price.

Two recently commissioned studies are helping policymakers zero in on ways to capture marginal externalcosts in transport pricing. The Real Cost Reduction ofDoor-to-Door Intermodal Transport (RECORDIT) proj-ect, funded by the European Union, has calculated theexternal costs of freight transport over more than 9,000kilometers of network for both road and intermodal ser-vices. The UNITE project, also funded by the EuropeanUnion, has carried out more than 30 case studies cover-ing all modes and situations (urban and interurbanfreight and passenger travel).

Both projects address the most relevant categories ofexternal costs: air pollution, noise, congestion, acci-dents, and global warming. RECORDIT has also devel-oped rough estimates of life-cycle costs (e.g., productionand disposal of vehicles, containers, and fuels). In addi-tion, both projects address infrastructure costs, or thecosts arising from wear and tear of the infrastructureitself, since these are a further component of the socialcosts to be passed on to the user.

The evidence produced by RECORDIT and UNITEshows the following:

• The methodologies currently used to calculateexternal costs are robust, especially for air pollution andcongestion and, to a lesser extent, noise and accidents.Costs associated with global warming still suffer fromlarge uncertainties.

• All categories of external costs are highly sensitiveto situational factors (e.g., geographic position, meteo-rology, population density, and time of day). Particu-larly for congestion, this makes it difficult to transfervalues from one context to another.

• RECORDIT has produced estimates of the aver-age value of external costs for each European Unionmember state that take account of the specific charac-teristics of the national networks, vehicle fleets, and soforth. It has then derived the value of the internalizationcharge, as discussed below.

For the 16 European Union nations, RECORDITidentified external costs per kilometer imposed by a 40-tonne articulated truck. These external costs rangedfrom €0.24 (Sweden) to €0.54 (Slovenia), with an aver-age of €0.32. The study further identified the extracharge per kilometer (compared with current taxes) thatwould be necessary to internalize external costs. These


ranged from a low of €0.17 (France) to a high of €0.35(Switzerland), with an average extra charge of €0.21.

It can thus be concluded that the taxation and charg-ing systems currently in place in the European Union donot cover the full social costs of transport infrastructure

use, with shortfalls in the range of €0.20 to €0.40 perkilometer. Correcting current distortions in pricing prac-tice requires the introduction of a variable per kilometercharge that could capture all important cost drivers,including vehicle technology and situational factors.

3 1CALCULATING COSTS AND MEASURING BENEFITS OF PRICING SCHEMES

3 2

Role of Pricing Revenue in Financing Projects and Services

Erik Amdal, Norwegian Public Roads AdministrationRobert Poole, Reason FoundationDario D’Annunzio, Cofiroute

LORD OF THE RINGS, TRONDHEIM, NORWAY

Erik Amdal

Cities all over the world struggle with the same trafficproblems: congestion, traffic accidents, and air pollu-tion. This was the situation in Trondheim, Norway’sthird-largest city, with a population of 140,000. Themain traffic problem in Trondheim was the lack of aroad system with sufficient capacity to handle trafficdemand. This caused traffic problems in the city centerand the nearby residential areas. As much as 50% of thetraffic in the city center was just going through the cen-ter without stopping. Between 1983 and 1987, trafficgrowth of 25% was registered, and it was easy to pre-dict a total collapse in the near future if nothing wasdone to reduce the growth and improve the transportsystem.

In an effort to reduce these problems, in 1987 the citycouncil decided to implement a road pricing or tollingsystem as one part of a new transport plan for the city.The transport plan covers all types of city transport.After extensive discussions with both local and centralauthorities, the national parliament approved a plan forextending the present main road system, building newroads around the city center, enhancing the road systemfor pedestrians and cyclists, and giving priority to pub-lic transport. It was agreed that the new investmentsshould be financed partly by implementing a toll ringsystem around the city.

With an eye to the toll ring, policy makers emphasizedthe following goals:

• The toll or road pricing system should have lowoperating costs.

• The system should be used as a traffic regulationtool, with inbound traffic paying a higher rate duringpeak hours to distribute the traffic over time.

• The system should be based on a no-stop electronicpayment system.

• The necessary toll equipment should be com-pressed to be suitable for all types of locations, even inthe streets of the city center.

The following were key elements of the implementedsystem:

• Provision of free electronic tags to all car users inthe Trondheim area,

• Operation of 10 unattended toll plazas and oneattended plaza,

• Weekday operation of the toll ring system from 6a.m. to 5 p.m., and

• Higher charges during morning peak hours.

The system opened on October 14, 1991. The Trond-heim Toll Ring Project was well marketed before theopening, and today 95% of the motorists entering thecity center use the electronic payment system. The rev-enues, today around 150 million NKr per year, are beingused to finance new road infrastructure, improved pub-lic transit, and new facilities for pedestrians and cyclistsin Trondheim. The first year after opening, inboundtraffic during toll hours declined by 10% and weekdaybus travel increased by 7%. In 1998 the system was

reworked to cover more traffic in the urban area. Thecity is now divided into six sectors, and vehicles crossingthe sectors have to pay toll.

Today, the main traffic problems are nearly solved,and the traffic situation in the city center is significantlybetter now than 10 years ago.

More recently, in part because of a funding shortfallresulting from a cost overrun on the last city bypass, weexpanded the toll ring again. Key elements of the revi-sion included six new charging points and an increase inthe base price. The new system is estimated to producetoll revenue of 200 million NKr per year, operating costsof 17 million NKr per year (representing less than 10%in operating costs), enough toll money to finance thelatest round of investments in Trondheim’s surfacetransportation infrastructure in 2005, and, most impor-tant, a solution to the city’s current traffic problems.

BUS RAPID TRANSIT/HIGH-OCCUPANCYTOLL NETWORKS

Robert Poole

Many high-occupancy vehicle (HOV) lanes lanes through-out the United States are seriously underused; at mosttimes of day, excess capacity exists on these lanes, whichare dedicated to the use of vehicles carrying two or more(or three or more) passengers. The Reason Foundationhas recently published a report on bus rapid transit sys-tems and the utilization of high-occupancy toll (HOT)networks to reduce congestion and improve urban transit.Such lanes would continue to serve very high-occupancyvehicles, such as buses and vanpools, but would be avail-able to lower-occupancy vehicle drivers who wished topay a fee for access to these free-flowing lanes.

The report examines eight of the most congested U.S.cities to determine what infrastructure would be neces-sary to complete a cost-effective HOT network. Pricingon the HOT lanes would be variable, such that the pricecharged to paying vehicles would be high enough tolimit traffic in the HOT lanes to a volume consistentwith free-flow conditions. On highly congested free-ways, this would produce peak-period, peak-directiontoll rates in the range of 30 to 40 cents per mile. Busesand vanpools, as well as emergency vehicles, would usethe lanes at no charge.

An analysis of potential revenues that would be gener-ated and the debt that could be supported was conductedfor each of the eight potential metropolitan area net-works. In addition, the cost of building out the networkwas estimated by drawing on the long-range transporta-tion plans of the respective metropolitan planning orga-nizations (MPOs), supplemented by the authors. Whilesome long-range plans omit high-cost HOV lane addi-

tions, many omit flyover connectors at freeway inter-changes because of their high cost. With the availabilityof a new revenue source, these missing pieces were addedto the plans proposed by the MPOs. The analysis showedthat bonds backed by the HOT lane revenue alone couldcover an average of 67% of the capital cost of construct-ing the new HOT lanes and interchange connectorsneeded to create a seamless network.

Put into practice, the concept could offer numerousbenefits, including “congestion insurance” available toall motorists; reduced congestion in the general-purposelanes; and facilitation of speedy, regionwide express busservice (bus rapid transit), all within the context of aninfrastructure expansion that could be largely self-financing.

TOLLING THE A-86 TUNNEL INVERSAILLES, FRANCE

Dario D’Annunzio

The A-86 is a ring road around Paris, the final link ofwhich has yet to be built. Its intended length is 1,100kilometers, of which about 900 kilometers has beencompleted. Traffic levels on the road have been rising,meaning that Paris is in much the same situation as mostother major cities in developed countries.

The final link of the A-86 is expected to cost about €1.8billion to complete. It will include two double-decked tun-nels, with each level including two traffic lanes and oneemergency lane. Charges levied on road users will repaycapital costs as well as operations and maintenanceexpense. The fee structure is consistent with the facility’sdevelopment and operation by a concessionaire. Totalannual revenue is expected to reach €110 million by 2020.This projection is based on an optimal toll schedule thatsets separate rates by time of day and day of week and thatdifferentiates between single motorists and subscriptionmotorists.

An opinion poll that surveyed 3,000 people gatheredinformation on perceptions of factors that contribute towell-being and those that cause concern. On the basis ofthis information, we have developed communicationtools that speak directly to the issues that are mostimportant to those in the A-86 community. One of ourmost successful communication tools has been an A-86West exhibition; we also publish and mail out an A-86West newsletter.

In summary, through its development under a conces-sion arrangement, the A86 West project brings to Paris aproject that costs nothing to the national or regionalgovernment since it is financed wholly by Cofiroute. Aflexible toll rate policy will encourage frequency of useand automated toll collection.

3 3ROLE OF PRICING REVENUE IN FINANCING PROJECTS AND SERVICES

3 4

Pricing Goes Global

David LeCoffre, Embassy of France, Washington, D.C.Marcel Rommerts, European CommissionGopinath Menon, MSI Global Pte. Ltd., SingaporeImad Nassereddine, 407 ETR Concession Company Ltd.

VARIABLE ROAD PRICING IN FRANCE

David LeCoffre

France has more than 50 years of toll road experience.Of the 5,000 miles of toll roads in operation, 4,500miles are publicly owned and 500 miles are privatized.Tolling has always been viewed as a means to pay forconstruction, maintenance, and operation. The Frenchgovernment is now starting to look at methods for con-verting traditional tolls into variable charges that couldnot only cover the cost of infrastructure but also aid intraffic management and cover the external costs (e.g.,environmental impacts) imposed by road use.

We define variable tolls as fees that are modifiedaccording to any number of parameters, including vehicletype, time of day, itinerary, environmental conditions,and the like. These parameters give rise to three specialapplications that may be useful under special circum-stances. They comprise (a) time-variable tolls, which arebased on the trip’s time of day; (b) itinerary-variable tolls,which vary with the route traveled; and (c) environment-variable tolls, which are based on vehicle emissions levels.

The French government views variable tolls favor-ably. Several principles help guide the approach that thegovernment is considering:

• Two users may pay two different toll rates if andonly if they are in a significantly different situation;

• No revenue increase: any toll rate increases duringa time of the day must be balanced by a comparabledecrease during another time of day;

• Clarity and simplicity: the user must easily under-stand the implemented system; and

• Protection of the public interest: variable tolls maybe used to enhance road safety.

Within the context of these principles, France is pur-suing a pragmatic, step-by-step approach that is devel-oping and will continue to develop on the basis oflessons learned from individual case studies. The experi-ence of six such case studies, focusing on roads aroundParis as well as some alpine tunnels, have resulted inpeak-to-nonpeak traffic shifts of as much as 12%.Lessons generated from these and other case studies willprove invaluable as France moves forward with itsEuropean partners in forging new public policy byredefining tolls and determining the extent to whichvariable tolls should be used.

TESTING THE REAL-WORLD ACCEPTANCE ANDEFFECTIVENESS OF URBAN PRICING

Marcel Rommerts

The European Commission is the administrative bodyof the European Union. The European Union has 15member states and will be enlarged with an additional10 member states in May 2004. Among its activities aresetting common policy frameworks, harmonizing stan-dards, and supporting information exchange and themanagement of a multiannual research, technologicaldevelopment, and demonstration activities program.

In the field of transport pricing, the European Trans-port White Paper, published in 2001, defines the follow-ing long-term policy objective: “gradually . . . replaceexisting transport system taxes with more effective instru-ments for integrating infrastructure costs and externalcosts.” It goes on to identify charges for infrastructure useand the fuel tax as two such instruments. In recentmonths, the European Commission has presented pro-posals for directives on the charging of heavy goods vehi-cles on the trans-European transport network and onelectronic charging systems. The last directive intends tomove Europe toward satellite-based road user charging.

Over the past 10 years the European Commission hascofinanced a substantial body of research and demon-stration projects in the field of urban pricing. The latestof these is the Pricing Road Use for Greater Responsibil-ity, Efficiency, and Sustainability in Cities (PROGRESS)project, which is producing interesting results based onpractical experiences. The majority of European citiestesting road pricing thus far have not yet fully imple-mented their pricing schemes, but data are graduallybecoming available. The following table shows the Euro-pean cities that are starting to produce data; participantsin the PROGRESS project appear in bold.

Development Full Pilot/of Full Pricing Demonstration Scheme Scheme Scheme

Trondheim Rome BristolOslo London Edinburgh

Bergen Durham GenoaStockholm Copenhagen

Gothenburg

These cities’ approaches vary both conceptually andin the technologies applied. Some existing pricing pro-grams (Trondheim, Rome) will be expanded on a trialbasis during 2004. The plan in Stockholm is for a full-scale cordon pricing scheme that will be launched earlyin 2005. The Stockholm population will be able to giveits views on the scheme in a referendum in 2006.

The experiences and conclusions of the differenturban road pricing research and demonstration projectsin Europe thus far can be summarized as follows:

• Urban pricing is possible with the use of existingand emerging technology. However, challenges persist.For example, further development of satellite-basedtechnology is needed. In urban areas other technologicalor nontechnological solutions will need to be part ofsuch systems. The European Galileo satellite networkwill improve satellite reception. The installation of theonboard equipment is complex, and retrofitting cancause problems.

• Pricing measures are effective in changing people’sbehavior and travel patterns. Experiences with the lim-ited traffic zone in Rome show a 10% reduction of thedaily traffic. A test in Bristol showed reductions of 15%to 20% in daily car travel during periods of poor airquality, mainly caused by car drivers switching to publictransport. Car users change timing, route, or destinationmore easily than mode.

• By making pricing part of a package of measures, itcan be made acceptable. Intelligent marketing and clearpolitical leadership are essential. A lengthy and complexprocess can be necessary to gain support, and the mediaplay a key role. Proposed approaches should have a clearpurpose and well-defined objectives. Exemptions to thescheme are needed for equity reasons, and the manage-ment of exemptions can require significant organizationaleffort.

EVALUATION OF SINGAPORE’S ELECTRONICROAD PRICING SYSTEM

Gopinath Menon

In 1975, Singapore introduced a manual (i.e., nonelec-tronic) cordon-based road pricing system that used arealicenses to control congestion in the city area. In 1998,this was converted to a fully automated electronic roadpricing system (ERP) that uses a dedicated short-rangeradio communication system in the 2.40-GHz band.The ERP is in operation at 28 entry points into the cityon weekdays from 7:30 a.m. to 7:00 p.m. and at 17points along congested stretches of expressways andmajor roads on weekdays from 7:30 to 9:30 a.m.

Given the ERP’s intent to charge vehicles for roaduse when and where they cause congestion, the systemfunctions as a pure demand management measure.

Entry points have overhead gantry signs. All vehicleshave fitted an in-vehicle unit, which is a pocket-sizedtransponder. Payment occurs via a smart card, which isissued by a consortium of banks. It is an active system inthat deductions are made instantaneously from thesmart card when the vehicle goes under the ERP gantry.The details of the last 25 ERP transactions are held inthe smart card. Photographs of rear license plates ensurethat drivers of violating vehicles have to pay a fine.

The capital cost of the ERP was S$197 million (US$1= S$1.76). Annual operating costs are S$16 million, andannual revenue is S$80 million. The system has provedto be reliable over the past 5 years.

Different classes of vehicles pay different charges onthe basis of passenger car unit equivalents. ERP ratesare reviewed at 3-month intervals and are based purelyon prevailing traffic speeds along the roads. The ERPaims to maintain a speed range of 20 to 30 kilometers

3 5PRICING GOES GLOBAL

per hour on city roads and 45 to 65 kilometers per houron expressways. Rates are increased or decreased whenthe average speeds for the 3-month period are outsidethe ranges.

We have found that the ERP has helped to spread traf-fic flow evenly over the working day and eliminate short,sharp peak periods—though some localized congestionfor short periods remains along alternative routes andalong the priced route immediately after the ERP stopsoperations. We have also found that the ERP has encour-aged many drivers to consider public transport as aviable alternative.

In closing, I would like to indicate some prerequisitesfor a successful pricing program:

• Development and marketing of congestion pric-ing and demand management as part of an overalltransportation strategy;

• Use of reliable and proven technology;• A system that is easy to understand and use;• Wide publicity for the system;• Provision of acceptable alternatives, such as good

public transport; and• Special provisions or exemptions for foreign vehicles.

E-407 PROJECT IN TORONTO, ONTARIO, CANADA

Imad Nassereddine

The $4 billion (Canadian) E-407 concession toll road is 108kilometers (67 miles) long with 39 interchanges. It is locatedjust north of Toronto, Ontario, Canada. The road has openaccess. No transponders or tags are required except forheavy vehicles (more than 5,000 kilograms), which musthave a transponder. If a vehicle does not have a transponder,a video camera records a picture of the license plate and a billis sent to the registered owner. This is true for all vehicles—even those registered in the United States.

The transponders both read and write, which allowsfor multiple entry and exit points. The tolls vary with typeof vehicle, time of day, and day of the week. They start atC$0.1295 per kilometer for light vehicles. They double forheavy single vehicles and triple for heavy double vehicles.

The E-407 concession agreement allows for rates tobe changed with 1 month’s notice, but a fixed trafficflow must be maintained. Usage of E-407 has increasedsteadily from 180,000 vehicles per day in 1999 to300,000 vehicles per day in 2003.


3 7

“CarTrek”Integrating Technology with Pricing Schemes

Harold Worrall, Orlando–Orange County Expressway Authority Kuniaki Nakamura and Nihon Doro Kodan, Japan Highway Public Corporation

TECHNOLOGY AND PRICING: CAUSE OR EFFECT?

Harold Worrall

Are technology and pricing the cause or the effect? Theanswer is yes! An example of policy affecting technolog-ical development is the challenge that President John F.Kennedy made to America to “put a man on the moonand safely return him to earth before the end of thedecade.” In that instance policy served as a catalyst to abroad range of technologies, including transistors andintegrated circuits. In contrast, the technology of radiofrequency identification and its practical translation intoelectronic toll collection (ETC) strategies have served asa catalyst for road pricing in all its forms. As facets ofpolicy and technology interact, new variants of policyand technology are created. The process is iterative.

A policy pyramid was presented that graphicallyidentified the relationship of policy, funding, demand,and supply. Each face of the policy pyramid is interac-tive with the others, and the results of that interactionmay catalyze yet other interactions. Funding policiesmay include tolling that affects demand and generatesrevenue, which may affect supply. Congestion pricing toaffect behavior may also generate revenue for additionalcapacity—and not necessarily on behalf of the modethat generated the revenue.

Pricing’s economic implications are broad. The long-held belief that public goods should be provided by pub-lic agencies may now come into question. The definitionof public goods now becomes a question itself. A possible

outcome of the new questioning process is the construc-tion of transportation facilities through concessionarrangements, much like those that have taken hold inmany parts of the world since World War II. Who shouldpay for technological advances: government, the automo-bile industry, the insurance industry, or the consumer?Must technology have value for it to become ubiquitousin a free market environment? Information is itself valu-able, and those who own the information may generaterevenue for either the public or the private sector. Whatabout liability? To what extent should governmentabsorb liability through sovereign immunity?

Social equity is also a consideration in the applicationof technology. Critical to the success of new applicationsis the protection of private information in a free democ-ratic society. The perceived threat of “big brother” is achilling factor to many and can cause the rejection ofotherwise reasonable public policy. Should technologybe available to all or just those who are able to pay forit? Rawls’s theory of justice would say that the protec-tion of the minimum position could be violated by pric-ing concepts. This leads to the question of whether thedisadvantaged, the elderly, and other population groupswill benefit from pricing scenarios or be disenfranchisedfrom transportation facilities because of it.

Finally, technological advances may “leapfrog” poli-cies that are based on today’s technology. Many lessonshave been learned on how to implement technology.Clearly, the business strategy should lead the technologi-cal applications rather than the reverse. Politics and juris-diction are externalities that frequently control therealization of the application of technology and should

therefore be considered initially rather than at the end ofa project. The implementation of one application, ETC,has resulted in a paradigm shift in the toll industry.

Standards and regulations can also significantlyaffect the implementation of technology. Standards mayalso interact with jurisdiction, since the jurisdictionalpreference is dependent on each area’s historical leveland nature of investment.

ELECTRONIC TOLL COLLECTION IN JAPAN: A WIDE VARIETY OF TOLLING APPLICATIONS

Kuniaki Nakamura and Nihon Doro Kodan

Expressways extend throughout Japan, and all aretolled. While the tolls have been helpful in generatingrevenue, Japan’s ongoing problems with traffic conges-tion and environmental degradation have promptedgreater attention to the technologies that can help turnsimple tolls into tools for demand management. ETC isa key factor in making congestion-based road pricingfeasible.

The ETC system in Japan uses an onboard unit (OBU)and an integrated circuit card. Although Japan’s express-ways are operated by many public organizations, thesame OBU can be used on all the expressways in the coun-

try. Our ETC system uses an active dedicated short-rangecommunications (DSRC) system to carry out each trans-action. We have found DSRC to be well suited to ourneeds given its expandability, high reliability, wide com-munication area, and efficient use of limited frequencyresources.

ETC can be used at approximately 1,200 toll plazasthroughout Japan. The number of installed OBUsexceeded 1.6 million by the end of October 2003, and700,000 vehicles use ETC each day. ETC users accountfor approximately 11% of the total traffic volume. ETCservice is scheduled to be available on almost allexpressways by the end of this fiscal year.

Thanks to the capability provided by ETC, Japan is inthe midst of experimenting with a variety of road pricingschemes, including environmental road pricing, specialpricing for long-distance use, and special pricing for spe-cific sections. Peak-period pricing and continuous-usediscounts are under consideration. These road pricingschemes are expected to ease traffic congestion onexpressways as well as ordinary highways and to pro-mote the use of expressways. We expect that with furtherpopularization and widespread use of ETC in Japan,increasingly effective road pricing strategies will bedeveloped and tested in the coming years and that roadpricing will become more prevalent throughout thecountry.


3 9

Evaluation of Active Pricing SchemesExpectations, Revelations, and Illuminations

Donald Shoup, University of California, Los AngelesEdward Sullivan, California Polytechnic State University, San Luis ObispoKristian Wærsted, Norwegian Public Roads Administration

LESSONS LEARNED FROMPAYING FOR PARKING

Donald Shoup

Employer-paid parking is the most common fringe ben-efit offered to workers in the United States, and 95% ofAmerican automobile commuters park free at work.Free parking at work amounts to a matching grant forcommuting by car: employers pay the cost of parking atwork only if commuters are willing to pay the cost ofdriving to work. Commuters who do not drive to workdo not receive an equivalent subsidy. This matching-grant feature of employer-paid parking helps to explainwhy 91% of commuters drive to work and why 91% oftheir cars have only one occupant.

A few employers offer commuters the option to takethe cash equivalent of any parking subsidy offered.Offering commuters the choice between a parking sub-sidy and its cash equivalent emphasizes that even freeparking has an opportunity cost—the forgone cash. Theoption to “cash out” a parking subsidy raises the effec-tive price of commuter parking without charging for it.Commuters can continue to park free at work, but thecash option also rewards commuters who carpool, ridepublic transit, walk, or bike to work.

California law requires many employers to offerparking cash-out if they subsidize commuter parking inspaces rented from a third party. The evidence suggeststhat parking cash-out produces significant benefits.Case studies in Southern California found that the solo-driver share fell from 76% before the offer of a parking

cash-out to 63% afterward. For every 100 commuters,parking cash-out induced 13 solo drivers to shift toanother mode. In another study, of the 13 former solodrivers, nine joined carpools, three began to ride publictransit, and one began to walk or bike to work. Withthree times as many commuters switching to carpools asto public transit, we see that parking cash-out canreduce solo driving to work even in cases where publictransit is not available.

Parking cash-out increased the employers’ costs byonly $2 per employee per month, because they savedalmost as much on provision of parking spaces as theypaid in cash to commuters. In addition, federal and stateincome tax revenues rose by $65 per employee per yearbecause many commuters voluntarily traded their tax-exempt parking subsidies for taxable cash. And from ahuman resources perspective, employers praised park-ing cash-out for its simplicity, fairness, and role in help-ing to recruit and retain employees. In summary,parking cash-out provides benefits for commuters,employers, taxpayers, and the environment.

The cash-out provisions in California are uniqueamong the states, however. Federal policy actually subsi-dizes solo commuting because federal tax law treatsemployer-paid parking as a tax-exempt fringe benefit. Tosolve this problem, I suggest one simple amendment tothe tax code: condition the tax exemption for employer-paid parking on that employer’s offering commuters theoption to cash out. The nonitalic text quoted below is theInternal Revenue Code’s existing definition of employer-paid parking that qualifies for a tax exemption; the italictext is the proposed amendment.

Section 132(f)(5)(C): QUALIFIED PARKING—The term“qualified parking” means parking provided to anemployee on or near the business premises of theemployer . . . if the employer offers the employee theoption to receive, in lieu of the parking, the fair mar-ket value of the parking.

Commuters who voluntarily choose taxable cash inlieu of tax-exempt parking subsidies will reduce trafficcongestion, air pollution, and energy consumption—andwill increase income tax revenues. Requiring employersto offer commuters the option to cash out their tax-exempt parking subsidies will reduce traffic congestion,conserve gasoline, improve air quality, increase tax rev-enues without increasing tax rates, and increaseemployee benefits without increasing employers’ costs.A minor tax reform can provide all these economic andenvironmental benefits simply by shifting from a policyof subsidizing parking to a policy of subsidizing people.

A LOOK BACK: CALIFORNIA STATE ROUTE 91

Edward Sullivan

The California State Route 91 Value-Priced ExpressLane facility (91 Express Lanes) is a four-lane toll high-way constructed in the median of an eight-lane urbanfreeway. The 16-kilometer express facility has no inter-mediate access and permits no heavy vehicles. Tolls aretime dependent and reflect demand, with electronic tollcollection only (no cash).

The 91 Express Lanes were originally constructedand operated by a private company under a franchiseagreement with the state. The project came aboutbecause of legislation (California Assembly Bill 680)passed in 1989 by the California legislature to attractalternative funding sources to meet state transporta-tion needs, gain private-sector efficiencies, and reducecongestion.

An impact assessment study took place from mid-1994 (about 1 year before opening) through 1999 tomeasure reactions to variable toll pricing and the otherinnovative features of the facility. Measured impactsincluded highway traffic changes; effects on corridorbus, rail, and park-and-ride usage; effects on accidentsand significant incidents; origin–destination (revealedpreference) surveys; opinion surveys; emissions model-ing; and behavioral choice modeling. It was found that91 Express Lane use strongly reflects hourly travel timesavings, and peak flattening is only weakly responsive totolls. Driving comfort and safety are often cited to justifypaying tolls when time savings are minimal. Income cor-relates positively with use frequency; being female,middle-aged, and highly educated also correlates with

greater use. Nevertheless, many frequent users are low-income, and many high-income commuters are infre-quent users or nonusers. Toll incentives were associatedwith a long-term increase in 3+ ridesharing on the facil-ity, and high-occupancy vehicle users appear generallymore likely to use the 91 Express Lanes. Benefit–costanalysis shows that large travel time savings lead to astrong surplus of benefits relative to costs, which causesthe 91 Express Lanes to compare favorably with othercorridor improvement options.

In spring 2002, after some controversy related toownership and severe parallel freeway congestion, thepublic Orange County Transportation Authority(OCTA) agreed to purchase the 91 franchise for $207.5million. State enabling legislation allowed the OCTAtakeover to become final in January 2003. In Novemberof the preceding year, voters also approved Measure Ato provide nearly $500 million in road improvements inthe SR-91 corridor; these improvements had previouslybeen blocked by the noncompete clause.

Despite its recent deprivatization, the SR-91 projecthas been and remains successful in many dimensions. Itwas an innovative model that helped establish an openmind toward market-based road pricing in the UnitedStates. It also proved that public–private highway part-nerships can be financially successful. In my opinion, theAchilles’ heel of the private project turned out to be thenoncompete clause included in the franchise agreement.

The 91 Express Lanes have shown that innovativeroad pricing can be economically attractive, win publicapproval, and influence travel behavior. Increasingtravel options is a subtle yet powerful outcome fromsuch projects. One-size-fits-all approaches in road pric-ing have demonstrably failed. In contrast, increasingtransportation choices through pricing has clearly suc-ceeded and should regularly be considered in futurefacility planning.

URBAN TOLLS IN OSLO, NORWAY: EXPERIENCES AND CONDITIONS FORIMPLEMENTATION

Kristian Wærsted

The “Oslo Package 1,” a user-fee-based array of proj-ects comprising several urban main road tunnels, wasdeveloped as a means to build 50 projects over a 10-year period. Fifty-five percent of the financing comesfrom user fees, and the remaining 45% is composed ofstate grants. Had the system been funded entirely bythe state, the same projects would have taken 35 yearsto complete. The Oslo Package 1 is a joint venturebetween Oslo (60%) and the neighboring county ofAkershus (40%).


The toll ring covers all roads in three corridors that leadinto the central part of the capital. The location of the cor-dons is a compromise balancing the highest possibleincome and a low number of plazas placed in areas whereland could be acquired most inexpensively. The followingare a few statistics. Fifty percent of Oslo’s population liveoutside the toll ring. Average daily trips in the paymentdirection total approximately 250,000 vehicles. Annualtoll revenues come to approximately 1 billion NKr; oper-ating costs consume about 10% of the gross revenue.Eleven of 19 toll plazas are minor, meaning that they com-prise just one lane for subscription members and oneattended lane, while the other plazas have automatic coinmachines to increase the capacity for manual payment.Lane capacity is approximately 1,600 vehicles per hourfor electronic fee collection lanes and 300 vehicles perhour for the automatic coin machine and attended lanes.The largest toll plaza has three dedicated electronic feecollection lanes, three lanes with automatic coin machines,and one attended lane. Average daily traffic at this plazanumbers approximately 50,000 vehicles.

When the Oslo Package 1 was first proposed, trans-portation officials faced significant public opposition;opinion polls indicated that 70% of respondentsopposed the toll scheme. Many visitors ask us how wewere able to implement the package in the face of suchopposition. We believe that the following are among themost important reasons:

• Bergen had already implemented a successful tollring in 1986.

• Road traffic conditions had become congested to achoke point.

• The major political parties agreed to support theproposal.

• The proposal involved a limited collection periodof just 15 years.

• Additional funding from the state was included aspart of the plan.

• The plan involved relatively low toll rates. • Eighty percent of all toll income is dedicated to

investment in road infrastructure; the remaining 20% isearmarked for public transport infrastructure.

• Opponents of road construction and automobileuse appreciated that the user-pays principle was beingapplied to motorists.

• The opening of the Castle Tunnel, the major tun-nel in the Oslo Package 1, 2 weeks before toll collectionbegan provided a positive signal to opinion. This six-lane tunnel removed Oslo’s most severe bottleneck infront of the Oslo city hall and demonstrated to driversthat they would get something back from the package.

• None of the toll stations was expected to createbottlenecks, since their capacity was calculated to behigher than that of the adjacent road network. Thisproved to be true after the opening of the toll ring.

Toll collection in the Oslo Toll Ring expires in 2007,and the big issue now is whether it will be removed,extended (as happened in Bergen), modified to accom-modate time-differentiated congestion pricing, orreplaced by another type of road pricing scheme. Aproject group is now working on an Oslo Package 3, sotime will tell. New electronic fee collection technology(AutoPASS) is being introduced, and contractual andoperational interoperability for all electronic fee collec-tion lanes in Norway will be implemented in February2004. At that time fully automatic toll plazas enablingfree flow through the plazas will be introduced inBergen and Tønsberg. In this new concept, driverswithout an AutoPASS will be videoed and billedmonthly for the exact fee. If the approach turns out tobe successful, it may form the basis for the future of tollroads in Norway.

4 1EVALUATION OF ACTIVE PRICING SCHEMES

4 2

A Closer Look at the Real World

Derek Turner, Derek Turner ConsultingStephen Ison, Loughborough University, United Kingdom

MANAGING THE STREETS OF LONDON

Derek Turner

The use of congestion charging as an effective tool for themanagement of urban traffic flows has been demonstratedby the ground-breaking scheme introduced in London inFebruary 2003. Many world cities that have alreadyimplemented new interurban toll routes are consideringsuch a congestion charge as a method of extending roaduser charging to an existing urban road environment.Congestion charging is particularly relevant to the city’senvironment because, correctly managed, it initiates a self-perpetuating cycle that encourages a shift from private topublic transport within the charging zone.

This method of charging is not a tax; rather, thecharges are part of an integrated approach that incor-porates improvements in public transport and highwayfacilities. The reduction in traffic allows buses to movemore freely, and the significant portion of net revenuespent on buses provides increased capacity and fre-quency of service. The enhanced service is vital to ensurethat former car users remain loyal to public transport inthe long term.

The central London congestion charge schemerequires purchase of a virtual area license to drive withina 21-square-kilometer area of inner London. Cameraslinked to automatic number plate technology capturevehicle registration plates on entry into the zone andstore details in a database until matched to a payment.The payment is applicable during weekdays from 7 a.m.to 6:30 p.m.

Strict enforcement and a thorough monitoring strategyhave enabled a successful launch and efficient ongoingperformance. The world’s largest congestion scheme hasprompted favorable comments, such as the following by Susan Kramer, a board member of Transport for Lon-don and a previous mayoral candidate: “We alwaysthought we had to live with congestion in our city centers. London has shown this is no longer true.”

Results after 6 months of performance have shown amultitude of improvements for London’s transport: a25% decrease in time spent stationary; a 30% reductionin traffic delays; and a 14% reduction in journey timesto, from, and across the charging zone. Reduction ininbound traffic flow has been most evident in peak peri-ods, with weekday speeds in and around the zoneincreased by 10% to 20%.

London’s buses have seen a 33% decrease in excesswaiting times for bus routes serving the congestioncharge zone. Bus delays due to traffic disruption havebeen halved both inside the zone and on the ring roadthat forms the zone boundary but does not incur acharge.

A reduction in road accidents has also been mea-sured, though a longer period is required to determineits significance. The net revenues (i.e., revenues afterdeduction of operating and enforcement costs and debtpayments) of the scheme are expected to be £68 millionfor 2003–2004 and are expected to rise to between £80million and £100 million in future years. The annual netbenefits, exclusive of these revenues, are forecast to be£50 million. They include considerations such as timesavings, fuel savings, and reliability benefits.

FAILED SCHEMES IN PRICING

Stephen Ison

While London’s experience with congestion pricing istypically viewed as a success story, it is important topay equal attention to pricing schemes that have notmade it to implementation. Experiences in Hong Kongand Cambridge, United Kingdom, provide two primeexamples.

Public perceptions of the depth of the problem andthe costs of addressing it played an important role inboth instances. While people frequently complain abouttraffic, often the public as a whole does not think con-gestion levels bad enough to warrant major policy ini-tiatives, particularly when they perceive that the costs ofthe initiative will be too high.

In addition, many people suspect that congestion pric-ing is aimed at not only financing infrastructure but alsopaying for general policy objectives. For this reason, sur-veys frequently find that if the respondents are confidentthat revenue will be used for a specific transportation-related purpose, such as public transport, they are morelikely to support a congestion pricing initiative. Mistrustof government, and particularly suspicions that a com-mitment to use revenue for a particular purpose will beoverturned in the future, can easily undermine supportfor any pricing program. In terms of congestion pricingin central London, the revenue generated is earmarkedfor transport-related projects. This is also the case forany other authority considering the implementation of acongestion pricing scheme in England and Wales in linewith the Transport Act (2000).

Other public concerns, which often extend to politicalleaders as well, revolve around privacy and the reliabilityof the technology on which the pricing system relies.

An examination of London’s experience helps illustrateconditions that may be necessary, though not sufficient, tomove from a proposed system to implementation. Amongthe essential ingredients are the following:

• Severity of congestion. In London, speeds had beendeclining since the 1970s, and in an amount sufficient tomake the magnitude of the traffic problem obvious to allroad users. (Interestingly, this suggests pricing’s greater

potential as part of a solution to address existing congestionthan as a preventive measure.)

• Strategic exemptions. To underscore the program’spolicy objectives and address equity concerns, London’spricing policy excuses certain residents, alternative fuelvehicles, emergency vehicles, vehicles with nine or moreseats, emergency vehicles, and vehicles driven by disabledpeople from the fee.

• Clarity of objectives, with an explicit line drawn totransport demand management.

• Proper hypothecation, or earmarking, of revenues. Apledge to dedicate revenues to public transport was apopular choice given the public’s widespread perceptionof its current financial needs outstripping availableresources.

• Easily understood technologies. While it may benecessary to refine the fee collection system at a laterdate, a pricing system is more likely to be adopted if theinitial system is simple and can be explained quickly andclearly to the public at large.

• Single implementing agency. • Charismatic advocate. Obviously, the presence of a

leader such as London’s Mayor Ken Livingstone can bekey to successful implementation. The case of London isespecially interesting, since congestion pricing providedthe opportunity for a left-of-center politician to seize ona market-based proposal early in his term and stake hisreputation on the proposal’s success.

• Strong presentation. London’s pricing advocatesdid an excellent job of engendering trust through opencommunications, a clear and well-composed presenta-tion of the problem and the proposal, and the develop-ment of first-rate communication tools, including ahighly effective website.

• Weak opposition. A final factor working in Lon-don’s favor was the relative absence of any sustainedorganized opposition to the proposal.

Some of these conditions are within policy makers’and program managers’ control, while others cannot bemanufactured. Without a clear understanding of thosefactors within and beyond their control and how thosefactors will bear on ease of implementation, the possibil-ity of replicating London’s experience through fortunatecircumstances and lucky breaks will be remote indeed.

4 3A CLOSER LOOK AT THE REAL WORLD

4 4

Impacts of Pricing on Interurban Freight Transportation

Robert Poole, Reason FoundationTony Wilson, National Transport Commission, AustraliaDarrin Roth, American Trucking AssociationsAndreas Kossak, High Commission Financing the

Federal Transportation Infrastructure, Germany

TOLL TRUCKWAYS: USING PRICING TO FINANCENEW GOODS-MOVEMENT INFRASTRUCTURE

Robert Poole

The United States faces a serious shortfall in highwayinvestment as fuel taxes fail to keep pace with inflation,increased fuel economy, and use of alternative fuels.Trucks deliver 90% of the value of U.S. freight, andthere is little likelihood of a significant mode shift to railfor a variety of reasons. The problem addressed in thispresentation is how to expand long-haul highwaycapacity to meet the needs of goods movement.

Historically, the trucking industry has opposed anyexpansion in the scope of tolling on the grounds thatpaying both tolls and fuel taxes on the same highwayconstitutes double taxation. Whether fuel taxes paid byheavy trucks fully cover their fair share of highway costscan be debated, but the fact is that political opposition totolls by the trucking industry has been a significantobstacle to wider use of tolls to fund improved highways.

Recent work at the Reason Foundation has posited anew approach to tolls and trucking. The basic concept isto provide significantly more valuable highway servicesto heavy-duty long-haul trucks to make it worth theirwhile to pay tolls. The key insight underlying thisapproach is that double- and triple-trailer rigs makepossible major increases in trucking productivity. Butthese longer combination vehicles (LCVs) are banned byfederal law from most parts of the National HighwaySystem. The federal “LCV freeze” permits LCV opera-tions only on routes that were available to these trucks

under state laws as of 1991. Thus, higher-productivityLCVs operate only on selected western Interstates and afew eastern turnpikes and toll roads.

The Reason Foundation’s researchers propose that LCVsbe allowed to operate on new, barrier-separated heavy trucklanes that would be added to selected Interstate routes, gen-erally to fill in missing links in the fragmentary LCV net-work or to extend that network to new destinations. Truckswould be charged tolls to use these new truckways andwould be allowed to operate as LCVs only on these speciallanes (in states covered by the LCV freeze).

Simulation modeling was carried out on the basis of aheavy-duty pavement design, a model of pavement wearand maintenance, and a variety of scenarios, includingboth standard 18-wheel single-trailer rigs and long turn-pike doubles. It was assumed that trucking firms wouldpay a toll of as much as 50% of the cost savings thatwould result from higher-capacity rigs. The resultinganalysis found that, over a wide range of scenarios, tolltruckways would be economically and financially feasible.

The idea is now being considered by Congress as partof reauthorization of the federal surface transportationprogram.

OVERVIEW OF STUDIES ONHEAVY VEHICLE CHARGES

Tony Wilson

Road use, like many other activities, has traditionallybeen regulated on the basis of a set of prescriptive rules.

For example, a particular type of axle might be limited tocarrying a set mass. This type of rule provides a blunt,indirect means of limiting the amount of pavement weara vehicle can produce and may also be used as an indirectmeans of ensuring that the vehicle is stable and safe.

As a result of these blunt rules, the approach in Aus-tralia, as in other countries, to pricing road wear hasbeen to rely on aggregate systems rather than to measurethe vehicle’s use and resulting road wear directly andprice it accordingly. The Australian road pricing systemfor heavy vehicles aims to fully recover their share ofroad construction and maintenance costs through a two-part pricing system comprising a fuel charge and fixedannual registration charges that vary by vehicle type andsize. The prices are based on average utilization for eachclass of vehicle—average mass, average distance trav-eled, and average fuel consumption rates.

Consequently, we, like others, have not had to developa good understanding of the relationships between roaduse and infrastructure costs. More research in this areawould be useful, but for the time being we in Australiahave relied on the original American Association of StateHighway and Transportation Officials tests of the fourth-power law to estimate the pavement wear contribution ofdifferent axles and loads, with load equivalencies derivedfrom a system of measurement different from that used inpavement design. However, this approach provides littleunderstanding of the variations that can result from dif-ferent pavement designs, traffic levels, and environmentalconditions. The European National Highway ResearchLaboratories COST 334 project has advanced under-standing of a number of issues, but many questionsremain.

While the long-standing blunt, prescriptive approachto regulating road use creates little incentive to shiftaway from a broad, aggregated approach to pricing,Australia is gradually making this shift. There are threemain planks to this new, less prescriptive approach:

1. Development of a performance-based approach toregulating safety and infrastructure outcomes of heavyvehicles. The new approach will operate as an optionalalternative to prescriptive mass, dimension, and config-uration rules for the time being. It directly specifies thesafety and infrastructure outcomes that vehicles arerequired to achieve.

2. A broad range of compliance and enforcementreforms that attempt to put in place an enforcement strat-egy that aims to promote compliance. The reforms sepa-rate offenses into risk bands depending on the potentialnegative impacts of noncompliance and make available acommensurate range of penalties. These provisions haveno precedent in Australia or overseas and will oblige allparties in the supply chain to take steps to prevent abreach of the road transport mass and loading laws.

3. The Intelligent Access Program, which is developingways of using vehicle-tracking technologies to monitor theroute compliance of heavy vehicles on Australian roads.This approach provides greater confidence that vehicles usethe roads they are meant to use. It provides a mechanism toallow more extensive access for vehicles operating outsidethe norms of the vehicle fleet, such as mobile cranes, vehi-cles operating under mass concessions, dangerous goodsvehicles, or other specialized or innovative vehicles.

As a result, we are now in a position to start examiningmore flexible approaches to regulating road use, but theywill be acceptable to infrastructure managers and the com-munity only if they are accompanied by variable pricingarrangements. By the same token, other interest groups willseek and accept variable pricing systems of this type only ifthere is a change to more flexible regulatory approaches.

The following are examples of more flexible regula-tory arrangements:

• Allowing heavy vehicles to choose what mass tooperate at, within safety limits;

• Allowing heavy vehicles broader access to a range ofroads or routes from which they are presently restricted;

• An improved method for managing the impacts ofland use changes that could necessitate additional heavyvehicle road use and create consequent impacts on thetransport infrastructure; and

• Applying pricing to allow optimum use of multi-ple transport modes in the total supply chain from ori-gin to destination by accurately charging for the roadlink in the transport chain.

The mechanisms to allow this type of incrementalpricing system in Australia are currently being developedand analyzed. The appropriate design is expected to bechosen over the coming 12 months, with work followingto put the new system in place by around 2006.

With these developments, Australia will be in a posi-tion to consider whether broader social costs of roaduse should be incorporated in the pricing arrangements.Inclusion of these other costs in the calculation wouldrepresent a significant shift in the objectives of a pricingapproach, which would need to be carefully consideredto ensure that the resulting pricing system is best suitedto the objectives to be achieved.

EFFECTS OF PRICING ON TRUCKS INTHE UNITED STATES

Darrin Roth

The American Trucking Associations is a national fed-eration representing the trucking industry. Its views on

4 5IMPACTS OF PRICING ON INTERURBAN FREIGHT TRANSPORTATION

road pricing center on a key distinction: mandatory ver-sus voluntary systems. It supports the concept of volun-tary tolls but is leery of the slippery slope wherebyvoluntary systems gradually morph into mandatory sys-tems. Without adequate assurance that voluntary reallydoes mean voluntary, the industry would look at mostpricing proposals with a good degree of skepticism.

Incentives that permit the industry to improve itsproductivity—for example, through adjustments to sizeand weight limits—can help mitigate industry doubtsabout the extent to which pricing will benefit truckersrather than simply raise revenues. Indeed, recent historyhas witnessed a large number of unacceptable policydecisions, including an 82% rate increase on the OhioTurnpike and a 300% increase on seven toll bridgescrossing the Delaware River. We have ample evidencethat revenue generation, rather than productivityimprovements and other benefits to road users, underliemany pricing ventures.

Another of the industry’s concerns is double taxation.Without a doubt, truckers already bear a sizable tax bur-den. A true user fee should be based on the true cost ofthe vehicle’s use of the facility, with revenue funnelingstraight back into the facility. This principle is utterlyoverturned when a user fee is imposed over and above anexisting tax system. Similarly, the industry’s support forany pricing project is also predicated on the appropriateuse of revenues generated by the project. In our view,revenues are legitimately directed to the service of debtand the expense of operating the facility; tolls should beremoved once bonds are paid off. Certainly, revenuesgenerated by a given facility’s users should not bedirected to any unrelated facility or purpose.

And what is pricing’s true effectiveness in modifyingbehavior and managing demand for a limited resource?Given shippers’ expectations for pickup and deliverytimes, truckers have little control over their travel times;as it stands, truckers seek to avoid peak times anyway,even without price signals to force the issue. Also, trafficdiversion can quickly undermine the true goals of anypricing project. One recent study predicts that with a tollincrease of $0.20 per mile, up to 50% of truck traffic canbe expected to divert to alternate routes. Another study,performed by Fluor-Daniel, demonstrated that under anew pricing project under which trucks and cars wouldface tolls of $0.17 and $0.05 per mile, respectively, 35%to 85% of vehicles would divert. And that 82% tollincrease on the Ohio Turnpike underscores the diversionconcern as well; following the increase, local roads sud-denly experienced a 30% to 50% increase in truck traf-fic. Such diversion can obviously impose significantsafety, environmental, and infrastructure costs.

Finally, electronic tolling imposes significant costs ontruckers; if the German road pricing proposal wereapplied to the United States, we estimate that it would

cost $200 million per year to place onboard units intonew vehicles and $1.5 billion to convert existing vehi-cles. The fuel tax, in contrast, imposes much lowerancillary costs.

While the American Trucking Associations is open toproposals such as the truck tollways currently proposedby the Reason Foundation and the conversion of high-occupancy vehicle lanes to high-occupancy toll lanes,our support is wholly dependent on assurances that theproposed pricing will be voluntary rather than manda-tory and make provision for alternate routes for truckerswho are unable to pay any newly imposed fee.

TOLLING HEAVY GOODS VEHICLES ONGERMANY’S AUTOBAHNEN

Andreas Kossak

In 1999 the German government decided to introducedistance-related charges for heavy goods vehicles(HGVs) starting in 2003. This decision stemmed fromat least three goals: to raise additional money for financ-ing the federal transportation infrastructure, to shiftfreight transportation from road to rail and inlandwaterways, and to improve the competitiveness of theGerman logistics industry.

A High Commission on Financing the Federal Trans-portation Infrastructure was appointed and given fulldiscretion to develop recommendations on financingstrategies. The commission’s central recommendationwas to convert “the financing of the Federal Transporta-tion Infrastructure . . . step by step from financing on thebasis of the Federal Budget and federal taxes respectivelyto financing by the user—as far as possible under the dif-ferent boundary conditions.” With regard to the techni-cal system for charging the toll and the amount of toll,respectively, the commission recommended that “the sys-tem should ensure upward-compatibility and interoper-ability” and that “HGVs should be charged an averagetoll of 25 Pfg. per vehicle kilometer on Autobahnen.”

By the end of September 2002, the national govern-ment had made a final decision for the operator of thetolling system and had decided to allocate 50% of thenet toll revenue to the railways and the inland water-ways. At present, we expect the tolling system to takeeffect in spring or summer 2004.

Throughout this process, the logistics industry hasnot registered significant opposition to tolling HGVsusing Autobahnen on the basis of internal costs. In fact,many in the industry hold that the introduction of thetolling system will be beneficial, since it will improve thecompetitiveness of the German logistics industry com-pared with that of the foreign truckers using Germany’sAutobahnen, which are exempt from the relatively high


German traffic-related taxes. The industry, however, hascalled for the exclusive dedication of the total net rev-enues for improvements to the federal roads system. Inaddition, it emphasizes that any additional financialburden must be passed on to the clients.

We expect that qualified logistics enterprises willincrease their productivity, though simple freelance

truckers may suffer some setbacks. We also expect thatan increase in transportation fees will raise consumerprices. And finally, we expect almost no shift of freightfrom road to rail, though a substantial shift from Auto-bahnen to toll-free “Bundesstraßen” is possible. Thisphenomenon could lead to pressure to expand thetolling to other types of roads.

4 7IMPACTS OF PRICING ON INTERURBAN FREIGHT TRANSPORTATION

4 8

Winners, Losers, or a Zero-Sum Game?The Distributional Impacts of Pricing Schemes

Peter Nelson, Resources for the FutureFarideh Ramjerdi, Norwegian Institute of Transport EconomicsDouglass Lee, Volpe National Transportation Systems Center

WELFARE AND DISTRIBUTIONAL EFFECTS OFALTERNATIVE ROAD PRICING POLICIES FORMETROPOLITAN WASHINGTON, D.C.

Peter Nelson

Like many metropolitan areas in the United States, theWashington, D.C., region has recently experiencedrapidly worsening traffic congestion as well as difficul-ties in finding revenue to finance improvements to thetransportation network. As a consequence, local policymakers have directed their attention to high-occupancytoll (HOT) lanes as a cost-effective way to provide addi-tional capacity. Currently the governments of bothMaryland and Virginia are examining the viability ofimplementing HOT lanes on a variety of local facilities.

Concerns about so-called Lexus lanes have arisen inthe Washington area in the past. In 2001, MarylandGovernor Parris Glendening killed a HOT lane projectbecause of concerns that it would be unfair to lower- andmiddle-income drivers. To test this assertion, we atResources for the Future modeled two scenarios by usingthe Washington START model, which is based on theSTART modeling suite developed MVA Consultancy.

START is a “strategic” model and is characterized byan aggregated treatment of the transportation networkand a highly detailed characterization of transportationdemand. Its flexibility, quick run times, and consistencywith household optimization theory make it useful forpolicy research. One of its attractions is that it can accountfor policies’ “adjustment costs” (e.g., the cost of switchingfrom on-peak to off-peak travel to avoid paying a toll).

Two scenarios were modeled: a HOT lane policy anda more comprehensive road pricing policy. Under theHOT lane policy, all of the region’s high-occupancyvehicle (HOV) lanes were converted to HOT lanes thatsolo drivers could use for a 25-cent-per-mile toll. Thecomprehensive road pricing policy tolled all of the area’sroadways at 7 cents per mile on general lanes and 22cents per mile on premium lanes.

The HOT lane policy produced substantial netbenefits—more than $170 million per year. Travelersgained $105 million in benefits, even after netting outtheir toll payments, through improved travel times.Gains were both direct (for those who used the HOTlanes) and indirect (for those who benefited from thespillover effects of opening up spare road capacity). Allincome groups experienced positive welfare changes.The only identifiable losers were previous users of theHOV lanes, who now experienced somewhat longertravel times, and travelers along “non-HOT” corridors.These travelers experienced losses because the policyincreased vehicle trips and therefore produced slightlymore congestion in the core. Losses were trivial forboth of these groups. In addition, the policy raised $65million annually.

One implication of the research is that compensationof travelers is a much less important issue in a HOT lanecontext than it is for more global road pricing schemes.In addition, because HOT lanes do not appear to inflictlarge welfare losses on any identifiable group of travel-ers (including low-income travelers), HOT lanes appearto be a promising avenue for promoting acceptance ofroad pricing.

ROAD PRICING AND EQUITY IN NORWAY

Farideh Ramjerdi

Equity concerns are high on the list of reasons for oppo-sition to road pricing. While some of the popular argu-ments against road pricing can be dismissed out of hand,equity concerns merit close attention—not just to facili-tate implementation of a measure that can improve theefficiency of the transport system but also becauseequity objectives are important in their own right. Areconciliation of the potential conflict between equityand efficiency can be brought about through the use ofat least two policy instruments. First, the recycling ofrevenues back into the transportation system should bean integral part of the road pricing scheme. Second, anunderstanding of the valuation of externalities by vari-ous socioeconomic groups and regions is essential forevaluating alternative pricing programs.

In forging transport policy, governments ideally havethree objectives: raising revenue to provide public goodsand services, achieving a desirable income distribution,and controlling externalities. In a perfect world a govern-ment has perfect information, can use nondistortionarytaxes for revenue-raising and distributive purposes, andhas perfect instruments to deal with the transport exter-nalities. In the real world, the evaluation of transportinstruments should take into account not only the trans-port sector but also the rest of the economy and thegeneral tax system.

Norway’s urban toll systems have been introduced asfinancing schemes intended to deal with funding short-falls that are unfortunately accompanying an increase inroad traffic. In 2000 toll revenues contributed about 35%of total funding for transport infrastructure. Since 1986,with the introduction of toll ring schemes in Bergen, Oslo,and Trondheim, and more recently in Stavanger and Kris-tiansand, there has been a dramatic shift toward toll-financed facilities in urban areas. With low elasticitiescoupled with a focus on revenue gains, the designs ofthese systems have exhibited a minor concern for equityand produced limited impacts on congestion levels.

Since the mid-1990s amendments to the nationalroad laws have made it possible to allocate some of therevenues from a toll scheme to public transport invest-ments. A new amendment, approved in June 2002, sanc-tions the use of a toll scheme for demand managementand has opened the door to congestion pricing. Underthis amendment the proceeds from a scheme must beused for local road and public transport purposes.

Where are we now in Norway with respect to roadpricing? Since the introduction of the toll ring schemes,support for road pricing as part of an integrated packageof policy instruments for urban areas has increased. Legalbarriers to pricing have diminished. And almost all larger

urban areas in Norway now have urban toll rings in placethat could be modified to address congestion. Modifica-tions to support congestion pricing might include increasesin toll levels, differentiated tolls by time of day, andchanges in the location of toll stations. While true conges-tion pricing will improve efficiency, such improvementsmay well be accompanied by negative distributive im-pacts. Revenue recycling can help, but its positive impactson public opinion will be minimized if there is a lack oftransparency in the process of allocating the revenues.Under these conditions, public opinion and political sup-port for the continuation of urban toll and congestionpricing schemes will erode even further.

We therefore argue that policies should be evaluatedon both efficiency and equity grounds. Congestion pric-ing, by its nature, has negative distributive impacts thatmust be addressed. The design of the integrated policyinstruments should take account of the negative distrib-utive impacts by providing the necessary compensationto the losers. Since this alone might not create a politicalconsensus for congestion pricing, further incentives toovercome inequities might be both politically necessaryand good public policy.

IMPACTS OF PRICING ON INCOME CLASSES

Douglass Lee

Vertical equity—the impact of a policy on the distributionof income among income classes—is one of several majorcomponents of policy evaluation and a subject that receivesa great deal of popular and political attention. Popularcomments about vertical equity, however, are often basedon a weak understanding of theory and little or no empiri-cal evidence. This is unfortunate, because useful theory andsome data are available and allow conclusions to bereached that can improve public decisions.

Though vertical equity is a matter of concern withmost policy initiatives, it comes up especially often indiscussions of congestion pricing. While existing data donot permit precise conclusions, a close investigation offindings to date and the application of some judgmentproduce several generalizable results.

First, the distributional impact of peak congestionpricing appears to be mildly regressive, measuredagainst household income, but not regressive enough tostand as an obstacle to peak pricing. Those traveling onurban highways at the peak period in the peak directionare substantially more affluent than the population as awhole, and those who choose to pay the toll are moreaffluent still.

Second, alternative (existing) financing mechanismssuch as fuel excise taxes, sales taxes, and local propertytaxes are also mildly regressive under typical conditions, so

4 9WINNERS, LOSERS, OR A ZERO-SUM GAME?

there is no great urgency to shift away from them on verti-cal equity grounds. (There are, however, good efficiencyand horizontal equity reasons for doing so.)

Third, using toll revenues to reduce general taxes orto provide income transfers based on need is probablythe safest way to recycle the revenues generated throughpricing schemes. Earmarking revenues for specific pur-poses can be desirable in closing the loop between pay-ers and beneficiaries but can be dangerous economicallyand misleading politically. Spending toll revenues toincrease highway capacity, subsidize transit, or support

the freight rail system may be inefficient if those sectorsreceive more funds than they can use efficiently—that is,apply in ways that generate positive net benefits. More-over, since public revenues tend to be fungible, ear-marking revenues may simply replace other revenuesources, in whole or in part. With reasonable care,though, recycling the toll revenues should result in a netfavorable vertical redistribution.

In short, congestion pricing is probably a progressivepolicy from the standpoint of redistributional equity,and no worse than mildly regressive.


5 1

Urban Freight Transportation

Mark Griffin, Southern California Association of GovernmentsDavid Levinson, University of MinnesotaMartin Ruesch, Rapp Trans AG, Switzerland

MOVING THE GOODS IN LOS ANGELES

Mark Griffin

The six-county region of Southern California representedby the Southern California Association of Governments(SCAG) serves as a crucial node of international andnational commercial flows. Commercial movements inand through the region contribute a significant amount ofeconomic activity across the nation. For example, theSoutheast region of the United States, inclusive of Miami,recorded slightly more than $87 billion worth of commer-cial movements with the SCAG region in 2000.

The SCAG region connects with the rest of the nationvia a freight infrastructure system that reaches by railand road to every part of the contiguous states. Thisconnectivity sustains certain levels of economic valuenationwide, and the level of activity indicates the mag-nitude of “value added” attributable to the goods move-ment infrastructure in Southern California and thenation.

In return for accommodating these international andnational commercial flows on its regional freight infra-structure system, the SCAG region receives (and distrib-utes) a lot of freight. This load negatively affects airquality and transportation congestion in the SCAGregion and thus diminishes the region’s quality of life.

The volumes of freight handled by the region areforecast to double or triple by 2030, depending on themode of transportation considered. In addition to alocal population of 17 million and a regional economicproduct in excess of $600 billion, several trends in the

international logistics industry are working to increasethe region’s share of freight movements. For example,the effect of “load centering” can be discerned in theincreasing market share of Asia-related trade being cap-tured by the ports of Los Angeles and Long Beach rela-tive to other West Coast ports, as well as by the greaterproportion (more than double) of Asia trade handled byWest Coast ports as a group relative to what would oth-erwise be expected given their local populations and lev-els of economic activity. In addition, the practice of“transloading,” whereby international goods arerepackaged from 40-foot international marine contain-ers into 53-foot domestic containers and trailers, hasbeen identified as a key characteristic in the shaping ofregional commercial flows.

The combined effects of load centering andtransloading are expected to impose significant newdemands on the goods movement infrastructure ofSouthern California. In light of these developments,SCAG is targeting pricing schemes that are consistentwith the development of greater goods movementcapacity in the region.

To build needed new capacity, new sources of revenuemust be found, and pricing mechanisms of one sort oranother are the most likely candidate. The updated 2004Regional Transportation Plan for the SCAG region,presently out in draft for public comment, identifies user-fee supported revenue bonds as the primary financialstrategy for developing greater goods movement capacity.Revenues raised from commercial flows in the regionwould be used to create new, special-purpose infrastruc-ture capacities. Examples of special-purpose facilities

under consideration include a regional dedicated truck-way system and enhanced regional rail capacity. Prelimi-nary financial analyses show that each of these capacityoptions would be essentially self-supporting with reason-able tolls or other movement charges given certain publicdebt issuance arrangements, such as tax-exempt revenuebonds, loans made available under the TransportationInfrastructure Finance and Innovation Act federal creditprogram, and, potentially, tax credit bonds.

With these investments in new goods movementinfrastructure facilities, the anticipated increase in aver-age truck delay on the region’s transportation systemthrough 2030 could be averted, with future delays heldto a reasonable level. Furthermore, the economic effectsof these infrastructure investments would benefit theregion in terms of employment and revenues.

TRUCKS’ VALUE OF TIME: IMPLICATIONS FORCONGESTION AND WEIGHT LIMITS

David Levinson

Minnesota’s spring load restriction policy, which placesstrict limitations on commercial vehicle weights duringthe spring thaw, has been in effect for more than 50years. Throughout this time, almost no considerationhas been given to the cost that the policy imposes on thefreight industry. However, the state has now commis-sioned a cost–benefit study to examine the policy’snecessity. The cost–benefit analysis includes estimates offreight demand and user costs, which are calculated asthe difference between total travel time and vehicle milestraveled with and without the policy in effect, with thisdifference then multiplied by the value of time for com-mercial vehicle operators in Minnesota. The users’ valueof time is an essential component, since the policy hasnumerous impacts that can make freight movementmuch more time consuming. For example, vehicles com-plying with the policy must shift seasonal timing of ship-ments, reduce load size per vehicle, change vehicle types,or change routes, all of which can impose additionalcosts on commercial vehicle operators.

Researchers have studied the value of time for morethan 40 years. Four methods to discern users’ value oftime are in common use. Estimates of net operating profitfix vehicle and labor costs so that with improved speeds,a vehicle will be able to travel farther in the same span oftime and contribute more profit to the company. Costsavings models are based on a reduction of those coststhat do not vary with miles of operation. Cost-of-timeestimates determine the cost of providing time savings.And finally, the willingness-to-pay approach considersindividual choices when respondents are faced with adecision between time savings and other benefits.

Given our specific research question, no estimates,regardless of these approaches, were available from pre-vious studies or data. Absent the necessary revealedpreference information, a sample was constructed fromseveral trucking industry sources to conduct a survey.Interviews were conducted by using an adaptive statedpreference survey to derive an estimate of the value oftime to the nearest dollar.

A tobit model was fit to the data from the interviewsto derive the estimate for value of time. A mean of $49.42was found, with a 95% confidence interval from $40.45to $58.39. Variation in the distribution of values is largelyundetermined with the exception of fleet operation,whether it is a for-hire truck fleet or a private truck fleet.

In addition to deriving estimates for commercial vehi-cle operators’ value of time, which can now inform pol-icy decisions concerning the spring load restrictionpolicy, the analysis helped illuminate the advantages ofan adaptive stated preference study in comparison withtraditional stated preference studies. The current stateof the art in using stated preference methods to evaluatethe value of time uses a fee structure in exchange fortime savings, in most cases a toll. It has been shown thatstated preference methods typically underestimate thetrue value of time, since the use of a fee structure fails toaccount for subjects who avoid paying additional feesfor a public good that they may believe they pay for inthe form of taxes. The fine structure included in theadaptive stated preference study we used for this analy-sis helped account for these otherwise “missing” sub-jects and provides a greater estimate for value of timethan do previous studies.

ROAD PRICING AND URBAN FREIGHT INEUROPE: PRACTICES AND DEVELOPMENTS FROMTHE BESTUFS PROJECT

Martin Ruesch

The BestUFS project (Best Urban Freight Solutions) hasrun for 4 years, from 2000 through 2003. Besidesaddressing other urban freight issues, it examines devel-opments in pricing freight movements specific to urbanareas throughout Europe over the years. Extensiveinformation on the BestUFS project can be found atwww.bestufs.net.

A few of the lessons learned to date are as follows:

• Freight transport’s share of the overall transporta-tion sector will increase in the coming years, and this willbe true both for urban areas and for interurban trips.Therefore, an understanding of the structure of the freighttransport industry, travel patterns, the local framework,the structure of the urban area, and existing access regu-


lations is critical for proper design and implementation ofa road pricing scheme.

• The value of time in freight transport is 5 to 10times higher than for passenger transport. Moreover,the price elasticity for freight movement is low in urbanareas; the possibilities for altering transport patterns arelimited because of access regulations, shippers’demands, and limited modal alternatives.

• European approaches to road pricing for urbanfreight are heterogeneous. The United Kingdom, Nor-way, and Italy lead the field in applying road pricing tofreight vehicles. Switzerland (2001), Germany (2004),and Austria (2004) have introduced or are planningdistance-based heavy vehicle fees.

• The range of approaches includes single road pric-ing (e.g., Norway, France), cordon pricing (e.g., Norway,Italy), network pricing (e.g., Germany), and area pricing(e.g., United Kingdom, Switzerland). While eachapproach has advantages and disadvantages, they tend tobe selected on the basis of local conditions and politicalreality rather than economic theories.

• Financing of infrastructure (e.g., Norway, France,Germany) and demand management (e.g., United King-dom, Switzerland) are the main objectives.

• Despite urban freight’s increasing share of thetransportation sector and its importance for the regionaleconomy, road pricing projects continue to focus onpassenger transport.

• The London congestion charging project, in placesince February 2003, provides an interesting illustrationof the impact of political realities on system design. Orig-inal plans called for a freight vehicle charge of £15, com-pared with £5 for cars, which was estimated to representabout 3% to 5% of the daily costs of truck operations.During the consultation process the transport lobbyreached a reduction from £15 to £5. Since implementa-tion, the reduction of travel times (by 14%) and theimproved reliability (by 30%) are important benefits forurban freight transport. Before implementation the trans-port sector had great doubts, but since implementationacceptance has improved remarkably.

• The Swiss Heavy Vehicle Fee, in place since Janu-ary 2001, provides a fine example of successful intro-duction of distance-based heavy vehicle pricing. Though

focused on interurban freight movement, the approachcould be adapted to urban areas. The main objectiveshave been the internalization of external costs anddemand management. The fee depends on the distancedriven, the vehicle’s maximum gross weight, and itsemission category. For a 40-ton truck the fee is about€0.40 per kilometer (2001–2004) and will be €0.65 perkilometer (after 2005)—about four to six times higherthan the planned fee in Germany. About 70,000 vehiclesare affected by the fee daily, and about 57,000 vehiclesare equipped with an onboard unit to permit electroniccollections. With relatively low capital and operationscosts, collection costs are about 4% to 6% of the rev-enues. Two-thirds of the net revenues are used forfinancing large-scale public transportation projects, andone-third are directed to the cantons to cover roadtransport costs. Positive effects identified during the first2 years of operation include beneficial fleet adaptation,organizational changes, and alternative route and modechoices.

The following is a summary of the main findings:

• Suitable pricing schemes for urban freight trans-port yield reliability and travel time benefits that exceedthe costs.

• Road pricing can improve the efficiency of urbanfreight movement and foster more sustainable logisticsand distribution strategies.

• A demand management approach can generatemore benefits for urban freight transport than a financingapproach.

• Urban transport policy, not only for passenger butalso for freight, ought to address road pricing.

• Urban freight issues should receive greater attentionduring the development of road pricing strategies andshould acknowledge access regulations, emissions cate-gories, vehicle sizes and types, and ultimately differentiatedload factors depending on a vehicle’s configuration.

• Charges for freight vehicles should be higher thanfor private cars.

• Early attention to interoperability of selected pric-ing systems is critical for preventing later discoveries ofincompatible approaches.

5 3URBAN FREIGHT TRANSPORTATION

5 4

The Price Is “Right”Perspectives on Finding It

Genevieve Giuliano, University of Southern CaliforniaEd Regan, Wilbur Smith and AssociatesJim Bourgart, Parsons BrinckerhoffMark Burris, Texas A&M University

INNOVATIVE FINANCING’S ROLE INPRICING PROJECTS

Genevieve Giuliano

Since the passage of the 1956 Interstate Highway Act,highway infrastructure in the United States has beenfunded, built, and operated almost entirely within thepublic sector. Infrastructure was funded primarily byfuel and other user fees, and projects were built on apay-as-you-go basis. This traditional model of highwayfinance is losing its relevance. Over little more than adecade, an entire array of new funding strategies haveemerged. Termed “innovative finance,” these strategiesseek to leverage public funds by accelerating projectconstruction, facilitating issuance of bonds and otherdebt instruments, tapping into new sources of revenue(including user charges), or attracting private invest-ment. Perhaps the most extreme form of innovativefinance is partial or full private funding and ownershipof highway facilities. This presentation investigates theemergence of innovative finance, offers some explana-tions for its rapid proliferation, and discusses the shiftsin risk that innovative finance implies. By using exam-ples of toll road projects drawn mainly from California,I examine various aspects of risk to understand whyprojects succeed or fail and the lessons that can bedrawn for future projects.

The erosion of highway system funding capacity iswell recognized. The conventional explanation identifiesthe declining productivity of the fuel tax, rising costs of

construction and of maintaining an aging system, devo-lution of financial responsibilities to lower levels of gov-ernment, and general public resistance to tax increases. Iargue that there is more to the story: a more general shiftin perceptions of the role of government, changes in ourunderstanding of transportation industry structure,mixed evidence of broad economic benefits of highways,increased concern with environmental costs, and lack ofconsensus on how transportation problems should beaddressed.

There are many arguments for innovative finance:projects can be built sooner, public dollars are lever-aged, private-sector costs are lower, public–private ven-tures spread risk, and technology now makes possibleuser charges and complex revenue-sharing agreements.Despite these advantages, most innovative finance proj-ects to date have been various forms of fund advance-ments and more flexible financing arrangements.Relatively few new highway projects include significantprivate-sector participation.

My assessment of two groups of projects—theAssembly Bill 680 toll road projects in California andfour new suburban toll roads—focuses on the varioustypes of risk such projects face. I conclude that success-ful projects require uniquely favorable conditions; polit-ical acceptance and the sustained support of publicpartners are critical. Fully private facilities are generallynot economically viable because of very long paybackperiods and uncertain user revenue streams. Moreover,the public sector retains the residual risk, even in thecase of fully private projects.

EXPERIENCES WITH ACTIVE PROJECTS:INTERSTATE 10

Ed Regan

As congestion pricing moves from theory to practice,new opportunities for providing higher-quality trans-portation through the use of managed lanes and,potentially, bus rapid transit are emerging. Two primeexamples of managed lane facilities are (a) the newInterstate 10 managed lanes project in Houston, whichis being implemented as part of a major Katy Freewayimprovement program and which provides an excel-lent illustration of the opportunities offered by blend-ing the high-occupancy toll (HOT) lane concept withbus rapid transit, and (b) the existing Interstate 15managed lanes project in San Diego, soon to be morethan doubled in size.

The Interstate 10 expansion program involves expan-sion of an existing seven-lane highway [six general-purpose and one high-occupancy vehicle (HOV) lane] toeight general-purpose and four value-priced managedlanes. The managed lanes are being financed by the HarrisCounty Toll Road Authority. Under a multiagency agree-ment, transit buses will be able to use the managed lanestoll free, and the toll agency has committed to charge suf-ficiently high prices to ensure free-flowing operations inthe managed lanes even during peak periods.

As a result, the Interstate 10 managed lane solutionessentially creates a two-directional, free-flowing “vir-tual” busway, shared with (and paid for by) passengercar motorists willing to pay a toll to obtain the same timesavings advantages afforded to the buses. In this way,HOT lanes and bus rapid transit will be able to workbetter together, a “win-win” scenario for both the high-way side and the transit side. Twinning these features hasthe potential to result in an integrated high-quality trans-portation solution that can manage demand while gener-ating revenue and providing a built-in incentive forincreased use of transit.

Another managed lane application meriting attentionis the successful Interstate 15 project in San Diego, whichstands as the world’s first and only use of fully dynamicvariable pricing. Single-occupant vehicles are allowed to“buy in” to previously constructed HOV lanes, and onenoteworthy feature of this project is the extremely posi-tive results generated from extensive public opinionpolling. The surveys have shown strong support for thevariable pricing approach, with overwhelming approvalregistered by both users and nonusers of lanes as well ascarpoolers and transit patrons. In fact, the most frequentresponse to a question about the single most effectiveway to reduce congestion on other portions of Interstate15 was to extend the tolled express lanes, which showed

consistently more support than simply adding toll-freeregular lanes.

INTERSTATE 680 AND OTHERCALIFORNIA PROJECTS

Jim Bourgart

By charging single-occupant vehicles for the opportu-nity to use freer-flowing HOV lanes, HOT lanes offer anumber of benefits: more efficient use of HOV lane andfreeway capacity, revenue generation to support trans-portation improvements, and the opportunity to sustainpublic support for existence of HOV lanes at all.

A prime example of the HOT lane concept is theplanned 14-mile Interstate 680, which emerged as astrong candidate because of the following characteris-tics: (a) sufficient distance with heavy congestion andstrongly directional commute traffic, (b) relatively fewinterim on/off users given the concentration of SiliconValley jobs at the south end and residences at the northend, (c) sufficient right-of-way and the preexisting planto include HOV lanes on the facility, and (d) real finan-cial needs. The anticipated alignment will include threegeneral-purpose lanes in each direction and an HOV-HOT lane in each direction as well.

The tolls will be adjusted up or down periodically onthe basis of demand, which will ensure that the com-bined HOV-HOT lane does not become congested. Thespecific approach for the fee structure is being devel-oped through use of an optimization model that inter-acts with the regional transportation model and solvesfor prices that meet efficiency, revenue maximization,throughput, and other desired goals. Because the key tovalue pricing is motorists’ desire to trade off time versuscost, one of the keys to making an accurate variablepricing forecast is the distribution of users’ value oftime. At first, we anticipate a peak toll rate of between$3 and $4 for the full 14-mile distance. There will alsobe an off-peak price and a “shoulder” period price. Atthis level, tolls in both directions would generatebetween $6.3 million and $14.7 million in revenues in2006 and between $12.3 million and $31.9 million in2025. Revenues will be used to pay for HOT lane oper-ations, improved bus service on the I-680 corridor, andcapital improvements to the I-680 corridor.

One of the most interesting parts of the analysis wasthe impact of the definition of “HOV” (two versus threeor more vehicle occupants) and the availability of inter-mediate access into the HOT lane. Not surprisingly, anHOV-3 policy generated significantly more revenue.The following table shows the anticipated 20-year netpresent value of operating incomes at a 4% discount

5 5THE PRICE IS “RIGHT”: PERSPECTIVES ON FINDING IT

rate under various scenarios in 2002 (U.S. dollars inmillions):

HOV2+ HOV3+

No intermediate access 142 207With intermediate access 83 228

Consistent with its design as a demonstration proj-ect, the I-680 HOT lane approach has the capacity tooffer answers to some of the questions that continue toaccompany the value pricing concept. Will drivers seethe HOT lane as worthwhile? How much will they bewilling to pay? How many vehicles and people can movethrough this corridor, and at what speeds? Can smoothtraffic flow be maintained? How much revenue will begenerated? And perhaps most difficult, will the systembe perceived as fair?

The project also presents its designers with some realoperational challenges and the opportunity to investigatesuch things as the effectiveness of enforcement policies,the impacts on HOVs, and the impact of constraining orincreasing access to the HOV-HOT lane. Other pricingstudies in the Bay Area have generated some helpfullessons; those studies include the I-880 commercial vehi-cle initiative, the Sonoma–Marin US-101 HOT Lanes,Santa Cruz Highway 1, and the Bay Bridge CongestionPricing Project.

PRICE DEMAND ELASTICITIES AND USAGE OFHOUSTON’S HOT LANES

Mark Burris

The HOV lanes in Houston were highly successful—sosuccessful, in fact, that two of them (Katy and North-west) exceeded capacity during the morning peak periodwhen they were open to all vehicles with two or moreoccupants. However, after raising the occupancy restric-tions to three or more persons during the peak periods,there was significant excess capacity. Therefore, to bet-ter utilize the lanes, Houston METRO and the TexasDepartment of Transportation implemented a valuepricing project named QuickRide.

QuickRide is an innovative project designed to usethe capacity of the HOV lanes on the Katy and North-west freeways more effectively. Under this project, two-person carpools can pay $2.00 to use the HOV lanesduring the peak period, even though the lanes are nor-mally restricted to vehicles with three or more occu-pants. This form of HOV lane is typically termed aHOT lane and can be an effective travel demand man-agement and congestion mitigation tool.

This method of managing demand has worked wellsince its implementation in 1998, with steady increasesin usage and enrollment. However, with reconstruc-tion of the Katy Freeway corridor under way, the KatyHOV lane could be an even more valuable asset inmanaging traffic, both peak and off peak. In addition,more HOV lanes in the Houston area are nearingcapacity during peak periods. Therefore, additionalefforts are under way to increase the QuickRide proj-ect’s effectiveness in utilizing the HOT lanes. Thiscould include increasing the hours of QuickRide oper-ation, dynamic pricing of the HOT lanes on the basisof congestion, variable pricing of the lanes on the basisof time of day, and even allowing single-occupant vehi-cles on the lanes for a higher toll than those paid bytwo-person HOVs.

One important tool for use in predicting driverresponse to these potential toll changes is the priceelasticity of demand for the HOV lane. For 1 month,April 2003, the price of QuickRide was reduced to $1per trip. The resulting price elasticities of demandranged from –0.11 to –0.26, with an average of –0.19.These results indicated an inelastic response to changesin the toll.

A survey of QuickRide enrollees and former enrolleeswas also conducted in spring 2003. The survey resultssupported the previous elasticity results. The primaryissue limiting QuickRide use appears to be one of conve-nience rather than cost. Both current and former partici-pants cited the inconveniences of carpooling as thegreatest deterrent to QuickRide use, while 73.4% of par-ticipants reported that the toll had little or no impact ontheir decision to use QuickRide. A survey of corridortravelers who do not use QuickRide is scheduled for fall2003; we anticipate that this survey will provide addi-tional insight into driver behavior to optimize the pricingstructure for the HOT lanes.


5 7

Factoring Pricing into the Planning Process

Yvonne Need, AVV Transport Research Center, NetherlandsRobert Dunphy, Urban Land Institute

PUBLIC ACCEPTANCE OF PRICING SCHEMES FORTHE NETHERLANDS

Yvonne Need

The Netherlands’ experience with road pricing datesback to 1995, when a coalition of political leaders for-mally accepted pricing as a means to manage traffic andfinance infrastructure. However, in the following yearsthe policy received significant scrutiny from Parliamentand opposition from the Dutch motoring lobby. By2001, transportation officials were focusing on a simplecharge-per-kilometer approach, because they had foundthat actual congestion-based charges suffered from atroubling lack of public acceptance.

Surveys found little public acceptance for pricing, orfeigned acceptance. The surveys also identified a signif-icant distrust of government, which primarily took theform of suspicion that road pricing is meant not to pre-vent congestion but rather to collect more money forthe state. A companion concern was that prices wouldgo up any time the government felt the need for morerevenue.

The surveys also revealed a remarkable lack ofawareness of the nature of congestion. Most respon-dents said that the biggest problem on the roads was thebehavior of other road users; only 32% of respondentsnamed congestion itself as a problem. Congestion wasalso seen as a simple fact of life and as something thatwould be impervious to any policy initiatives seeking toinfluence it. Understandably, most respondents viewedcongestion as a societal problem produced by others,

with individuals stating that they themselves do notdrive more than necessary.

The public also expressed concerns about fairness,and particularly the fear that pricing will lead to a systemin which the rich will be able to drive as much as theyplease while the poor won’t be able to afford to driveanymore. Concerns about fairness also centered on afear of fraud, such that honest people would end upshouldering most of the financial burden. Finally, a smallbut passionate majority voiced anxiety about pricing’simplications for personal privacy.

Given the public’s concerns about congestion pricing,I would like to put forward a series of recommendationsfor advancing the political viability of congestion pric-ing. The recommendations include a commitment to usestrong communications as the pillar of the introductionstrategy, an effort to discuss and demonstrate antici-pated effects at the individual and societal levels, andassurance that all claims can be substantiated. It is alsoimportant to develop a good marketing strategy andstate the program’s goals clearly. From a technical per-spective, planners should avoid starting with a low pricethat is sure to be raised later, and they should avoidfunding systems that force citizens to pay for the costsof introducing the program. It is also worthwhile toidentify groups that will gain and groups that will loseout so that any equity implications of the pricing pro-gram can be directly addressed. Finally, in recognitionof the concerns raised by the small but vocal minoritywho are especially concerned about privacy, it is impor-tant for the program design to include safeguards thatguarantee the privacy of system users.

PRICING TRAFFIC, PACING GROWTH

Robert Dunphy

New developments in transportation pricing and contin-ued shortfalls in public coffers indicate that the time isright for a different approach to funding transportation.Significantly, expanded use of road pricing promises alsoto help pull new housing inward, in contrast to the cur-rent system under which people often accept longer com-muting distances in an attempt to find lower-pricedhousing. Several new pricing strategies have the poten-tial to exert an especially powerful influence on land usepatterns.

The first is a street service fee, which would shift thelion’s share of highway finance from the gasoline taxto a street service fee paid by the month, similar to feesfor cable TV or the Internet. This approach wouldresult in an immediate drop in the price of gasoline,simplify the adjustment of user charges, and protecttransit revenues. A monthly utility or telecommunica-tions fee is already familiar to most Americans andthus would not represent a wholly foreign concept. Itcould also make car taxes more palatable by spreadingthem over a year rather than imposing them in one ortwo payments per year, as is typical for most car licens-ing fees. A simple fee would be based on annualmileage estimates adjusted regularly for actual use.Technology could allow the charging of higher rateson congested facilities.

The second is an honest pricing approach. The grow-ing acceptance of charging solo drivers for an uncon-gested commute in HOT lanes creates a newopportunity to fund radial highways needed to accom-modate suburban growth. New radial roads needed toserve suburban expansion would all be priced. Ratherthan choosing the largest house for which a buyer qual-ifies and worrying about the traffic later, a “drive to

qualify” decision would require weighing the savings inhouse payments against potentially significant marginaldriving costs. Asking home buyers to pay the cost ofsprawl could help reverse the middle-age spread of mostregions and create a sizable new funding source. Itwould also protect residents of new developments froma future of being stuck in traffic.

Four recent experiences in pricing demonstrate thegrowing acceptance of a price-based approach to financ-ing infrastructure and managing demand; they also pro-vide good test cases to help us understand the land useimplications of various pricing approaches. Land useresults from the following experiments can be expectedto generate informative results in the coming years. Atone end of the spectrum, HOT lane demonstration proj-ects are the “light beer” of pricing even though theyrequire considerable efforts for successful implementa-tion. At the other end, London’s congestion chargingscheme represents a “deep pricing” approach and offersa new model for many cities struggling to deal with theeffects of car traffic.

• Unprecedented improvements in London’s trafficbrought about by London’s program have rewardedMayor Ken Livingstone with strong public support.

• A “London-like” proposal for New York couldresult in similar levels of congestion relief, as well as aninfusion of between $7 billion and $19 billion for badlyneeded transportation investments.

• In Minnesota, which has studied pricing since1994, the stars are aligned to create the state’s first HOTlane conversion on Interstate 394, reinforced by theneed for money.

• The Seattle, Washington, region, whose 205-milenetwork of carpool lanes is one of the nation’s largest, isabout to proceed with its first HOT lane and has stud-ied an extensive pricing system for a regional networkof 131 miles on seven major highways.


5 9

Responses to FindingsThe Future of Pricing

Steve Heminger, Metropolitan Transportation Commission and Conference Chair, FacilitatorEmil Frankel, U.S. Department of TransportationMarcel Rommerts, European CommissionAnne Canby, Surface Transportation Policy ProjectDan Beal, Automobile Club of Southern California

The symposium closed with a roundtable discus-sion facilitated by Steve Heminger, conferencechair.

In response to a question on the toll and pricing provi-sions included in the U.S. administration’s proposed bill toreauthorize the federal highway and transit programs,Emil Frankel noted that two factors—the difficulty ofexpanding capacity through new infrastructure and ashortage of capital—have coalesced to create sustainedinterest in road pricing. As a result, the administration’sbill calls for a gradual “mainstreaming” of the prior tollprovisions. Mr. Frankel also noted that the legislation ispermissive, not directive, in allowing states and local gov-ernments the flexibility to pursue pricing as standard prac-tice rather than through a pilot project. The bill stoppedshort of repealing the ban on tolls on the Interstate system,however, in recognition that the nation has not fullyentered the road pricing era, though it is close to doing so.

The administration joins with others in the trans-portation community in its concern for the fuel tax’slong-term sustainability as the principal revenue sourcefor funding the nation’s surface transportation system.While the administration chose not to include a direc-tive for a blue ribbon commission to examine alterna-tives to the fuel tax in its bill, research into user-basedmechanisms is well under way; the administrationexpects that the nation will be in a good position to veta range of alternatives by the time of the next surfacetransportation reauthorization. Mr. Frankel added thattechnological advances are key to broadening the rangeof available policy choices and indicating which policiesare most feasible and desirable.

Audience members posed several questions to Mr.Frankel. A speaker from Minnesota noted the criticalityof the federal value pricing pilot to that state’s decisionto undertake a pricing experiment and expressed con-cern that “mainstreaming” value pricing through elimi-nation of the value pricing pilot program could haltfurther progress in the area. Another speaker questionedthe administration’s decision to delete the directive for ablue ribbon commission to consider alternatives to thefuel tax. Mr. Frankel noted that this is a pivotal time, inthat the “push” of resource constraints is coincidingwith the “pull” of new technologies to spur greaterattention to pricing systems. He expressed confidencethat pricing, if properly explained to the public, wouldgarner widespread support.

To provide a European perspective, Marcel Rom-merts explained that while Europe already has manyinterurban toll roads, ample opportunity exists forrefinements, especially in the area of truck-bornefreight. Mr. Rommerts indicated that the increased useof pricing for trucks is expected to level the playing fieldamong the various transport modes and classes of vehi-cles and, of course, to raise revenue. Another key lessonto date is that in contrast to the interurban point-to-point model, the cordon-based approach that Londonhas successfully implemented is emerging as a promisingstrategy. He noted that more experiments in Europeancities are likely in the coming years but that a politicalchampion for the strategy is essential; in London, KenLivingstone’s persistence and enthusiasm for the cordonsystem were critical to the ultimate implementation ofthe pricing program.

Mr. Heminger asked Anne Canby whether a consen-sus was starting to emerge among those who have regis-tered concern over pricing’s potential implications forequity and those who have favored pricing for its envi-ronmental benefits. Ms. Canby said that the tensionssurrounding road pricing underscore the need for abroad tent. She added, however, that different groups’objectives may be more consistent than might firstappear; for example, the environmental community’ssupport will depend, in large part, on the dedication ofrevenues to strategies designed to broaden and improvethe public’s travel choices. Groups such as the SurfaceTransportation Policy Project also call for full consider-ation of pricing’s widespread impacts; for example, sheadded, officials in Delaware fully integrate the statetransportation funding and investment system into anoverall transportation strategy. Both of these conditionsare clearly consistent, with close attention to the equityimplications of any pricing project.

Ms. Canby went on to say that equity remains apressing issue, and given that the cost of transportationis a proportionally greater burden on those with lowerincomes, any pricing scheme ought to include strategiesfor offsetting the economic impacts on poorer travelers.Political support can be mustered only through absolutetransparency in the decision-making process and earlyinvolvement of the grassroots community. In general,decisions should be made at the level of governmentclosest to the impacts of the scheme itself; in urbanareas, for example, the focus probably should be on the

metropolitan planning organization rather than thestate department of transportation.

Finally, representing the automobile users of theUnited States, Dan Beal stated that the American Auto-mobile Associaton is well informed by its more than 40million members and its own research of the manytransportation challenges facing mobility in the UnitedStates. The association is well aware that the currentsystem for funding U.S. highways will face severe chal-lenges in the years ahead. Citing a distinction made inthe past by Ken Orski of the Urban Mobility Corpora-tion, Mr. Beal explained that while “value pricing,”which offers drivers an option to pay for a superior levelof service, may be acceptable to the association, moreskepticism surrounds full-fledged congestion pricing, inwhich pricing is used to manage demand even in theabsence of any benefit to those who pay. Mr. Beal addedthat the association’s support of the State Route 91 andInterstate 15 express lanes underscored this perspective.One remarkable outcome of the SR-91 experiment, headded, is that the original allegation that the expresslanes would turn into “Lexus lanes” was disproved; infact, the benefits have been widely distributed. He reit-erated that this outcome—the creation of an improvedlevel of service for a large number of drivers—was essen-tial to the association’s support of any pricing project.Mr. Beal also noted that proponents of pricing mustmake a convincing case of its merits and not simply seekto impose it on the public through an assumption ofwhat is best for American drivers.


Resource Papers

6 3

RESOURCE PAPER

Then and NowThe Evolution of Congestion Pricing in Transportation andWhere We Stand Today

Martin Wachs, Institute of Transportation Studies, University of California, Berkeley

The proposition that roads should be priced inpart to manage congestion by influencing trafficflows is not a new one. References to the con-

cept have appeared in the scholarly literature for atleast 83 years. But, like many good ideas in the realm ofpublic policy, it has taken quite a while to catch on. Theviews of scholars do sometimes influence public policy,but only after being shaped by policy makers and opin-ion leaders do they ultimately make their influence felt.The question we are here to explore is whether roadpricing has finally entered or is about to enter the main-stream of transportation policy. We will do this at aninternational conference because the history of trans-port policy, the nature of road pricing, and the responseto experiments with congestion pricing are sensitive tothe contexts in which they have been discussed andattempted, so there is much to learn through compari-son. Over the coming few days we will hopefully learnfrom and teach one another by analyzing how historyand current experiments in many places interact withand depend on their physical, social, economic, andpolitical environments.

I believe our deliberations and case studies will con-vince us that road pricing is not quite yet within the main-stream of transportation policy options but that moreprogress has been made in that direction in the last decadethan had been made in the preceding 70 years. Road pric-ing is at a critical juncture in North America today. Itremains fragile, yet it is poised to be adopted on a muchbroader scale than would have seemed feasible only adecade ago. There is still a great deal of skepticism andsome overt opposition on the part of policy makers and

elected officials, but the concept has survived and has beentested in a number of applications despite widespreaddoubts. A decade ago I thought the odds were againstachieving road pricing on a large scale, but today I am farmore optimistic, and the reasons are the organizing themefor my presentation.

EVOLUTION OF ARGUMENTS FOR CONGESTIONPRICING IN THE UNITED STATES

Congestion pricing was, to my knowledge, first sug-gested by economist A. C. Pigou in 1920. His words arereproduced in the accompanying Box 1. Pigou’s conceptwas amplified by economist Frank Knight in 1924, in apassage also reproduced in the box. The language usedby these two distinguished economists is not terribly dif-ferent from that used in later years by such well-knownadvocates for congestion pricing as Nobel laureateWilliam Vickrey in the 1960s and 1970s.

It would be a mistake to interpret these early sugges-tions as a quaint historical footnote that was of limitedrelevance to the political debates about transportationthat were current when they were written. In the early1920s, in both the United States and Europe, automo-bile ownership and the use of motor trucks were grow-ing at more rapid rates than at any time before or since.While the provision of roads had for many centuriesbeen a responsibility of local communities, the dramaticgrowth of automobile and truck travel in the early1920s was causing much greater traffic between com-munities, and the emphasis in transport policy making

was on providing a fundamental road network to getfarmers “out of the mud” and to enable citizens to driveover longer distances between towns. In Europe, respon-sibility for building new main roads most often fell tonational governments, while in the United States respon-sibility for providing mile after mile of new highwaysfell primarily to the states. Many states found them-selves spending a major proportion of their general taxrevenues on road building, yet congestion was worsen-ing because of rapid growth in travel rather than beingeliminated by these projects.

At exactly the time that Pigou and Knight were writ-ing, Oregon had set the tone before 1920 by adopting amotor fuel tax that was hypothecated or earmarked tobe spent only on road construction and maintenance.Dozens of states adopted such taxes in the 1920s. Inter-estingly, texts of the debates held by state legislatures atthat time indicate that most of them consciouslyadopted the fuel tax as a second-best approach. Theybelieved that tolls were inherently the most appropriateway to raise money for roads, since the beneficiarieswould pay at the time and place of use, but tolls wereexpensive and awkward to collect. In addition toabsorbing a fifth to a quarter of their proceeds in costs

of administration, tollbooths themselves created traveldelays and traffic safety hazards. Motor fuel taxes wereseen as imperfect substitutes, but they had the advan-tage that they were easily administered and that thecosts of administering them were closer to 3% or 4% oftheir proceeds. Hypothecated motor fuel taxes werepopular among truckers, automobile clubs, newspapers,and politicians, and they played a central role in provid-ing the basic road infrastructure that was at that time sodesperately needed (Brown 2001).

Over many decades we became so accustomed topaying earmarked fuel taxes, including those leviedsince 1932 by the federal government, that we graduallyforgot there had ever been discussions of tolls as a supe-rior means of financing transport systems. As roadcapacity expanded, we also failed to note that discus-sion of congestion tolls was highly relevant to publicdebates about how to manage congestion on roads andsimultaneously to raise revenue needed to build roads aspart of that management program. Most Americans,unfortunately, think that where tolls are not chargedtheir roads are “free,” while of course they are payingfor their travel through a variety of other taxes and feesthat they may not even know of.


PIGOU ON CONGESTION PRICING IN 1920Suppose there are two roads, ABD and ACD, both lead-ing from A to D. If left to itself, traffic would be sodistributed that the trouble involved in driving a “repre-sentative” cart along each of the two roads would beequal. But, in some circumstances, it would be possible,by shifting a few carts from route B to route C, greatly tolessen the trouble of driving those still left on B, whileonly slightly increasing the trouble of driving along C. Inthese circumstances a rightly chosen measure of differen-tial taxation against road B would create an “artificial”situation superior to the “natural” one. But the measureof differentiation must be rightly chosen.

Source: Pigou 1920 (see especially p. 194).

KNIGHT ELABORATING ON PIGOU IN 1924Suppose that between two points there are two high-ways, one of which is broad enough to accommodatewithout crowding all the traffic which may care to use it,but it is poorly graded and surfaced, while the other is amuch better quality road but narrow and quite limited incapacity. If a large number of trucks operate between thetwo termini and are free to choose either of the tworoutes, they will tend to distribute themselves between

the roads in such proportions that the cost per unit oftransportation, or effective result per unit of investment,will be the same for every truck on both routes.

As more trucks use the narrower and better road,congestion develops, until at a certain point it becomesequally profitable to use the broader but poorer high-way. The congestion and interference resulting from theaddition of any particular truck to the stream of trafficon the narrow but good road affect in the same way thecost and output of all the trucks using that road.

It is evident that if, after equilibrium is established,a few trucks should be arbitrarily transferred to thebroad road, the reduction in cost, or increase in out-put, to those remaining on the narrow road would bea clear gain to the traffic as a whole. The trucks sotransferred would incur no loss, for any one of themon the narrow road is a marginal truck, subject to thesame relation between cost and output as any truckusing the broad road. Yet, whenever there is a differ-ence in the cost, to an additional truck, of using thetwo roads, the driver of any truck has an incentive touse the narrow road, until the advantage is reduced tozero for all the trucks.

Source: Knight 1924.

BOX 1Pigou and Knight on Congestion Pricing

In Europe, tolls, fuel taxes, and hypothecation werealso debated at just about the same time that Pigou andKnight were writing. Hypothecation was much morerarely adopted in Europe than in the United States. Inmost instances fuel taxes were merged with governmentrevenues from other sources while appropriations forroads were made from general government funds. Nev-ertheless, fuel taxes emerged as sources of revenue forgovernments that, in Europe as in North America, werebuilding thousands of miles of new roads in response tothe growth of automobile travel at the time.

Over many decades growth in travel continued tocreate congestion, but through motor fuel taxes andtolls levied on some major long-distance highways andmany bridges, growth in travel also produced growth inrevenue that was used to build and maintain the trans-port system. It was not until the 1960s that this methodof infrastructure finance and management began toshow signs of deterioration.

Population and economic growth after World War IIled to urban congestion. In response, urban and subur-ban highways and freeways were constructed to allevi-ate overcrowded city centers.

Gradually, the earlier solutions came to be seen asinadequate. The costs of new roads grew as higher designstandards were used; more property was taken; and com-munities demanded mitigation measures to addressincreasingly controversial losses of homes, businesses,and recreational facilities. Gradually, too, citizens andpoliticians became increasingly reluctant to raise the rateof motor fuel taxation, and highway budgets becamemore limited as inflation reduced the real value of tax col-lections (Taylor 1995). In addition, many jurisdictionsbelieved that it was appropriate to spend highway userfees for nonhighway purposes. In some places, it was seenas reasonable and proper to use motor fuel tax revenuesto support public expenditures on maintaining andupgrading public transit systems as they gradually weretransferred from private to public ownership. In otherjurisdictions, motor fuel tax revenues were used for non-transportation purposes. In Texas, for example, one-fourth of the proceeds of motor fuel taxes are earmarkedfor expenditures on public education. However well jus-tified these policies were seen to be by many citizens, theywere seen by others as a “diversion” of what rightfullyshould be spent on highway programs (Roth 2003). And,whether or not fuel taxes rightfully should be reserved forhighway programs, highway spending in real dollars hasdeclined in relation to growth in population and travelfor several decades.

The effects of these trends on highway programshave been exacerbated by the gradual increase in fleet-average fuel economy. While new cars typically trav-eled about 12 miles to the gallon in 1950, today averagenew car fuel efficiency is well over 20 miles per gallon,

and even sport-utility vehicles today are more econom-ical of fuel than were standard sedans three decadesearlier (Wachs 2003). In the United States the federalgasoline tax now stands at 18.4 cents per gallon, andstate motor fuel taxes range from a low of 7.5 cents pergallon in Georgia to a high of 29 cents per gallon inRhode Island. If the fuel tax had risen sufficiently since1957 to keep pace with the Consumer Price Index, theaverage tax per gallon among the 50 states would todaybe 9.7 cents per gallon higher than it is. If measured inrevenue per vehicle mile of driving, the effects ofimproved fuel economy make this comparison even moredramatic. In Virginia, for example, the combination ofstate and federal fuel taxation today produces revenuethat is 42.4% below the proceeds per mile of driving in1957. On the one hand, the method of raising revenuefor transportation projects does not meet rising costs,and so the condition of the system deteriorates and thecapacity of the system expands much more slowly thantravel volumes. For example, between 1980 and 1999vehicle miles of travel on U.S roadways grew by 76 percent, while lane miles increased by only 3 percent(Wachs 2002).

On the other hand, the method of collecting revenuedoes not itself induce more efficient use of the system, asmany believe congestion pricing would do. It was there-fore quite logical that as the fuel tax gradually producedless revenue in relation to travel, many started to renewthe call for congestion pricing. Proponents like WilliamVickrey took cognizance of its complementary proper-ties. It produces needed revenue while encouraging moreefficient use of existing road capacity by inducing someto shift their travel to off-peak times, to other modes,and to less crowded roads. These properties are notedso persuasively by Vickrey in his own writings that Ihave reproduced some of his statements here rather thanparaphrasing them (see Box 2).

It was not at all coincidental that calls for increasedapplication of congestion pricing arose in the 1960s and1970s and accelerated in the 1980s and 1990s as high-way programs were affected simultaneously by conges-tion resulting from growth in economic activity anddeclining revenue from the motor fuel taxes in relationto travel. While Singapore had adopted congestion pric-ing with some success, it remained largely untested inthe United States and Europe, a reflection of politicalrealities that always make it difficult to shift direction inmore than incremental ways in democratic societies.

Despite growing attention to road pricing by scholarsand sophisticated policy wonks, it was difficult to findmany practical politicians who advocated pricing. Alt-shuler (1965) had noted several decades ago that poli-cies are adopted when they spread benefits broadly andconcentrate costs narrowly, while those that spreadcosts more widely, like road pricing, are far more diffi-

6 5THEN AND NOW

cult to enact. In addition, in the American political sys-tem, proposals must survive many rounds of review anddiscussion by diverse interest groups before numerouslegislative committees and often at many levels of gov-ernment. To be enacted, a proposal must be supportedin most of these settings. Those that are hailed by someand condemned by others most often fade away in ourconsensus-directed democracy (Wachs 1994). Whilecongestion pricing had its outspoken advocates, I wrotein the early 1990s that it also had many detractors, andthe latter were often more influential. The advocateswere professors and environmentalists with limitedpolitical influence, while the detractors were morenumerous and more potent political adversaries, includ-ing automobile clubs, trucking associations, and cham-bers of commerce. Under such circumstances, it wasdifficult to anticipate, only one decade ago, the adop-tion of road pricing in the near future in democraciessuch as the United States.

THE CURBING GRIDLOCK STUDY

Under the circumstances I have outlined above, roughlya decade ago the Transportation Research Board andthe Commission on Behavioral and Social Sciences andEducation of the National Research Council (NRC)agreed to conduct a joint study that would

• Assess and synthesize available research and expe-rience on congestion pricing,• Commission papers on critical issues raised bycongestion pricing to be presented at a national sym-posium, and

• Develop recommendations on the potential roleof market pricing principles as a tool for congestionmanagement, guidelines for the assessment of theimpacts of congestion pricing experiments, and fruit-ful areas for further research, demonstration, orexperimentation. (Transportation Research Boardand Commission on Behavioral and Social Sciencesand Education 1994, v)

A committee of 15 experts assisted by capable NRCstaff members and eight nonvoting liaison representa-tives from interested government agencies and industryassociations met and deliberated over a period of nearly3 years. The report of this committee consists of twovolumes, one in which its findings and recommenda-tions are summarized and a second containing thepapers that were commissioned and presented at thenational symposium. The report provides a good sum-mary of the state of congestion pricing a decade ago,and thus it is an important baseline that we may use atthis symposium to measure accomplishments andchanges in attitudes and expectations over the pastdecade. The findings and recommendations containedin Curbing Gridlock are summarized in Boxes 3 and 4,respectively.

I would characterize the outcomes of Curbing Grid-lock as guardedly optimistic with respect to the poten-tial of congestion pricing to become a substantialelement of the transport policy agenda in the UnitedStates. Like many commissions and committees createdin the public policy arena, and consistent with the man-dates of the National Academies, this study committeeavoided enthusiastic advocacy. It attempted to present abalanced view based on the availability of partial evi-


There are probably few areas in modern economic soci-ety where conditions are as far from ideal as in the con-gested traffic and transportation facilities of our greatmodern metropolitan conurbations. This is equally truein the short run, in terms of making the best use of thefacilities we have and, in the longer run, in terms of theappropriateness of the facilities for current and projectedtraffic needs.

This relative inefficiency can be attributed in largemeasure to the fact that the individual user, faced withalternative ways of achieving his objectives, does not,under existing conditions, receive any obvious indica-tion of the costs which his choice will impose on oth-ers, whether by impairment of the quality of service orby the cost of expanding the facilities to the pointwhere this impairment is prevented.

To begin with it is perhaps worth observing that some-times a facility becomes worthless precisely because it isfree. For example, where a high-speed or short-cut facil-ity of limited capacity has as an alternative a more cir-cuitous or slower route with ample capacity, freeoperation may mean that a queue builds up during heavydemand periods at the access to the faster facility untilthe time required for queuing and transit is equal to thetransit time by the circuitous route; under these circum-stances no-one is able to make the trip any faster than ifthe faster route did not exist. Enlargement of the fasterroute may be a complete waste of money unless the routeis enlarged sufficiently to take care of all traffic thatmight offer.

Source: Vickrey 1967.

BOX 2William Vickrey on Congestion Pricing

dence. It indicated that the potential of road pricing tocontribute to the lessening of congestion in urban areaswas significant but largely untested at the time. It con-centrated on urging further study, research, experimen-tation, and evaluation of field experiments and onrecommending governmental programs that wouldmake them possible. It concluded that most evidencesuggested that road pricing could make a significantcontribution to the alleviation of worsening traffic con-gestion. Yet the report simultaneously acknowledgedgreat uncertainty with regard to distributional issues:Could such programs be carried out without harminglower-income travelers, women, and members of minor-ity groups? The report also acknowledged that as a com-munity of interest we have less insight than we wouldlike into the economic development and environmentaloutcomes of road pricing as well as the implications forland use and urban form.

It is interesting to note that the majority of the recom-mendations from Curbing Gridlock have not been imple-mented, although some important ones have been.Consistent with the recommendations, when the federalgovernment reauthorized the surface transportation pro-gram by enacting the Transportation Equity Act for the21st Century in 1997, the congestion pricing demonstra-tion program was included and renamed “value pricing”to reflect a larger scope including, for example, high-occupancy toll (HOT) lanes. The program, however, isnot slated for inclusion in the Bush administration’s cur-rent proposal for reauthorization in 2003 or 2004. Inaddition, a variety of approaches have been consideredto remove the prohibition on the charging of tolls on theInterstate system, and this restriction no longer seems tobe binding in the long term. And, consistent with the rec-ommendations of the study, Congress has acted to treatemployer subsidies of public transit and employee park-ing more equally than was the case previously. However,the report’s suggestions that Congress provide incentivesto fund major programs in metropolitan areas, fund

extensive evaluations of experimental programs, andprovide matching development funds to local govern-ments have not been enacted. Most of the recommenda-tions aimed at state and local governments and thosethat specifically enumerated research opportunities havenot been undertaken. Despite this, as will be shown inthe following sections, there have been importantchanges in attitudes toward congestion pricing, and it isreasonable to say that public policy makers appearsmore receptive to the concept than was the case at thetime the study was completed.

RECENT PRICING TRENDS IN THEUNITED STATES

Facility Pricing in the United States Versus Area Pricing in Europe

Although road pricing in the United States remains con-troversial and vulnerable to organized opposition, it hasactually advanced dramatically since the publication ofCurbing Gridlock, probably to a greater extent thanhad been envisioned when the report was published. Asmore fully described in the companion resource paperby two European authors, the complexion of pricing inthe United States is noticeably different from that inEurope. Most of the highly publicized applications ofroad pricing in Europe are area pricing schemes, similarto the original application of pricing in Singapore, andinvolve cordons about central city locations. Fees arepaid, as in London or Trondheim, to cross the cordon inorder to enter a central congested area during peak peri-ods. In America, by contrast, there are few applicationsof area pricing schemes. Instead, most applications arelocated on highway facilities, where fees are required toenter certain lanes during periods of congestion.

In part, the prominent difference between the growthof area schemes elsewhere and facility-based schemes in

6 7THEN AND NOW

• Congestion pricing would cause some motoriststo change their behavior.

• Congestion pricing would result in a net benefitto society.

• Congestion pricing is technically feasible.• Institutional issues are complex but can be re-

solved.• All income groups can come out ahead given an

appropriate distribution of revenues.• Some motorists would lose.

• Congestion pricing would reduce air pollutionand save energy.

• The political feasibility of congestion pricing isuncertain.

• Evaluation of early projects is crucial.• An incremental approach is appropriate.

Source: Transportation Research Board and Commission on Behavioral and Social Sciences and

Education 1994, Vol. 1, pp. 4–9.

BOX 3Findings from Curbing Gridlock

the United States reflects the extent of urban decentral-ization in America over the past several decades. ManyAmerican downtowns are thriving, but those that aresuccessful have given greater emphasis to tourism andeconomic activities that cater to visitors, such as con-

ventions and trade shows. They have generally all beenlosing employment and retail sales relative to suburbanareas that provide ample freeway access and acres offree parking. In an environment of vigorous competi-tion for commercial employment and retail trade, few


FEDERAL GOVERNMENT

Congress should extend the pilot program when the Inter-modal Surface Transportation Efficiency Act (ISTEA) isreauthorized in 1997.

Public officials (state, local, or regional dependingon who has authority) should be given discretionregarding the use of revenues collected by congestionpricing pilot projects.

Congress should allow congestion pricing on urbanInterstates or other federal-aid routes if called for instate implementation plans (as required by the 1990Clean Air Act Amendments) or if local or state author-ities can demonstrate the need to manage congestionon these facilities through pricing.

The federal government should provide additionalincentives to encourage pricing on more than just singlefacilities by giving substantial grants or additionalhousing, transit, or community development funds toany metropolitan area with significant congestion thatis willing to experiment with broader pricing strategies,for example, a regional parking management program.

In cases where high-occupancy-vehicle (HOV) laneson federal-aid facilities have clearly failed to induceridesharing, or in cases where local officials can showthat adding congestion pricing on existing HOV laneswould not undermine the region’s HOV strategy, exper-iments should be allowed that would convert under-used HOV lanes to tolled lanes while allowing HOVusers to continue to travel at no charge.

Because of the unique opportunities offered by con-gestion pricing projects to learn about behavioralresponses to variable pricing and how they affect traveldemand, the federal government should bear the bulkof the cost of extensive evaluations.

Matching project development grants should bemade available to local governments, states, tollauthorities, and metropolitan planning organizationsfunded out of the congestion pricing pilot program sec-tion of ISTEA.

Federal law should treat the tax-exempt status ofparking and transit subsidies equally and shouldrequire employers who provide parking subsidies togive employees the option of taking this subsidy in theform of cash.

STATE AND LOCAL GOVERNMENTS

State and local governments should adopt statutes sim-ilar to the California law requiring “cashing out”employee parking.

RESEARCH PRIORITIES

Careful and extensive evaluation of congestion pricingprograms introduced in the United States is the highestpriority for research. Research is also encouraged inother areas as follows.

• The impact of congestion pricing on businesslogistics and commercial carriers.

• The extent to which transit services and revenuescould be improved as a result of congestion pricingand how this might benefit lower-income users.

• Development of improved models for simulatinghousehold travel changes in response to pricing andother travel demand management strategies.

• Improved measures of congestion.• Efficiency and productivity benefits of conges-

tion pricing.• Development of a program to ensure that the

United States learns from current and emerging exper-iments with road pricing in other parts of the world.

• Measurement of long-term land use changes thatmight occur in response to congestion pricing.

• Studies of how the benefits and burdens of poli-cies such as congestion pricing shift over time throughlabor, land, and retail markets.

• Constituency building and the local politics ofimplementation.

• The efficacy of distributing tradable permits toall motorists for driving during peak periods as analternative to charging congestion tolls (this optionwould allow motorists to be “bought off” of congestedroutes rather than being “tolled off”).

Source: Transportation Research Board and Commission on Behavioral and Social Sciences and

Education 1994, Vol. 1, pp. 9–15.

BOX 4Recommendations from CURBING GRIDLOCK

American central business districts could achieve a con-sensus that area or cordon pricing is an appropriatetechnique by which to control traffic congestion. Theyfear that cordon pricing in the center will only acceler-ate the migration of economic activity to outlying sub-urban centers. In their pursuit of economic growth,American downtowns can be said to fear road pricingmuch more than they fear congestion.

It is also the case that the steady decentralization ofresidences and employment in America for more than80 years has resulted in the more dramatic growth ofcongestion on regional freeways than on central citysurface streets. Naturally, then, congestion pricing inthe United States has been more facility based andlocated in suburban settings.

HOT Lanes as a Road Pricing Innovation

A number of authors who participated in the CurbingGridlock study had observed that Americans were evenmore likely than Europeans to interpret road usecharges as punitive, especially because, in many moreinstances than in Europe, roads have already been paidfor by hypothecated user fees in the form of motor fueltaxes. Trucking interests and automobile clubs havebeen complaining for decades that road user fees wouldconstitute charging users a second time for roads thatthey have already paid for directly through fuel taxes,which are themselves “surrogate tolls.” Given this back-ground, it is easy to see that the more successful path tothe adoption of road user charges in America consists ofcharging motorists directly for the production of com-pletely new and beneficial travel options, and not charg-ing them simply for the use of congested roads in orderto regulate flows.

On the SR-91 project in Southern California, forexample, four express lanes were added to an extremelycongested freeway in a suburban setting, and users arecharged to use the new capacity according to a toll sched-ule that varies with the level of congestion, while the pre-existing lanes are not tolled. By capturing those willingto pay more to travel at higher speeds, the newer lanescreate benefit for those who choose to use them and forthose who choose not to pay but who face lower trafficvolumes on the preexisting lanes. Such projects exem-plify the specific conditions under which Americans, inan environment of politically prominent and universalhypothecated user fees, are willing to accept road pric-ing. They see marginal benefits in exchange for the mar-ginal costs that are being imposed on them. Because ofpreexisting requirements that new capacity expansionsprovide special opportunities to high-occupancy vehicles(HOVs) such as carpools and vanpools, the SR-91 proj-ect at first allowed such vehicles to travel in the new lanes

free, and this suggested a more general principle that hasbeen more widely adopted.

Robert Poole, Kenneth Orski, and a number of othertransportation innovators saw opportunities for simi-lar win-win situations in the networks of HOV lanesthat had already been built during the past 20 years ina number of American cities. To promote carpooling,vanpooling, and transit use, thousands of lane mileshad been added to freeways but reserved for HOVs.While some of these lanes actually carry more people inthe peak periods than adjacent general-purpose lanes,they often appear to be less crowded than thosegeneral-purpose lanes. Poole, Orski, and others advo-cated the conversion of HOV lanes that were beingused below their full capacity to HOT lanes. HOVstravel free in such lanes, while additional single-occupant vehicles (SOVs) are allowed to buy their wayin through payment of a premium fee or toll. Again,those paying the toll, who already paid for the roadsthrough their fuel taxes, are not compelled to pay a tollbut instead are given an opportunity to buy an upgradein their travel. In San Diego County an 8-mile HOVlane in the median of a crowded Interstate 15 was con-verted to HOT-lane operation during peak periodsstarting in 1996. Since 1998 the price on this facilityhas been adjusted to reflect current demand in order toassure the HOV users that their travel will not bedegraded by the SOV drivers who choose to buy theirway into these lanes. In Houston, Texas, the Katy Free-way performed a pilot test that charged carpools of twopeople a fee to travel on a similar lane that was free tocarpools carrying three or more people. Other regions,including Alameda County near San Francisco andMinneapolis, Minnesota, are considering the conver-sion of HOV lanes to HOT lanes or building new HOTlanes from scratch.

Later at this conference, others will provide you withmore detailed accounts of these pioneering cases. I wishonly to point out that they have made a huge differencein American policy making. They have moved conges-tion pricing from a hypothetical concept that manyfound frightening to a demonstrated concept that hasworked to the advantage of many who initially had feltthreatened by the concept. Many said that pricingwould not work because people had little or no flexi-bility to change their travel patterns, and these laneshave shown otherwise. Originally derided as “Lexuslanes” that would serve the rich, premium lanes havebeen chosen by many users of many income circum-stances on occasions when they are pressed for timewho would have chosen the regular lanes on other days.One author at the Curbing Gridlock conference hadfeared that congestion pricing would discriminate onthe basis of gender because male travelers often havemore resources than women (Giuliano 1994). Yet some

6 9THEN AND NOW

women have opted for the HOT lanes because of thepressure of trips from work to child care locations andhave reported benefits from the increased range oftravel choices.

Proving the Effectiveness of Electronic Toll Collection

Another important trend during the decade since Curb-ing Gridlock has been the widespread adoption of elec-tronic toll collection technology throughout the UnitedStates. As recently as a decade ago, the lay public andelected officials simply did not believe that tolls were apractical way of either collecting revenues or controllingtraffic congestion, because they envisioned manuallyoperated tollbooths at which expensive employees madechange and delayed traffic. While electronic toll collec-tion using simple transponders has been most widelyapplied to bridges and roads that had flat tolls that donot vary with the level of congestion, their use by mil-lions of Americans is proving that electronic tolls can beuser-friendly and are technically feasible at acceptableoperating cost.

There is no doubt that the dramatic national adop-tion of FasTrack and E-ZPass and other electronic tollpayment systems is making road pricing more feasibleand promising than ever. Familiarity with the operationof electronic toll collection is reducing opposition toroad pricing. Gradually, by relying on electronic tollpayment instruments, some heavily traveled facilities,including New York City toll bridges and the New Jer-sey Turnpike, have introduced modest price differentialsbased on time of day. While these fall short of full con-gestion-based pricing, they are clearly a transitiontoward it on a scale that I would not have envisioned tobe feasible just a decade ago.

In Europe a number of countries have alreadyadopted and others will soon adopt systems ofweight–distance fees for trucks based on electronictolling and vehicle tracking systems that incorporateGlobal Positioning Satellite Systems (GPSS). Similarly,several states in the United States are implementing orconsidering the implementation of such road usercharges for goods movement (Forkenbrock and Kuhl2002). Experiments are either already under way or inthe later stages of planning in Atlanta, Minneapolis, andSeattle that apply GPSS technology to the monitoring ofurban passenger travel to price automobile insurance orroad use in more direct proportion to use and cost. Whilethe general implementation of electronic road usercharges for passenger cars based on time and location oftravel is obviously not yet under consideration, increasedexperimentation and accumulated experience withtrucks will continue to familiarize public officials and

travelers with technological options that will becomemore acceptable over time.

Growing Traffic, Financial Pressures, and anEmphasis on Management

Throughout the United States there is a widely sharedperception that traffic congestion is worsening. Whilethe reality varies greatly by location, it appears that thisperception is generally accurate. Average daily vehicularvolumes grew on urban Interstates by 43% between1985 and 1999. In a study of 68 urban areas the TexasTransportation Institute reported that the percentage ofdaily travel taking place under congested conditionsincreased from 32% in 1982 to 45% in 1999 (Schrankand Lomax 2001); typical motorists faced 7 hours perday of congested roadways in 1999 compared with 5hours in 1982. The Federal Highway Administrationsimilarly reported that road delays, defined as travel tak-ing more time than it would under free-flow conditions,increased by 8.5% between 1993 and 1997.

There are several reasons to believe that highwaycongestion will continue to grow. I indicated earlierthat highway-related revenues are growing far moreslowly than volumes of travel, and there is widespreadunwillingness by elected officials to raise user fees inproportion to increasing costs. In addition, unit costsof construction and maintenance are increasing fasterthan the general Consumer Price Index. Higher propor-tions of state transportation budgets must be spent onmaintenance and rehabilitation, which limits the avail-ability of funds for new capacity. In addition, manymetropolitan areas are spending higher proportions oftheir transport funds on transit investments, which lim-its the availability of funds for highways. Where newhighways are built or existing ones widened, it is morenecessary than ever to invest in mitigation measuresthat lessen the undesirable impacts of highways oncommunities but reduce the funds available for newcapacity. Despite this, highway traffic is growing fasterthan transit use, and urban goods movement—whichcannot be accommodated by transit—is growing at afaster rate than passenger travel.

For all of these reasons, more and more public offi-cials are accepting that America will be expanding high-way capacity much more slowly than highway use forthe foreseeable future. This leads to the suggestion thatwe must do more to manage the capacity that we dohave. This, in turn, is gradually leading to increasing—if still grudging—acceptance of pricing for the purposeof managing flow, especially where the managementstrategy is aimed, as it is on HOT lanes, at the efficientuse of new capacity and the provision of new traveloptions.


EMERGING PROSPECTS FOR THECOMING DECADE AND BEYOND

I expect that recent trends will continue in the UnitedStates and Canada. There will be steady but gradualexpansion of congestion pricing in the face of continu-ing opposition and skepticism. While proponents ofcongestion pricing have long emphasized its potentialcontributions to the improvement of system efficiency,growing shortages of revenues are likely to be as influ-ential as concerns about efficiency in the continuedadoption of electronically priced congestion charges.

A few older American cities, such as New York andBoston, may eventually attempt area-based pricingstrategies that emulate successes that have been achievedin Europe, but I expect facility-based applications ofpricing to continue to be more common in America forreasons noted above.

Similarly, because strong objections remain to the“retrofitting” of congestion pricing on roads that havealready been paid for by other sorts of user fees, I wouldpredict that for some time to come pricing in NorthAmerica is likely to be more commonly attempted atlocations at which new capacity is being added in theform of additional lanes, such as HOT lanes, or whereentirely new road facilities are being added to the net-work. In some cases, these could be new lanes that arespecifically reserved for trucks and goods movementand that are paid for by tolls on the trucks that use them.Gradually, at specific bottlenecks, including heavily con-gested major bridges providing access to the cores oflarge urban regions, congestion pricing will be added ascurrent toll schedules are revised, to manage flow moreefficiently while increasing revenues.

I expect efficiency-based road pricing to be morewidely applied to goods movement over the comingdecade or two than to automobile traffic. Trucks, ofcourse, pay more through user fees than do cars, andthere is more concern that current pricing mechanismsdo not charge them fairly. We expect the volume of goodsmovement to increase over the coming decade muchmore steeply than highway passenger traffic. The instal-lation of electronic devices in trucks and the monitoringof truck movements through GPSS are much furtheradvanced and much more politically acceptable than isthe case with respect to passenger vehicles. I think it pos-sible that truckers will support the construction of truck-only auxiliary lanes on existing but congested Interstatehighways, to be financed by electronically imposed truckfees based on precise monitoring of truck weights anddistances traveled on those facilities.

Gradually, as it is proven that emerging technologycan facilitate more sophisticated pricing schemes with-out confusing travelers or customers, I would expect tosee increased application of dynamic cost-based pricing

to nonroad transportation. These approaches are alreadymore common with respect to passenger air travel thanroad travel. I would expect to see additional applicationsto urban passenger transit systems in the form ofincreased use of off-peak discounts and distance-basedfares. Such approaches may also be applied to far moresophisticated schedules governing the pricing of parkingspaces at urban transit and commuter rail stations aswell as at airports, sports stadia, and other venues thatgenerate a great deal of automobile traffic.

Because equity continues to be an overriding concernin American politics and threatens to slow the progressof pricing unless it is addressed in serious and practicalways, greater experimentation with relating pricing toincome and equity is also likely. For example, I wouldexpect to see the introduction of lower-priced or “life-line” rates for low-income travelers on some facilitiesthat decide to introduce road pricing.

In the much longer term, perhaps over 20 or moreyears, it seems reasonable to expect that motor fuel taxeswill eventually become obsolete as the primary source ofroad user–based financing. Whether fuel cells or othertechnological innovations become the principal means ofpowering motor vehicles, it is reasonable to postulatethat policy makers will attempt to promote the adoptionof new energy technologies by designing tax incentivesto encourage their introduction. With the widespreadavailability of electronic toll collection, however, it isreasonable to think that user fees and hypothecation,long a mainstay of American transportation systemfinance, will evolve from reliance on the taxation of fuelpurchases to the more direct pricing of travel at the timeand place roads are used. This was, of course, originallycontemplated in the 1920s. In fact, those who adoptedthe motor fuel tax at that time thought it was a tempo-rary and second-best solution. I believe they were right,though their vision will have taken much longer toachieve than they could ever have imagined.

REFERENCES

Altshuler, A. A. 1965. The City Planning Process: A PoliticalAnalysis. Cornell University Press.

Brown, J. 2001. Reconsider the Gas Tax: Paying for WhatYou Get. Access, Vol. 19, Fall, pp. 10–15.

Forkenbrock, D., and J. G. Kuhl. 2002. A New Approach toAssessing Road User Charges. Public Policy Center,University of Iowa.

Giuliano, G. 1994. Equity and Fairness Considerations ofCongestion Pricing. In Special Report 242: CurbingGridlock: Peak-Period Fees to Relieve Traffic Con-gestion, Vol. 2, Transportation Research Board,National Research Council, Washington, D.C., pp.250–279.

7 1THEN AND NOW

Knight, F. H. 1924. Some Fallacies in the Interpretation of SocialCost. Quarterly Journal of Economics, Vol. 38, pp.582–606.

Pigou, A. C. 1920. The Economics of Welfare. Macmillan, Lon-don.

Roth, G. 2003. A Road Policy for the Future. Regulation,Spring, pp. 54–59.

Schrank, D., and T. Lomax. 2001. The 2001 Urban MobilityReport. Texas Transportation Institute, College Station.

Taylor, B. D. 1995. Public Perceptions, Fiscal Realities, andFreeway Planning: The California Case. Journal of theAmerican Planning Association, Vol. 61, pp. 43–56.

Transportation Research Board and Commission on Behavioraland Social Sciences and Education. 1994. Special Report

242: Curbing Gridlock: Peak-Period Fees to RelieveTraffic Congestion (two volumes). National ResearchCouncil, Washington, D.C.

Vickrey, W. S. 1967. Optimisation of Traffic and Facilities.Journal of Transport Economics and Policy, Vol. 1, pp.123–136.

Wachs, M. 1994. Will Congestion Pricing Ever Be Adopted?Access, Vol. 4, Spring, pp. 15–19.

Wachs, M. 2002. Fighting Traffic Congestion with InformationTechnology. Issues in Science and Technology, Vol. 19,pp. 43–50.

Wachs, M. 2003. A Dozen Reasons for Raising GasolineTaxes. Public Works Management and Planning, Vol. 7,pp. 235–242.


7 3

RESOURCE PAPER

One Step Forward, Two Steps Back?An Overview of Road Pricing Applications and Research Outside the United States

Anthony D. May and A. Sumalee, Institute for Transport Studies, University of Leeds

This paper is offered as a complement to MartinWachs’s review of developments in the UnitedStates and Canada (Wachs 2005) and aims to

summarize developments in road pricing elsewhere inthe world. This is a substantial challenge, particularlybecause it is being written at a time of rapid develop-ment in the politics of road pricing internationally. Wecannot claim to be expert in or wholly up to date in ourunderstanding of all these developments. What followsshould therefore be taken as a summary of the generalcontext rather than as an accurate account of the cur-rent state of play internationally. We hope to learn moreabout these developments during the conference andwill update this paper in the light of those findings. Inthe meantime, we apologize to anyone whose country’sdevelopments are inaccurately recorded here.

As Martin Wachs notes, developments outside NorthAmerica have taken a different route from those hedescribes (Wachs 2005). All can trace their activities backto the seminal work of Pigou, Knight, and Vickrey but cannow be seen as forming three broad groups. The first andmost extensive is the work on road pricing in urban cen-ters. Such pricing is usually based on charging to cross cor-dons or to be within them and is designed largely to reducecongestion and protect the environment; the London Con-gestion Charging Scheme is the latest and highest-profile outcome of this approach. The second is the devel-opment, as in the United States, of toll highways designedprincipally to raise revenue to finance the road. Whilefew countries outside the United States have developedhigh-occupancy toll (HOT) lanes as an extension of this

concept, Norway has introduced an alternative of tollrings, which are implemented on existing highways butare designed to finance new infrastructure. The third isthe more recent development of proposals for distance-based interurban charging, initially for commercial vehi-cles but potentially for all traffic on congested roads. Wereview progress in all of these, starting with Europe andthen considering Asia and finally, briefly, the rest of theworld. We have, however, limited ourselves to schemesthat reflect at least in part the original principles of roadpricing; we have not attempted to review the wider fieldof toll highway developments.

We conclude this international review of policydevelopments with a summary of the state of play. Thepicture presented is one of many proposals but few suc-cesses, though, as Martin Wachs notes, the potentialfor real progress appears greater now than it hasthroughout the history of the subject. At the same timeit is clear that there is a recurring set of reasons for fail-ure to make progress: in particular concerns about pub-lic acceptability but also issues concerning equity,economic impacts, technology, and scheme design.Another characteristic of the differences between prac-tice in North America and elsewhere is that many ofthese issues have been the subject of much more inten-sive research elsewhere in the world. To complementour review of policy developments, we therefore sum-marize key findings from these research programs. Weconclude by assessing the potential over the nextdecade and identifying those aspects of the subject arearemaining most uncertain.

POLICY DEVELOPMENTS

United Kingdom

The United Kingdom has perhaps the longest programof research into road pricing but had, until the recentlyintroduced schemes in Durham and London, little toshow for some 40 years of research.

The first major study, the Smeed Report of 1964(Ministry of Transport 1964), was a model for muchsubsequent research. It set out clearly the congestionproblem to be tackled (with its simple rule of thumbthat at 10 mph each driver was imposing time losses onothers equal to twice his own travel time), the inade-quacy of alternatives to pricing, the criteria for design ofan effective scheme, and the technologies available atthe time. Its nine design criteria merit repeating here asan aid for today’s designers:

1. Charges should be closely related to the amount ofuse made of the roads.

2. It should be possible to vary prices for differentareas; times of day, week, or year; and classes of vehicle.

3. Prices should be stable and readily ascertainableby road users before they embark on a journey.

4. Payment in advance should be possible, althoughcredit facilities may also be permissible.

5. The incidence of the system on individual roadusers should be accepted as fair.

6. The method should be simple for road users tounderstand.

7. Any equipment should possess a high degree ofreliability.

8. It should be reasonably free from the possibility offraud and evasion, both deliberate and unintentional.

9. It should be capable of being applied, if necessary,to the whole country and to a vehicle populationexpected to rise to over 30 million.

The Smeed Report was closely followed by a practi-cal study of the relative merits of road pricing and park-ing controls in London, Better Use of Town Roads(Ministry of Transport 1967), which argued clearly fora simple form of road pricing within a cordon identicalto that now in operation. The Greater London Council(GLC), which had been formed in 1965, developed thisproposal further in a scheme entitled SupplementaryLicensing (Greater London Council 1974; May 1975).Its preferred scheme was a charge of around £5 ($7.50)per day in 2003 prices to enter or be within an areadefined by the Inner Ring Road between 0700 and 1900on weekdays, with a charge of three times that level forcommercial vehicles and exemptions for buses, taxis,disabled drivers, and emergency vehicles. It would haveused prepurchased licenses and manual enforcement,

much as in Singapore, with the costs of operationaccounting for around 15% of revenues. It was pre-dicted to have reduced car traffic entering the center by45% and vehicle kilometers within the area by 35% andto have increased speed within the area by 40%. Theimpacts outside the area were predicted to be small butpositive. The proposal came close to being accepted byGLC, which would then have had to seek legislationfrom government, which was thinking along similarlines in its transport white paper (Department of Envi-ronment 1976). Unfortunately, GLC decided not to pur-sue the proposal, mainly because of concerns overequity implications and impacts on the economy. Simi-lar proposals emerged at the same time for Bristol andYork, but this was a high point in the development ofroad pricing, not to be regained for another 20 years.

The reemergence of interest in road pricing in the1990s stemmed from a growing realization that “pre-dict and provide” policies were unlikely to succeed anda renewed interest in integrated transport strategies as asolution to urban problems (May and Roberts 1995).Several cities, including London, Edinburgh (May et al.1992), Bristol, and Leicester, conducted integratedtransport studies that demonstrated the benefits of roadpricing as a means of controlling demand and financingother strategy elements, as discussed further below.However, it was the national government that commis-sioned the next major study, of London congestioncharging, in 1992 (Richards et al. 1996). This again wascomprehensive in its coverage, with investigations ofalternative schemes, potential technologies, administra-tive and enforcement arrangements, and overall costsand benefits. It was recommended that charges beimposed for passing points in the road network or forbeing within a defined area. The previous proposals fora cordon around central London were reexamined. Acharge of £10 ($15) per crossing was predicted to reducetraffic in the area by 25%, increase speeds by 32%, andgenerate revenues of around £400 million ($600 mil-lion) per year. The most complex scheme studied, withthree cordons and four radial screenlines, was predictedto have a similar impact in the center but also toimprove speeds in inner London by 10% and to gener-ate almost twice as much revenue and three times theeconomic benefits (May et al. 1996b).

This study had been commissioned, but was not actedupon, by the last Conservative government. It was part ofthe evidence used by the incoming Labor government todecide to provide local authorities with the power toimplement congestion charging schemes (and taxes onprivate parking) and to retain the net revenues for othertransport projects (DETR 1998). This legislation was abreakthrough on three counts: it passed the initiative tolocal government, albeit with a requirement for approvalby the central government; it allowed revenues to be


hypothecated for at least 10 years and thus addressed akey concern in public attitude surveys (Jones et al. 1996);and it established congestion charging as a potentiallycentral element in an integrated strategy (May andRoberts 1995). Initially almost 30 local authoritiesexpressed interest and joined the government’s ChargingDevelopment Partnership. However, outside Londononly four or five remain interested, partly because thegovernment has recently appeared less supportive andpartly because it has been more willing to provide alter-native funding for public transport schemes that mighthave been financed from hypothecated revenues. Durhamintroduced a single point charge on a sensitive road lead-ing to the cathedral in 2002 and achieved a 90% reduc-tion in traffic. Bristol is developing proposals for a singlecordon, although recent changes in political control haveraised questions over their development. Edinburgh hasrecently confirmed its proposals for a scheme with twocordons, one around the center and the other inside theouter ring road, and a charge of £2 ($3) to cross either orboth; these will be the subject of a referendum in 2004.London’s implementation of congestion charging in Feb-ruary 2003 has, of course, eclipsed all these develop-ments. We will not describe it further here, since it is thesubject of later presentations. However, it is worthrecording that its design and impacts are remarkably sim-ilar to the proposals for supplementary licensing 30 yearsago, with two notable exceptions: operating costs haveproved to be a much higher proportion of revenues,which substantially reduces the finance available forother transport projects; and, crucially, the scheme hasbeen implemented, while those of 1964, 1967, and 1974gather dust on the shelves.

While most of the interest in the United Kingdom hasinevitably focused on urban congestion charging, recentreports have advocated the use of distance-basedcharges nationally on congested roads, offset by theabolition of the annual vehicle tax and some reductionin fuel taxes (Commission for Integrated Transport2002). A system of this kind is scheduled to come intooperation for commercial vehicles in 2006, and a gov-ernment field trial of the technology, based in Leeds, isexpected to start shortly after some considerable delay.

Norway

In Norway road pricing has long been used as a supple-mentary fiscal instrument to raise finance for road proj-ects. Currently, 25% of the total annual budget for roadconstruction in Norway comes from the road pricingschemes around the country (Odeck and Brathen 2002).Most of the road pricing schemes impose tolls on par-ticular sections of trunk roads, tunnels, or bridges. Onlyfive of them are urban charging cordon schemes (or toll

rings): those in Bergen, Oslo, Trondheim, Stavenger, andKristiansand. However, recently discussions have takenplace concerning the modification of the current tollfinancing schemes to congestion charging schemes inBergen, Oslo, and Trondheim.

The Bergen toll ring was introduced in 1986 with theaim of directly raising finance for completing theplanned road system. In 1990 the capital city of Norway,Oslo, also introduced an urban toll ring, to finance anew tunnel under the city center. The implementation ofthe tolls in both cases was timed to coincide with theopening of the new tunnel and bypass projects financedby the toll revenues. In 1992 a toll ring was implementedin Trondheim, which has been gradually developed overthe years since its introduction. An “amputated” toll ringwith only two toll plazas was in operation from 1992 to1996 in Kristiansand. A new package and toll chargeperiod were recently agreed on to fund the constructionof the new trunk road (E18) and two tunnels throughKristiansand. In 2001 Stavanger implemented a city tollring. The toll will be in operation for 10 years to financethe new road and other transport projects. Table 1 sum-marizes the characteristics of the schemes in these fivecases.

Given the original objective of raising revenues, thelower toll level in all schemes only reduced the trafficslightly (6% to 7% for Bergen, 3% to 4% in Oslo, and10% in Trondheim during the charged periods). Origi-nally, in Bergen the toll revenues collected were onlyused for road projects. A new agreement was reached in2002 for maintaining the toll ring system until 2011,with the basic toll levels increased to 15 NKr from 2004onward (which coincides with the implementation ofelectronic collection), only 45% of the revenues beingallocated to road investment, and the scheme being refo-cused as a congestion charging system. In Oslo, Trond-heim, Kristiansand, and Stavanger, the revenues willhelp finance road projects, public transport improve-ment, and other safety instruments. New toll ringschemes are also under way. In 2003 the Namdal proj-ect (in the city of Namso) started; it is claimed to be thesmallest toll ring in the world (only two toll points).Tønsberg will decide on the introduction of a toll ringby 2004.

The toll ring system in Norway is currently at a cross-road. Most of the projects around the country were orig-inally initiated to finance major local transport schemes(mostly road transport infrastructure). The agreementsfor many existing schemes are near their end or alreadyterminated (the case in Bergen). A decision on the futureof the toll rings has to be made. At the national level inNorway a new law on tolling and road pricing has justbeen sanctioned by Parliament. Through this law, roaduser charging is accepted as a means both for revenueraising and for demand management, but the two objec-

7 5ONE STEP FORWARD, TWO STEPS BACK?

tives can never be mixed. This means that today’s tollingsystems must be dismantled before any urban pricingscheme can be introduced. Public acceptance of thesechanges is also uncertain. While 54% opposed Bergen’stoll ring before its implementation, that had fallen to37% a year later. It is not clear whether toll ringsdesigned for congestion charging will attract such major-ity support.

Sweden

Sweden has had an interest in restraining traffic, partic-ularly in Stockholm and Gothenburg, since the 1980s.Its main focus has been protection of the environment,although relief of congestion has also been an issue. Themost significant proposal for Stockholm emerged in1991 as part of the Dennis agreement (Gomez-Ibanezand Small 1994). The Dennis package involved relievingtraffic problems in the inner city by improving publictransport, building an inner ring road and a tolled west-

ern bypass, and introducing a toll ring just outside theinner ring road. Tolls would have been around $2 atcurrent prices, with the possibility of variations by timeof day and by standard of emission controls. With theouter bypass tolls, they would have been designed toprovide the main source of finance for the investments.While the proposals initially had the support of all themain political parties, it soon became clear that both theinner ring road and the toll ring were highly controver-sial, and the proposals were dropped in 1997. However,other agencies, including the Swedish Society for NatureConservation, the Swedish Institute for Transport andCommunications Analysis, and the Swedish Environ-mental Protection Agency, have since submitted propos-als for somewhat similar pricing schemes. Most recently,the Swedish National Road Administration has pub-lished a review of the options for road pricing in urbanareas (Eliasson and Lundberg 2003). While the reviewdoes not make specific proposals, it is one of the mostcomprehensive summaries of successes and failures inroad pricing currently available.


TABLE 1 Key Characteristics of the Norwegian Toll Rings

Bergen Oslo Trondheim Kristiansand Stavenger

City population 213,000 456,000 138,000 70,000 103,000

Starting date Jan. 1986 Feb. 1990 Oct. 1991 April 1992 April 2001

Number of toll stations 7 19 22 5 21

Charging regime Uniform Uniform Peak and off-peak Uniform charge Peak and off-peak charge charge charge chargea

Entry charge for small vehicles (NKr)b 10 15 15 (for all periods 10 10 (peak)

for manual payment)c 11 (off peak)

Charging period Weekdays, All days, Weekdays, Weekdays, Weekdays, 6 a.m.–10 p.m. all hours 6 a.m.–6 p.m. 6 a.m.–6 p.m. 6 a.m.–6 p.m.

Discount Discount for Discount for Discount for users Discount for Several advance monthly prepaid tickets of electronic monthly payment discounts subscriptions systems subscriptions with AutoPass

Annual gross revenues (NKr millions) 156 1,046 168 95 80

Annual operating costs (NKr millions) 30 103 17 20 21

a Peak period: 7–9 a.m. and 2–5 p.m.; off-peak period: other times between 6 a.m. and 6 p.m.b Heavy vehicles are charged double price.c For prepayment of 6,000 NKr, 9 NKr between 6 and 10 a.m. and 6 NKr between 10 a.m. and 6 p.m.; for prepayment of 3,000 NKr, 10.5 NKrbetween 6 and 10 a.m. and 7.5 NKr between 10 a.m. and 6 p.m.; for prepayment of 1,000 NKr, 12 NKr between 6 and 10 a.m. and 9 NKrbetween 10 a.m. and 6 p.m.

The Netherlands

During the late 1980s, the Dutch government proposedthe introduction of a large multiple cordon-based roadpricing system called rekening rijden (“road pricing”)for the Randstad region (including Amsterdam, Rotter-dam, The Hague, and Utrecht, plus part of the provinceof Noord-Brabant). The main objective of this proposedscheme was to manage travel demand and hence toreduce congestion. Other objectives were to decreaseenvironmental pollution and generate funds to financenew infrastructure. Because of public opposition theproposal was not pursued. In 1991 a more conventionalform of road toll using toll plazas (tollpleinen) was pro-posed. The objective of the scheme was redefined toraise money for road infrastructure. However, thepotential disruption of the traffic attributable to thestop-and-go operation of the toll plazas and the amountof land required for implementation caused the proposalto be rejected.

In 1992 a proposal of reduced scope, which involveda system of supplementary licensing for motorists usingthe main road network during peak periods (spitsvi-gnet), was discussed. The peak-hour motorists wouldhave been charged a fixed toll to travel during peakhours regardless of the area. The charge would be about$2.85 per day (1992 prices) applied during the morningpeak period, 6 to 10 a.m. However, the proposal wasnot approved after a new government was elected in1994. Boot et al. (1999) suggested that the most impor-tant reason for the failure of these earlier proposals waspolitical acceptability.

Subsequently, in October 1994 the Dutch parliamentagreed in principle and strongly proposed the implemen-tation of a revised form of rekening rijden (referred to as“congestion charging”), which would be a system ofelectronic toll cordons around the four main cities in theRandstad area starting in 2001 (Dutch Ministry ofTransport 1995). The charge would be in operation dur-ing the morning peak hour (7 to 9 a.m.) on weekdays.The objective of this late proposal was to improve acces-sibility of the economic centers. In 2001 congestioncharging became a major political issue in the Nether-lands. The proposal of rekening rijden was opposed byseveral interest groups. The main objection was that theauthorities failed to provide an alternative for those whowere obliged to travel by car during the proposed charg-ing period. The government is now considering an alter-native proposal for a Mobimeter (“kilometer charging”)system. The idea was supported by the successful devel-opment of the technology for the kilometer charging sys-tem. In addition, the policy could well fit in with theEuropean Commission white paper that proposed a kilo-meter charging system as a good instrument for trans-port pricing in Europe. The cabinet has now announced

a proposal for legislation on the kilometer charge by theend of 2003 and stated its intention to start implement-ing the system in 2004 (the system is expected to be fullyoperational by 2006). The system will be a nondifferen-tiating kilometer charge first, but the possibilities of dif-ferentiating the charge in relation to congestion will bediscussed further.

The barriers to the success of the implementation ofcongestion charging in the Netherlands have been poli-tics and technology. The success of the recent proposalfor a kilometer charge will rely heavily on the reliabilityand capability of charging technology. However, thegreatest barrier to further progress still appears to bepolitical and closely linked to public acceptability.

Germany

The key development of road user charging in Germanyis the implementation of interurban freight charging.Since April 2001 there has been a standard emission-related tariff for motorway tolls applicable to heavygoods vehicles (HGVs), jointly implemented by Bel-gium, Denmark, Germany, Luxembourg, the Nether-lands, and Sweden (Eurovignette). The current systemof Eurovignette imposes a license charge on all HGVsweighing more than 12 tonnes (except buses, coaches,and specialist vehicles) for using the road network inany of these countries. The charges are varied accordingto the number of axles and engine emission standards.

Germany is facing the problem of continuing freighttraffic growth as the consequence of the Single EuropeanMarket and the enlargement of the European Union (EU)to the east and globalization. Freight traffic is forecast togrow by 64% before 2015. The German governmentaims to tackle the problem by creating an efficient trans-port infrastructure to accommodate the growth in trafficdemand, improve the rail freight network, and createfair competition between modes. One key strategy is torectify the price ratio between the rail and the road sec-tors. Thus, after a long discussion, the introduction ofdistance-related charges for the use of motorway systemby HGVs was approved by the government in April2002. The act allows the introduction of distance-basedcharging on the motorway network and some part of thefederal highways (mainly for safety reasons), and the tollrevenues can be used for infrastructure projects.

The toll system will be changed in autumn 2003 fromthe old Eurovignette system to the kilometer charge sys-tem. The charge will still be differentiated according toengine emission standard and number of axles. It willreplace the Eurovignette and some part of the fuel duty.The charge is expected to vary between €0.10 and €0.17per kilometer and is in line with EU Directive 1999/62/EC(Commission of the European Community 1999). Driv-


ers will have two charging options. The first is the auto-matic charging option, which is for vehicles equippedwith an onboard unit. This automatic electronic systemcan be located exactly by satellite and continually trans-mits the position of the vehicle, the company and vehicledata, and the kilometers traveled on charged roads to acentral computer. An automatic procedure then chargesthe toll in arrears to a preselected payment partner. Thesecond option is the manual prebooking system. Themanual procedure requires that the driver or the vehicle’sowner stipulate a route in advance and “buy” the route atone of the toll terminals or via the Internet before thejourney.

Other European Developments

The European Commission has conducted research overseveral years into marginal cost pricing and its applica-tion to policy [Nash and Matthews (2001) give anoverview]. Its 2001 transport policy sets out clearly itsaspirations for a more effective pricing policy for alltransport (Commission of the European Community2001) and indicates the principles to be adopted fortransport infrastructure charging. In particular, it pro-motes equal treatment of all operators and modes,argues for charges that internalize external costs, andstates that charging revenues should be channeled intospecific national or regional funds to finance measuresthat themselves reduce external costs. By these means, itargues, a double dividend is obtained. However, thecommission is limited in the extent to which it can influ-ence the decisions of individual member states. It is ableto assess the acceptability, from a European perspective,of proposed changes in charging structures (and is cur-rently reviewing the United Kingdom’s plans fordistance-based charging for commercial vehicles), but itcan only encourage governments to introduce charges inthe first place. It notes that the proposals leave eachmember state wide scope in terms of implementationwhile offering a common methodology for setting pricelevels. At a more detailed level, a new European directiveon interurban freight charging was released in 1999(Commission of the European Community 1999), whichaims to revise the current Eurovignette system. Severalcountries have been considering the possibility of a moreadvanced interurban HGV charging system, includingGermany (as mentioned earlier) and Switzerland.

One of the commission’s main tools for providingencouragement is demonstration projects, and tworelated research projects in its Fifth Framework researchprogram involve the implementation of demonstrationprojects (PROGRESS) and their evaluation (CUPID)(Baker 2002). Among these eight demonstration projects,Bristol, Edinburgh, and Trondheim have been mentioned

above. Two, in Gothenburg and Copenhagen, involvesmall field trials coupled with attitudinal and behavioralresearch into the likely impacts and acceptability of dif-ferent road pricing schemes. One, in Helsinki, involvesonly desk-based and attitudinal research into alternatives.The other two are access control schemes in Genoa andRome, to which charges might be added. In Rome, someclasses of drivers already pay for access permits, and so asimple form of road pricing already exists (Tomassini2002). These are of interest, since the widespread use ofaccess controls in Italian cities, with only vehicles thathave been allocated permits allowed to enter, has beenseen as an alternative to charging as a means of control-ling car use and has had some success (Topp and Pharoah1994). The current proposals envisage drivers allocatedpermits (because they are residents or have businesspremises in the area) still being able to enter free ofcharge, but with others being able to pay to do so, thusmaking more efficient use of the road space. The technol-ogy is in place to check permits automatically and to iden-tify those who have paid to enter.

Without exception, these pilots have taken longer toimplement than had been anticipated when the researchprogram was developed in 2000. In all cases, politicaluncertainty reinforced by critical public opinion surveyshas been the main barrier to progress, although in one ortwo cases problems with new technology have alsodelayed implementation. Paradoxically, only the Londonscheme, which was not part of PROGRESS, and to alesser extent the Norwegian toll rings that predated it willprovide real evidence to other European governments ofthe benefits of urban road pricing.

Singapore

Given the limited land space, the Singapore governmenthas foreseen the possible severe impact of traffic con-gestion on the development of the country (Foo 2000).The government has been trying to control the level ofcar traffic in the network through various generationsand combinations of pricing measures over the past 30years. Two means of controlling car travel demand havebeen adopted: the control of vehicle ownership and therestraint of vehicle usage.

A tax was imposed on new vehicle registrations in1972, and tax rates were subsequently increased as ameans of controlling ownership. However, there wasconcern that the tax was inflexible and that it was notimposing sufficient control. In 1990 the governmentintroduced a unique form of vehicle ownership control,the vehicle quota system (VQS), in which a quota fornew vehicles in any month is determined to match anapproved overall growth rate of 3% per year and thepayment is determined by a bidding system. After the


implementation of the VQS, the average annual motorgrowth rate was decreased to around 2.83% from4.4%. The VQS also generated a substantial amount ofrevenue for the government (around $1.8 billion in1994 alone).

Although additional taxes had been in place since1972, the Singapore government was not satisfied withthe effectiveness of this measure in curbing congestion.In 1975 Singapore introduced the world’s first urbanroad pricing scheme, the area licensing scheme (ALS), toincrease the incentive for car users to switch to publictransport. The original ALS was a single cordon cover-ing the central business district (CBD) of Singapore,called the restricted zone (RZ). Under the ALS, a permithad to be purchased to travel into the RZ by car duringpeak traffic periods, with exemptions for those with fouror more people (Holland and Watson 1978). Enforce-ment was based on manual operation by police person-nel located at each of the entry points. The morning peakcar traffic volume entering the RZ in 1992 was approxi-mately one-half the level 17 years earlier, before the ALSwas introduced. Speeds had increased by 20%, and acci-dents had fallen by 25% (Menon 2000). Public trans-port’s share of working trips increased from 33% in1974 to 67% in 1992.

Initially, the charge structure was simply a flat ratecharge of S$3 for traveling inside the RZ in the a.m. peakperiod (7:30 to 9:30 a.m.) on Monday through Saturday.However, 3 weeks later the charging hours were extendeduntil 10:15 a.m. in response to the substantial increase intraffic volume entering the RZ just after 9:30 a.m. (Chin2002). The charge was then increased to S$4 and S$5 in1976 and 1980, respectively. Gradually, the structure ofthe charge and the charging period were modified toincrease the effectiveness of the scheme. In 1989 thecharge period was extended into the p.m. peak (4:30 to7:00 p.m.) with a charge level of S$3. The charge periodwas extended again to the whole day from Mondaythrough Friday in 1994 with the same charge level of S$3.The ALS was considered successful, and it was claimedthat there were no significant impacts on businesses insidethe RZ (Seik 1998).

Nevertheless, the original ALS also had unintendedadverse effects such as congestion on feeder roads andexpressways leading to the CBD (Goh 2002). The gov-ernment decided to introduce the road pricing scheme(RPS) to regulate traffic on the expressways and feederroads in 1995. The RPS (manually operated) was imple-mented on the three main expressways heading into theCBD with congestion tolls to pass defined points. About16% of motorists stopped using the expressways duringthe RPS operation hours (between 7:30 and 9:30 a.m.).However, the ALS and RPS were claimed to cause under-use of the roads within the CBD and not to be able todeter the congestion outside the RZ. In addition, the man-

ual operation of both systems was too labor intensive andnot flexible enough to permit future modification.

In 1998 the electronic road pricing system (ERP) wasimplemented. The ERP cordon covered an area similarto the original RZ of the ALS. However, the charge isimposed on a per crossing basis, which is different fromthe original operation of ALS. An incomplete second cor-don has since been implemented. The ERP charge ratesare set on the basis of type of vehicle (including motor-cycles). The charges are also differentiated according tolocation of crossing, day, and time of day. The roadauthority in Singapore reviews speeds quarterly on theexpressways and roads where the ERP is in operation.After the review, the ERP rates are adjusted to maintainaverage traffic speed on expressways and roads insidethe RZ at 45 to 65 kilometers per hour and 20 to 30kilometers per hour, respectively.

Immediately after the implementation of the ERP,traffic volume on the heavily congested roads fell by17% from the condition during the operation of ALS.Traffic volume into the CBD decreased by 10% to 15%compared with the condition during the ALS operation(Chin 2002). The ERP has been effective in maintaininga speed range of 45 to 65 kilometers per hour forexpressways and 20 to 30 kilometers per hour for majorroads as intended. The estimated monthly revenue fromthe system is S$3.4 million, which is substantially lowerthan the revenue collected from the old ALS and RPSschemes, about S$5.8 million per month (Goh 2002).The change of the fundamental principle of chargingfrom ALS, which allowed multiple entries for the wholeday, to the ERP, which charges per crossing, is the rea-son for the significant drop in demand despite the lowercharge rates.

The Singapore government has adopted a “stick andcarrot” policy under which a substantial amount ofmoney has been invested in improving the public trans-port system. After gaining sufficient revenues from ALS,in 1988 the government decided to develop the MassRapid Transit, which is the network of heavy rail, andlater a light rail network (initiated in 1999). The devel-opment of public transport has enhanced its modalshare, which increased from 46% to 70% of all journey-to-work trips to the CBD between 1976 and 1991. TheSingapore Land Transport Authority (LTA) plans tomodify the charging area and charge levels to achievebetter utilization of the road network while maintainingan acceptable level of service. Although there has been awide range of well-documented papers on the successand implementation path of road pricing in Singapore,there has been little discussion of public responses. Thestable political climate in Singapore has supported thegovernment and LTA in adopting an aggressive transportpolicy over the past three decades. Despite all the suc-cesses, questions have been asked about the extent of


decentralization of the city and the economic impact ofthe cost of the journey to work (Phang 1993; Willoughby2001).

Hong Kong

In 1982 the Hong Kong government decided to adopt fis-cal controls to contain traffic. Particular measures intro-duced were the trebling of the annual fee for private carsand the doubling of the fuel tax and the registration feefor new cars. As a result of the vehicle ownershiprestraint, private vehicle ownership decreased from211,000 in 1981 to 170,000 in 1984. However, the levelof congestion was only reduced in the least congested(low-income) areas and during the same period rose inthe most congested areas (Dawson and Brown 1985). Pri-vate car and taxi use remained high, particularly duringpeak periods (Lewis 1993).

In response to this failure, in 1983 the Hong Konggovernment decided to commission a 2-year investiga-tion of the viability of introducing a road user chargingscheme using an ERP. The Hong Kong governmentchose not to adopt a low-tech option like the ALS inSingapore on the basis that it would be too liable tofraud and require a considerable amount of enforce-ment (Borins 1988). The principles of the proposed ERPwere similar to those of the current ERP in Singapore(with a charge per crossing). Three schemes weredesigned with different locations of charging cordons,screenlines, and charge structures. The designs were pri-marily intended to cover the most congested areas,Hong Kong Island and Kowloon. The charge structurewas planned to vary by time period and area. The com-binations of different charging cordons and screenlineswith different charging structures followed the idea of atheoretical optimum (Dawson and Catling 1986).

The system proposed in the 1983 study was based onautomatic vehicle identification with a passive electronicnumber plate mounted underneath the vehicle. At thecharging points, inductive power and receiver loopsinstalled underneath the road pavement surface wouldbe used to detect and identify the vehicle crossing thepoint. The information of crossing vehicles and theircrossing times would then be transmitted from the road-side computer to the main accounting and billing system.The motorists crossing the charging points would thenreceive a bill monthly. Enforcement would be conductedvia closed-circuit television, which would record the rearnumber plates of the vehicles. Technological tests witharound 2,600 cars confirmed a high reliability rate forthe system. The proposed ERP was expected to decreasethe traffic volume by at least 20% during the peak hours,and the capital cost of the scheme was estimated to bearound $30 million (in 1983) (Borins 1988).

After the success of the technological trial and thepotential positive outcome of the ERP, the Hong Konggovernment decided to consult the district boards,which represented the public. The government facedtwo main arguments: the need for road pricing given thescale of the congestion problem and the potential forinvasion of privacy. In early June 1985, the proposal ofthe ERP was unanimously turned down by the districtboards (Leung and Liu 1985). Borins (1988) discussedvarious tactical and political errors in the process ofdeveloping and selling the ERP to the public.

In 1994 the Hong Kong government revived the ideaof tackling traffic congestion by road pricing. The gov-ernment commissioned a major feasibility study, whichbegan in March 1997, with the objective of examiningthe practicality of implementing ERP in Hong Kong. Var-ious technological alternatives were considered, includingthe dedicated short-range communications (DSRC) sys-tem as currently operated in Singapore and the vehiclepositioning system (VPS) based on the Global PositioningSystem (GPS). A cordon-based charging scheme was stillthe preferred alternative for the charging regime. Like thescheme designed in 1983, the charging zone would coverthe most congested areas of Hong Kong and be operatedon a directional and time period basis. The initial sugges-tion was that the peak-period charge would be from 8:00to 9:00 a.m. and 5:30 to 7:00 p.m. A slightly lower chargewould be applied during the interpeak hours. The chargerate would be set to maintain a target speed of 20 kilo-meters per hour. It was estimated that the implementationof the proposed ERP would reduce car trips entering thecharging zones by up to 50%, with 40% diverting to pub-lic transport and 10% changing travel time. To rectify thefailure of the first proposal, there was a well-planned pub-lic consultation program to allow public input into thedevelopment of the scheme.

Technology trials were conducted in late 1998 withboth DSRC and VPS technologies. The results showedthat both DSRC and VPS could be adopted in HongKong and that the privacy issue could be overcome.However, in 2001 the government concluded that onthe basis of the feasibility study report in 1999 therewere no transport and environmental grounds to justifyERP (Legislative Council 2001). Therefore, the govern-ment decided not to pursue the implementation of theERP, despite the promising results of the technologicaltrials. Although the technological barrier in relation tothe privacy issue has been overcome, the question of thepolitical and public acceptability of ERP remains.

Other Asian Developments

Especially in Asia, the rapid growth of the economy hascatalyzed the growth of traffic and vehicle ownership. In


Seoul, after several decades of rapid growth in car usage,the Seoul metropolitan government (SMG) has takenseveral measures to reduce congestion in the inner cityand increase the mode share of public transport. Since1993 the government has been investigating differenttraffic demand management techniques through variousfiscal tools including congestion charging. In 1996 SMGimplemented congestion tolls (around $2.20 for bothdirections) on two main tunnels linking the downtownarea to the southern part of the city (Hwang et al. 1999).The objectives of this implementation are threefold: toreduce the incidence of low-occupancy vehicles, to raiserevenues for transport-related projects, and to assess theeffectiveness of the pricing technique. Private cars withthree or more passengers are exempted from the tolls.Traffic volume decreased by 20% in the first 2 years afterthe operation. Average traffic speed increased by 10 kilo-meters per hour. A proposal for expanding the currentcongestion charging system in Seoul has been developedthat is based on point charging. However, this expansionof congestion charging has not been implemented to datebecause of political concerns.

After the success of the ALS implementation in Sin-gapore, in the 1970s the World Bank funded studies ofthe feasibility of implementing a similar scheme inKuala Lumpur (Malaysia) and Bangkok (Thailand).Although the studies strongly supported the implemen-tation of the schemes in both cities, initial setbacks havedelayed implementation. In Kuala Lumpur, gantrieswere already installed at various points around thecharging zone boundary. However, the operation of theALS was ultimately deferred by the government. Thereasons given were that the city needed to improve pub-lic transport and complete the inner ring road as analternative for through traffic first (Armstrong-Wright1986). In addition, it was claimed that the success ofother road improvements at that time was able toreduce the congestion problem sufficiently in the cen-tral area. Interestingly, the same political decision mak-ers both approved the initial plan and deferred it later.In Bangkok, the proposal for the implementation ofALS was immediately rejected by the governmentbecause of political concerns. On the one hand, therehas been no implementation of any form of congestioncharging systems in these cities to date. On the otherhand, Thailand, Malaysia, and other countries in theregion (including the Philippines, China, and Taiwan)have been progressive in using road pricing as a meansto finance road infrastructure projects. There are vari-ous road toll projects both in urban and interurbancontexts in these countries (with the sole objective offinancing road construction).

In Japan, the Tokyo metropolitan government (TMG)developed the Transport Demand Management TokyoAction Plan in 2000. The plan envisages future implemen-

tation of road pricing in the center of the city. TMG set upa committee to examine the possible implementation ofthe road pricing scheme. In 2001 the committee produceda report that proposes four different charging cordondesigns. In early 2001 an electronic toll collection systemwas introduced in the Tokyo area; it was expanded tocover more than 600 existing toll points and went nation-wide in November 2001. The initial purpose of this elec-tronic toll system was for financing, but the emergingpolicy in Japan is to price roads differentially to reflectcongestion and environmental impacts. Currently, experi-ments for congestion and environmental charging arebeing conducted in various locations.

Elsewhere

There are a few road pricing proposals elsewhere in theworld, and most of them are using road pricing as aninfrastructure financing tool rather than as a congestioncharging measure. In Australia, several high-technologytolling systems are in place: a series of tolled motorways,bridges, and tunnels in Sydney; City Link in Melbourne;and Gateway Bridge/motorway and Logan motorway inBrisbane. The interesting issue for Australia is thenational policy to allow a customer of one toll road oper-ator to be able to use other toll road systems “seamlessly.”In the recent AusLink Green Paper, the possibility of mov-ing the existing toll financing scheme to a congestioncharging scheme is mentioned (Department of Transportand Regional Services 2002). A road user charging sys-tem for HGVs based on variable weight and distance (amass–distance regime) was also referred to as an alterna-tive. In New Zealand, the paper-based road user chargesfor HGVs, introduced in 1977, is a weight–distance taxrelying on vehicle distance measurement devices. The pur-pose of this system is to recover road costs from heavyvehicles. In 2002 the government announced its intent tointroduce an electronic road user charging system toincrease fairness and efficiency of the charging system tovehicle operators. Migration from the paper-based sys-tem to the new electronic system will be voluntary. Cur-rently, a feasibility study is being carried out to investigatethe business case and functionality design. There havebeen road pricing proposals in South America. There wasan early feasibility study of implementing road pricing inCaracas, Venezuela. More recently, the city of Santiago,Chile, has outlined a plan to implement an urban roadpricing scheme.

IMPLICATIONS

As noted earlier, three approaches have been developedoutside North America.


Most effort has been put into the design, develop-ment, and implementation of urban road pricing. How-ever, with the exceptions of London and Singapore, nosignificant scheme has yet been successful. This remainsthe least effective area of policy development, and it isimportant to understand the barriers to progress. Themost widespread is political unacceptability, but con-cerns are also raised about equity and economicimpacts; indeed, these underpin many of the wider con-cerns about acceptability. To a much smaller extent, thefeasibility of pricing and of the supporting technologyand the potential presented by that technology for inva-sion of privacy remain concerns. There is a growinginterest in the design of alternative charging regimes andtheir integration with other policy instruments as waysof overcoming these concerns. All of these issues havebeen the subject of research, and we consider theseresearch results further in the next section.

As in North America, there has been widespread useof toll highways as a means of financing the roads them-selves. Uniquely, Norway has taken this principle andapplied it to the existing infrastructure by using tollrings to pay for new infrastructure. This has clearly beensuccessful in Norway, but no other country has imple-mented similar financing strategies. Norway is now fac-ing the question of the future of these toll rings oncethey have generated the necessary revenues. It has beenaccepted that they might continue to be used to financefurther (usually public transport) projects and to reducecongestion. However, it is as yet unclear whether tollrings designed for one purpose are necessarily suitablefor another and very different purpose.

The third and most recent development has been theinterest in using distance charging to manage congestionand to charge more appropriately for road use oninterurban road networks. The German system forcharging heavy commercial vehicles will be the first suchscheme, and the United Kingdom is likely to follow in2006. At present it appears that it will be another decadebefore such controls are imposed on all traffic.

RESEARCH ISSUES

Acceptability

A large number of surveys of attitudes toward road pric-ing have been carried out since the 1980s, particularlyin the United Kingdom. This summary is taken from afuller review available from the authors (Jaensirisak etal. 2003b) that provides a full list of references. Selectedreferences are cited below.

A total of 29 surveys in the United Kingdom between1989 and 2002 found levels of public acceptance ofroad pricing ranging from 8% to 76%. Clearly, other

factors are influencing acceptability, and much of theresearch has focused on these factors. One of the clear-est is the question of hypothecation; among the surveys,average acceptance was 35% where there was nohypothecation and 55% where there was.

Numerous studies illustrate the critical impact ofhypothecation on acceptability. Jones (1998) concluded,“Most professional and governmental bodies in the UKnow accept that hypothecation of revenues will be partof the price that will have to be paid to gain sufficientpublic support for urban road pricing to ensure its intro-duction in this country.” There is, however, inconsis-tency across the results of different studies. Some havefound that the greatest impact is obtained from spend-ing on improved public transport, while in others it isinvestment in the road network and in yet others it isreduction in taxes.

Acceptability has been found to be influenced by atti-tudes to transport problems and the perceived effective-ness of the scheme (PATS Consortium 2001). It is alsoinfluenced by attitudes relating to the environment andtoward the hazards of car traffic. Those who are con-cerned about the quality of the environment and nega-tive effects from traffic are more likely to acceptcharging than others. On the contrary, those for whomthe car has positive images tend to oppose charging.Some people use their cars because they enjoy doing sorather than through necessity, which leads to resistanceto policies aimed at reducing car use (Steg and Tertoolen1999).

Other attitudinal aspects of acceptability relate toperceptions of freedom and fairness (Jones 1998; PATSConsortium 2001) and concerns over equity issues (Giu-liano 1992; Langmyhr 1997). Indeed, a distinction canbe made between selfish and social perspectives. Aninteresting point about congestion was observed bySheldon et al. (1993), who stated “no-one appears will-ing to accept that they contribute to the problem: it istypically something that is caused by someone else.”Nonetheless, Rienstra et al. (1999) recognize that socialconcerns do influence preferences toward road pricing,while Schade and Schlag (2000) identified social normsas important.

Acceptability is likely to relate to personal character-istics and constraints, which may include income, age,education, transport mode used, frequency of car use,availability and quality of alternative modes, location ofhousehold and workplace, household type, and lifestyle.However, it is clear from a number of studies (Schadeand Schlag 2000) that socioeconomic factors have asomewhat lesser impact on acceptability than do attitu-dinal factors.

The importance of the communication process toacceptability—making clear the main objectives,addressing public concerns, and spelling out the bene-


fits—has been highlighted (Schade and Schlag 2000).The benefits that will influence acceptability are the timesavings and environmental improvements. However, it isuncertain that travel time reduction and environmentalimprovement are perceived by the public to compensatefor the charge (Giuliano 1992; Harrington et al. 2001).

System features will influence acceptability. There isa preference for simple systems (Bonsall and Cho 1999),although Schlag and Schade (2000) found little differ-ence between distance-based, congestion-based, andcordon pricing.

Last but not least, the level of acceptability of roadpricing can be expected to be critically dependent on thelevel of charge. In almost all cases where the charge hasreceived attention, no quantified relationship betweenacceptance and the charge has been developed (Schadeand Schlag 2000; PATS Consortium 2001). Althoughdetails are not provided, Hårsman (2001) states that“acceptance relates to the level of charges and to the useof toll revenues. Experiences from the PRIMA case citiesindicate that fairly low starting levels are needed and thatthe charges can be increased successively to meet finan-cial requirements.” The notable exception in this contextis the Harrington et al. (2001) study, which quantified theeffect of congestion pricing on voting behavior.

Our own research (Jaensirisak et al. 2003a) hasattempted to fill some of the gaps in this understandingand developed relationships that enabled acceptabilityto be estimated in terms of the characteristics of thescheme. While we found road pricing to be unaccept-able to the majority, some personal characteristics madeit more or less so. Charging was more acceptable to non-car users, those who perceived pollution and congestionas very serious, and, to a lesser extent, those who con-sidered the current situation unacceptable and whojudged road pricing to be an effective means of reducingcongestion. Conversely, older respondents were morelikely to judge charging as less acceptable. Somewhatsurprisingly, income did not influence acceptability.

Among the potential impacts of charging, an abilityto achieve substantial environmental improvements wasthe single most important contributor to increasedacceptability, followed by contributions to reducingdelayed time for cars. There was a preference for usingthe revenue to reduce taxes, but the impact was small.As expected, design features were found to influenceacceptability, which could be increased by limitingcharging to the central area and, to a lesser extent, peakperiods; using cordon-based charges rather than contin-uous charging regimes; and imposing lower levels ofcharge.

By combining all of these results, it proved possibleto specify design combinations that would be voted forby the majority of the population. In London a cordoncharging scheme limited to the central area with a

charge of £5 per day (equivalent to the scheme sinceimplemented) would be acceptable to the majority, anda charge of £7 would be, provided that it generated sub-stantial environmental benefits and reductions in delayfor cars. In Leeds, charge levels of £2 or £3 would beacceptable to the majority, but only given substantialenvironmental improvements and reductions in delayfor cars.

Equity

Equity issues have been a focus of concern for a consid-erable time (Cohen 1987; Else 1986; Small 1983). Vari-ous definitions and dimensions of equity as a result ofroad pricing have been suggested. Viegas (2001) andJones (2002) pointed out that the definition of equity intransport largely concerns fairness of the right of accessto transport infrastructure for different groups of people.This raises the question of whether road pricing is a fairallocation mechanism among different groups of indi-viduals. Giuliano (1994) suggested that the equity issuein road pricing must consider both the distribution ofbenefits associated with reduced congestion (includingside benefits such as pollution reduction and improvedpublic transport service) and the distribution of costsneeded to achieve the congestion benefits. Schade andSchlag (2003) suggested the psychological view on theissue with the reference to the term “justice,” which maybe different from the idea of a fair allocation mechanism.

Regardless of the exact definition of equity, for ana-lytical purposes it is necessary to define groups of poten-tial winners and losers from road pricing (Langmyhr1997). In the main, there are two dimensions of equity:vertical and horizontal. The vertical dimension of theequity issue concerns the unequal impact from thescheme across different groups of the population segre-gated by income and socioeconomic characteristics. Forinstance, one may argue that the implementation of aroad user charging system will benefit the rich while dis-advantaging the poor (or lower-income group). The ver-tical equity analysis is mostly associated with theprotection of those in the worst conditions (PATS Con-sortium 2001). Jones (2002) referred to vertical equityas social equity. The horizontal dimension of the equityimpact is referred to as the spatial equity impact or ter-ritorial equity. The horizontal equity impact can bedescribed as the impact on the population living in dif-ferent parts of a certain area. If the scheme benefits onlya small group of people from some areas but the rest ofthe population experiences a decline in social welfare,the scheme can be argued to be inequitable.

Early attempts in dealing with the equity issue weremainly involved in analyzing the impact of road pricingon vertical equity (Anderson and Mohring 1995; Frid-


strom et al. 2000; Giuliano 1994; Gomez-Ibanez 1992;Langmyhr 1997). A general conclusion from variousresearchers was that low-income or less flexible car users(e.g., based on gender or flexibility of working schedule)are likely to be the worst-off groups as a result of roadpricing. If revenues are not redistributed in any way, roadpricing generally results in gains for higher-incomegroups and losses for lower-income groups (Else 1986;Cohen 1987). The way the revenues are distributed hasa significant impact on the equity issue (Fridstrom et al.2000; Giuliano 1994; Small 1992).

Some research has examined the horizontal dimen-sion of equity. Fridstrom et al. (2000) analyzed the spa-tial impact of road pricing cordons by using spatialaccessibility for each zone segregated by modes as theindicator. They suggested that the main adverse impactof a charging cordon is its boundary effect, which alsodepends on the actual design of the scheme. A small cor-don would affect residents inside the cordon the most,whereas those outside the cordon are the main victimsin a wider cordon scheme. In the study of the SingaporeALS, Holland and Watson (1978) indicated that the cor-don gave more advantage to the commercial firms out-side the cordon. Obviously, this problem may beeliminated by the introduction of a different chargingregime, such as a time-based, a distance-based, or adelay-based regime (Jones 2002). Halden (2003) alsoused the accessibility ratio between car and noncar fromdifferent zones for different purposes. The resultsshowed a great diversity of the impacts on differentareas in the city and classes of users.

Recent research has examined the approach to includ-ing equity aspects in the design of road pricing systems.Mayeres and Proost (2001) proposed a weighted welfareindicator giving more weight to the benefit–cost incurredby less advantaged groups. The test results showed thatroad pricing is an important element of the tax reform evenwith a greater emphasis on equity. Meng and Yang (2002)developed a framework for calculating optimal road toll(to maximize social welfare) with constraints on the spatialequity impact. Recently, Sumalee (2003) proposed an ana-lytical method to identify an optimal location of chargingcordon with spatial equity constraint. Jones (2002) pro-posed a simple approach to address equity concernsthrough scheme design, exemption, and discount.

While there remain some uncertainties over equityimpacts, they mainly relate to issues of scale, which willdepend on detailed design, and of design approaches,which can be adapted to mitigate these impacts.

Economic Impacts

The economic and relocation impacts of transport schemesare notoriously difficult to measure or predict. For road

pricing, the lack of empirical evidence makes the problemworse. The early study of area licensing in Singapore didnot attempt to assess the impacts on land use. It did askbusinesspeople for their assessment of the scheme, whichwas largely positive, but this may well have reflected a gen-eral view in Singapore at the time that government wasmaking the right decisions. Ten years later an attempt wasmade to assess the impacts retrospectively. It was con-cluded that there was no evidence of adverse impacts oneconomic activity in the city center (Armstrong-Wright1986). However, this assessment was made difficult, bothbecause parking restrictions had been introduced at thesame time, about which businesses were much more criti-cal, and because the Singapore economy had expandedrapidly in the intervening period, which masked any impactof road pricing. There is no documented evidence of anysimilar assessments in Norway. Empirical evidence is beingsought in London in the context of early claims of aroughly 10% reduction in retail trade.

An earlier study asked businesses in three cities—Cambridge, Norwich, and York—about the expectedimpacts of a road pricing scheme charging £3 per day toenter the city center in the morning peak (Gerrard2000). The majority anticipated positive impacts on theenvironment and congestion but negative impacts onthe economy and tourism and on their own staffing andprofitability. When asked whether road pricing wouldinfluence their next location decision, 53% said it wouldand 26% that it might.

Model-based predictions typically suggest muchsmaller impacts. An analysis of the impacts of conges-tion charging in London was carried out by using theMEPLAN model of London and the South-East,which reflects the effects of changes in accessibility onlocation (May et al. 1996a). For a £4 charge to entercentral London, the predictions were as follows:

• Central London employment would rise by 1.0%.• Inner and outer London employment would fall

by around 0.5%.• Household numbers would fall by 0.2% in central

London and 0.1% in outer London.• Household numbers would rise slightly in inner

London.• Higher-income household numbers would

increase in central London.

A subsequent study in Edinburgh using the START/DELTA model, which includes responses to both accessi-bility and environment (Bristow et al. 1999), indicatedthat a £1.50 charge to enter or leave the city centerwould increase city center population by 2.2%; an ear-lier study with a similar model but different parameters(Still et al. 1999) had suggested a 1.8% reduction in citycenter population and a 3.1% reduction in city center


employment. Both studies suggested that the impacts ofchanges in accessibility were larger than but opposite insign to the impacts of changes in environmental quality.

This remains an area of considerable uncertainty onwhich more evidence is needed.

Technology

In the past, the operation of point-based road pricingschemes was mostly based on manual toll collection orautomatic coin collection machines at tollbooths. Theoperation required vehicles to slow down and stop at thetollbooth. This system offers a high level of reliabilityand enforcement. It also involves a simple technologythat is widely accepted. However, the system creates seri-ous congestion around the toll collection area. An alter-native charging regime is an area-based charging system.The original ALS in Singapore was a showcase of theapplication of a paper-based system involving a mini-mum level of technology (Holland and Watson 1978).The downside of the paper-based system is the intensityof manual enforcement. Electronic technology for charg-ing and enforcement is seen as the pathway to the futuresuccess of the implementation of road pricing.

Key challenges for technology include reliability, thecost of implementation, and privacy. In addition, well-designed technology can provide for greater flexibilityin the range of users and vehicle origins, for more com-plex charging regimes of the kinds outlined below, andfor solutions to equity concerns by permitting varyingcharges and exemptions for different types of users.

In the past decade there has been rapid developmentin charging technology in response to the requirementsmentioned above. There are two main avenues for thecurrent development of charging technology. The firstinvolves use of the DSRC system. The system is made upof two main types of equipment: roadside equipment(RSE) and in-vehicle units (IVUs) that enable two-waycommunication using DSRC. The RSE is connected to acomputer, which carries out the necessary processing.The arrangement tested in Hong Kong in the 1980srelied on a similar system (Dawson and Catling 1986).However, the Hong Kong system was claimed to violateprivacy because of its IVU and back-office technology(Borins 1988). The IVU technology in the early study inHong Kong was a read-only tag that could signify onlythe identity of the vehicle to the RSE. The read-only tagcould not convey any information such as credits orcharges incurred.

The Singapore ERP overcomes this problem byintroducing smart card technology for use with IVUs(Menon 2000). Instead of having an account for eachvehicle, a smart card contains available funds fromwhich charges are deducted at the charging point. The

IVU technology adopted in the Singapore ERP uses atransponder with full two-way communication facili-ties with a smart card interface that is able to store andprocess the data. The same system is being tested andimplemented widely in Japan as the basis for the futureroad user charging system (Kumagai 2003).

The DSRC system operates at free-flow level at thecharging points. Therefore, it requires a high-levelenforcement technology for detecting noncomplyingvehicles (Blythe and Burden 1996). The technology cur-rently adopted is automatic number plate recognition(ANPR) and closed-circuit television. ANPR has alreadybeen tested and used effectively in many cases such asthe Highway 407 system in Toronto, the CityLinkscheme in Melbourne, the ERP in Singapore, andrecently the ALS in London (Turner 2001). At the charg-ing point, if the vehicle is detected as not having an IVUor smart card or if the card lacks sufficient funds, thenumber plate will be captured by the ANPR andprocessed. In London, ANPR cameras at various pointsinside the charging zone record all vehicles, and eachvehicle number plate is compared with the database ofregistered numbers.

The DSRC can operate at different frequencies. Thiscaused a problem in terms of interoperability of differentsystems developed by different providers (Clark 2000).An example is the problem in Australia, where the tollsystems operated in Sydney and Melbourne are based ondifferent standards and are not compatible (Charles2001). In the United States the 915-MHz band was cho-sen as the national standard, while the European Com-mittee for Standardization (CEN) chose 5.8 GHz toavoid the frequency band of the European Global Sys-tem for Mobile Communications. In Japan, the Associa-tion of Radio Industry and Businesses also chose 5.8GHz as the national standard, but the standard is notcompliant with the CEN standard (Guillermo Jordan etal. 2001). To overcome the interoperability problem, theNorwegian government set up a company, AutoPASS, todevelop and operate the charging technology for tollingfacilities in Norway. The new AutoPASS is consistentwith both global ISO standards and European standards(CEN). The new specifications are used in the replace-ment of four systems in Oslo, Trondheim, Rennfast, andHvaler. In addition, AutoPASS users can use their cardson almost half of the toll road projects in Norway.

As an alternative to the DSRC-based system, theGlobal Navigation Satellite System (GNSS) and the Gen-eral Packet Radio System (GPRS) can be adapted tooperate point and distance charging systems (Catling2000). GNSS uses a satellite-based positioning and navi-gation system to compute the location of a vehicle in aroad network. Currently, the United States and Russiaprovide the two navigation satellite systems (GPS andGLONASS, respectively). EU’s Galileo alternative is due


to be available in 2008. Since the satellite navigation sys-tems provide only one-way communication (from thesatellites to the receivers), a cellular phone system is nor-mally used for communication between the vehicle andthe control system for the transaction process. ForGPRS, the position can be determined by the data con-nection via the mobile phone network with an always-onconnection. The resulting VPS allows a more complexcharging regime to be implemented. The system alsorequires minimum infrastructure on the roads. The feecan be defined on the basis of crossing points, presencein an area, or per unit of time or distance. The fee struc-ture could be stored either at the main control center orin the IVU. A similar system was tested in Hong Kongand was proved to be reliable (Catling 2000). The Swissand German governments also launched the first large-scale GPS-based project, which will soon be operableand will charge HGVs on the basis of distance traveled(Guillermo Jordan et al. 2001). The key barrier to large-scale implementation, especially in an urban area, is therequired level of accuracy of the positioning system. Atthe moment, the accuracy of the GPS system is 10 to 15meters, whereas Galileo promises to deliver positioningaccuracy down to 4 meters. Despite the potentialimproved accuracy, there are various blind spots in theroad network (e.g., tunnels) where the GNSS may expe-rience problems. This can be overcome by integratingthe GNSS with the short-range communication system(e.g., communication with beacons) or a dead-reckoningsystem (Ochieng 2003).

Scheme Design and Integrated Strategies

The majority of proposals for road pricing have assumedthat charges would be imposed to cross cordons or passpoints in the road network. Point-based or cordon charg-ing is a remarkably flexible technique. It can involve singleor multiple cordons, screenlines to control orbital move-ments, and point charges at particularly congested loca-tions, with charges varying by location, direction, andtime of day. The early proposals for Hong Kong (Dawsonand Brown 1985), those studied in London (Richards etal. 1996), and the current scheme in Singapore (Menon2000) all exhibit this flexibility.

However, even such complex charging structureshave been criticized. It has been argued that they areinflexible since fixed charging points cannot readily berelocated, that they are inequitable because they imposethe same charge for short and long journeys, and thatthey are disruptive because they encourage rerouting toavoid the charge. All of these limitations arise from thediscontinuities that point-based charging introducesinto the road network. These arguments have led to thealternative suggestion of continuous charging schemes,

in which charges are levied on all travel throughout adefined area on the basis of distance traveled, time spenttraveling, or perhaps time spent in congestion.

A recent survey of the policies adopted by U.K. cityplanners indicated that they typically adopted a simpleapproach by focusing on the city center and any majortraffic generators on its fringes. The single cordonwould be placed just inside the inner ring road aroundthe center, with crossing points minimized where possi-ble, a uniform charge to cross at all points, and thatcharge kept low enough to be publicly acceptable(Sumalee 2001).

Conversely, theory tells us that the “first-best” charg-ing regime is one that results in drivers on each link inthe road network incurring the marginal cost of travelon that link (Sheffi 1985). Such charges are impractica-ble and could prove expensive to implement, but theyserve as a benchmark for assessing real schemes. Thequestion of where best to locate a single cordon or agiven number of charging points is altogether more chal-lenging and has been addressed by relatively fewresearchers (Hearn and Ramana 1998; Shepherd andSumalee 2004; Verhoef 2002). One important theoreti-cal study comparing parking charges, cordon chargesaround centers, continuous charges, and charges limitedto selected lanes with free parallel routes suggests thatthe last of these, which largely reflects HOT lane prac-tice, is by far the least efficient in its impacts on networkperformance (Small and Yan 2001).

A recent research project has used genetic algorithmsto determine optimal locations and charge levels for dif-ferent patterns of charging points. In an application toEdinburgh, it compared four single cordons largely basedon planners’ designs, the same cordons with varyingcharges, an optimally located cordon, and charging lim-ited to 10 isolated points in the network. The planners’cordons varied substantially in their performance, withthe best producing more than twice the benefits of theworst. The optimally located cordon was about 25%more effective than the best of those suggested by theplanners. Relaxing the requirement for a closed cordonand limiting charges to 10 key points added a further20% to the benefits, and relaxing the need for uniformcharges at all points a further 20% to 60%. Charging at10 points, with variable charges, proved to be twice aseffective as the best planners’ cordon with uniformcharges (May et al. 2002). While this research raises sev-eral other questions, it suggests that there is much to begained by a more analytical and flexible approach to thelocation of charging points in urban networks.

Shepherd (2003) investigated the relative perfor-mance of cordons, a fuel tax, and a smart card–basedapproach for Edinburgh within integrated strategies byusing the strategic model START. He concluded thatsmall city center cordons can create boundary effects


and increase average trip lengths. Larger cordons canalso have boundary effects, though if they are largeenough they have little adverse effect on those residingin the area. A simple increase in fuel tax was 84% aseffective as the first-best system. This simple systemwould be easy to implement but would mean addingapproximately €1.5 to the price of a liter of fuel. Apply-ing a smart card distance-based system with a minimumand maximum charge level of €1 and €4, respectively,increases the benefits to 96% of first-best results.

A separate strand of research has compared cordoncharges with those involving delay. Behavioral researchsuggests that drivers will be less willing to reroute orreduce their travel in response to time-based chargingbecause the charges are variable and hence uncertain.Conversely, such responses are stronger with distance-based and cordon charges. There is also evidence thatvariable charges induce greater risk-taking by drivers andhence increase accident risk (Bonsall and Palmer 1997).

The impacts on network performance are very differ-ent. Distance-based charging proved the most effectivein reducing distance traveled and travel times within theurban areas studied, while delay-based and cordoncharging were the least effective. Distance-based andtime-based charging were equally effective in reducingthe resource costs of travel. However, distance-basedcharging also had the most extreme impacts on routechoice, with significant diversion to the unchargedorbital routes outside the urban area. In all cases the netimpact on vehicle kilometers traveled was small, withreductions within the urban area being offset byincreases outside. This argues for charges to be imposedover much wider areas than those often envisaged (Mayand Milne 2000).

Overall, it appears that distance-based charging mayprove to be more effective and flexible than point-basedcharging once the technology is available to implement it.

Road pricing is increasingly being seen, at least inEuropean cities, as part of an integrated strategy inwhich individual policy instruments complement oneanother or overcome the barriers to the implementationof other instruments. A recent policy review has sug-gested that integration can be achieved by reinforcingthe benefits, reducing political and financial barriers,and compensating losers. It highlights road pricing asbeing able, uniquely, to reinforce the benefits of all othertypes of policy instrument, while at the same time gen-erating income to contribute to their costs. It also notesthat other policy instruments can help to reduce itspolitical unacceptability and adverse distributionalimpacts (May 2004).

An early example of this was the integrated transportstudy for Edinburgh, which indirectly led to the currentroad pricing proposals there (May et al. 1992). Afterextensive analysis, six possible strategies were devel-

oped, which involved differing levels of infrastructureinvestment, road space reallocation, fares, and roadpricing, with revenues from the latter hypothecated tofinance the former. Two were high-cost strategiesinvolving roundly similar financial outlay, one with andone without road pricing. At the other extreme, twogenerated sufficient income to pay for the other ele-ments of the strategy with again one involving road pric-ing and the other not. The third pair involved anintermediate level of finance. Those including road pric-ing were between 50% and 200% more effective thanthose without in terms of their net economic benefits;their performance was also much less sensitive to thelevel of public finance available.

Subsequent research has used optimization tech-niques to determine the optimal combination of policyinstruments in different cities for a given set of policyobjectives. An initial study using different transportmodels in nine European cities found that city centerroad pricing charges or comprehensive parking chargesin the range €1.6 to €5.0 per day were a key element ofthe optimal strategy in six of the nine cities, and that infive of the six cities the resulting strategy was self-financing over a 30-year period (May et al. 2000). Morerecent work in four cities, using the same transportmodel for each, has demonstrated that city center roadpricing, with peak charges in the range €1.9 to €7.9 perday, is part of the optimal strategy, together with publictransport fare reductions and frequency increases(Emberger et al. 2003).

CONCLUSIONS

Martin Wachs (2005) comments that “road pricing isnot quite yet within the mainstream of transport policyoptions, but . . . more progress has been made in thatdirection in the last decade than had been made in thepreceding 70 years.”

That assessment is clearly borne out in experienceelsewhere in the world. The past decade has seen theintroduction of electronic road pricing in Singapore andcongestion charging in London; the establishment oftoll cordons in Norway; and a commitment to distance-based charges in Germany and the United Kingdom, atleast for HGVs. While elsewhere it has repeated the pat-tern of proposals for and rejection of urban road pricingof previous decades, we can at least claim that thatactivity has become more intense, particularly in theUnited Kingdom, Italy, Sweden, the Netherlands, Japan,and Hong Kong.

Where proposals fail, the barriers to progress remainlargely the same: lack of political commitment reinforcedby limited public acceptance and concerns about equity,economic impacts, and, to a lesser extent, technology.


However, we have also made significant progress inresearch into these issues in the past decade. We nowhave a much fuller understanding of the factors influenc-ing acceptability. We have identified the key dimensionsof equity and understand better the scale of impact ondifferent groups. Technological developments have beensubstantial and offer new solutions to earlier concerns.In addition, recent research into optimal scheme designoffers ways of intensifying the benefits of road pricingonce introduced. It is only in the area of economicimpacts that significant uncertainties remain, and itappears unlikely that a much greater understanding canbe obtained in the absence of empirical research.

The potential for a significant breakthrough in thenext decade is greater than it has ever been, but much willdepend on the political commitment of local and nationaldecision makers. London is particularly important in thisregard, because it offers the first demonstration of suc-cessful application in a city to which others can relate. Italso promises, over the next 2 years, precisely the detailedempirical evidence called for in Curbing Gridlock (Trans-portation Research Board and Commission on Behav-ioral and Social Sciences and Education 1994). London,of course, is not typical of most other cities that are con-sidering road pricing; even before congestion chargingonly 15% of central London commuters traveled by car.But the detailed empirical evidence on user and systemresponses should allow others to assess more reliablywhat the impacts would be in their own cities.

London also offers evidence for political analysts onthe processes that enable such a complex scheme to beimplemented successfully. Central government playedthe key initial role in establishing the position of themayor and providing him with the necessary enablinglegislation. The appointment of a strong, visionaryleader with such powers then enabled the scheme to beimplemented, despite the loss of confidence and com-mitment at the central government level. Paradoxically,the most powerful ally of the left-of-center mayorproved to be the business community rather than thesocialist government.

As in London, much will depend in the next decadeon political will at both the national and the local levels.European politicians are almost certainly ahead of thosein North America in accepting that we cannot build ourway out of our transport problems. But they remaincautious about policies that are likely to be unattractivein the short term and may take much of a term of officeto implement. National governments need to assist byproviding enabling legislation and consistent policy sup-port. Local governments will succeed where they canfind visionary leaders who are supported by committedand creative professionals.

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9 2

Committee Member Biographical Information

Steve Heminger, Chair, is Executive Director of the Met-ropolitan Transportation Commission (MTC), theregional transportation planning and finance agency forthe San Francisco Bay Area. MTC allocates roughly $1billion per year in funding for the operation, mainte-nance, and expansion of the Bay Area’s road and transitnetworks. MTC also functions as the region’s ServiceAuthority for Freeways and Expressways and has servedas the Bay Area Toll Authority responsible for adminis-tering the base $1 toll on the state-owned bridges.Before joining MTC in 1993, he was Vice President ofTransportation for the Bay Area Council, a regionalpublic policy group. He also has served as a staff assis-tant in the California State Legislature and the U.S. Con-gress. He received a master of arts degree from theUniversity of Chicago and a bachelor of arts degreefrom Georgetown University.

Mr. Heminger is prominent in the area of road pric-ing. He led the effort in the San Francisco Bay Area thatreceived the first congestion pricing demonstrationgrant from the Federal Highway Administration. Healso served on the National Research Council commit-tee on congestion pricing that produced Special Report242: Curbing Gridlock: Peak-Period Fees to RelieveTraffic Congestion (1994).

Robert D. Bullard is the Ware Professor of Sociology andDirector of the Environmental Justice Resource Center atClark Atlanta University. He is the nation’s leading experton environmental justice and transportation equity. Dr.Bullard is the author of 11 books that address sustainabledevelopment, environmental justice, urban land use,

industrial facility permitting, community reinvestment,housing, transportation, and smart growth. His bookDumping in Dixie: Race, Class and Environmental Qual-ity (Westview Press, 2000) is a standard text in the envi-ronmental justice field. His other books include In Searchof the New South (University of Alabama Press, 1991),Confronting Environmental Racism: Voices from theGrassroots (South End Press, 1993), People of ColorEnvironmental Groups Directory 2000 (Charles StewartMott Foundation, 2000), and Unequal Protection: Envi-ronmental Justice and Communities of Color (Sierra ClubBooks, 1996). He coedited Residential Apartheid: TheAmerican Legacy (University of California at Los AngelesCenter for African American Studies Publications, 1994);Just Transportation: Dismantling Race and Class Barri-ers to Mobility (New Society Publishers, 1997); andSprawl City: Race, Politics and Planning in Atlanta(Island Press, 2000). His most recent book is titled JustSustainabilities: Development.

Kenneth J. Button has been Professor of Public Policyand Director of the Center for Transportation Policy andOperations in the School of Public Policy, George MasonUniversity, Fairfax, Virginia, since 1997. From 1994 to1996 he was Conseiller in the Advisory Unit to the Sec-retary General of the Organisation for Economic Co-operation and Development (OECD), Paris, where heheaded work on international aviation policy. He was atthat time on leave from being concurrently Professor ofApplied Economics and Transport at LoughboroughUniversity, United Kingdom, and VSB Visiting Professorof Transport and the Environment at the Tinbergen Insti-

tute, Amsterdam, Netherlands. He was also at the timeDirector of the Centre for Research in Economics andFinance at Loughborough University. He was the SpecialAdvisor to the U.K. House of Commons Transport Com-mittee between 1993 and 1994. In 1990 he was full-timeConsultant to the OECD Environmental Directorate.

Dr. Button’s academic training is in the fields of eco-nomics, econometrics, and transportation planning. Hehas published or has in press some 80 books and morethan 400 papers in leading academic journals. He hasgiven written and oral evidence to transportation com-mittees of the U.S. Congress and to both the U.K. Houseof Lords and House of Commons Transport Commit-tees. His work on road pricing includes jointly editingRoad Pricing, Traffic Congestion and the Environment(Edward Elgar publishing), serving on the CharteredInstitute of Transport (CIT) working party on Paying forProgress: A Report on Congestion and Road Pricing,and chairing the CIT working party on Paying for BetterMotorways. In addition, he has published articles onroad pricing as chapters in numerous books and in suchjournals as Transportation Research; TransportationResearch Record: Journal of the TransportationResearch Board; International Journal of Transport Eco-nomics; Logistics and Transportation Review; TransportReviews; and Transportation Planning and Technology.Dr. Button received a B.A. degree from the University ofEast Anglia, an M.A. from the University of Leeds, and aPh.D. from the University of Loughborough.

Damian J. Kulash is President and CEO of the EnoTransportation Foundation, Inc., Washington, D.C. Hehas 30 years of experience in managing transportationorganizations. He has been extensively involved intransportation policy analysis and has managed manymultidisciplinary, multiperspective teams to extractaction plans in complex, difficult situations. He hassuccessfully brought industrial and government leadersto work together and has forged new working arrange-ments between state and federal agencies. As ExecutiveDirector of the $153 million Strategic HighwayResearch Program, Mr. Kulash created and managedscores of diverse advisory committees to guide the pro-gram toward useful products and to work with federal,state, and industry organizations to put results intopractice. As President and CEO of the Eno Transporta-tion Foundation, he has established a series of forumsdealing with cutting-edge issues affecting all modes oftransportation and their compatibility with other areasof national concern. They include activities addressingthe economic returns on transportation investment,coordination of intermodal freight operations inEurope and the United States, and development of aU.S. transportation strategy compatible with nationalglobal climate change objectives.

Kathleen F. Marvaso is Managing Director, AAA Gov-ernment Relations, Washington, D.C. In this capacityshe directs all federal and state legislative activities forthe 45 million member association, focusing on a fullrange of safety and mobility issues affecting travelers.Since 1993, Ms. Marvaso has been instrumental indeveloping strategies to help the association achieve itspublic service goals, improve mobility, and enhance thesafety of the traveling public. In recent years she hasguided the 80-club federation’s efforts to enact gradu-ated driver licensing laws in every state and has directedthe association’s advocacy work on issues includingtruck safety, highway maintenance, design and funding,child passenger safety, and clean air.

Before joining AAA, Ms. Marvaso worked as a leg-islative assistant for Congressman Bill Nelson, now oneof Florida’s two senators, and managed campaign opera-tions for Mr. Nelson’s 1990 bid for governor. A journal-ism graduate of the University of Florida at Gainesville,she earned a master’s degree in business administrationfrom George Mason University in Virginia.

Anthony D. May has more than 35 years of experiencein transport planning and traffic engineering. He hasbeen a Professor at the University of Leeds, United King-dom, since 1977, and he has served as Head of theDepartment of Civil Engineering, Dean of the Faculty ofEngineering, and Pro-Vice Chancellor for Research. Heis currently Director of the Institute for Transport Stud-ies. Between 1985 and 2001 he maintained a linkbetween research and teaching at Leeds and practicalexperience in consultancy with MVA Ltd., for which hewas Director of Transport Policy. Before 1977 he spenta number of years with the Greater London Council,where he was responsible for policy on highways, traf-fic management, and transport-related land use plan-ning for the capital and managed major studies ontraffic restraint, parking policy, and motorway trafficcontrol.

While at Leeds, he has been awarded more than 80research grants and contracts by the Engineering andPhysical Sciences and Economic and Social ScienceResearch Councils, the European Community, the ReesJeffreys Road Fund, and several local authorities.Among the studies conducted have been those for thetransport problems of inner-city firms, techniques formonitoring travel, development of dynamic route guid-ance, the management of congestion at signalized junc-tions, the most appropriate structure for theorganization of transport functions in the U.K. conur-bations, the design and assessment of road pricingstrategies, the development of trip planning systems andawareness campaigns, the combined performance oftransport and land use strategies, the impact of inte-grated transport strategies and their contribution to

9 3COMMITTEE MEMBER BIOGRAPHICAL INFORMATION

environmental policy, and the development of guidanceon sustainable urban transport and land use policy.

Dr. May has been a specialist adviser to the House ofCommons Transport Committee and the House ofLords Select Committee on Science and Technology anda consultant to OECD, the World Bank, the Trans-portation Research Board, the Singapore Land Trans-port Authority, the New Zealand Ministry of Transport,and the Thailand Commission for the Management ofLand Transport.

Servando M. Parapar was selected by the Miami–DadeExpressway Authority (MDX) board to serve as its firstExecutive Director in 1996. Mr. Parapar’s first prioritywas to negotiate the transfer of the Miami–DadeCounty tollway system, which was accomplished inDecember 1996. Since then, under his leadership andguidance, MDX has put together a $2.75 billion mastertransportation plan with the overriding objective of cre-ating an integrated system that provides a seamless andbalanced movement of traffic. The current MDX 5-yearwork program is estimated at $796 million. Mr. Parapardirected the strategic alliance with the Florida Depart-ment of Transportation that has led to the successfulimplementation of SunPass, a statewide electronic tollcollection system, at MDX facilities. Under his guidanceMDX has utilized design–build contracts to completethree roadway construction projects in record time. Mr.Parapar is also leading Phase I of the SR-836 corridorreconstruction, one of the major roadways in Miami–Dade County.

Mr. Parapar serves on the boards of directors of theInternational Bridge, Tunnel, and Turnpike Associationand the Intelligent Transportation Society of Florida.He was born in Havana, Cuba. A U.S. citizen, he holdsa bachelor’s degree in architectural engineering fromthe University of Miami and a master’s degree in civilengineering from the University of Florida.

Robert W. Poole, Jr., is founder of the Reason Founda-tion and a nationally known expert on privatization andtransportation policy. In 1978 Mr. Poole launched theReason Foundation, a national public policy researchorganization. He began researching privatization of gov-ernment functions in the 1970s, and his book CuttingBack City Hall (Universe Books, 1980) was the firstbook-length examination of the subject. He advised theWhite House Office of Policy Development on privatiza-tion during the Reagan years and testified before the Pres-ident’s Commission on Privatization in 1987. During thefirst Bush administration, he worked with the Vice Presi-dent’s Competitiveness Council and the White HouseCounsel to help develop an executive order on infrastruc-ture privatization. In 1992 he served as a board memberof the Vice President’s Space Policy Advisory Board.

Mr. Poole was one of the first to propose privatiza-tion of the air traffic control system, and his work inthis field has helped shape current proposals for an airtraffic control corporation. His 1988 policy paper onprivate toll roads directly inspired California’s landmarklegislation on the subject (since emulated in 15 otherstates); he served 18 months on the Privatization Advi-sory Steering Committee of the California Departmentof Transportation helping to implement the measure. In1995 he served as a member of California’s commissionon transportation investment. Mr. Poole has also helpedlaunch national debates on airport privatization and oncongestion pricing for urban freeways.

Mr. Poole received bachelor’s and master’s degrees inengineering from the Massachusetts Institute of Tech-nology.

Edward J. Regan III is Senior Vice President of WilburSmith Associates (1990 to present). He is responsible forthe oversight and management of the TFT Group, a 45-person division dedicated to providing professional ser-vices to the toll industry worldwide. Mr. Regan is arecognized expert in toll facility studies and finance.Under his leadership, traffic and revenue studies per-formed by the TFT Group have been used in support ofmore than $50 billion in toll facility finance. He has alsobeen heavily involved in the development and analysis ofinnovative value pricing programs for various toll facili-ties. His technical specialties include senior project man-agement, transportation planning, road pricing studies,traffic operations, toll feasibility studies, traffic and rev-enue studies, strategic planning, toll collection/automaticvehicle identification system design, and toll plaza oper-ations. He has overseen projects in the United States,Canada, and Australia.

Martin Wachs is Director of the Institute of Transporta-tion Studies at the University of California, Berkeley,where he also holds faculty appointments as Professor ofCity and Regional Planning and as Carlson Distin-guished Professor of Civil and Environmental Engineer-ing. Until 1996 he was Professor of Urban Planning andDirector of the Institute of Transportation Studies at theUniversity of California at Los Angeles, where he hadbeen a member of the faculty since 1971 and where heserved three terms as Head of the Urban Planning Pro-gram. The Institute of Transportation Studies at Berkeleyis one of the largest academic transportation researchcenters in the United States. It has approximately 200employees and an annual budget of $40 million.

Dr. Wachs holds a bachelor’s degree in civil engineer-ing from the City University of New York and M.S. andPh.D. degrees in transportation planning from the CivilEngineering Department at Northwestern University. Heis the author or editor of four books and has written


more than 130 published articles on transportation plan-ning and policy on such topics as the transportationneeds of elderly and handicapped people, fare and sub-sidy policies in urban transportation, the problem ofcrime in public transit systems, and methods for the eval-uation of alternative transportation projects. He has alsodone historical studies of the relationship between trans-portation investments and urban form in the early partof the 20th century and on ethics in planning and fore-casting. Recently, his writings have dealt with trans-portation finance and the relationship betweentransportation, air quality, and land use.

Dr. Wachs served as Chairman of the Executive Com-mittee of the Transportation Research Board during2000, and he recently completed a term as a member of

the California Commission on Transportation Invest-ment, to which he was appointed by Governor Pete Wil-son. He is currently a member of the Advisory Committeeon Research and Development for the California Depart-ment of Transportation and recently completed his termas the first Chair of the Advisory Panel for the TravelModel Improvement Program of the U.S. Department ofTransportation. He chairs the Subcommittee on Planningand Policy Review of the Transportation ResearchBoard’s Executive Committee.

Professor Wachs is a Fellow of the American Instituteof Certified Planners, a National Associate of theNational Academy of Sciences, a Member of the Amer-ican Society of Civil Engineers, and a member of theInstitute of Transportation Engineers.

9 5COMMITTEE MEMBER BIOGRAPHICAL INFORMATION

9 6

Participants

John Albion, Lee County Board of Commissioners, FloridaSherri Alston, Office of Transportation Policy Studies,

Federal Highway AdministrationErik Amdal, Norwegian Public Roads Administration,

TrondheimJean Andersson, Confederation Construction, Brussels,

BelgiumJames Anglin, HNTB Corporation, Orlando, FloridaWilfred Babbili, North Central Texas Council of

Governments, ArlingtonTom Barry, PBS&J, Orlando, FloridaDan Beal, Automobile Club of Southern California, Costa

MesaJohn Becker, HNTB Corporation, Plano, TexasWayne Berman, Federal Highway Administration,

Washington, D.C.Kiran Bhatt, K.T. Anyalytics, Inc., Bethesda, MarylandSaul Billingsley, FIA Foundation, LondonGhislain Blanchard, Transport Canada, Ottawa, OntarioJames Bourgart, Parsons Brinckerhoff, San Francisco,

CaliforniaBud Boyd, Florida Department of Transportation,

TallahasseeCarol Bozarth, JAFA Technologies, Inc./EFKON, Mt. Laurel,

New JerseyTony Brennand, Greater Wellington Regional Council,

Wellington, New ZealandJeffrey Brown, Florida State University, TallahasseeKenneth Buckeye, Minnesota Department of Transportation,

St. PaulRobert Bullard, Clark Atlanta University, Atlanta, GeorgiaMark Burris, Texas A&M University, College Station

Ellen Burton, Orange County Transportation Authority,California

Kenneth Button, George Mason University, Fairfax, Virginia

Jeffrey Buxbaum, Cambridge Systematics, Inc., Cambridge,Massachusetts

Duane Callender, Federal Highway Administration,Washington, D.C.

James Calpin, UBS, New YorkAnne Canby, Surface Transportation Policy Project,

Washington, D.C.Ray Casas, MDX, Miami, FloridaJeff Casello, University of Pennsylvania, PhiladelphiaMichael Caylor, TransCore, Orlando, FloridaKris Cella, Cella & Associates, Inc., Fort Myers, FloridaNicola Chandler, New Zealand Ministry of Transport,

WellingtonTakahito Chiba, Express Highway Reseach Foundation of

Japan, Chiyoda-ku TokyoLowell Clary, Florida Department of Transportation,

TallahasseeYuval Cohen, PB Consult, Parsons Brinckerhoff, New YorkReynaldo Cortez, PBS&J, Miami, FloridaJames Crawford, South Jersey Transportation Authority,

Hammonton, New JerseyMichael Cummings, Washington State Department of

Transportation, SeattleDavid Cummins, ACS, Washington, D.C.Richard Cunard, Transportation Research Board,

Washington, D.C.Barry Curtis, Manukau City Council, New ZealandThierry Dallard, ASF, Paris

Aubrey Davis, Washington State TransportationCommission, Olympia

Patrick DeCorla-Souza, Federal Highway Administration,Washington, D.C.

Robert Dunphy, Urban Land Institute, Washington, D.C.Carl Friedrich Eckhardt, Dornier Consulting GmbH, Berlin,

GermanyClaire Felbinger, Transportation Research Board,

Washington, D.C.David Fink, Texas Department of Transportation, HoustonJohn Finn, HNTB Corporation, Wayne, North CarolinaEmil Frankel, U.S. Department of Transportation,

Washington, D.C.Chris Freke, Manukau City Council, New ZealandTony Friedlander, Road Transport Forum NZ, Wellington,

New ZealandGenevieve Giuliano, University of Southern California, Los

AngelesAnton Goebel, Finnish Road Administration, HelsinkiTeresa Gonzales, Cascadia Project, Discovery Institute,

Seattle, WashingtonVirginia Goodin, Texas Transportation Institute, AustinMark Griffin, Southern California Association of

Governments, Los AngelesGary Groat, Fluor, Arlington, VirginiaJóhann Gu∂mundsson, Ministry of Transport, Reykjavík,

IcelandHreinn Haraldsson, Public Road Administration, Reykjavík,

IcelandJeff Harris, Transport Canada, Ottawa, OntarioMichael Harris, PB Farradyne, Herndon, VirginiaArnoldus Hart, Wilbur Smith Associates, Los Angeles,

CaliforniaJim Hatter, Federal Highway Administration, Atlanta,

GeorgiaJayEtta Hecker, U.S. General Accounting Office,

Washington, D.C.Jay Hedley, Accenture, Arlington, VirginiaSteve Heminger, Metropolitan Transportation Commission,

Oakland, CaliforniaRobert Hicks, Public Technology, Inc., Washington, D.C.Jerry Hiebert, North Texas Tollway Authority, PlanoKevin Hoeflich, PBS&J, Ocoee, FloridaMayer Horn, KLD Associates, Inc., Commack, New YorkDon Houghton, Auckland Regional Council, New ZealandJerry Ingram, Kimley-Horn and Associates, Inc., West Palm

Beach, FloridaStephen Ison, Loughborough University, Leicestershire,

United KingdomNicholas James, Macquarie Bank, New YorkKatherine Jefferson, George Mason University, Centreville,

VirginiaGeoffray Jerome, Cofiroute, Sevres, FranceKjell Werner Johansen, Institute of Transport Economics,

Oslo, Norway

Greg Jones, Federal Highway Administration, Atlanta,Georgia

Patrick Jones, IBTTA, Washington, D.C.Camille Kamga, City University of New York Graduate

CenterJari Kauppila, Ministry of Transport and Communications,

Helsinki, FinlandCathy Kendall, Federal Highway Administration,

Tallahassee, FloridaAndreas Kossak, Hamburg, GermanyTrond Krakenes, Ministry of Transport and

Communications, Oslo, NorwayDamian Kulash, Washington, D.C.Cherie Kyte, Virginia Transportation Research Council,

CharlottesvilleAdeel Lari, Minnesota Department of Transportation, St.

PaulTerrie Laycock, County of Loudoun, Leesburg, VirginiaDavid LeCoffre, Embassy of France, Washington, D.C.Douglass Lee, Volpe Center, U.S. Department of

Transportation, Cambridge, MassachusettsGregory LeFrois, HNTB Corporation, Wayne, New JerseyDavid Levinson, University of Minnesota, MinneapolisAnjali Mahendra, Massachusetts Institute of Technology,

CambridgeMichelle Martin, Maryland Department of Transportation,

HanoverJan Arne Martinsen, Norwegian National Roads

Administration, OsloKathleen Marvaso, AAA Government Relations,

Washington, D.C.Anthony May, University of Leeds, United KingdomCatherine McGhee, Virginia Transportation Research

Council, CharlottesvilleGopinath Menon, MSI Global Pte. Ltd., SingaporeMartine Micozzi, Organisation for Economic Co-operation

and Development, ParisCraig Miller, Miller Consulting, Inc., Pompano Beach,

FloridaStephen Moon, Stephen Moon & Associates, Tallahassee,

FloridaMassoud Moradi, PBS&J, Ocoee, FloridaEdward Mulka, JAFA Technologies, Inc./EFKON, Mt.

Laurel, New JerseyLee Munnich, Humphrey Institute of Public Affairs,

University of Minnesota, MinneapolisMark Muriello, Port Authority of New York and New

Jersey, New YorkKuniaki Nakamura, Japan Highway Public Corporation,

TokyoRobert Namoff, Florida Transportation Commission, MiamiChristopher Nash, Institute for Transport Studies, Leeds,

United KingdomImad Nassereddine, 407 ETR Concession Company Ltd.,

Woodbridge, Ontario, Canada

9 7PARTICIPANTS

Yvonne Need, AVV Transport Research Center, Rotterdam,Netherlands

Peter Nelson, Resources for the Future, Washington, D.C.Brian Nordahl, Deloitte & Touche LLP, Chicago, IllinoisJon Obenberger, Federal Highway Administration,

Washington, D.C.James Odeck, Norwegian Public Roads Administration, OsloBerg ór Ólason, Ministry of Transport, Reykjavík, IcelandKevin Palmer, PBS&J, Tallahassee, FloridaJeffrey Parker, Jeffrey A. Parker & Associates, Inc.,

Chilmark, MassachusettsCarlos Penin, CSA Southeast, Coral Gables, FloridaBenjamin Perez, PB Consult, New YorkAlexis Perrotta, Regional Plan Association, New YorkPaul Pezzotta, Wilbur Smith AssociatesGary Phillips, URS Corporation, Tallahassee, FloridaDon Pickrell, Volpe Center, U.S. Department of

Transportation, Cambridge, MassachusettsRobert Poole, Jr., Reason Foundation, Los Angeles,

CaliforniaCesar Queiroz, World Bank, Washington, D.C.David Rae, URS Corporation, Tallahassee, FloridaFarideh Ramjerdi, Institute of Transport Economics, Oslo,

NorwayEdward Regan, Wilbur Smith Associates, New Haven,

ConnecticutWilliam Reinhardt, Public Works Financing, Westfield,

New JerseyAndrea Ricci, ISIS, Rome, ItalyBlasko Ristic, Deloitte & Touche LLP, Chicago, IllinoisAlain Robillard, Autoroutes du Sud de la France, ParisBarbara Rohde, Humphrey Institute, Minneapolis,

MinnesotaMarcel Rommerts, European Commission, Brussels, BelgiumKeith Rosbury, HNTB Corporation, Plano, TexasMiriam Roskin, Roskin Consulting, Seattle, WashingtonDarrin Roth, American Trucking Associations, Alexandria,

VirginiaGabriel Roth, Chevy Chase, MarylandMartin Ruesch, Rapp Trans AG, Zurich, SwitzerlandPeter Samuel, TOLLROADSnews, Frederick, MarylandErna Schol, AVV Transport Research Center, Rotterdam,

NetherlandsEric Schreffler, ESTC, San Diego, CaliforniaDavid Schumacher, San Diego Association of Governments,

CaliforniaGerald Sears, Virginia Department of Transportation,

RichmondRichard Seiden, Transportation Economic and Management

Systems, Inc., Frederick, MarylandStephen Selwood, Automobile Association New Zealand,

AucklandMario Semmler, University of Pennsylvania, PhiladelphiaJacquelyn Seneschal, KCI Technologies, Hunt Valley,

Maryland

Anatole Sergejew, Ministry of Transport, Auckland, New Zealand

Phillip Shapiro, BMI-SC, Silver Spring, MarylandDarryl Sharpton, Sharpton, Brunson & Company, Miami,

FloridaTetsuo Shimizu, University of Tokyo, JapanDonald Shoup, University of California, Los AngelesRobert E. Skinner, Jr., Transportation Research Board,

Washington, D.C.Kenneth Small, University of California, IrvineWilliam Stockton, Texas Transportation Institute, College

StationRoger Stough, George Mason University, Fairfax, VirginiaEvelio Suarez, Florida Turnpike Enterprise, Boca RatonEdward Sullivan, California Polytechnic State University,

San Luis ObispoJanusz Supernak, San Diego State University, CaliforniaChris Swenson, CRSPE, Inc., Cape Coral, FloridaMyron Swisher, Colorado Department of Transportation,

DenverDavid Tassinari, Florida Turnpike Enterprise, OcoeeGraham Taylor, Transit New Zealand, WellingtonGeorge Tharakan, World Bank, Washington, D.C.Valencia Thompson, Federal Highway Administration,

Baltimore, MarylandRoger Toleman, New Zealand Ministry of Transport,

WellingtonTakakazu Tsuji, University of Pennsylvania, Bryn MawrDerek Turner, Derek Turner Consulting, LondonJean-Christophe Vanderhaegen, Confederation Construction,

Brussels, BelgiumHerbert Vargas, Amasua Varchan, Inc., Pembroke Pines,

FloridaAndrew Von Ah, General Accountability Office, Los

Angeles, CaliforniaMartin Wachs, University of California, BerkeleyKristian Wærsted, Norwegian Public Roads Administration,

OsloRichard Walega, Accenture, Annapolis, MarylandGeorge Walton, Parsons Brinckerhoff, Baltimore,

MarylandRobert Weiss, North Carolina General Assembly, RaleighTony West, LTSA, Wellington, New ZealandParker Williams, ACS, Washington, D.C.Tony Wilson, National Road Transport Commission,

Melbourne, Victoria, AustraliaHarold Worrall, Orlando–Orange County Expressway

Authority, FloridaBeverly Wright, Xavier University of Louisiana, New

OrleansDavid Yale, Metropolitan Transportation Authority, Los

Angeles, CaliforniaHiroyuki Yamamoto, Expressway Technology Center,

Chiyoda-ku Tokyo, JapanJeffrey Zupan, Regional Plan Association, New York


CONFERENCE PROCEEDINGS 34

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International Perspectives on

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