Road Pricing

Ohio Turnpike not to be privatised

2013-05-16T09:00:00.000+01:00

As has been previously reported, there had been a lot of debate as to whether it was worthwhile to privatise the Ohio Turnpike.

According to an article on Cleveland.Com, the revenues for the 241 mile long Ohio Turnpike for 2012 were at a record US$270 million (with an expected profit of US$15 million).

Governor John Kasich is keen to utilise the value of the toll road to support other transport infrastructure projects in the state. The law currently restricts the net revenues to being spent on transport projects within one mile of the road.

Tolls increased by 10% in January 2012 and traffic volumes have increased, making the toll road a lucrative asset for the state. It has been reducing staff and consequential costs.

So the decision has been made not to privatise the road, but instead have it issue bonds which will essentially mean the state is borrowing against future revenues from the Turnpike to pay for other transport projects. US$1.5 billion in bonds will be issued.

A website called Ohio Turnpike Analysis contains more details. With a specific report of more in-depth analysis here, supported by Big Four accountancy firm, KPMG. Indeed that report had been commissioned to specifically restrict options to those that exclude privatisation, but could include a lease to a concessionaire for the revenues.

In announcing the decision on the Turnpike the website states:

While the state could have realized more money by leasing the Turnpike, maintaining public control of the Turnpike and keeping the Turnpike Commission independent helps keep tolls low and workers on the job. Better coordination with ODOT keeps virtually all Turnpike revenue in Northern Ohio.

The Ohio Turnpike Commission is to be expanded into the Ohio Turnpike and Infrastructure Commission, which will have new "expanded authority" over major transportation projects in Ohio.

In addition, there will be a cap on tolls as follows:

Tolls for local passenger trips that are paid with EZ Pass will be frozen at current levels for the next 10 years. For all other tolls (longer passenger trips and all truck trips) any increases will be capped at the rate of inflation, or approximately 2.7 percent annually, assuming sustained traffic growth at the historic 1 percent rate. This low, stable rate will be less than half the rate of increase that passenger tolls have seen over the past 20 years and almost a full percentage point less than past increases to truck tolls.

Comment

It is always curious to see how reluctant authorities in the United States are to embrace private enterprise, capitalism and free markets when it comes to roads, especially when compared with countries that many Americans would consider to be more regulated and pejoratively, socialist (e.g. France, which has had little hesitation to have a large network of privately owned highways). The rhetoric around it is remarkably parochial (with the implication that only people from Ohio could run the road "properly").

What is almost completely absent is this analysis is any idea of the capital value of the Turnpike. The private sector has to account for its assets, but the public sector should as well. It should make a return on that capital value, because taxpayers' money is tied up in it. They should understand why their money is making more than a market return or less than that, otherwise it isn't clear whether the asset is being well managed or not. Of course the only way to get a market capital value would be to talk to the market. What would it be worth if it was sold, unencumbered (or encumbered by specific legislation)? It would be dependent on revenue forecasts and expected costs, then the analysis can be done as to whether the surplus, after renewals and depreciation is worth more than the expected sale price.

There is a reasonable case to be made for reducing the risk of monopolistic pricing of the Turnpike, but beyond that if pricing can be efficient, and also reflect demand, there is scope for it to improve utilisation and get better value out of the asset.

In short, it appears that retaining the asset in state ownership is a political decision based on parochial and long term financial grounds (better for the money to stay in Ohio, and better for the state to spend the revenues rather than monetise the asset, and let the private sector enjoy the revenues).

The estimated value of a lease was a net NPV of US$1.8 billion, but I would have liked there to be some consideration of the most radical option - selling it. Not that this is what should be done, but that it would provide a benchmark of value, to measure others against it. The value of the sale money can then be treated on its own merits.

What I hope is that the new Ohio Turnpike and Infrastructure Commission efficiently transitions to fully electronic free flow tolling, adopts international best practice in asset management and customer management, and so replicates as much as is possible the efficiencies the private sector would bring to its operations. It should also apply this to how it will supervise and manage other infrastructure projects financed through the forthcoming bond issue.

However, I also hope that the broader issues of sustainable revenues for Ohio are looked at more widely. The Ohio Turnpike is not enough in itself to generate revenues to replace declining fuel tax yields. Moreover, Ohio should look at how it can leverage revenues from transit traffic and improve pricing overall to get better network utilisation, and better distribution of charges across users.

The Ohio Turnpike may not be privatised now, or in the near future, but it should raise the debate for others. Why should states own roads, especially toll roads? What are the deadweight unseen costs of maintaining that ownership?

The problems of measuring traffic congestion

2013-05-15T09:00:00.000+01:00

Reuters has published an interesting article by Felix Salmon where he examines more closely the basis for the data behind TomTom's congestion indices.

Some of his points:

- TomTom's data comes from people who have its devices in their cars when they are turned on and being used. Most peak time commuters are far less likely to be using satellite navigation services for their daily commute compared to occasional users of the road. As such, both the driving habits, the speeds and the weighting of traffic volumes based on the presence of such devices will be skewed away from regular users.

Now I think that over time, this may change as these systems also advise on traffic conditions more reliably. Anything that encourages people to always have the system on will help, but for now it is at least questionable as to whether the sampling of peak users is representative.

- TomTom doesn't have any measure of confidence levels in its data, because it hasn't actually measured the congestion by any other means. That makes the indices curious, but hardly a sound basis for major public policy decisions.

- Measures of congestion on a percentage basis distorts delays for short trips relative to longer ones. A half hour delay on a one hour journey would be seen as less of a delay than a 10 minute delay on a 15 minute journey, which it is, in one sense. Yet, 10,000 people enduring a half hour delay is more significant than a 10 minute delay.

What this all means is that, beyond individual corridors, it is astonishingly difficult to generalise about cities accurately, comparing performance between cities. That doesn't mean TomTom should be pilloried for what it has done. It is interesting what it has compiled, but it isn't much more than that.

Florida advisory panel proposes distance based road pricing

2013-05-14T09:00:00.000+01:00

Columnist Kingsley Guy in the South Florida Sun Sentinel has commented on the proposal from the Florida Metropolitan Planning Organization Advisory Council (take a breath) that the state introduce a 2/c mile tax on road use.

The proposal comes simply from concerns that fuel taxation is becoming increasingly less reliable as a source of revenue to fund the state's transportation expenditure.

The state has 12 different fuel/vehicle ownership taxes (plus two Federal fuel taxes), two of these taxes haven't been increased since 1941 and 1943 respectively (meaning they are now worth 7-8% of what they originally were set at). 3 are inflation adjusted.

Sources of Florida state transportation trust fund revenues

Black line shows where revenues have to be to remain constant in real terms

FMPOAC concludes that six options should be looked at. These are:

- Index all fuel taxes to inflation;
- 1c optional Municipal sales tax;
- Increase State Highways fuel tax by 2c a year, above inflation;
- Vehicle Mileage Tax;
- 5c local Diesel tax for counties;
- Redirect part of fees that were shifted from transport funding to the State Transportation Trust Fund.

On VMT it said:

This recommendation is to have the Legislature commission and fund an extensive effort to deal with the systemic issues of fuel taxes becoming less sustainable as a primary surrogate for a transportation user fee. While fuel taxes served as an adequate substitute for a true user fee for decades, significant increases in mandated vehicle fuel efficiency and the introduction of all electric and plug‐in hybrid vehicles are eroding transportation revenues. It is recognized that there are significant concerns over the concept of charging users of the highway system based on each mile traveled. These include privacy of citizens, the cost of implementing such a system, and institutional issues associated with revenue sharing. This effort is intended to address these issues at a minimum, deploy a demonstration of the concept and develop a business plan and implementation roadmap to move Florida to a VMT‐based system.

Guy rightly rejects Virginia's bizarre hypothecation of a new sales tax to pay for transport, as if people who rarely drive should pay more for potholes (through their shopping) than a trucking firm does. May as well pay for electricity through general taxation, or telecommunications.

He notes that tolling in Florida has had a distance dimension to it, and that is widely accepted.

However, he also notes some important concerns:

- Privacy. Suggesting an odometer only option. Which is fair enough, as long as it cannot be defrauded. However, privacy does need to be respected, not dismissed. Too many wingnuts think distance based road pricing is part of a conspiracy (one that would be far better implemented if done in cahoots with mobile phone operators!);

- Fraud. He expresses concern about people cheating a distance based system, which is fair enough, but this can be addressed and has been elsewhere. Enforcement is a key part to any such system;

- Visitors. A big issue for any state only system is covering those from out of state quickly and efficiently. I'd suggest some sort of vignette (time based charge), but there are other options too.

- Heavy vehicles. He notes that fuel tax charges heavier vehicles more, and that there needs to be a reflection of weight as well. He's right, and fuel tax does this very poorly, as it tends to charge the smaller trucks too much, and the heaviest ones not enough. Notice that the trucking sector can often be very unhappy about better pricing of roads, partly for this reason.

- Transition. He wonders if there may still be a fuel tax as well as distance charging.

He also notes that there remains an issue of poorly spent money, which is separate from that.

I'm encouraged that Florida is starting to look at this issue more seriously. The state has done well to use tolls to a wide extent, which has helped it a great deal and will help it with any transition to more direct user charging. However, it could do worse than look at progress in Oregon, and the lessons learned from distance charging in other countries as well.

Jakarta moving forward with congestion pricing

2013-05-13T08:30:00.000+01:00

The Jakarta Post reported that Jakarta Governor Joko “Jokowi” Widodo, has said that the Government Regulation regarding the financial and taxation status of electronic road pricing (ERP - the term being used in Indonesia to describe urban congestion charging) has been signed.

In 2011, a regulation on traffic management and engineering was signed to facilitate ERP, now with there being legal approval at the financial level, there are no legal barriers to implementation.

The Jakarta Transportation Agency (which has an almost impenetrable website) has said that work will start on the design and concept, including establishing where and by how much motorists will pay. The current talk is of implementation in 2014 according to the Jakarta Globe.

Electronic Road Pricing will replace blunt HOV rule at peak times

The intention is that ERP will replace the current vehicle rationing system in place in parts of Jakarta, this is essentially a peak time HOV system that requires all cars to have 3 or more occupants. It applies to specific roads between 0700-1000 and 1630-1900 on weekdays.

This has resulted in entrepreneurial Jakartans standing beside the roads approaching the "3-in-1" zone charging a small fee for hitching with motorists. The Jakarta Globe has an article about the "Jakarta Jockeys" as they are called, typically charge Rp.15000 (US$1.54) each to be the third (or even second and third) occupants of cars driving into the restricted zone. Police officers currently enforce the HOV system on sight, issuing fines of up to Rp.1 million (around US$103) for violations. The roads the system applies to get revised regularly, but the whole system will disappear when ERP is introduced.

The scheme will also replace the odd/even vehicle demand management system that was just introduced in March 2013. That system restricts vehicles with odd or even number plates from entering certain areas at peak times on specific days, essentially alternating access during weekdays to reduce congestion.

ERP will contribute to major reduction in congestion

ERP is intended to be the major contributor to a target of reducing traffic delays by 40% by 2014 according to the Jakarta Post. Apparently only 40% of time spent on the roads by commuters is spent moving. 56.8% of trips into Jakarta are undertaken by car. Traffic has been increasing by 11% per annum, but road capacity by 0.01%.

Beyond the urban congestion charge, tough enforcement of illegal on-street parking and on-street vendors on major routes will increase the usable capacity of those roads. The city and Indonesia itself is loathe to ban people from buying vehicles, but may also consider other measures to restrict vehicles (e.g. banning even or odd numbered licence plated vehicles from certain days).

I wrote previously about where I thought it might be implemented.

Possible first stage of Jakarta Electronic Road Pricing

Blue is Phase 1, Yellow Phase 2 and Red Phase 3 of proposed Jakarta congestion pricing

The city has stated that the prices would likely be in the range of Rp. 6500 (US$0.67) and Rp. 21000 (US$2.16) would be adequate to make a meaningful difference to congestion, prices would vary according to time of day, size of vehicles and location, with higher prices for the most congested routes and crossing points. The expectation is that a mix of individual routes and cordons will be charged, it is worth bearing in mind that Jakarta has quite a few (manual) toll roads, so is not unfamiliar with road pricing. There are separate concepts to adapt Jakarta's toll roads towards fully electronic free flow technology, both to address toll plaza congestion and to allow for more dynamic, peak pricing.

"The administration said that the provisional trip charge reflected inflation and economic growth and was based on a survey of motorists and the tolls charged by turnpikes and ERP systems in other countries."

The expectation is that the system will resemble the Singaporean one, with a DSRC type system with on-board units required for all vehicles driving on the charged roads, and prepaid smartcards inserted in them that can be topped up at various retail outlets. Of course it will also require extensive number plate recognition based enforcement.

Decisions on exact implementation have yet to be announced.

News Briefs - Australia, Canada, Ireland, South Africa, USA

2013-05-10T08:30:00.000+01:00

Australia – Survey says distance based congestion charge would change behaviour

According to AAP, reported by Perth Now, a survey from the University of Sydney has indicated that a distance based congestion charge of A$0.05/km (US$0.08 mile) at peak times could see 22% of peak commuters driving at different times (assuming a charge between 0700-0930 and 1630-1830) and 13% to shift to public transport.

The survey comprised 1000 adults. 66% said they had no flexibility to change travel times for commuting, but the other 34% said they did.

Obviously a survey isn’t a wholly reliable measure of behaviour, but what I find telling is the potential for time shift. Far too many think congestion pricing is about mode shift, when there is as much (if not more) to gain from changing time of travel to periods when there remains spare road capacity, which means getting optimal use of the network.

Canada - British Columbia debates road pricing

According to Straight.com, British Columbian Green Party leader, Jane Sterk, has come out in favour of "pay-as-you-drive" road pricing for Vancouver, to reduce congestion and raise revenue to pay for public transport. The same article notes that the current Minister of Transportation and Infrastructure for the province, Mary Polak (Liberal), says the issue is up to the cities to come up with a proposal and convince the provincial government that it has public support, whilst the Opposition spokesman Harry Bains prefers to consider other measures first. The general election for British Columbia is on 14 May.

Meanwhile, the Delta Optimist has published an opinion piece by Ted Murphy who says that road pricing is likely to be the best option:

It stands to reason those who put the greatest strain on the system, and those who are most likely to benefit from any improvements, should be the ones that pay the largest share of the tab.

Conversely, it doesn't make much sense for homeowners, who are an easy mark but don't necessarily tax the transportation network, to continually be gouged every time TransLink is in need of more cash.

There's much to be worked out when it comes to road pricing, and there will undoubtedly be resistance to the idea of paying to traverse roads that up to now have been free, but at the end of the day I suspect it will be the favoured option.

It's not a question of if, but how, they're going to extract more money from us, so they might as well do it in the fairest way possible.

It isn't clear as to whether British Columbia voters think the same way.

Ireland - manual toll booths add costs to trucking firms

The Independent in Ireland reports that toll booth barriers cost them on average an extra (Euro) 0.99c each time (US$1.30) in wasted fuel. This is with DSRC toll tags that enable automatic payment, but require trucks to slow down to a crawl to trigger the lift of the barrier.

This is crazy of course. The M50 toll road in Ireland was converted to electronic free flow a few years ago, largely because of congestion (it being the ring road for Dublin). There ought to be a transition towards at least a mix of free flow lanes and barrier lanes.

South Africa - 24 years to repay debts for Gauteng Freeway Improvement Project

Eyewitness News reports that the South African National Roads Authority Ltd has said that it will take 24 years of toll revenues to repay the debts incurred to build the Gauteng Freeway Improvement Project. This is based on the (R)30c/km (US$0.05 per mile) rate agreed by the Government. The maximum monthly that can be charged is R550 (around US$61).

USA - Maryland - Intercounty Connector exceeds forecasts

At a time when there are more than a few examples of toll roads that have demand well below forecasts, it is perhaps good news to report on the InterCounty Connector in Maryland (Maryland Route 200), a fully electronic toll road that opened in 2011. According to the Washington Examiner, estimates of 30,000 daily users by June 2012 have been exceeded on the western end of the road by September 2012 (to 35,000) and not far behind on the eastern end (26,000). The road raised US$19.7 in the year ended June 2012 compared to projections of US$18.7 million.

Singapore assessing GPS based urban congestion charging

2013-05-09T09:00:00.000+01:00

The Star Online reports that the Singapore Land Transport Authority has been trialling a GPS based electronic road pricing system on one road for a year, with the intention being that such a system might replace the existing gantry based electronic road pricing scheme.

According to Yahoo:

"Kapsch TrafficCom, MHI Engine System Asia and NCS, ST Electronics (Info-Comm Systems) and IBM Singapore, and Watchdata Technologies and Beijing Watchdata System were awarded the tender" in 2012 to develop a system within 18 months as replacements for the ERP system, each getting S$1 million (US$812,000) to do so.

Singapore's existing system has been the benchmark for urban congestion charging since it was introduced in 1997. It charges different prices by location and time of day at all of the charging points, enabling differentiated pricing. Prices are reviewed regularly up or down, depending on congestion levels, with the intention being to maintain minimal levels of service speeds. As a result, congestion on Singaporean roads is relatively rare for a city of its size. It is efficient pricing par excellence, and a far cry from the very blunt charge in London, and the slightly less blunt charge in Stockholm. Revenue is not a relevant influence on prices.

If successful, the GPS trial could mean 80 gantries currently used for Singapore's congestion charging system would be replaced, and vehicles equipped with the existing prepaid card based tag system would need new charging equipment installed.

However, the report doesn't include good news for those with concerns about privacy, as it says it will be used to enforce other laws:

like catching speeding vehicles and those which beat red lights, spotting illegal parking or tracking hit-and-run drivers. It can help find stolen cars, assist police in solving certain types of crimes, and aid in tracking offenders.

Singapore's authoritarian reputation appears to be the chief concern.

Some bigger questions arise, as such an all pervasive system that would charge for every kilometre travelled could replace the punitive ownership taxes, by focusing on usage. Singaporeans seem to treat the ownership taxes as just another cost for owning a car, although the other deterrent to ownership is the limit on the number of cars that are registered - people buy and sell and bid for a limited number of permits to own a car that can double the cost of owning a car. The result, according to the article, is only 12 in 100 own a car in Singapore, compared to 24 in 100 in Hong Kong, a similar city "state", which does not have restrictions on car ownership and punitive taxes (but car parking is largely provided by the market, which prices parking at a premium in this territory with land scarcity in its inner city areas).

Odds are that Singapore will transition to distance, time and location based urban congestion pricing within the next few years.

In the meantime, the Singapore Land Transport Authority is now assessing the outcomes of the trials to consider the next stage, which may be a tender for full implementation. However, there is currently no deadline for implementation of a next generation ERP system.

Advocates of distance based road pricing look to Oregon in the coming months

2013-05-08T08:30:00.000+01:00

I've written before about Oregon's efforts to develop a Vehicle Mileage Tax intended for the most fuel efficient vehicles to replace its fuel tax. It has successfully run a pilot of various technologies and systems, with the intention being that it become a mandatory requirement for all vehicles with a fuel efficiency above the threshold of 55 Miles per Gallon (5.1 litres per 100km). Key is choice, with there being technology and non-technology options, with both private and public sector provided options.

It is expected that there will be vote this week in the Oregon House of Representatives for House Bill (HB) 2354B in the House Revenue Committee. The expectation is that it will be passed onto the Joint House-Senate Ways and Means Committee. HB2354B identifies all vehicles that get an estimated 55 MPG or better being subject to distance based tax.

In the Senate, there is a Bill (810A) that provides for a volunteer programme of 5,000 to choose to pay on a distance basis in the state.

It may be that the Bills will merge meaning that (guess) all vehicle 55MPG or better get taxed up to the first 5,000 that want to volunteer (although I'm unsure quite why many would do so). If it were up to me, I'd start off with all newly registered vehicles (there are hardly any in that category now anyway).

The House Bill needs a 60% majority because it is a new, mandatory, tax measure. The Senate Bill, because it authorises a voluntary measure, only needs a simple majority to pass.

Whatever happens, one of the bills or a merged one may go for a vote in the next month or so. That would authorise the implementation of the first VMT/distance based road usage charging system in the USA for cars.

It would be a huge step in policy, albeit a small impact on almost all Oregonians. However, it would provide a basis to protect future revenues for highways in the state. As vehicles become more and more fuel efficient, more will shift from paying by fuel tax to paying by distance.

If Oregon demonstrates that this can be done, in a way that largely has public acceptability, that doesn't threaten privacy or mean people are paying more than they should for roads, then it opens the door for other US states (and other countries) to start making this transition.

Georgia (USA) to introduce pure toll lanes as new capacity

2013-05-06T08:30:00.000+01:00

Most "managed lanes" or "express lanes" in the USA are what I'd call pure HOT lanes. They are tolled, but High Occupancy Vehicles (HOVs - cars with 2 or 3 or more occupants) are allowed to use them for free. More often than not such lanes are conversions from HOV lanes (also called "transit" or "carpool" lanes).

Not Georgia's I-75 Express Lanes project, which I mentioned previously in an article about public attitudes to such lanes.

These are new build lanes. Brand new capacity. These are pure toll lanes (although local buses can use them for free), with all cars using them having to pay. Trucks are not allowed to use them.

Atlanta Forward blog has published a debate on the pros and cons of the I-75 Express lanes project The project is a reversible Express toll lane (between 1 and 2 lanes) between SR 155 and SR 138 along an over 12 mile stretch of the Interstate. It is under development now and will be completed in 2016.

The lanes will be northbound (towards Atlanta) in the AM peak and southbound in the PM peak. Tolls will be dynamic, so will vary in real time according to demand on the lanes.

A DSRC transponder will be offered for those wishing to use the lanes, or they may choose to pay after usage with a bill sent to the vehicle owner’s address after the number plate has been captured by cameras. The latter option will be more expensive. All revenues from the lanes will be used to pay the capital costs of the lanes, which are estimated to be US$150 million. Trucks are curiously not allowed to use them.

It will be interesting indeed to see if the lanes can pay for themselves, as this is rare (and explains why such lanes are rare outside the US – as most HOT/toll lanes are conversions, not new lanes).

The arguments for the toll lane are:

- They provide a new option;

- The new capacity will not get congested as pricing will ensure that;

- Some will use them every day, but most wont. Only when there is a time sensitive appointment, like a meeting;

- The lanes benefit other travellers because they will reduce congestion on untolled lanes, and buses will have unhindered trips.

Arguments against tolls on the lanes are:

- Untolled lanes would be used more;

- Most users will be local, wealthy, extravagant or late;

- It’s “UnAmerican” to pay (I actually though it was un-Soviet);

- Gas tax is fairer because everyone will pay and then other road improvements can be built.

Naturally I’m supportive of the lanes, because ignoring pricing is ignoring an opportunity for those who want new capacity to have to pay for it. It is also right that people pay for premium service when they need it. Unpriced roads risk congestion, the toll lanes promise a standard of service that the “free” egalitarian public domain roads can’t promise.

Hopefully Georgians will come to see them as an asset, and that it provides a valuable option. However, my other interest is whether the lanes will pay for themselves.

If so, they provide a new model for considering how new capacity can be paid for.

News Briefs - China, India, UK, USA

2013-05-03T08:30:00.000+01:00

China - Poll rejects congestion pricing

China Daily reports that an online poll (yes I know) by China Youth Daily saw around 75% of respondents oppose congestion charging for Beijing, preferring to support "improving the city's planning process, the road repairing projects, and the traffic management mechanism" to reduce congestion. Good luck with that then.

Hong Kong - Hopewell retains BBB- Fitch rating

Reuters reported in October 2012 that Hong Kong based toll road investor, Hopewell, retained its credit rating with Fitch. Hopewell Holdings owns 68% of Hopewell Highway Infrastructure Limited, and Fitch reported:

Hopewell Highway Infrastructure Limited (HHI), continued its stable performance in the financial year ended June 2012 with a 5% increase in revenue. An overall increase in traffic volume is driven by continued economic growth in the Guangdong province, and improving connections to local road networks and strategic locations. In particular, the West Route enjoys synergies from completion of Phase II, and average daily traffic grew by 39% in FY12.

A new tariff framework effective from June 2012, as well as the "Holiday Toll Free Policy" effective from October 2012 will adversely affect cash flow generation capacity of the toll road portfolio. Fitch expects the toll road portfolio's EBITDA to decrease by around 15% as a result in FY13.

Hopewell is in joint ventures with Chinese companies over five toll roads in the Pearl River Delta area of Guangdong province in China.

India - Toll tags may be mandatory

A report from the Deccan Herald quotes N R Gokarn, CEO, National Automotive Testing and R&D Infrastructure Project (NATRIP), a government led project, as saying that "RFID tags" that identify vehicles are likely to become compulsory across India. This would help with identifying vehicles more generally, as well as facilitating a shift towards electronic free flow tolling. The National Informatic Centre (NIC) contains data on over 90 million vehicles including owners and insurance details, and it is intended that any such system enable ready access to that database for tolling.

India - IRB acquires MVR

LiveMint reports that IRB Infrastructure Developers Ltd has acquired 74% of MVR Infrastructure and Tollways Ltd.

IRB's corporate profile states:

The company, along with its subsidiaries has constructed or , operated and maintained around 8,000 lane kms of road length so far and one of the major road developers in the country. The aggregate size of all our BOT projects (both completed and under execution) is around Rs. 170,552 Million (US$3.1 billion).

MVR Infrastructure and Tollways is a construction and toll road management company based in Tamil Nadu.

UK - Manchester still not interested in congestion charging

A rather odd little news report from the Manchester Evening News notes that a survey recently conducted by the AA indicates 80% of those polled oppose congestion charging for Manchester. A referendum in 2008 saw a 79% "no" vote for a proposed congestion charging scheme that was to raise money to pay for major public transport improvements.

This is hardly surprising. People wont vote for what they see as a new tax, especially since central government decided to give Manchester the money for some of the public transport improvements anyway, presumably as an election sweetener, and Manchester local authorities borrowed money to pay for the rest. Meanwhile, Manchester was hit by the recession, and traffic volumes have not increased since 2008. Any deal for congestion charging needs to offer something in terms of improvements to roads or reductions in other taxes to have any chance of being supported.

UK - Birmingham's transport authority wants private toll road nationalised

I've written about the M6 toll road before. It was fully privately financed and built, and runs at a loss, without a penny contributed by taxpayers. It is heavily under-utilised, in part because tolls are highly priced (but revenue maximising) and in part because the travel time savings are not high, except at peak times when the untolled parallel motorway is congested.

This upsets the planners at Centro - the West Midlands Transport Authority - which is responsible for transport planning in the wider metropolitan region surrounding Birmingham. Centro has no authority over the motorways, but according to the Birmingham Post, Chief Executive, Geoff Inskip wants central government to buy the M6 toll road, reduce or eliminate the tolls, and so relieve the existing untolled road. It even suggested tolling the existing untolled road at peak times, to help pay for the purchase.

Now I'm no fan of nationalisation, but tolling the existing route at peak times would provide some "competitive neutrality" between the routes. One idea is that vehicles are charged to use both routes through fuel tax, but none of that fuel tax goes to the owners of the M6 toll road. If a deal was done to reduce tolls by a proportion reflecting that contribution, it might make a small difference.

USA - New York - Citizens' Budget Commission recommends higher tolls

Capital New York reported in October that the lobby group "Citizens Budget Commission" proposed that 25% of funding of the New York public transit system should come from tolls:

The commission argues that not only should drivers' tolls cover the upkeep of bridges and tunnels, which they do now, but they should also underwrite a quarter of mass transit services, thanks to all of the "harmful consequences" that drivers cause but do not pay for, like "noise, congestion, air pollution and greenhouse gas emission."

To that end, the commission would raise tolls on M.T.A.-controlled bridges and tunnels to as much as $9 in cash. Right now, drivers pay $6.50. Once the 2013 and 2015 hikes go into effect, drivers will pay $7.50.

Further, the commission proposes raising vehicle registration fees, which are now amongst the lowest in the country, and the gasoline tax.

The CBC also says congestion pricing should also be considered, again.

It also proposes fare increases for public transit. This doesn't mean tolls on untolled crossings, but raises the obvious question as to why not, as the inequities of only charging some crossings simply becomes exacerbated.

Spain's growing network of bankrupt toll roads

2013-05-01T08:30:00.000+01:00

Spain was once lauded for having a large network of first class privately financed toll roads. Now it looks like many of those roads were commissioned by government, and built by the private sector based on overly optimistic forecasts of growth off of the back of Spain's property led boom, that was a bubble which has popped.

Phys.Org reports from AFP on the debacle of the roads heading for bankruptcy, and it isn't just rural highways, but big urban highways near Madrid:

Two highways, Radial 3 and Radial 5, opened in 2004 at the height of Spain's construction boom. Now the company owes 660 million euros ($850 million) to the bank, 340 million to the builders and 400 million to residents evicted to build it.

Six toll roads have entered bankruptcy proceedings since May 2012, when the Madrid-Toledo (AP-41) toll road was the first. It was managed by Grupo Isolux Corsan SA, Comsa SA, Azvi and Banco Espiritu Santo SA, and owed over US$646 million in debt.

Many more more are also heading for bankruptcy.

It isn't just roads, as Spain built high speed railways and airports, with some of both of those now looking like woeful investments.

The craze drove Spain to break records: it became the country in Europe with the most kilometres of motorways and the most commercial international airports, and was second only to China in the world for the length of its high-speed train lines.

Meanwhile, the government already upgraded existing roads as well, untolled roads. At a time of deep recession, it is clear that Spaniards are preferring to save money over time, so are avoiding the toll roads in favour of the untolled government roads.

Motorway traffic is now at levels not seen for over 15 years.

The report continues:

On the Accesos de Madrid roads, "where there were supposed to be 35,000 vehicles a day, there are 10,000," said Jose Antonio Lopez Casas, director of Accesos de Madrid, the company that manages two major highways around the capital.

What is the lesson?

That road projects should be driven not by political imperatives, but commercial ones. The private sector assumed that perpetual growth would continue and that forecasts of growth were robust, but ignored the bubble economy (like so many others did). Instead of project let concessions, it may have made more sense to commercialise parts of the network, letting the private sector manage existing highways and decide on the merits of upgrading them instead of building new tolled roads.

However, there is a bright side in that the risk has been born by the private sector. The roads are built, and the cost to maintain them is a fraction of the capital cost to build them, which in most cases will be wiped out and born by the creditors.

Spain is obviously "overbuilt" for toll roads, and bankrupt toll roads may see prices cut to encourage demand, but may also put pressure on government to change how it charges its untolled network (through fuel tax). The bigger issue is whether the sheer scale of this bankruptcy overwhelms, and is likely to create mergers and require more fundamental reform of the highway sector, or if government feels pressured to nationalise the roads (unnecessary and unwise in my view).

One way of incentivising a shift towards distance based congestion charging

2013-04-30T08:30:00.000+01:00

The very name "congestion charge" (or tax or fee) turns many people off, and introducing any form of additional charge will automatically generate opposition.

So what's one way of both moving towards better pricing that isn't just about a shift from ownership fees to paying for usage, but also charging according to time and location?

David Hensher, Director of the Institute of Transport and Logistics Studies at the University of Sydney proposes one way on the website The Conversation.

He suggests not just introducing a new charge, but by lowering vehicle registration fees in exchange for paying for distance for motorists in Sydney (with a charge only at peak times for driving in Sydney). He proposes a 50% cut in vehicle registration fees in exchange for this new charge.

He claims it would reduce peak kilometres driven by 4.7%, but more importantly by offering choice it makes road pricing far more acceptable as an alternative to the status quo.

He continues:

This road pricing reform plan would require drivers to purchase an on-board unit (approximately $50 one-off cost), that will record the kilometres by time of day. The off-peak kilometres are not charged, but peak kilometres will be charged at the agreed rate.

This scenario implies that if a unit is not installed, all kilometres will be charged as peak kilometres. So there is an incentive to install a meter (with the expectation that all motorists will do so), just like households have had with off-peak electricity meters or with water meters when they were first introduced.

Of course to charge all kilometres there would have to be a reliable way to charge them without the on-board unit, as odometer tampering would be encouraged. An alternative would be simply to hike up the vehicle registration fee as the alternative.

The on board units would also need to identify location, because peak driving in rural New South Wales is meaningless, so I'd suggest a broad cordon that started at the metropolitan edge of Sydney, and maybe one or two other cities like Newcastle and Wollongong. It would be better to be more refined than that of course. Of course if it applied across the whole state, then there would have to be an off peak charge (and there would be merits in reducing vehicle registration fees to simply administrative charges) related to infrastructure costs.

Such an approach could attract a lot of interest, and lay a platform for a longer term shift from fuel taxation.

His suggestion got 80 comments on the website, some complimentary, others sceptical, but overall it is a good contribution to the debate about how to move towards distance based charging, by offering savings on ownership taxes in exchange for some form of peak charging.

This is, of course, only an option in jurisdictions with quite high ownership taxes, but it is promising to see that the debate is happening in Australia on this.

Auckland transport funding report promotes urban road pricing and tolls

2013-04-29T14:37:00.003+01:00

Auckland has 1.4 million people, and its local politicians have ambitious aspirations for expanding the city's highway and public transport networks, but like many cities face a funding problem. It can't raise enough money from existing funding sources to meet its aspirations for spending on transport.

New Zealand has a comparatively efficient system for charging road users across the country and allocating the revenue, largely, on economically efficient grounds. Fuel tax (notably on petrol only) of US$0.4285 a litre is all hypothecated into the National Land Transport Fund (NLTF), this is supplemented by a weight/distance charge on all diesel vehicles (and vehicles over 3.5 tonnes) which varies by vehicle tonnage, and a small ownership tax (motor vehicle registration and licensing fees). That fund is used to fully fund state highways (the national highway network) and to part fund local roads and subsidies for urban public transport. Local authorities submit bids for road maintenance and construction funding, and funding for public transport subsidies and capital works, and these get allocated according to a mix of benefit/cost criteria and reflection of overall government priorities (e.g. congestion reduction). The NLTF funding provides between 40 and 75% of the cost of local authority transport activities, so local authorities usually fund the rest from rates - a tax on the value of land and properties on it.

Local authorities have no powers to toll existing roads or raise taxes on fuel, but most do obtain some revenue from parking (there is a tiny historic tax on fuel dedicated to local authorities, which raises very little)

Tolls are in place on two roads. One is a state highway north of Auckland (where it is being used to pay the debt of half of the construction cost of the road), another is a local road in Tauranga (which has received no NLTF funding because it had a poor benefit/cost ratio). A third motorway under construction near Tauranga is also to be tolled to provide part of the funding for the road. Tolling legislation means that any local authority and the NZ Transport Agency (which operates the state highways) can apply to the Executive for authorisation to toll any projects which involve new capacity only. It provides a solid framework for more tolling within those grounds.

Auckland's problem is that the Mayor and the Council want to spend an additional NZ$400 million (US$339 million) annually over the next 30 years on transport in the city region on top of what is currently provided through that national funding system. Given there is little need to boost spending elsewhere in the country (much of it simply needs continued road maintenance and minor improvements to networks), raising national fuel tax or road user charges appears inequitable.

So Auckland Council set up the Alternative Transport Funding Group, which itself set up a Consensus Building Group of stakeholders to produce a report on funding options, which included representatives across business, social, motoring, public transport, cycling, construction and other sectors.

Auckland has several times mulled over road pricing, so this report is the latest incarnation, and of course, it has sparked debate as it presents two options for the city (and central government, as legislation will be needed to allow for road pricing on existing roads).

What did it say?

The report considered many options including:

- tolls on specific roads;

- 6 "road pricing" options specified as being a single cordon, double cordon, area charging, motorway only charging, full distance charging and managed toll lanes.

I'm amused at "full distance charging", which ignores that there already is distance charging for heavy and diesel vehicles. It would seem odd to consider layering another system on top of one that works.

"Managed toll lanes" were ruled out because they wouldn't raise enough revenue or were too expensive to administer for the revenue that could be raised. That means they couldn't even fund additional lanes. Curious when you consider how widespread they are in the US (although the policy goal in the US of providing a congestion free alternative does come into the fore).

Parking levies were also ruled out, which is significant as this is often seen as an alternative to congestion charging.

The options that got more consideration were:

- Fuel taxes

- Public transport fares

- Rating-based sources

- Road pricing

- Tolls on new roads

Two packages of options were finally proposed for public consultation

1: Increases in rates (NZ$90m US$76m additional per annum). Increases in fuel taxes of 0.6c/l (US$0.51) nationally (regional fuel tax seen as complex as there is no diesel tax at present, and a significant proportion of diesel usage is off road, so that diesel tax would need to be refunded). Tolls on major new roads (two are listed as being eligible for tolls) and increases in public transport fares.

2. Road pricing charging motorways only, or a single cordon charge, to generate NZ$250 million a year (US$212 million) plus increases in rates and public transport fares.

The tone of the report clearly indicates the second option is preferred, but that requires a law change the current government appears to not support.

Review of conclusions

Given the long time frame implied in this report (30 years), it seems to be a major failing, considering that it proposes changes in legislation, for it to implicitly reject distance based charging. Especially since New Zealand already has a platform for this in its existing road user charging system. Proposing a single cordon (an absurdly blunt tool except for a tightly confined city centre) or charging motorways (which have regular interchanges, so ample options for rat-running) is the thinking that was behind the earlier Auckland Road Pricing Evaluation Study from seven years ago.

Similarly, it is quite an assumption that fuel taxes will continue to be able to be raised to keep on top of ever increasing fuel efficiency of the petrol driven fleet, and that an alternative revenue raising instrument wont be needed on a national scale. At the moment, New Zealand raises fuel taxes roughly according to inflation on a regular basis. It will need more than that over the longer term, which raises all the same issues seen in other jurisdictions, not least the distributional question as to why those who can afford brand new fuel efficient cars should have their road use cross subsidised by those who cannot.

Increases in rates funding (a tax on land) and public transport fares (especially since much of the proposed spending is for public transport) are likely to make some sense. Tolls where feasible for new roads, likewise.

However, the big debate is whether to increase taxes on fuel or introduce road pricing (although some are arguing that the scale of spending proposed is excessive, so should be looked at first).

In a world where fuel taxes are being reconsidered because of changes to how vehicles are being powered, it seems rather bizarre to talk of using such taxes as a long term option (although in truth, that option is really a choice between raising more money nationally, not regionally).

The ARPES study was useful to get a strategic overview of what road pricing in Auckland could achieve, but it is now out of date, and discussion around road pricing in Auckland is hamstrung by the simple point over objectives.

This most recent exercise is purportedly about raising money to pay for transport projects. That raises more specific questions about having principles underpinning how you do that.

Some of these projects are incapable of being funded by the users, not because it isn't practical to do so, but because the users are not willing to pay for them. In that case, presumably if there are net benefits, those who benefit the most should be charged for those benefits (these could be property owners or users of other modes) proportionately. If that doesn't actually work, then the projects might need to be reconsidered or should be funded through general taxation (if there is no specific reason to target any one group to pay for them).

Some projects will be self funding, obviously those that be tolled or charged directly, but there will be few of those. More widely, it can be argued that some road projects are self funding from a "network" perspective, in that if all motorists are charged across a network, then it generates a surplus to pay for targeted upgrades (much like the national funding system).

So the question becomes whether Auckland should have a separate road pricing system, to raise revenue for its transport network, from the national distance/fuel based charging system.

I'd argue that the case for that is not strong in itself. For to just raise revenue all motorists could be charged the same, either for owning a car, parking a car or using fuel or tyres or driving by distance.

However, raising revenue involves applying prices, and it would seem to be a waste to just charge all motorists the same, when only a small number at certain times at certain places impose major costs on the mobility of others, through congestion.

So the issue comes as to whether the introduction of better pricing can both reduce these inefficiencies, and raise additional revenue.

Clearly it can. Yet the options considered in this report are poor indeed.

A single cordon in Auckland around the CBD would probably involve the least distortions, but would raise relatively low amounts of revenue and have a modest effect on congestion (unless it also including charging the motorways that pass through it, which risks encouraging some rather horrendous rat running). Although, it would probably be the least worst option in my view, but would certainly encourage a shift of some businesses out of the CBD.

A single cordon as proposed in the ARPES report would create major distortions by pushing a cordon out into the suburbs. That would demand a residents' discount scheme and negatively affect businesses just inside the cordon.

The "motorway only" charge creates a different risk. The ARPES report indicated it would generate more congestion as much traffic would shift off of the motorways and onto parallel local roads (which in many cases are both quite good and somewhat congested already). Advocates of this option think if it is "cheap enough" it will work, which means having a one-off charge to access the motorway network, regardless of how far one drives. Barely better pricing. Having a distance based charge on the motorways might make more sense, but the consequences for use of the local road network are considerable.

More work needs to be done.

One option could be an Auckland "vignette" whereby anyone driving on Auckland roads has to buy access through a pass that may last from one day to one year. That option hasn't even been considered.

Another could be to transition the existing mix of electronic and paper based distance road user charging systems into a mandatory electronic system, such as by making electronic systems mandatory for all newly registered diesel/heavy vehicles, and an option for petrol vehicles to receive a refund in fuel tax in return. Such a system involves radical changes to the national charging system, that are unlikely to be embraced by central government unless it can sell a fuel tax refund to a public not yet convinced that an alternative could be better.

What is likely to happen? Nothing. Central government doesn't support some of the spending goals, and local government doesn't have the powers to introduce road pricing on existing roads (it doesn't control the motorways). Furthermore, I doubt the opposition Labour Party would want to support pricing existing roads as it needs to win votes in Auckland to win the general election in 2014.

Bizarrely, the Green Party is opposing road pricing, even though it would deliver demonstrable reductions in emissions and support public transport, preferring a populist line of simply arguing against the road building elements of the transport package and saying that there would be enough money if money spent on road improvements was redirected to public transport. Remarkably narrow minded thinking which isn't exactly outcomes focused.

So, in conclusion, Auckland talks more about road pricing, but unless there is consensus about a need for more revenue, and that other alternatives are less palatable or fair, I doubt if much will happen in the short term.

Denmark abandons lorry road pricing programme

2013-04-23T08:00:00.000+01:00

I wrote several months ago about Denmark's programme to introduce a distance based lorry road pricing system, which would apply to lorries over 12 tonnes and on all major motorways and highways across the country.

It now appears that the project has been suspended because the estimated revenues will be insufficient to justify the estimated costs.

The project was being managed by the Ministry of Taxation, and was intended to replaced the Eurovignette for heavy vehicles operating in Denmark.

A press release in late February explained the decision.

The key statement is below:

The investment cost and the future operating expenses for Lorry Road Pricing in Denmark has shown to be significant. Expenses concerns, inter alia, investment in the technical equipment, such as On-Board Units needed in every vehicle and the enforcement gantries to be deployed. In addition to that comes also the operating cost.

Altogether the Government is not convinced that benefits from Lorry Road Pricing in Denmark compare favorably with the associated administrative cost. On this basis the Governments has decided to refrain from introducing Lorry Road Pricing, as planned, from 2015.

So it is about cost. There isn't a complete loss of hope though:

If it proves possible to introduce Lorry Road Pricing in Denmark in a period of years without significant economic cost ? e.g. in the light of technological advances or operational experiences in other countries ? the Government will reconsider its decision.

Commentary

This is, of course, very disappointing for those of us supporting a progressive shift towards user pays and more innovative forms of road pricing. The scale of the system proposed was certainly small, and Denmark does not have extensive transit traffic, although it is located between the Scandinavian peninsula and the rest of Europe, there are alternatives to highways, given extensive ferry traffic.

I've observed for a while that there is a growing difference between some of the distance based systems developed and introduced in Europe, and that which has been developed for the United States and in New Zealand. Insufficient work has been done to explain this, but consider that in New Zealand there are two competing providers of electronic weight/distance based road user charging for heavy vehicles (and a basic prepay paper based system), operating across a network of all roads, with non compliance rates (in revenue terms) of less than 10% and operating costs (including compliance costs for users) between 5-10% of revenue (on charges that reflect the share of highway costs attributable to heavy vehicles), it seems remarkable that Denmark cannot develop a system that can keep costs below 10% of revenue overall.

My only suggestion is whether Denmark can introduce distance based charging not on a "big bang" basis of shifting all Danish trucks over in one lot, but gradually.

Options worth considering would appears be:

- Having distance charging as an optional alternative to the Eurovignette for the first three years (using better electronic enforcement of the Eurovignette as a step towards enforcement of distance charging);

- Introducing the distance charge as a partial replacement to purchase and registration taxes as a first step (Eurovignette replacement as a second step), with it being mandatory for newly registered vehicles first;

- Open up the market to multiple providers based on a basic standard of charging specific rates for certain vehicle types;

- Expand scope to vehicles down to 3.5 tonnes, again making it a tradeoff against other taxes.

I'm not privy to all of the details in Denmark, but I am not convinced that distance based road pricing cannot be introduced economically at present.

Mileage Based User Fees - what's going on in the US?

2013-04-22T09:30:00.000+01:00

Mileage Based User Fees (MBUF), Vehicle Mileage Taxation (VMT), distance based charging, distance based road user/usage charges, these are all different terms for essentially the same thing, which to me is simply road pricing with the base chargeable event being distance.

I attended and spoke at the IBTTA's Transportation Finance and Mileage-Based User Fee Symposium in Philadelphia a week ago (which explains the gap in blogging). Whilst the presentations from that Symposium will shortly be available here, I thought I'd give a quick summary on some of the interesting points I picked up from the occasion.

It's worth noting that the Mileage Based User Fees Alliance (MBUFA) has a new website with some useful content including "five myths". It should be a useful platform for updates on the development of distance based road pricing in the United States, as various states pursue different approaches to this solution for raising revenue to pay for roads. I met Barb Rohde, Executive Director, who is enthusiastic about MBUFA, and I sincerely hope it shows the baton of developing such systems is moving more clearly from Europe to the United States, which faces some different challenges (as in Europe many such systems have been in addition to existing charges and have only been applied to heavy vehicles).

I obviously did not go to every session, so my summary really only notes a few points I wasn't previously aware of. As usual, if anyone has a different recollection or believes the statements below are not true, I'd appreciate any comments:

30 June 2013 is key for Oregon, as it will be the point by which the state legislature ought to have passed the bill to authorise the introduction of distance based charges for ultra-fuel efficient vehicles (all vehicles with fuel efficiency of greater than 55MPG). If it does, then Oregon is on the way to being the first state in the US to introduce distance based taxes for cars. If not, then it is expected that further work will be done on the proposal (as it is not significantly controversial at present).

More people are killed in road accidents in California due to poor road maintenance, than from alcohol or drug use while driving combined (not directly a fault of road pricing, but ought to cause some serious rethoughts of the state's governance of highways).

Pennsylvania is increasing fuel tax by 5c/gallon (1.3c/litre) per year for the next five years, all of which is to be dedicated to transport funding. 78% to roads, the rest to public transport. This in itself wont be enough, and will be supplemented by tolls where feasible.

The Pennsylvania Secretary of Transportation, Barry Schoch, said that he would surrender 12c/gallon in gas tax if he could be allowed to toll the interstate highways in the state.

Former Governor of Puerto Rico, Luis Fortuno, said that the territory did not look to the United States to provide a model of PPP type funding for highways, but rather Canada, the UK and Australia provided the most relevant and useful experiences. I've written previously about Puerto Rico's radical approach to privatisation of its tolled highway network.

Sweden is currently looking at using existing interoperable DSRC toll tags in foreign vehicles travelling in the country to apply the congestion taxes of both Stockholm and Gothenburg to foreign vehicles. In both cities, foreign registered vehicles are exempt. Many Norwegian registered cars have toll tags (given Norway's extensive toll road network).

Conclusion

Overall, a lot is riding on Oregon, with Washington State following close behind and increasing interest from the likes of California. Whilst work has been done in Minnesota and Colorado, it doesn't appear that either state is very close to making progress in distance based charging. The biggest conclusion I derived from the event was that quite a lot of states are interested and following what is happening, but few are willing to do more than investigate options at this stage. Certainly one trick few have noticed is that distance based charging could be lucrative in charging transit traffic.

A few states have moved on increasing "gas tax" or using other taxes to help plug the gap, but the bigger trend does appear to be more use of what I would call "conventional" tolling - using tolls to help fund new infrastructure by tolling the new infrastructure itself. There is also interest in using existing toll facilities to cross subsidies adjacent roads.

If Oregon presses forward, I expect momentum to come from Washington state and possibly California (although it is far more difficult there). I also expect other states to start to show serious interest in distance based charging as an option. If it stalls, the problem of revenue will remain, but I still expect many states to expand the use of tolling regardless. That remains an option for many (and most states still have more scope to use tolls) and states such as Texas and Florida remain at the forefront of expanding tolls.

What is sadly lacking in all of the debates around revenue for roads in the US is discussion about governance, delivering better value for money in road maintenance and construction programmes and moving to distance based pricing because it is fairer and will result in more efficient economic outcomes (even ignoring charging by time and place).

Moving to charging motorists directly according to usage and away from proxies like fuel tax means some serious additional questions need to be asked:

1. What should be the basis for the level and schedule of charges? The default has been to match existing gas tax levels, but it would make far more sense to understand what levels of revenue are needed to maintain and improve highway networks, and how to allocate the cost of doing this amongst groups of road users. That debate simply doesn't happen, and currently means significant transfers between different taxpayers/road users on grounds that are far from efficient.

2. What should decide on what such revenue should be spent on? The default has been to assume that the predominantly engineering based assessments of what is needed is an efficient and appropriate measure of future spending. This seems difficult to sustain given that these assessments are not based on market or commercial measures of optimising expenditure, returns or costs, but rather bureaucratic/political measures which in most other sectors it would be recognised as being inferior. Giving motorists confidence that they are getting value for money is critical to building support for user charges, and to do that there needs to be greater involvement of the private sector, more commercial imperatives in decision making and a withdrawal of politics from decisions on specific projects. Longer programmes of expenditure, dedicated budgets over multiple years and performance based contracting and asset management systems (all of which are the norm in some other developed countries) could save up to 20% of the costs of maintenance. Motorists and taxpayers are right to ask if money is well spent, I'd be astonished if a serious investigation into applying global best practice didn't show scope for significant savings in spending on US highways.

3. What sort of entities should be operationally responsible for US highways in the future? This follows the previous question, but comes about when there is a new relationship between road users and road providers. When people are charged directly for road use, they will expect customer service, they will make queries and complaints. They will want a better service than they currently get for licensing vehicles and drivers, and it is an opportunity to use the feedback from that relationship to improve how roads are managed. I doubt very much whether traditional DoT structures are the best way to achieve that, and that the possible options include looking at establishing separate stand alone agencies, with independent boards supervised by DoTs, as a first step to developing fully professional providers of highway services.

Meanwhile, there is plenty of cause for the US to be proud that it is having this debate. There remains a climate of denial over declining fuel tax revenues in Europe. In Australia the debate has emerged, but hasn't quite progressed as far (although Australia's governance of highways and system of setting charges is more sophisticated than what is seen in most US states).

May the debate continue, may Oregon progress and may more US states start to ask the hard questions about revenue options, but also the more difficult questions I have listed above. You cannot separate revenue raising, from charge setting, expenditure management and highway governance and expect to make transformational changes.

News briefs - Australia, Germany, UK

2013-04-05T08:00:00.000+01:00

Australia - Transurban CEO calls for network road pricing and hangs onto Pocahontas 895

AAP reports that Transurban CEO, Lindsay Maxsted, told the company AGM last year that

"The time is quickly coming where we must face concepts such as distance-based tolls, peak-hour pricing or demand pricing... We must utilise our existing networks better."

The Sydney Morning Herald reported him saying:

the states could not ''build our way out of congestion forever'' and needed to look at different pricing models for roadways.

He said that there could also be off peak discounts, but existing concessions meant Transurban could only charge one price all day long. He insisted Transurban was not motivated to renegotiate these, but that future concessions should include the flexibility for peak and off peak pricing.

This is a welcome step, and besides being obvious, it demonstrates that private road owners are incentivised by the market to increase yields at peak times, and utilisation off peak, which would benefit them and off peak users (and peak users if congestion is avoided).

However, New South Wales Minister for Roads, Duncan Gay, responded saying there wouldn't be a "congestion tax" or "time of day tolling", which frankly is a missed opportunity. Curiously an online poll on the Sydney Morning Herald website suggested 42% would support higher peak time tolls. A figure which astonishes me, as I wouldn't expect people to support this without expecting more reliable trips or reductions in off peak tolls.

On the beleagured Pocahontas 895 toll road he said Transurban will hang onto the asset, but seek to renegotiate with its lenders:

"That's the most likely outcome: a full reconstruction with those lenders, and we may well be the ongoing owners of that asset," he said "The fact is that because of the poor performance of the asset, there's not a lot of people out there that run the asset, and in terms of our expertise, we're still probably the logical owner of it but not at the price paid those many years ago."

Germany - attitudes to urban congestion charging

I already reported on how some German states have been considering urban congestion charging as a revenue raising proposition. An article in The Local points out some more details of what was being considered and responses to it:

- It talks of a single charge of EURO 6.10 per day (US$7.85);
- Green Party says it is "badly needed" to pay to maintain and modernise transport infrastructure;
- Federal commissioner for tourism Ernst Hinsken, of the conservative Christian Social Union (part of the ruling Federal coalition), warned against "defrauding commuters and tourists" arguing it would unfairly punish commuters facing increasing fuel prices;
- HDE, a retail business association, claimed it would make downtown city centres less attractive, by penalising those who visit them for shopping.

Still a fair way to go in Germany before this goes further.

UK - Local transport chief calls for nationalisation of private toll road

According to the Birmingham Mail, Centro (the public body responsible for planning and contracting public transport services in the West Midlands) Chief Executive Geoff Inskip has called for the UK Government to nationalise the M6 toll road. He said it was "madness" that the parallel untolled publicly owned M6 is "choc a bloc" with congestion, but that high prices on the toll road meant it was underutilised. Midland Expressway (the company that owns the road) responded by saying it had a "long term view" of the investment.

Welsh toll road report incorrect, says UK and Welsh governments

2013-04-04T10:30:00.000+01:00

I'm as guilty as the mainstream media for the simple error - I didn't check official sources for the announcement that the M4 relief road in Wales could be a toll road, for both the Chancellor of the Exchequer and the Welsh government are denying it.

Multiple media outlets reported that the UK Government was to approve the construction of a major new highway in Wales as a toll road. It was criticised by some, concerned that tolls would mean the road would not get well utilised compared to the congested stretch of motorway it is intended to bypass.

Subsequently, the Welsh government, which has devolved responsibility for major highways in Wales, was reportedly angry at claims that the UK government, not it, could decide if the new road would be tolled. Wales Online said a Welsh government source described the idea as "unworkable" (without specifying why). Some in Wales are upset that as the Scottish government has removed tolls and not faced pressure from the UK government to toll the new duplicate Forth Road Bridge north of Edinburgh (the existing bridge was tolled until 2008, when the newly elected Scottish National Party Government abolished tolls across Scotland), then neither should Wales be pressured to toll.

This is quite right. The question of tolling is fully within the purview of the Welsh government, although the question of how to raise the £830 million to build the road without tolls remains when the Welsh government has very limited revenue raising powers. The Scottish government simply decided to use general revenues to pay for the roads.

So it is clear that the Welsh government is not currently pursuing the project as a toll road. The BBC has also reported that the Chancellor of the Exchequer said he was "misreported" as expecting it to be a toll road. He said:

We're working with the Welsh assembly government. I don't know where this idea of a toll road has come from.

"It's been mis-reported in the papers. It's certainly never anything I've considered, so I was reading about it in the press and couldn't work out where it had come from.

"But I'm clear we can work with the Welsh government to get the funding for this road and improve it.

"And of course it's up to the Welsh government whether they want to do any tolls, but it's certainly not something I'm asking for.

Meanwhile, the various reactions to the tolling proposal has been mixed according to Wales Online and the BBC:

- Conservative Welsh Assembly Member for South Wales West, Byron Davies, was concerned about tolls, given tolls exist on the Severn Crossings, and didn't want the tolls undermining the purpose of the highway project;

- Liberal Democrat Welsh Assembly Member for South Wales Central, Eluned Parrott, simply preferred improving the railway network;

- Sustrans Cymru, an environmental transport group, was opposed to building the road at all, preferring to shift commuters to public transport (although the option of pricing the existing road to do this was not mentioned);

- Richard Hebditch of the environmentalist transport lobby group, Campaign for Better Transport, claimed that it was about shifting the cost "off balance sheet" and taxpayers would ultimately have to pay (which isn't clear in this case and certainly is not true of the M6 toll road);

- Ian Taylor, of the Alliance of British Drivers, is vehemently against all tolling.

- The Confederation of British Industry is a strong supporter of building the road, although expressed no opinion on tolls in this report.

So for now, it may not be a new toll road in the UK, although the issue of how the road is paid for has not been clarified.

Yet it will have to be. As the Welsh government has few options to raise revenue, the matter will entirely depend on whether, and by how much the British government is willing to provide the capital grants or ongoing financial support to pay for the road.

If it isn't the full cost then tolling becomes an option, unless the Welsh government thinks it can save money or redirect existing funding it gets from the British government for other activities to the project.

New York Times asks what should revenue from tolls be spent on

2013-04-04T08:00:00.000+01:00

The New York Times has published an interesting series of opinion pieces on the question of what to do with revenue from toll roads (apologies this was in October 2012, but still relevant).

Sam Staley, who many will know, and who is associate director of the DeVoe L. Moore Center at Florida State University, proposed the discussion. It is, in my view, one of the most neglected questions in this sector.

The motivation for the question is how there are discussions in Ohio about using toll road revenue to pay for highway projects unrelated to the toll roads, and the well known debate about using revenue from the Dulles Toll Road to cover half of the capital cost of a metro urban railway line.

The views express should be read entirely, but in summary there is:

- Sam Staley. Proposing that toll revenues should be used to maintain and enhance the tolled facilities, including new tolled lanes, rather than be seen as just another revenue source, as it is a form of direct user pricing and should reflect that.

- CW Marsella (consultant) . Proposes that toll revenues should pay for transit components of a corridor if that is part of the overall project that includes the toll road.

- Todd Litman (executive director, Victoria Transport Policy Institute). Proposes that some toll revenue be spent on public transit, suggesting that peak only congestion charging can be used for this.

- Lexer Quamie (policy counsel for the Leadership Conference on Civil and Human Rights). Says that toll roads are bad for the poor, who shouldn't have to pay for roads. Public transit should be paid for from general taxes.

- Edward Rendell (former Pennsylvanian Governor). Proposes tolls shouldn't be used for public transit, it should be subsidised by other revenues.

North Carolina's Triangle Expressway strictly penalising late payment

2013-04-03T08:00:00.000+01:00

North Carolina's Triangle Expressway is the state's first toll road and the first fully electronic free flow toll road in the US built from scratch (i.e. built as a free flow electronic toll road, not converted).

According to the News Observer, some motorists are facing penalty fees for non-payment that are many multiples higher than the original toll. This, of course, is hardly unusual. Fully electronic free flow tolling needs to be strict on enforcement, and bill payment. However, it is shocking some of those who neglect toll bills of less than US$1.

48% of users are registered with DSRC "Quickpass" transponders, automatically debiting tolls. The remainder are identified by number plate and get sent bills in the mail. For many the bills are so low (US$0.45 for example) they forget them, until there is a US$6 late fee added for each month it isn't paid, and another US$25 after the second month. That adds up and the report mentions some users who now face paying over $40 for a one off usage of the road.

In 10 months since the road opened, it levied US$1.42 million in surcharges for tolls worth US$771,000. This is lucrative of course, but given the road only opened at the beginning of 2012, there is always going to be a period of users becoming familiar with how fully electronic free flow tolling works. I'd give it two years to settle down, and by then there ought to be more like 75% transponder usage, and 90% of bill by mail users paying within one month.

North Carolina Department Of Transportation (NCDOT) wants to encourage motorists to get transponders and to pay on time, so is treating this as a chance to deter late payment. However, one interesting element is how it gets information to bill out of state motorists,

It is easy to get number plate data for North Carolina of course, and the state has arrangements with five other states (and negotiating them with others), yet this means that vehicles from 44 states can, in effect, drive toll free on the road. 5% of users currently come into that category. Yet, NCDOT is not being complacent, and if the numbers of users for individual states become worthwhile to pursue, it will seek arrangements with those states. This is going to become more common, and I'd suggest states need to think about some sort of outsourced clearing house arrangement to minimise the costs of doing this, and to enhance the reliability of the data they all have on vehicles, owners and owners' contact details.

There is also interesting data that has been published on payment rates for the expressway after 10 months:

- 72% of those sent bills by mail pay within the one month billing period;

- 83% of bill by mail users are registered North Carolina vehicles;

- 12% of bill by mail users are with the four other states with NCDOT has a data sharing agreement with (California, Florida, Ohio, Texas and Virginia).

I've written a couple of pieces on some of the teething problems of this road, all of which ought to be object lessons in toll road developers actually taking experience from free flow toll roads elsewhere before developing systems and business rules from scratch. None of the problems faced by North Carolina are especially new, except to that state, and I wager perhaps the designers? I would have thought the experiences from Canada and Australia at least ought to have been easy to replicate here, or is it the problem of some that they simply don't believe that experience from "lower ranked" countries is worth applying in the United States?

The two issues reported on the expressway recently are:

- Double billing of motorists with two tags that are interoperable on the road; and

- Mistaken enforcement due to misreading of a character of a number plate.

I wish NC DOT all the best in what is a relatively risky endeavour, but one that will pay off, and hopefully what it is learning about enforcement, the hard way, will make it far easier to do more new free flow toll roads in the future.

UK government proposing new toll road in Wales

2013-04-02T12:00:00.000+01:00

Several British newspapers are reporting that the British Government is prepared to back the Welsh Government (which is essentially a devolved regional administration) borrowing money to pay for a project generally called the M4 relief road. According to Wales Online, while the debt guarantee will be provided, it will up to the Welsh government as to how much of the cost of the £830 million (US$1.26 billion) project it will recover from tolls.

However, given that without additional funding from the British Government (the Welsh Government does not essentially have taxation powers) the project will hit Welsh finances hard, tolls are being promoted for this new road.

The announcement is expected from the forthcoming Comprehensive Spending Review, which will be released in a few months time, and is expected to include support for a wide range of new road projects, most of which will not be tolled.

According to the Independent, the road is a 14 mile, dual carriageway (two lanes each way) road, connecting junctions 23 and 29 of the M4 in Wales, bypassing Newport to the south (and bypassing a regularly congested stretch of motorway, constrained by a tunnel). A website outlining the details of the issues and the option assessment is here.

The website TunnelTalk published this image of the route, which can be seen in red at the bottom edge of the built up area:

M4 relief road which may be tolled

One interesting dimension is that most of the peak traffic causing congestion has origins/destinations around Newport, so would not be served by the new road directly. The new road would provide a way for through traffic between Cardiff and the south-west of Wales with England to bypass that congestion (and that traffic may be seen as having a higher net GDP contribution that short car commuter trips, especially with upgrades to the parallel railway expected in coming years). This may mean that demand for the new road will not primarily come from most users of the existing road.

Comment

This is the first solid evidence of the promotion of tolling by the current government, and may be a portent for a more generous view of using tolls to support new highway construction.

The currently preferred option is not strictly a motorway, but a major highway that would bypass the congested area, yet my view is that if you are to ask people to pay for a road, it ought to be of a high quality, and there may be arguments that it justifies going back to the original £1 billion (£1.52 billion) motorway scheme. However, it is clear that tolling this road wont pay for it, and is likely to recover less than half of the amortised construction costs. It would seem foolish to squander that toll revenue on building a better road that may not be necessary. What the new road will simply have to offer is a consistent high quality experience that is good enough for users to pay for. Beyond two two-hour peak periods, it is not likely the new road would get much usage.

Some parallels are being drawn to the much criticised M6 toll road. Criticism that I don't believe is warranted, given taxpayers paid nothing for the road (although they pay fuel tax using it) and government widened some sections of the M6 that was bypassed (because of peak congestion).

What needs to be done for this road is to ensure that it can minimise negative publicity and to get some acceptance of the value of new toll roads. This is what should be done:

1. Ensure it is built to a high standard, with as consistent a speed as possible throughout.

2. Forget manual tolls, this should be an electronic free flow toll road. Meanwhile, take the opportunity to convert both Severn Crossing toll systems to the same. If DSRC makes sense, let's make it interoperable and easy to get accounts.

3. Ensure design of the occasional user toll payment is easy to understand, and the initial start up period incentivises good behaviour.

4. Set toll rates according to time of day. Peak and off peak, and put prices in big electronic signs well in advance.

5. Have a one week toll free period at the start, so potential customers get used to it.

6. Offer a discount for using both Severn and the new road. This will help avoid accusations that Wales is targeted for tolls in ways other parts of the country are not.

The Severn Crossings are actually key to all of this. The far eastern end of the proposed new toll road connects with them, and they are toll crossings with tolls ranging from £6.20 for a car to £18.60 for buses and large HGVs. That's not insignificant.

The Severn Crossings concession will expire some time after 2017, so the chance should be taken to consider whether to let it return to state ownership permanently, reduce or abolish the tolls, or to privatise it and use the capital from that to reinvest in the network. The popular line would be to abolish tolls, but then the costs of maintaining the bridges would fall on general government revenue, which includes motoring taxes. An alternative would be to simply recover those costs and charge the cost of capital of the crossings on toll payers, with higher tolls at peaks, and lower tolls at off peak, or to privatise the crossings with conditions around toll increases, and realise the capital value of the crossings for something else.

Yet another alternative would be to retain the present tolls, but use them to cross subsidise the new M4 relief road, on the basis that almost all users the Severn Crossings will use either the new road or the existing M4 (and so gain from the relieved congestion due to the new route).

In all cases, this new toll road needs to be thought about strategically, alongside the Severn Crossings and with a mind not only on the financials, but on treating road users as customers.

News briefs - Indonesia, Philippines, South Africa, USA

2013-04-02T08:00:00.000+01:00

Indonesia - Citra Marga Nusaphala Persada building more toll roads

The Jakarta Globe reports that Citra Marga Nusaphala Persada, the privately owned infrastructure firm, is planning to spend around US$200 million (Rp.2 trillion) on new projects. It has a 62.5% share of a a 22.8-kilometer toll road, connecting Antasari, in South Jakarta, and Depok in West Java.

Philippines - Call to scrap VAT on tolls and subsidies for private toll roads

Business Mirror reports that Senator Ralph Recto has called for an end to the 12% VAT on tolls to ameliorate expected increases in tolls. He suggests this would be preferable than plans to subsidise more toll roads to encourage private sector investment. At present toll road operators have to apply for increases in tolls from the Toll Regulatory Board and are expecting to increase tolls by 10-33% this year. His view is that if toll road operators could price the roads to generate a return that they could fully recover, the need for subsidies could be avoided.

South Africa - SANRAL CEO calls for acceptance of court decision

Engineering News reports that the South African National Roads Agency Ltd. Chief Executive, Nazir Alli, has called for opponents to tolling to "accept" the decision by the Constitutional Court to set aside the "interim interdict" granted to the Opposition to Urban Tolling Alliance (a lobby group opposed to tolling urban roads in the country), stopping tolls on the Gauteng Freeway Improvement Project (GFIP).

He said that without tolls, there wouldn't be the money to pay for major road improvements and claimed that the money for roads would need to involve cutting subsidies to public transport instead. He claimed that government did not have enough money to pay for building and upgrading all of the roads required, and that much of South Africa's roads are not tolled.

USA- New York - Could New York introduce congestion pricing more readily now?

Keystone politics points out that Manhatten now, effectively, has a cordon of automatic number plate recognition cameras, on all bridges, run by the NYPD. So, perhaps, the costs of congestion pricing may be slightly less than otherwise thought?

USA - Texas - Groups urge boycott of USA's fastest toll road

Texas SH130 is now the USA's fastest road with a speed limit of 85mph, but the website of TV station KXAN reports that groups "Texans Uniting for Reform and Freedom" (TURF) and "Texans for Accountable Government" (TAG) are urging motorists to boycott the road.

Opposition appears to be based on:

- Safety fears at the high speed limit;

- Little efforts taken to avoid feral hogs from being a collision risk;

- Xenophobia (because the road is owned by Cintra, which is of course Spanish).

TURF is a contradictory organisation, that is opposed to tolls because roads "should be free". It claims to "work tirelessly to secure a pro-freedom, pro-taxpayer, fiscally solvent, freely-accessible public road policy". Quite how making taxpayers pay for roads they don't use, and opposing user pays is pro-freedom and pro-taxpayer, is rather curious. Indeed forcing taxpayers to pay for something they don't use is quite socialist, opposing privately owned roads is as well. I can empathise with concerns around eminent domain and improving the quality of government spending, but opposing Cintra because it is foreign is simply mindless nationalism. Should foreigners stop buying goods and services produced by Texan firms?

TAG has a broader political focus saying it is "dedicated to safe guarding individual liberty, protecting personal privacy and property rights, election integrity, safe water, and electing representatives, not bureaucrats, to office", but it was far from easy to find anything on tolls on its website.

UK government confirms road pricing and privatisation off the agenda for now

2013-03-25T14:24:00.001Z

I noted last week that the latest Budget from the UK government seemed to indicate that there will be no reform of Vehicle Excise Duty (a tax on owning a vehicle), now it is confirmed by the Transport Secretary (Minister) Patrick McLoughlin in today's Financial Times (registration needed) that road privatisation is off the agenda (Also reported in the Daily Telegraph).

He has stated a categorical "no" to national road pricing, saying "I’m not looking at ways of taking more money off the motorists. I think the motorist has been hit hard over time".

He also said that road privatisation, whilst not ruled out, simply cannot be implemented before the next General Election in 2015. It looks like a more modest reform is envisaged, to provide a longer term funding cycle for highways that avoids spending on roads being affected by annual budgetary cycles.

The Financial Times report indicated:

the DfT’s options paper would focus more on finding ways to give road investment greater future certainty over capital investment and upgrades.

The "options paper" in expected in the middle of the year, and may include a more independent commercial structure for the Highways Agency, as a precursor to privatisation.

There may be more flexibility to use tolls, with the A14 project, discussed before on this blog, being the most talked about future toll road project.

Comment

It isn't surprising that this has been shelved, as it has been clear that there is some complexity to the issue and how it was being approached. However, it is disappointing that it seems to have to some fairly clear stumbling blocks.

It should be possible to commercialise or be well on the way to commercialising the Highways Agency, which sets it up to be partially or wholly privatised, either as a single entity, regional entities or even competing entities. It should also be possible to ringfence funding for such a body (and to do the same for similar local authority entities), whether it involves formal hypothecation of highway taxes or not.

However, the "elephant in the room" on policy is charging. As much as increasing fuel taxes appears politically too difficult for now, it is more difficult to talk about tolling existing roads.

I've said before that any major reforms are going to have to involve certain key principles. I suggest some of these are:

- Choice: Motorists must be given the option of paying directly for road use or continuing to pay as they do now. Only by having it as an option will there be incentives to get service, pricing and costs right.

- Link between prices and costs: This barely exists now in the rates of VED for heavy vehicles, but needs to be a rational relationship between the long run infrastructure costs of sustaining the network and developing it, and those road users who should bear those costs. This means charge setting being rational, but also money from direct charging going into roads (and I suggest some money from existing motoring taxes going into them as well).

- Commercially driven dimension to prices: Not only should prices be driven by costs, but also commercial incentives to attract motorists to paying directly rather than through fuel and ownership taxes. That's why any new entities need to be given maximum freedom to incentivise direct tolls. That can be moderated by OFT application of competition law, to avoid excessive rent seeking by highways companies, but then if there remains choice, the risks of this can be reduced.

- Decentralisation and competition in retailing of road charging: A national road pricing scheme should never be considered, for the same reason there isn't a national air fare system or national telecommunications fee system. People should be able to go to different retailers of access to highways, and buy packages of services. This means having a structure that will allow this market to develop, as it has in Ireland for toll roads.

- Respect of privacy: Initially, those concerned about privacy would simply stay on the current motoring taxes, but new options should include ways of paying for road use that also respect this. That must be the answer to concerns about people's movements being tracked. However, also having some protocols around use of data on movements and respecting privacy of account data will be critical.

- Quality of service: Most discussions about road pricing involve the "how" and "how much", with little about getting value for money. A commercialised structure should change the culture of highways management to be service oriented, and be committed to delivering high standards of service for paying customers. Indeed, you do not need tolls to introduce this, although they will help.

Finally, there needs to be some conscious thought about what motoring taxes are form, rather than the implicit "they are just general tax revenue" presumption that Treasury has taken.

Ownership taxes, after all, impose modest barriers to car ownership, but are a third best way of adjusting for the point that fuel tax poorly reflects marginal infrastructure costs imposed by HGVs above 8 tonnes or so.

Fuel taxes can be argued as being carbon taxes, and taxes on noxious emissions, and taxes to recover infrastructure costs, as well as general revenue taxes. It would help transparency and acceptance of reform if levels for all of these were spelt out.

Road pricing inevitably means motorists buying a service from a provider of such a service, at a price that reflects the fixed and marginal costs of that provision (plus a factor for profit or the opportunity cost of capital depending on governance structures). It is difficult to envisage it going anywhere until the management and relationship of roads with users becomes a little closer to that of other regulated utilities.

UK Budget - easier to tax owning a car than using it?

2013-03-21T12:53:00.001Z

Yesterday, the UK Chancellor of the Exchequer (Minister of Finance/Treasurer), George Osborne, released the 2013 budget. The entire content is here, but I only want to focus on the road pricing/charging elements which are of passing interest.

They are:

- Another inflation based increase in fuel tax cancelled;

- An inflation based increase in vehicle excise duty (annual tax on ownership) proceeds;

- No reform of vehicle excise duty to proceed;

- Expected net revenue of lorry road user charging scheme (vignettes) announced.

Fuel tax increased cancelled - again

For some years, UK governments have increased fuel tax every year, increasing it by inflation and an increment of between 1 and 5%.

None of this revenue is hypothecated at all onto road spending; it is treated as general taxation. As an aside £9 billion is the total central government spending in the UK on roads, whereas fuel duty raises £26.6 billion this year (and taxation on owning a vehicle adds another £5.9 billion). This issue is widely known, many motorists being aware that they pay far more to use the roads than government spends on them. It's particularly an issue when there is a significant backlog of deferred maintenance on local authority roads, and a long list of unfunded major capacity relief projects. There is a widespread perception of poor value for money.

So the Chancellor announced a planned 1.89p/l increase in fuel duty for September 2013 has been cancelled. This follows cancellation of a January 2013 increase last December. The rate is £0.5795 per litre (US$3.33 per gallon). Compare that to the highest combined state and federal fuel tax in the USA of US$0.69 per gallon (New York State), and you can see this is a different order of magnitude.

Fuel tax in the UK conceptually funds roads, railways (which get about £7 billion in subsidies) and helps pay for welfare, health, education, housing, defence etc. Clearly fuel tax increases were tolerated in the UK (although a massive campaign in 2000 ended the inflation + 5% automatic escalator) during times of prosperity, but not any more.

The Chancellor claims that fuel prices are now 13p/l lower than they would have been otherwise, saving £7 per average tank fill.

What this raises is an obvious question, which I have mentioned before. Are fuel tax rises in the UK now too politically toxic, in the way they are in the United States? There has been a vocal campaign called "Fair Fuel UK" calling for cuts in fuel tax, with the support of some MPs. It argued high fuel tax was "corrosive" to business and affected the competitiveness of UK businesses, based largely on the UK having one of the highest fuel taxes in the world.

Bear in mind that in the US the fuel taxes are a fraction of the level in the UK, and they are typically hypothecated to highway trust funds, so most if not all of the revenue goes on roads. Increases in fuel tax in the US would mean more money for roads (whether it is spent wisely is another debate). Increases in fuel tax in the UK have never been argued as being about spending money on roads, but just as a general tax. However, with tax comprising over half the price of a litre of fuel (when you factor 20% VAT on top of the retail price and the fuel duty), the case for fuel duty being the tax that has gone too far becomes clearer.

This might change when there is an economic recovery, and if wholesale petroleum prices drop. However, if market prices remain high, I suspect it will be too hard for politicians to do for some time yet. It might be easier if part of the revenue was hypothecated towards road spending (a point vehemently opposed by Treasury which does not want fuel tax treated as a road user charge), and increases were linked to that. Yet, if all road spending came from fuel tax revenue, it would only need 20p/l (7p/l if you took the revenue from vehicle excise duty).

However, for the rest of the term of this Parliament the issue will be whether planned increases in 2014 and 2015 (the year of the next general election) proceed, I am betting they wont. The cut in revenue will be swallowed by general efficiencies across the board (the Department of Transport, along with most others, faces a 1% reduction in spending this year). So the debate on the future of fuel tax wont be loud this side of the election, but it is a debate that should happen.

Vehicle excise duty raised - again

Almost no coverage has been given to the inflation based increase in vehicle excise duty, which is a tax on owning a vehicle paid either annually or six-monthly. The rates range from zero for electric and other ultra low emission vehicles to £460 a year (US$699), varying based entirely on CO2 emission ratings. VED applies to all vehicles, but there will be no increase in rates for HGVs, in part because of the introduction of the Lorry Road User Charge, which for UK registered lorries means an offsetting reduction in VED for those liable.

There have been minor changes to exemptions for this tax for disabled drivers, but also an extension of the exemption for old vehicles (those manufactured before 1974). However, my conclusion on this is that it is obviously easier to tax owning a car than it is to tax operating it, although clearly even an inflation based increase to £460 a year would be much less than an inflation based increase in £0.58/l in fuel tax.

No reform of vehicle excise duty

I wrote extensively about a proposal to introduce a "two-tier" vehicle excise duty, essentially lowering the basic VED on one hand, but introduce a voluntary "motorway access charge" (essentially similar to a vignette) for using the motorways and other major highways. The purpose was to enable some dedicated revenue to be available for those roads as part of plans to privatise the motorways.

It appears the idea has been shelved, and announcements on structural reform of the highway sector to allow more private investment are now expected in June. None of this is a great surprise, as it appears that MPs fear any reform wont be popular with the public.

Lorry road user charge revenue

One line in the Budget mentions expected revenues from the lorry road user charge (a vignette on HGVs 12 tonnes and over), net of the reductions in VED for UK lorries subject to the charge. This essentially represents the new revenue from foreign lorries and is £25m a year (US$38m), and is not estimated to increase in the next three years (indicating that there is not much confidence in the figure and a belief that it may suppress growth in foreign lorry traffic). What is significant about this is how insignificant foreign lorry traffic is to the UK, but then this was more about a political promise to put foreign lorries on an even footing with UK ones.

Conclusion

The word "toll" isn't mentioned once in the Budget, and what it all appears to show is a lack of ambition and a very conservative attitude to taxing motorists. Fuel tax looks impossible to increase, yet vehicle excise duty because it is a one off annual payment, seems easier. Given VED costs less than insurance for most vehicles, it isn't a surprise that this is tolerated. I am pleased the VED reform has been scrapped, because it doesn't really meet specific criteria for a good pricing instrument. It wouldn't reflect usage, it wouldn't reflect expenditure on infrastructure, would have limited effect on demand, would probably be negative for externalities (encouraging diversion onto unsuitable roads) and bears little resemblance to any sort of market based pricing. Finally, it shows that the UK government is almost frightened of mentioning tolls and their use at all for funding new infrastructure, which is a pity. The UK has high poorly targeted motoring taxes, it could have better roads, better quality road spending, less congestion and more efficient outcomes if a package could be put together that could be sold convincingly to motorists that delivered better pricing and spending. However, for now motorists are just pleased to not be paying more fuel tax, and government looks like it will make some governance reforms in managing highways that we will see in coming months, with next to no role for tolls.

Texas - leading toll road state in the USA?

2013-03-18T08:30:00.000Z

Is Texas the king state for tolling in the US?

A story from TV station KENS5 on its website seems to suggest this. Some key points:

- Tolling is the default option as a source of funding for major road projects, as long as it is technically feasible to do so;

- Fuel taxes in Texas have not increased in 20 years, so revenue has been substantially eroded by inflation and engine efficiency (75% of fuel tax revenue is hypothecated into the state Highway Trust Fund);

- A report in 2009 said Texas needs US$4 billion more spending per year to prevent congestion worsening (although I'd argue congestion pricing might make a major dent on that);

- Since 2006, Texas has built 150 miles of toll roads and has 100 miles more planned (this includes HOT lanes);

- Texas legislature authorised seven PPP toll roads in 2011.

The philosophy appears to be that tolls are preferable to raising taxes, including taxing fuel. There is a sStrong belief that user pays is fair.

Mike Perez, the McAllen city manager said “The feeling is if you want to use it, you should pay for it,” ...“That’s what I see in McAllen. There’s a kind of hesitancy toward ‘Let's all go together and pay for it so 20 percent can use it.’”

That's a point to respect, all new road projects benefit a minority of motorists, so why should all pay for it, when those who use it can be charged directly?

The growth in private investment is notable too:

Cintra, a toll operator based in Spain, is the lead company in three large Texas toll projects, including the state’s first privately operated toll road, a segment of State Highway 130 from Austin to Seguin that opened in October. The terms of all three contracts allow Cintra to collect tolls on the roads for roughly 50 years.Nicolas Rubio, the president of Cintra’s American arm, based in Austin, said contracts for such long periods are the only way companies like his can recoup the large upfront investment they make in building the roads and maintaining them.“When you really look at these projects, the bulk of the revenues are back-ended, and you need to be patient until you can be able to get back that money,” Rubio said.

Comment

States across the US are coming to realise that with the difficulty in raising fuel taxes, there will have to be new sources of revenue to pay for roads and new arrangements to finance, build and own them. Texas has grasped the obvious option of simply using tolls more frequently, and to be fair the projects that have progressed have lent themselves to tolling. It has embraced user pays, but I question whether more may be done with tolls to manage peak demand, and what happens when conventional tolls cannot be stretched further. That's when debate must move onto VMT/MBUF/distance based charging, which will raise the hackles of some in terms of privacy. Yet a state that purportedly is led by politicians who embrace private enterprise and user pays should embrace more user pays on roads, and even the commercialisation and private investment in existing roads.

In the meantime, good on Texas for embracing tolls, may it continue and inspire other states to see how far they can practically use tolls to pay for new road capacity. The question being how far it is efficient and effective to toll new roads, but not untolled ones.

An interactive map of toll roads in Texas is here.

News briefs - Australia, New Zealand, South Africa, UK, USA

2013-03-14T09:00:00.000Z

Australia - Transport Reform Network calls for treating highways as utilities

Supply Chain Review reports that the cross-sector lobby group, Transport Reform Network (TRN), is calling for roads to be managed more like the electricity and water sectors, as a utility. It was commenting in the context of a lack of funds to address problematic railway level crossings. TRN suggests that any reform needs to look comprehensively at ownership and fuel taxes as well as tolls, it is more concerned that talk of road pricing isn't about "bolting on" a solution to existing structures, but is part of a more comprehensive reform of highways across Australia.

This is quite enlightened and actually far beyond how most commentators, lobbyists and governments think of roads.

New Zealand - NZTA enforcing tolls against recidivist violators

The NZ Herald reports that the New Zealand Transport Agency (NZTA) successfully enforced a prosecution against a man who failed to pay NZ$5000 (US$4109) in tolls on the Northern Gateway toll road north of Auckland (the only state highway toll road in the country).

Robert Masaberg was convicted in North Shore District Court of 20 charges of failing to pay a toll and was ordered to pay $1156 in fines, court and prosecution costs.He owes $5181 in unpaid tolls for the Northern Gateway Toll Road, unpaid administration fees and additional costs connected with attempts to get him repay his debt.

It was reported nearly two years ago that no one had been prosecution for non-payment, it is clear this policy has changed. Three other prosecutions are to be pursued for evaders. NZTA says the non-compliance rate for the toll road is 4%, which after four years of operation remains perhaps higher than would be expected.

South Africa - Times reports on allegations of poor practices by SANRAL

The Sunday Times of South Africa reports on a court case that claims the South African National Roads Agency Limited (SANRAL) has implemented the Gauteng toll system unlawfully, and in a way that is "disproportionately and unjustifiably expensive". It undertook a three month investigation that raises questions about procurement practices that seem to favour certain suppliers, including a consultancy (TolPlan) that it claims has a vested interest in the promotion of projects as it works on the feasibility studies, tenders for development and engineering work on the projects. It also claims that Kapsch won the tender for the toll system based on a minimum level of "black empowerment" shareholding of the firm set up for the contract, but has bought out most of that black shareholding (and will receive more revenue as a result). Noting that the Kapsch led firm will receive around 25% of the tolling revenue (which if true, is comparatively high).

The story is that it is a "cozy club" which implies a potential element of either corruption or sloppy mismanagement by SANRAL. SANRAL CEO Nazir Alli admits that it "looks" like Tolplan had a conflict of interest by adjudicating on tenders and then working on the projects themselves, and another manager noted that SANRAL accepts consultancy recommendations "99%" of the time.

Clearly allegations of this kind raise opposition to tolling in the country, if the sense is that those promoting tolls are doing so out of personal financial interest. The more that looks like being the case, the more damage is obviously done to plans to expand tolling the country, and damage both to SANRAL and those companies which engage in such practices with full awareness of what is going on.

UK - MP suggests tolling road to pay for maintenance

Whilst government considers reform of the highway sector, the Bournemouth Echo reports that one MP has floated tolling an existing road, that needs a £26 million (US$39m) major repair which is currently unfunded. The MP is Chris Chope, who represents Christchurch and is from the Conservative Party. The road is the A338 Bournemouth spur road, the main road from the east and north into the city. The idea has been scorned, no less than because it would mean motorists paying to use an existing road, and risks substantial diversions of traffic onto parallel routes or dissuading visitors altogether.

USA - Pennsylvania - fully electronic tolling open option for congestion pricing

The self-styled "liberal" news-site Keystone Politics comments approvingly about the Pennsylvania Turnpike Commission's plan to convert manual tolls to fully electronic tolling, saying the key advantage (beyond removing people from "dehumanizing" work) would be to allow for higher tolls at peak times, to reduce congestion and encourage public transport usage. The plan is to replace all toll booths over five years, and frankly the sooner the better.

USA - Texas - toll tag options

The Waco Tribune has a useful article on toll tag account options in Texas. It outlines how there are three toll road authorities in the state, each offering toll road accounts that are effective on all toll roads in Texas (TxTag, provided by Texas DoT. TollTag, provided by North Texas Tollway Authority. EZ Tag, provided by Harris County Toll Road Authority. It describes how non-tag toll prices can be between 33-50% more than tag product prices.

India's Ministry of Urban Development promoting congestion charging

2013-03-13T08:30:00.000Z

The New Indian Express reports that the Ministry of Urban Development Secretary, Sudhir Khrishna (who is a professional civil servant, not a politician, for the sake of clarity), has written a letter to Chief Secretaries of State in the country calling on them to consider introducing congestion charging in cities.

The letter urges a range of TDM approaches, including promoting public transport, cycling and walking (the latter two are far too often neglected in cities), but that resolving congestion can be difficult and needs to involve managing excessive use of private vehicles, specifically recommending cities consider what has been done in Singapore and London.

The article suggests that the original Singapore Area Licensing Scheme, which involved vehicles having paper permits pre-purchased and manually inspected for access into city centres, may have particular potential.

Positively, he seems to be promoting congestion charging as a simple economic concept, whereby those who value a scarce resource the most pay to use it.

India has many toll roads, but has a major problem before it can introduce congestion charging

Tolling isn't new to India, but it is focused on new expressway corridors between cities. However, they have suffered because tolling is done manually, creating bottlenecks of their own at manual toll booths. Indeed, India has a whole host of problems around incentives in its PPP toll road programme, which seems to be ripe for some more fundamental reforms, and is a victim of private concessionaires seeking to transfer risk to public entities ill equipped to manage them.

The fundamental problem being the difficulties of enforcing any form of road pricing in India based on tracing violators through number plates.

Without some concerted efforts at federal or state levels to address standardisation of number plates, reliable ownership data and systems for maintaining the accuracy of that data (and facilitating effective debt collection), India can't seriously introduce congestion pricing as is seen elsewhere.

It can and should price and enforce parking appropriately in the interim, as this is a far cheaper and obvious first step. It can consider a paper based permit system, enforced through parking or at traffic signals, but that has its own limitations.

Moreover, if one of the problems is a lack of decent arterial routes to bypass built up areas, then those routes need to be completed as well. It is the usual list of issues that cities that are rapidly developing need to address, but a focus on what needs to be done to facilitate congestion charging may help catalyse a look at that.

Focus needs to be on vehicle identification and enforcement

Brazil is taking an ambitious path, by essentially making DSRC tags mandatory on all vehicles by 2014, which is one way of identifying vehicles and linking them to accounts. India might do the same, or could simply choose to reform its vehicle registration and number plate system. All of this requires a lot of effort and cost, but does need to be managed professionally and independently, and backed up by the powers to enforce a standard process on vehicle owners, buyers and sellers.

Failing to do that will mean calls to introducing congestion charging will be just that. For unless an electronic system can easily identify, trace and charge or fine a vehicle by itself, and do so accurately and reliably, you simply cannot introduce a modern congestion pricing system.