Washington Times opposing VMT tolls for the wrong reasons

According to a Washington Times editorial, the Congressional Budget Office is claiming road users should pay more because of externalities, but it claims that the lack of funds for roads are not due to a lack of funds, but because of funds diverted into “mass-transit programs and grants to local police departments to run speed traps”.  The CBO supports VMT (Vehicle mileage tax) because of the need to protect revenue.

In other words, it is a bit of a rant. The hint of truth is that, yes funds are diverted to other purposes, and legitimate arguments can be made about that.

However, the best argument for VMT is not revenue protection.  For there can always be multiple ways of addressing that (although none of the others are particularly good), it is that VMT can far more effectively address congestion and be the platform to treat roads as an economic good and a service with revenue linked to investment, rather than a public good funded from politiclaly driven taxes.

While it is easy to get angry about the misuse of funds, the answer is not to oppose more efficient road pricing, but to support better governance mechanisms for the use of the revenue collected.

European Union pushes strong support for road pricing

While much publicity has been seen in the European Commission draft transport white paper calling for a ban on cars with internal combustion engines from cities, it is also strongly in favour of road pricing, albeit for purposes likely to be controversial to many road users.   I doubt there will be a 50% shift from road to rail and water for intercity passenger (and especially freight) trips, but this blog is about road pricing.  So what does it mean for the 27 EU Member States?

For a start it is a White Paper, which means it forms a strategic policy framework which provides guidance but is not to be legally enforced across all Member States in all forms.  Much implementation will be at the national and local level, so the EU role will be more limited.

I have found a few references to road pricing:

2.4 "Road pricing and the removal of distortions in taxation can also assist in encouraging the use of public transport and the gradual introduction of alternative propulsion."  So it is seen as a tool to penalise existing road users.

3.3.  Concern over the need for trucks to have multiple toll and vignette transactions to cross multiple borders, with interest in pursuing a single interoperable approach.  The key problem of course is that despite this goal, most truck operators do not have vehicles crossing so many borders, but rather just a few.  The market for this is not large.

It wants to encourage direct charges to raise revenue, but also "internalisation of externalities".  That means charging for pollution.  It also advocates users paying a greater proportion of costs, which is more of an issue for public transport than roads, although I doubt the EC would acknowledge that.  However, I have no issue with encouraging user pays. 

Yet, it becomes more specific here:

For passenger cars, road charges are increasingly considered as an alternative way to generate revenue and influence traffic and travel behaviour. The Commission will develop guidelines for the application of internalisation charges to all vehicles and for all main externalities. The long-term goal is to apply user charges to all vehicles and on the whole network to reflect at least the maintenance cost of infrastructure, congestion, air and noise pollution.

Noise? Somehow relieving property owners from their choices around location would seem to be far from economically efficient.  However, the goal is ambitious - full network pricing that recovers "at least" costs of infrastructure, congestion and pollution.  Why it could be more (other than a profit factor) is unclear.

The EC wants a leading role to revise vehicle taxation saying that by 2016:

• Revise motor fuel taxation with clear identification of the energy and CO2 component.

• Phase in a mandatory infrastructure charge for heavy-duty vehicles. The scheme would introduce a common tariff structure and cost components such as the recovery of wear and tear, noise and local pollution costs to replace the existing user charges.

• Evaluate existing car road charging schemes and their compatibility with the EU Treaties. Develop guidelines for the application of internalisation charges to road vehicles, covering the social costs of congestion, CO2 – if not included in fuel tax – local pollution, noise and accidents. Provide incentives to Member States who launch pilot projects for the implementation of schemes along such guidelines.

• Proceed with the internalisation of external costs for all modes of transport applying common principles while taking into account the specificity of each mode.

• Create a framework for earmarking revenues from transport for the development of an integrated and efficient transport system.

• Issue guidelines providing clarification concerning public funding to the different modes of transport and to transport infrastructure, where necessary.

• Reassess transport taxation where necessary, namely by linking vehicle taxation to environmental performance, reflecting on possible way forward to review the current VAT system concerning passenger transport, and revising company car taxation to eliminate distortions and favour the deployment of clean vehicles.

I understand fuel tax as a CO2 charge, but not beyond that if you have full road pricing.  The agenda for trucks is clear, all should pay a charge to reflect infrastructure and external costs by 2016.  For cars, there is interest in piloting congestion charges.  However, note that the system is meant to be used to subsidise other modes.  Quite why they should expect financial support if road transport is efficiently charged escapes me, as this is far from efficient.

It wants to subsidise toll systems and interoperable tolling saying "Provide EU support for developing and deploying technologies that improve  infrastructure use efficiency and decarbonisation (new road network pricing and tolling systems, ITS and capacity improvement programs)"

So in conclusion, it is ambitious. The EU wants full network road pricing, which reflects infrastructure costs and environmental costs, and it wants it now.  It wants to standardise systems across Europe and incentivise trials for congestion charging.  However, as much as this is interesting and positive, it also harbours a clear  anti-road transport agenda, wanting to use such charges in part to subsidise other modes, even though such pricing ought to eliminate any need for this.

The bigger question is how this will influence EU Member States.  The EU has supported pricing before, but it would be hard to say that the EU has effectively made much difference in promoting it.  Member States have pursued truck tolls, highway tolls and congestion charging based on domestic political considerations.  The useful EU role has been to ensure non-discrimination and transparency are applied to tolls so that they are not applied in ways to penalise foreign road users.   It would be unfortunate if it saw its role to be to unfairly and inefficiently penalise road transport once road pricing systems are in place.

The new European Union Transport White Paper (which has a far wider remit than roads) is available here as a PDF.

French court decision identifies RAPP Trans on Ecomouv conflict of interest

Further to the story from yesterday, French website Transport Logistique reports that the Swiss based consultancy firm RAPP Trans is the firm implicated in presenting a potential conflict of interest with the French heavy vehicle tolls project.

The report (in French) indicates the consortium ALVIA (comprising Sanef, Siemens and Atos) alleges "that the competitive dialogue did not obey "the principle of transparency and the principle of inviolability of applications".

The problem allegedly being that the French government relied on RAPP Trans to provide it with professional services.  RAPP Trans is a technical consultancy, best known for having designed the Swiss LSVA heavy vehicle distance based charging system that has been in place since 2001.  It has also undertaken other technical advice work in a number of European countries. 

RAPP Trans also allegedly has "close trade links" with Autostrade, the lead company in the winning bid for the French system, through work with the European Commission.

The fundamental legal question in the appeal will likely be whether those links are sufficient to overturn the tender. 

The appeal will be most interesting.  If the appeal does not succeed, it will raise questions about how transparent RAPP Trans was with the French government about its relationship with potential suppliers, it will possibly create a far higher standard of due diligence of separation of roles between advisors (if RAPP Trans had done work for Autostrade during the time of its work for the French government, it would appear to be a clear cut case of conflict, but if the relationship was beforehand it would seem less clear).   It could simply mean consultants have to choose more distinctly whether they want to advise governments or advise suppliers.  It is a decision that gets undertaken quite frequently - and it does not look good if any company is caught out appearing to be able to give unfair advantage to tenderers.

French truck toll system (ecotax) on hold

A French Court has suspended the contract offered to the Autostrade led consortium to develop, build, install and operate a distance based heavy vehicle toll system on untolled French highways, because of allegations of conflict of interest according to Le Monde.   The Ecotax contract had been won by a consortium called EcoMouv.

The issue appears to be that one of the companies associated with the winning consortium was also providing advice to the French government that issued the tender - a classic case of conflict of interest.   It is hardly appropriate or ethical business conduct if this is the case, as one cannot be seen to be providing advice to a government entity that issues a tender, whilst also being party to one of the tenderers.

More details will be reported as they come to hand, but the Autostrade led consortium  (Ecomouv) intends to appeal the decision.  If the decision holds, at the very least it will mean the tender will need to be started from scratch, and anyone that was a party to the alleged conflict of interest would be ruled out - which could be very costly for those involved.  However, regardless of the outcome of appeals, it would appear that the proposed heavy vehicle toll system for France is suspended.

UPDATE:  It's all go, appeal successful.

UPDATE 2:  More details here on the Ecotaxe.

Apologies

Sorry for the break in service, I have been moving home at the same time as work has become more like 60 hours than 40 hours, so in the midst of all that, there has been some neglect of this project.   On top of that, home broadband service has been delayed for two weeks.

Florida toll bridge nearing bankruptcy

Approaching the long causeway type bridge

Garcon Point Bridge links Interstate 10 and Pensacola Beach in Florida. It was commissioned by the Santa Rosa Bay Bridge Authority for US$95 million in 1996, and is a privately owned concession, but traffic volumes have not matched forecasts. In fact they are less than half the predicted 7500 vehicles a day (itself a ridiculously low volume for most toll roads). Consultancy URS undertook the forecasts and understandably doesn’t include the project in its portfolios. The question is whether consultancies that make such mistakes get sued for the losses due to reliance on forecasts that don’t prove correct?

According to the Wall Street Journal if the bridge authority can’t make the interest payments, the bridge could be turned over to its bondholders or taken over by the state. Both of those actions could happen through bankruptcy proceedings.

What’s best is the note on the website of the bridge:

“Executive Director: Vacant-no funding available”

If you can't afford an Executive Director, then surely it is a matter of weeks.

Maryland's new toll road a step forward in two ways

The Maryland Intercounty Connector is a new 7.2 mile toll road opening on 22 February between Interstate 270 in Gaithersburg and Georgia Avenue in northern Silver Spring according to the Washington Post.

The new road is the first stage in what will be called Route 200, which will be an 18.8 mile 6-lane highway which will ultimately connect Interstate 270 with Interstate 95 at Laurel. Yet it is still half the length of the original project conceived for this corridor.   Travel time along the corridor will be 70% reduced compared to using existing roads.

One significant step forward will be the use of all electronic free flow tolling. Technology well established over a decade ago in Toronto, Canada (Route 407) and Melbourne, Australia (Citylink) and used in multiple toll roads across the world.  This will avoid congestion at toll booths and will mean drivers paying either using an on board tag with an account (EZ Pass) or billed according to their number plates. The latter will include a US$3 service fee, incentivising users to establish EZ Pass accounts.

More important from an economics point of view is that tolls will vary according to demand. There will be three tolling periods:

Peak 0600-0900, 1600-1900 (weekdays only)

Offpeak 0500-0600, 0900-1600, 1900-2300, (0500-2300 weekends)

Overnight 2300-0500 (all days)

Charges vary considerably according to the schedule by time of day, with peak times having a 26% surcharge over off peak, and overnight being a nearly 48% discount on offpeak for cars. Similar variations exist for heavier vehicles.  The full toll schedule is here.

However, the intention is to change pricing periods dynamically. This means any charging period could start or finish up to one hour earlier or later depending on demand, with that variation happening with 10 days notice. So it wont be real time dynamic changes, but rather monitored changes in performance.   It has parallels to Singapore's Electronic Road Pricing system which regularly changes prices to maintain free flow conditions.

The difference that makes should be dramatic. Though it will be interesting to see if at times of low demand, peak periods shrink significantly, and overnight periods also increases to respond. Conversely, some motorists will not be happy if they choose to drive at off peak periods near the peak and find within a month or two they are paying the peak price because of congestion at those times.

Of course without increases in prices, there may still be congestion if the peak charge remains too low to manage demand.

Yet this is a really important display of applying market oriented pricing signals to the supply of road capacity. It both helps to manage congestion, but also should mean motorists notice the discounts they get from travelling at different times.  So overall, a valuable piece of new infrastructure, with modern tolling technology and the application of efficient pricing principles to help manage congestion.

May it be an example to future projects in the US.

Greek toll road boycott threatens future concessions

As has been reported in TollRoadsNews, the economic crisis in Greece has had one unfortunate impact on toll road concessionaires in the country - they have become the target of protests against privately owned toll roads. The protests appear inspired by the relatively strong communist political movement in Greece (it is notable that the third largest political party elected to the Greek Parliament is the Communist Party with just over 8% of the vote in 2009). 

Greece’s economy is particularly hard hit by recession, primarily because Greece has had decades of budget deficits that resulted in the country facing a sovereign debt crisis. The Greek government response has been to significantly cut public spending, which is having a major short term effect on the pay and employment of many people. Some are taking it out on the country’s toll roads by simply refusing to pay.  The situation has been exacerbated by some toll increases.

Three major concessionaires agreed in 2007 to engage in a major construction programme to expand the country’s motorway network, but in recent months more and more motorists are simply refusing to pay, making the road concessionaires engage in debt collection and court action.

The percentage of drivers refusing to pay tolls has jumped from 3 to 14 percent of total users in less than a year, an official with one of the operators told Reuters. 

Protests started in late 2010, as there were initially pickets at toll booths, followed by protestors taking over toll booths and raising barriers to let motorists pass free according to the Greek Reporter.

This was followed by the Mayor of Stylida, Apostolos Gletsos who used a bulldozer to destroy a barrier to open an access road parallel to the Athens-Lamia national highway at the Pelasgia toll booths. He wanted his residents to be able to use the road free of charge, after a discount card that allowed 1000 residents to use the road for only 0.50 euro expired in January.   The issue being that a relatively short trip within his district requires use of the toll road, a point that a concessionaire should be able to have flexibility over (but should be a commercial decision). 

Some protestors don't simply want to pay less, but want renationalisation of the roads, partly motivated by the steep recent increases in fuel taxes (which motorists reasonably think might go on paying for roads, when it is general revenue used to reduce the budget deficit).  The call to renationalise the roads is based on the idea that the roads were already "paid for" (because the capital is not expended and never needs replenishing), which for most of these roads is simply not true.   It parallels a campaign to boycott paying public transport fares after fares were increased by up to 180% as subsidies were drastically slashed as part of the austerity measures.

One report indicated up to a third of drivers had regularly refused to pay tolls.

The Greek government response has been to play the populist card, calling on concessionaires to half toll prices.  The concessionaires have said in response "extend our concession periods then".  Discussions are continuing, but the government has also keenly been enforcing violators.  The concern being that widespread evasion could spread to taxes - then government starts to worry (although tax evasion has widely been seen as a national sport in Greece).

Sadly, with far left activists, attention is being misdirected to toll road concessionaires which are delivering value to motorists, when the real problem should be with excessive other road taxes, and such taxes not being used on roads.  These activists are ideologically opposed to private enterprise owning and operating roads, so are opposing tolls because of ideology, not economics.  Note they are also boycotting utility charges and hospital fees.   

I sympathise with Greeks who are undergoing massive economic upheaval because governments have been overspending for decades, spending beyond tax revenue and deluding a generation or two that a borrowed lifestyle can be sustained.   However, private investors and concessionaires have helped Greece build significantly improved motorway infrastructure, and should not be chased away by radical leftwing activists who, if they had their way, might have had Greece go the way of its northern neighbours who have tried Marxism and moved on!

Greece needs more new highways in coming years, the last thing it needs is for future concessionaires (and existing financiers and owners) to see the country's toll road sector as being risky for revenue because of people who don't believe in property rights.

Electronic free flow tolling raises questions in South Africa

Gauteng province toll road network

The  South African National Roads Agency Limited (SANRAL) is recognised by the World Bank (and my own experience) as being probably the best national highways agency in the developing world, certainly the best in Africa.  It runs as a company, contracts out as much as it can to maximise value, treats motorists as its customers and has extensively involved the private sector in its core business.  It has also had relatively free reign to use tolls when insufficient funds were available for major projects.  It has rigorously used economic analysis to optimise maintenance expenditure over new works, and preferring small high value projects to major projects.  In short, there are plenty of countries that could learn from South Africa, including more than a few developed ones.

In Gauteng province, SANRAL decided to move forward to converting all of its toll roads to fully electronic free flow open road tolling from later this year, but controversy has arisen from the proposals.  DSRC based tolling (tag and beacon) is to be the preferred technology, with users with cars expected to pay an average 44c per km and those without (detected by Automatic Number Plate Recognition) at 66c per km.  Unlike most toll systems I have seen, there will be a discount scheme for heavy users, primarily because most highways are not congested.  This will mean those with DSRC based accounts will pay less if they drive beyond a certain frequency.  According to iOL, "Because Sanral's discount system is based on the amount spent the previous month, it is variable, but you can expect to get between 15 percent and 37.5 percent slashed off your monthly bill."

Yet whilst tolls are not new in South Africa, questions of fairness have arisen for some users, who are unhappy with the need to have a DSRC account to get discounts, and who think motorists can get away with no paying if their number plate if fraudulent.

Criticism has arisen for those who will pay more for not having a DSRC tag, because it is 25% cheaper to use DSRC.  An online toll calculator is here, is quite sophisticated and demonstrates exactly the wide variation in rates depending on usage and charging technology.  The other fear is that stolen and fraudulent number plates will mean that dishonest people will evade the toll in a way they could not do so while barriers remain in place.   That causes media reports like this one to be produced about how open road tolling wont work.   The truth is that if number plate fraud or inaccuracies are over about 15% it is a serious issue, and need to be addressed.  Certainly electronic free flow is technically workable, but it needs an accurate and updated number plate database to be maintained.

The AA and other motorist advocates say that motorists pay taxes for roads and do not believe it is fair, as the price of fuel increases tolls are seen to be another imposition.

The wider concern appears to be simply cost. A backlash has started to appear because of inflation, and tolls are seen as an imposition that does not apply on other roads.

However, SANRAL is now being more conservative with electronic tolls. It has been reported that SANRAL has announced that eventually all of its toll roads will have electronic tolls, but as an alternative to manual tolls, not to replace them.   

Certainly, the number plate issue should be addressed and tolls should be seen as delivering value.  However, it is not SANRAL's fault that other motoring taxes do not all go on roads.  That's a matter for the government , and returns to the key issue for tolling everywhere - motorists need to see value for whatever they pay for using roads, and tolls are a part of that.  At times of economic difficulty they are an easy target for those who think they are being unfairly charged, but transparency about what tolls are used for, and what the alternative are would go a long way.

News briefs on tolls Jan/Feb 2011

South Devon Link Road will not be tolled: According to ThisIsSouthDevon, the Torbay and Devon County Councils have decided to use higher local property taxes rather than tolls to progress the A380 South Devon Link Road, contrary to earlier reports that tolling was being considered.  An extra £20.5 million will be contributed, and the capital cost is being reduced by scaling down the project.  The rest of the cost is to be sought, again, from central government on the basis that it is a high value project with a far lower central government contribution.

Sale of shares in Portuguese toll road company: According to Reuters, "Spanish savings bank Nova Caixa Galicia said it had sold its entire 2 percent stake in toll road operator Brisa for 68.4 million euros ($93.37 million). Brisa's other shareholders include Spanish road operator Abertis, which holds 15.2 percent of its Portuguese counterpart and has said the stake is a financial holding. Abertis recently sold its 6.7 percent stake in Italian toll road operator Atlantia".  Given the recession in Portugal, I am not surprised at the desire to bail out of toll roads when demand in that economy is deeply depressed.  Toll roads on the Iberian peninsula are likely to be

Filipino toll road network continues to expand according to major concessionaire: ABS/CBN reports that Metro Pacific Tollways Corp (MPTC) will press ahead with Segments 9 and 10 of the North Luzon Expressway Phase 2 project.  Segment 9 will connect the McArthur Highway in Valenzuela all the way to Nlex while segment 10 will link the same highway to Port Area in Manila. The cost will be 10 billion Filipino peso (US$229 million).

The two projects span 8.5 kilometers. Segment 9 aims to ease access to McArthur Highway, the old route to central and northern Luzon while Segment 10 will dramatically speed up the transport of goods to and from Manila’s North Harbor.

MPTC controls the concession to the 84-kilometer (km) Nlex and holds the contract to operate and maintain the 94-km Subic-Clark-Tarlac Expressway.

Tolling has been a key source of funding of the Filipino highway network and there appears to be little let up in the appetite for, and viability of new toll roads in the Philippines.

Manila Skyway toll restructure: Manila's major urban elevated highway, the Skyway toll road is to get its toll schedule restructured to better reflect distance travelled on its segments.  The Philippine Daily Inquirer reports that the concessionaire, Citra Metro Manila Tollways Corp, will be increasing some and reducing other tolls on the route. Last year, the company opened a new three-kilometer section of Skyway from Bicutan to Sucat. Motorists have been allowed to use the new section for free up till now.