Wednesday 25 July 2012

Macquarie Atlas Roads revenue up in June 2012 quarter

The Herald Sun of Melbourne reports that toll road concessionaire Macquarie Atlas Roads has stated that toll revenue across its investments increased 1% in the latest quarter, despite a weighted average toll volume reduction by 1.7%.  The headline results are reported by MAR as follows:

  • In 6 months to 30 June 2012, weighted average toll revenue is up 0.9% compared to the same period the previous year.
  • Autoroutes Paris-Rhin-Rhone (France) has seen a 0.5% reduction in revenue in the past 6 months compared to the previous, reflecting a 5.2% reduction in heavy vehicle traffic and 2% reduction in light traffic.  This was put down to the weak economy, reduction in workdays (negative for trucks, but the positive effect on cars was offset by poor weather) and high fuel prices.
  • Dulles Greenway (DC) has seen a 8.3% increase in revenue in the past 6 months compared to the previous, with a 0.3% increase in total trips.  Revenue increased due to an average 8% increase in pricing on 1 January 2012 approved by the Virginia State Corporation Commission, indicating very low demand elasticity relative to pricing.
  • M6 Toll (UK) has seen a 3.1% increase in revenue in the past 6 months compared to the previous, with a 0.6% increase in trips (although this involves a 1.8% increase in workday trips, but 3% reduction on weekends and public holidays).  The proportion of cash transactions (indicating more occasional users) increased by 1.7% of all transactions.  Revenue increased due to changes in pricing on 1 March 2012 and increased demand.
  • Chicago Skyway (IL) has seen a 4.9% increase in revenue in the past 6 months compared to the previous, with a 1.1% increase in trips (comprising a 2.6% increase on workdays but a 1.6% decrease on weekends/public holidays).   Revenue and trip increases were driven by a 18.9% increase in heavy vehicle volumes, offsetting the 0.9% decrease in light traffic.
  • Indiana Toll Road has seen a 7.7% increase in revenue in the past 6 months compared to the previous.  Traffic was up 2.6%.  Most notable is an 18.7% increase in heavy vehicle traffic paying using manual collection rather than account based transactions, this compares with only a 2.2% increase in traffic for all light vehicles, and heavy vehicles with accounts.  Toll rates were revised in 1 July 2011 which also contributed to higher revenues.
  • Warnow Tunnel (Germany) saw a 7.1% decrease in revenue in the past 6 months compared to the previous.  This followed a 12.2% decrease in total trips.  The primary reason is that roadworks on the “competing” untolled route ceased in October 2011, resulting in a diversion back to the no longer disrupted untolled option.  Toll rate increases on 1 November 2011 and 1 May 2012 partly offset this reduction in demand, although it would not be surprising if the November 2011 increase induced a greater shift in demand as the tolled route was seen as even less competitive on price and travel time.

Monday 23 July 2012

Policy challenges of VMT in the USA

Dr. Travis Dunn of D’Artagnan Consulting* has prepared an interesting presentation (that he gave at the recent IBTTA Symposium on Mileage-Based  User Fees and Transportation Finance) on some of the challenges US policy makers when considering a shift from fuel excise taxes to distance based charging for road use (commonly referred to as VMT or Vehicle Mileage Tax**) .

He makes some fascinating points (sources in his presentation): 

- From 1994 to 2010, the real value of the Federal gas tax has declined by over 40% compared to the Highway Purchasing Price Index (the cost of paying to maintain and build roads). It has not increased in nominal terms since 1994. It is US$0.04/litre (US$0.184/gallon);

- At the state level, 18 states have also not increased their State gas taxes in nominal terms since 1994, 2 have reduced them (Connecticut and New Mexico) others have increased them. The average across all states is an increase of 2.8c/gallon since 1994. This roughly equates to a decline of around 25% in real terms, but obviously some states have seen far higher declines, and a few (notably North Carolina and Washington) have kept up pace with inflation and some. 8 states index their own gas taxes to inflation;

- Vehicle fuel efficiency has improved by around 15% in terms of gallons per mile since 1994, although it had declined between 1994 and 2004 by around 7%, this has been more than reversed from 2004 onwards. 

From this, he concludes that the timing for VMT to replace gas tax has been since that rise in efficiency, as it is a combination of inertia in indexing gas tax to inflation and the increased fuel efficiency of the fleet that is putting pressure on state and federal budgets dependent on these hypothecated taxes. 

He concludes there are a few more fundamental policy points: 

- Whilst VMT protects revenue from erosion due to reductions in fuel consumption per vehicle mile, it does not protect it from inflation. VMT will still need to be increased to offset that;

- Federal gas tax already means a complex set of cross subsidies between states. Four states get less than 90% of what they contribute in Federal gas tax (Texas, South Carolina, Utah and New Jersey), whilst 17 states get more than 110% of what they contribute (DC gets nearly five times what it pays, Alaska gets nearly four times). VMT may mean states are likely to want to keep the revenue they generate, and perhaps it means rates might vary from state to state;

Yet if VMT was introduced to replace gas tax, the picture would change, assuming funding stayed the same. Texas would gain by paying $411 million less than it does now (reflecting its fuel consumption is high relative to distance travelled). Florida would lose by paying $510 million more than it does now (reflecting the opposite). 

Obviously there are other dimensions that Travis doesn’t take into account, which could help mitigate this, primarily because discussion of VMT has been as a straight replacement for gas tax.   However, as a tool it can be used to significantly improve pricing, after all vehicles already pay differently according to fuel consumption, which reflects weight, topography, road network and demand conditions.

I'd argue some of the minimum components of VMT should be:

-    VMT shouldn’t be a flat rate for all vehicles, because gas tax isn’t. It would be highly preferable to match VMT to also reflect weight, so that whilst cars pay a common rate, trucks and buses would pay more to reflect the greater wear and tear they impose on roads, and the capital requirements for highway structures to be built to cope with such weights.   Other taxes (such as tyre taxes and registration fees) that may be proxies to reflect this would need to be taken into account, and adjusted downwards if desirable;

-   VMT should reflect geographic variations in cost.  Even if there is a federal VMT, it seems reasonable to be cost oriented by having VMT rates that could vary from state to state because costs vary.  As long as this is oriented towards cost recovery, it should be less controversial, but it ought to also mean revenue raised in one state is spent in that state (or on routes approaching it). 

-  VMT at the interstate level can be varied to reflect recovery of the costs of major new capital works, replacing conventional tolls.

His whole presentation is here (PDF), it's worth a look through.  If you have any questions, his contact details are at the end.

Obviously it is a long way to go before VMT will be rolled out on a wide scale replacing existing taxes, but the challenges driving the concept are here now and unless some of the key dimensions of the current system and what VMT will bring are understood, it will difficult to move forward and the current problems will simply get worse.   Travis's presentation raises just some of those issues, which highlight the obvious but often ignored point that the existing system produces "winners and losers", another system will change who they are - the bigger challenge is making sure whatever comes ahead, that VMT can be seen as being fair.

Thursday 19 July 2012

Budapest congestion charge suspended by Hungarian Parliament

Budapest's plans for congestion pricing look set to be delayed, as the Hungarian National Assembly voted against changing the law for it to be implemented, according to the Budapest Times.

14 members of the Hungarian National Assembly voted in favour of the law change, but 305 opposed it. Of those voting for it, most were from the LMP, a leftwing environmentalist party.  It is likely this move was driven by populism, as congestion charging was unlikely to be widely supported in advance of its introduction.
The implications are potentially serious, as congestion charges were a precondition of EU funding already provided for the new metro line (M4) currently under construction.  Given that the Government had previously supported abolishing all central government subsidies for public transport in the city, it leaves the Mayor of Budapest, István Tarlós, in a difficult position.   He faces having to drastically increase public transport fares to maintain services, which will no doubt exacerbate traffic congestion as some users will switch to driving.  Other options include increasing parking charges, or drastically cutting services.   You see congestion charges for Budapest were, in effect, replacing central government funding to subsidise public transport. 

He is unlikely to directly face the wrath of the European Commission, as central government will have to deal with that, but it is likely to be highly embarrassing, and Hungary may face a cut in any future funding if it doesn't match its promises with actions.

I've previously commented on how I thought Budapest faced an uphill struggle to implement congestion pricing in such a short time frame.  Yet I believe it should be implemented, albeit on a more considered timetable, with time taken to develop it in an integrated way, that prices rationally and deals with changes in traffic patterns appropriately.

This now all looks like a potential mess.   An earlier report indicated that tolls on the Danube river crossing bridges might be implemented instead.   This would be simple, although obviously create concerns about being unfair on those from Buda entering Pest.   Yet it is unclear whether this is allowed under current laws.

What is certain is that the issue wont be going away because:
-  The politics of raising public transport fares and cutting services rival those of introducing congestion pricing;
-    Budapest will remain congested, regardless of what is done with public transport funding;
-    The EC will not look kindly upon Hungary breaching one of its conditions for funding for its new metro line.

UPDATEHungary Around the Clock reports that Budapest Mayor István Tarlós says that the subsidy contract with the European Commission for the Metro 4 line, which included the condition that congestion charging be introduced, should now be renegotiated.  The report noted that it was the previous Socialist-Free Democrat leadership and former mayor Gábor Demszky that pledged to introduce the charge by late 2013.

Budapest Business Journal notes that the Mayor has said final decisions on funding for BKV (the Budapest Public Transport Company) will be made in September, including "alternative options". 

Another article noted that while the Metro 4 project is going well, the congestion charge needed a series of park and ride stations on the periphery, and nothing has been done about it.  It has also been noted that it will be virtually impossible to procure and install a system within the planned time.

UK government adds new (A14) toll road project to programme

The UK Department for Transport has announced that a "major new scheme" has been added to the Highways Agency programme for development, specifically being a remodelled version of the deferred A14 Ellington to Fen Drayton upgrade which I wrote about here.  In essence, this was one of the largest projects on the Highways Agency books that was indefinitely deferred because of cost, now it has been revived in a modified form, with tolls.

The official statement says:

Study work has confirmed that funding for these can be generated in part through tolling a length of the enhanced A14, featuring around 20 miles of new or widened road. However, more work will be taken to determine the best tolling solution, including what length the tolled section should be, how users would pay and what the tariff should be.

What does the new proposal involve?

There are no published maps yet of the preferred option, but many options presented in earlier work undertaken for the DfT.

The project has three core segments:

1.  Widening of part of the Cambridge Northern Bypass.
2.   Construction of new parallel local roads to the A14 from Cambridge to southeast of Huntingdon, and upgrading the existing A14 (perhaps elevating it to motorway status);
3.  Construction of a bypass of Huntingdon on the southern side to the A1.

The first segment is almost certainly not going to be tolled, as it involves simply extra lanes.  Tolling these lanes would generate little revenue and usage, because the distances are too short, and tolling the entire road is out of the question, as it would partly defeat the purpose of the bypass in keeping traffic out of urban Cambridge.  

The third segment  is conceptually easy to toll, as it is a new road, and so should be able to generate some revenue from motorists avoiding delays on the existing one.  However, on its own, it wouldn't be expected to generate much revenue.

The second segment  is the most interesting.  It is government policy to only toll new capacity, and what is proposed is that the current road be retained and enhanced, but disconnected from the interchanges along most of its length.  In parallel, new local roads will be built either side (presumably one way each way) that are connected to the interchanges, essentially performing the function of the current A14 for local traffic.

That allows for the option to leave the new local route untolled, whilst tolling the new one, meaning that local residents wont be disadvantaged, whereas through traffic pays for the new capacity.

It would make sense for this segment of the A14 to be redesignated into motorway as it would have no interchanges of any kind.  With the removal of local traffic it would not need to be widened to six lanes, as there could be four lanes of untolled parallel road for such traffic. 

In short, a rather innovative approach has been proposed that means building a new road, with the same capacity as the existing road, for local traffic which will be untolled, whilst treating the existing road as the "new capacity" for tolling purposes as it will be literally an expressway between the Cambridge northern bypass and M11 and the Huntingdon bypass.

This option appears to correspond to the tolling assumptions made in the report to DfT on options published earlier in the year which states:

• tolling is only possible where a viable alternative for local traffic is available (Achieved);
• when a toll is levied only strategic traffic would use the new sections and hence incur a charge (Achieved);
• the charge would be levied in peak periods only (3 hours in AM and 3 hours in PM) (this is interesting);
• the charge is made for each passage of the route; and
• freight vehicles are charged at a toll twice that of private cars ( the assessment has been undertaken based on a toll of £3/£1.50 respectively).

It is unclear if it is now proposed that tolls be for peak periods only and at such low rates.   Opponents to road building, the Campaign for Better Transport, suggest that £370 million could be raised from tolling (disapprovingly), which is a sizeable contribution to a project likely to cost around £1 billion.


It is important to emphasise that this project is not going to be fully funded from tolls, and it isn't clear what proportion of funding will be generated from tolls (and that will be dependent on the scale and level of tolls).  However, the mere fact that tolling is being encouraged is promising for projects on this scale, albeit there are few such projects in England (bear in mind, tolling is only a matter in England, as Scotland, Wales and Northern Ireland have devolved governments that have their own policies on this).

It is more important to note that it hasn't been approved for funding yet.  No doubt it will be a prime candidate for private investment in highways, whether it be through a renewed Private Finance Initiative (PFI) programme, or a more innovative and far-ranging move to privatise some highways (e.g. one can envisage the A14 being leased off to a private company for 40 years in exchange for undertaking this upgrade work and operating the road).   

This could be the first step on an interesting journey for the future of highways in the UK. 

However it is most important to emphasise that my interpretation of what could be tolled may not come to pass.  The Huntingdon bypass segment is likely to be considered easiest to toll, and I expect the tolling of the Cambridge-Huntingdon segment will create some controversy.

Hopefully it will be packaged up as potentially the UK's first serious highways privatisation, with a mix of toll funding and service payments from central government.   However, reports that construction couldn't begin before 2018 demonstrates that one of the biggest bottlenecks is the planning process.  It takes far longer to plan and select options, and gain approvals to build a road, than to actually build it.

What should happen now?

There will be consultation on the options, but already the AA is opposing the idea of tolling the existing road beside a new parallel untolled road (with the same capacity as the existing road).   What's going to be important is the detail.

The Huntingdon bypass being tolled will be relatively uncontroversial as long as the current route is not downgraded, such as imposing speed restrictions.

The Cambridge to Huntingdon bypass segment will be controversial, especially if the new parallel local route is a substantial reduction in standards compared to the current road.  If it isn't dual carriageway and isn't grade separated, or is significantly speed restricted, then it will be disliked, as motorists will have to use the existing road - tolled - with no interchanges - to maintain the same level of service.   Yet if the new road is similar to the existing road, will it mean little use of the tolled "express lanes" as the existing road will become? 

The previous reports on A14 options considered tolling only at peak times.  That may actually be one of the keys to making it more acceptable, but will it be unduly restricting revenue?

Wednesday 18 July 2012

News briefs - Australia, Canada, Indonesia, Jamaica

Does fuel tax reduce congestion?

The answer to that question is yes, but not very well. Andrew Coyne from the Nanaimo Daily News (Canada) writes a good summary article about why full network congestion pricing is the best single tool for addressing traffic congestion, compared to building more roads, adding more public transport and simple cordon pricing. I'd counter his claim that London and Stockholm congestion charging haven't work so well because of induced demand within the cordons, because this simply isn't true. In London, road space was reallocated to pedestrians, cyclists and buses. Nevertheless, whilst he doesn't address the real concerns people have about privacy (which I believe can be overcome, but cannot be ignored), it isn't a bad article as to why road pricing needs to be comprehensive to properly address congestion. So far, nobody has dared try it.  Singapore may be the first to do so?

South Australia not going to have toll roads

According to Australian public broadcaster, ABC, "Chief executive of the Department of Planning, Transport and Infrastructure, Rod Hook, told 891 Breakfast this morning that Adelaide's road future could come at a toll". His view was quite simply that tolls would be needed as a source of revenue perhaps in order to get continued Federal funding for South Australia's highways. The Labor, Liberal and Family First parties in the state of South Australia all oppose the introduction of tolls, even though tolls are widespread in use on highways in Victoria, New South Wales and Queensland.

Toronto 407 toll road continues to perform well

The Globe and Mail reports that the 407 ETR in Toronto has had a good year. Trips increased 1% year on year, but revenue increased 10.6%. This is due to an increase in tolls at peak times by between 5-10% indicating that users are still willing to pay to use the road at those times. Notable is that revenue in the latest quarter is 83% higher than the same quarter last year. Revenue per trip is around C$6.37 (US$6.28). “Unbilled trips” (those either not identified or not able to be pursued for enforcement) are now at 2.2%, which is attributed to improved technology (presumably better resolution of Automatic Number Plate Recognition images).

407 ETR is owned by the Canada Pension Plan Investment Board (40%) , Spanish infrastructure company Cintra Infraestructuras SA (43.23%) and Canadian engineering firm SNC-Lavalin (16.77%).

Total revenue was C$188.4 million (US$185.9 million) for the year till June 30 up from C$170.3 million (US$168 million).

Tolling pushes ahead in Indonesia but PPPs not yet a success says Minister

The Jakarta Post interviews the Public Works Minister of Indonesia who says that Public-Private Partnerships are not yet a success, but progress has been astonishing:

For instance, when constructing the Jagorawi toll road in 1978, the state set up a company called PT Jasa Marga that acted as a toll road operator. However, Jasa Marga also emerged as regulator because we did not open the service to the private sector. We revised the law on roads and established the Toll Road Authority Agency (BPJT) as regulator in 2004. This law puts Jasa Marga only as operator and it has to compete with other investors if it wants to construct toll roads. It really attracts the private sector to invest in toll roads.

The key problem apparently being that interest rates for borrowing for Indonesian projects are high, demanding a high rate of return from projects.
Meanwhile, the Jakarta Globe reports on lending having been approved for a new 34km toll highway southwest of Surabaya.

Decline in demand but increase in revenue on Jamaican toll road

According to Go Jamaica, the Toll Authority of Jamaica has reported a third consecutive annual decline in traffic volumes on its tolled highway. The report says there has been a 5% average decline in 2010/2011 compared to the previous year. However, revenues are up by over 4%, presumably due to higher tolls or longer trips taken by those vehicles on the road. I went to the Authority's website to learn more, but it is not kept up to date, with the latest news release being in November 2010, and there being no annual reports published on its website (or not easily found). Hardly a model of transparency, or maybe this isn't seen to be a key distribution channel to supply information.

It's not easy to find Jamaica Infrastructure Organisation's website, but it does have some more information. JIO is the name of the concessionaire company responsible for the three toll roads. It has up to date prices. Which even its regulator hasn't got. There is even a frequent user discount.

Lawsuit over traffic forecasts for Brisbane's Clem 7 toll tunnel

Now it appears the lawsuit is proceeding. Australian public broadcaster, ABC, reports that:

“A law firm has launched a $150 million class action on behalf of 700 clients who say they were misled by traffic forecasts for Brisbane's $3.2 billion Clem Jones toll road”

“The law firm Maurice Blackburn says investors relied on forecasts by the multinational engineering group AECOM.

It predicted that by now 100,000 vehicles would flow through the tunnel daily but current levels are only a quarter of that.”

“the forecaster AECOM Australia says investors were given detailed assessments of the project beforehand as well as its risks and says it will defend the claim.”

Given that investors have been burnt before in a couple of other high profile Australian toll road forecasting mismatches, this case will be interesting. It may come down to whether AECOM was professionally negligent, or if it provided sufficient detailed background for there to be enough provisos about risk and exclusions of liability that it can be said that investors should have known better. Consultants do this sort of work all of the time, and it is fundamental to the success and failure of such roads (the other two biggest risks are construction costs and government intervention either as regulator or in funding competing infrastructure from taxpayers).

It may expose the key tension for demand forecasters commissioned by investment companies, and the incentives they face. It goes beyond this case, as AECOM, for now, must be presumed to have acted properly. One of the issues was the presence of two sets of traffic forecasts. AECOM did work on the traffic demand study for both the Product Disclosure Statement (the document intended to outline the project as an investment) and the Environmental Impact Statement (the document intended to obtain planning approval). They delivered vastly different forecasts (100,000 trips per day by 2011 for the PDS. 57,000 for the EIS). AECOM will claim they were based on different criteria, but it raises some serious questions for all of the parties involved. Many investors would have looked differently upon the road with the EIS traffic forecasts.

How does a consultancy respond to a client if that client seeks forecasts to attract investors, particularly if their own professional opinion may be that demand wont be enough to be viable, in the face of government promoting and encouraging a project to proceed?

What if a demand forecaster said "look this doesn't look like it will work", which essentially suggests either government has to subsidise the project, or it does not proceed? Therein lies the key tension with public-private partnerships.

My key point is that there will be, and ought to be cases, where governments seek roads to be built, using PPPs and tolls, but in actual fact they are not viable. In such cases, reality should not be evaded. If a road cannot be funded through tolls, and the traffic forecasts are such that private investment is not interested, then government either must contribute more (i.e. use a shadow toll based on fuel tax consumed on the new road) or defer the project.

Nevertheless, I am sure concessionaires, consultancies and government authorities will watch this case with interest.

Monday 16 July 2012

News briefs - Australia, Ireland, Transurban


Brisbane's Courier Mail reports that the Federal agency Infrastructure Australia has suggested that Brisbane adopt congestion pricing to help pay for a A$4.5 billion (US$4.6 billion) rail project called Cross River Rail

 "Infrastructure Australia national co-ordinator Michael Deegan said the Queensland Government should consider a parking levy and congestion charging to help fund Cross River Rail"

The response from Queensland's Transport Minister, Scott Emerson, has been to oppose the idea. 


Sinn Fein's newspaper, An Phoblacht, reports that that 7 million Euros in subsidies will be provided for the concessionaires of the Limerick Tunnel and the M3 in Meath.

I wrote last year that the Limerick Tunnel may have traffic levels as low as 25% beneath the threshold required to avoid subsidies, and the M3 (the northern motorway from Dublin) has volumes 22% below that level. Limerick Tunnel is owned by the DirectRoute consortium, and M3 by Eurolink M3.

Sinn Fein is opposed to public-private partnerships and seeks the renegotiation of the contracts, but it is extremely unlikely that the concessionaires will be backing out of these unless they were paid a substantial premium. The pricing paid would have been based on gaining enough revenue to support the long run capital costs and a profit, and existing toll revenue doesn’t do that (although Sinn Fein claims a profit is being made, it will not be a return on the cost of capital).


Australian based toll concessionaire Transurban has had a good year with Melbourne's Herald Sun reporting a nearly 6% increase in revenues in the year to 30 June 2012.  Total revenues are at A$943.9 million. (US$962.1 million).  It publishes detailed data about its roads indicating the following:

-  8.5% increase in revenue on Melbourne Citylink in 12 months, average daily transactions up 1.6%.
- 3.1% reduction in revenue on Hills M2 Sydney in 12 months, average daily transactions down 5.1% (attributed to substantial roadworks over this period, with closed lanes and lowered speed limits making the route less attractive);
- Lane Cove Tunnel Sydney has had a 0.7% reduction in average daily transactions, but truck trips overall grew 6.7% in the latest quarter (but not car trips);
- 0.6% increase in revenue on Sydney's M1 eastern distributor in 12 months, average daily transactions up 0.7%. Although truck traffic was down 1.2% in the latest quarter;
- 5.2% increase in revenue on Sydney's Westlink M7 in 12 months, average daily transactions up 1.3%. Notable was an increase in tolled trip length by 0.6% in the latest quarter;
- 8.1% increase in revenue on Sydney's M5 South Western motorway in 12 months, average daily transactions down 0.1%, with cars down 0.4% but trucks up 1.2%.  Car toll prices had been increased by nearly 16%, but not trucks;
- 5.7% increase in revenue on Virginia's Pocahontas 895 in 12 months, average daily transactions up 3.2%.

What this seems to indicate is that the jewels in the Transurban crown remain Melbourne Citylink (responsible for 50% of total group revenue) and the Westlink M7 (responsible for 21%).  The Lane Cove Tunnel remains a rather lacklustre performer, as does Pocahontas 895.

Friday 13 July 2012

France's Ecotaxe - national truck tolling, distance based

More information has been published about the French nationwide heavy vehicle road user charge system now under development, thanks to the "Ecomouv" consortium producing a website in multiple languages.  

 Given interest in vehicle mileage taxation in the United States and heavy vehicle distance based charging in Australia, it will be notable for both France and Germany to be blanketed by such charges on major highways across their territories.

It's worth noting this tax is in addition to existing taxes in France, including diesel tax up to* EUR0.4284 per litre (US$0.525).

Ecomouv is a subsidiary of Italian toll road operator Autostrade, which is partnered with mobile phone network operator SFR, state owned railway operator SNCF, IT services company Steria, and French electronics company Thales.

Some key useful facts:
- The distance based tax will apply to all goods vehicles weighing over 3.5 tonnes, both French registered and foreign vehicles;
- The stated purpose is to encourage more environmentally friendly goods transport, in part by having pricing that differentiates by emission class and to discourage empty running;
- The Ecotaxe will also normalise demand between tolled motorways and untolled routes, promoting more optimal use of the entire national road network;
- The taxed network comprises 10,000 km of national highways and motorways that are not concessioned routes (many of those are tolled and will not be subject to this tax as well), and 5,000 km of secondary roads (largely to prevent "rat running" by truck drivers seeking to evade the tax);
- A 25% discount will apply for trips within three "peripheral regions", largely to promote regional development;
The system as described appears to be a "light client" form of GPS enabled distance measurement, whereby information about distance travelled on charged routes is calculated on board the vehicle, but then transmitted through mobile telecommunications networks to a back office system to calculate the tax liability;
- Exempt vehicles include all buses, some public vehicles (e.g. military) and vehicles used to transport agricultural goods;
- Options to pay include a prepay account, or a postpay account (the latter requiring a credit check);
- Enforcement is carried out using a network of gantries to take images of vehicles and their number plates if any are identified as not having a functioning on board unit;
- Mobile enforcement units will also roam the network to remotely check vehicles at random;
-  Revenue is estimated to be 1.24 billion Euro per annum (US$1.5 billion), of which 760 million (US$930 million) is to go to AFITF - "L’agence de financement des infrastructures de transport de France", a public body that is responsible for central government expenditure on railways, roads, inland waterways and ports. 160 million (US$196 million) to regional and local government.  
 - 250 million Euro (US$306 million) per annum consists of operating costs.
- The remainder will be to recover the 600 million Euro (US$735 million) capital costs over the period of the concession, which is 11.5 years.
-  About 550,000 French and 250,000 foreign trucks are expected to be users of the tolled network.
-  It is expected the tax will increase the cost per tonne of transporting freight in France by 2.9%.

A zoomable map of the taxed network is available here.

It is due to be operational as of mid 2013.

Actual tax charges are NOT published yet, but the range appears to be from (Euro) 0.025c/km (US$0.03) to 0.20c/km (US$0.25) according to a French presentation from the MEDDTL (government body responsible) with weight and emissions class being the key determinants.


The French Ecotax is essentially a way to make money from trucks using the government owned highway network, which are currently priced off of the private and publicly owned tolled motorways.  It is to generate new revenue, particularly from foreign lorries that enter France from Spain, Italy and Germany, some of which are avoiding the heavy vehicle distance charging systems in Germany and Switzerland as well as the French toll motorways.  It essentially "plugs the gap" in charging trucks to use France's highways.

The cost of collection, including the recovery of the cost of capital is 25.8% of the total revenue.  This is high, and this figure will do little to encourage take up of such systems elsewhere.  Given that technology has moved on substantially since the Swiss LSVA was introduced in 2001 and the Germany LKW-Maut in 2005, I'm surprised that costs are being claimed as so high.  A technologically robust path has been adopted, as it replicates much of what is done in Germany.  However, I'd be surprised if those costs are realistic after about 4-5 years of operation.  Costs may be closer to 50% of revenue in the first year and 30% in the second, but in the long run it should be closer to 10% (as users become familiar with the system and the initial installation, publicity and enforcement efforts are better matched to ongoing renewal rather than one off inauguration).

I have figures for other systems, and will endeavour to publish those in due course in order to get a better comparison of  relative costs.

Other ways of looking at the costs:
Average capital and operating costs of 355 Euro per truck per annum
EUR0.03 per km in capital and operating costs

*  Diesel tax in France is determined by regional governments which may vary it between EUR0.4284 and EUR0.4169 per litre, with a EUR0.0135 surcharge to fund certain projects being optional.

Thursday 12 July 2012

Proposed private toll road is about making money as a utility corridor

It is difficult to be sure whether the article that I found on this proposal is wholly serious, given the concept is for a 220 mile completed segregated private toll road from Calais to Coburn Gore in Maine, with the primary traffic being trucks, yet with the key money expected to be made from providing a corridor for utilities - in particular energy pipelines.

The Portland Daily Sun (Maine) reports that the idea is from an entrepreneur, who is facing substantial opposition from environmentalists who are more concerned about the expected traffic rather than the effect of the road:

“A completely fenced-in, 220-mile private toll road, running along rivers, lakes and farms, then over mountains and ridgelines. Starting in Calais and ending at the Quebec border at Coburn Gore, the so-called "east-west corridor" is being pushed by Peter Vigue, head of Cianbro, the construction wing of Maine's energy-speculation industrial complex.

Under Vigue's plan, a steady parade of tired Canadian truckers hauling tandem trailers (or Irving tanker trucks filled with gas and diesel) from the Port of Saint John in New Brunswick will pay $125 to save two hours driving time en route to Quebec.

The Canadian trucks would be allowed to surpass American weight standards, all while traveling at 75 mph, the proposed speed limit.”

So the concept has the ring of some soundness to it, charging a lot for a long corridor that saves a lot of time and fuel, and being able to carry trucks with greater mass and dimensions than those allowed on public highways.  However, while Peter Vigue is ambitious, it would appear the sums have been done on the traffic volumes, tolls and expenses because...

The tolls from the truckers coming from both directions, though, won't be enough to pay for the construction of the $2 billion road project. And since Vigue won't even venture a guess on the fee for passenger vehicles, it's doubtful revenue from tourist traffic will make a dent in the construction debt. That's why the scheme is referred to as a "corridor" instead of a "highway." protestations to the contrary, Vigue's fancy new website ( admits the powerful truth: the road paves the future for utility and communications corporations to run lines from Canada into the heart of Maine. Big Wind and other energy giants will be glad to rent the private highway's median as a way to link to the power grid. And once the roadwork is completed, then voilà, a ready-made path exists for a pipeline pumping oil sands to the Canadian Maritimes.

This all seems a bit of a gamble of course, the issue being whether electricity utilities and telcos actually want such a corridor, which isn't clear.  The oil sands point may be more of a point, but what's most important is seeing a road corridor as being much more than a place for vehicles to drive along, but actually a utility corridor.  Such corridors are getting precious in urban areas in particular, as it is expensive and laborious seeking approval from last numbers of property owners.

Existing route in blue, black is "as the crow flies" but is not a proposed route
The report concludes though that this proposal appears to be a bit of a struggle...

Despite support from Governor LePage and members of the Legislature, the highway isn't a done deal, yet. Vigue still has to raise billions of bucks, followed by the tough task of convincing regulators that paving a new roadway through undeveloped land — and expanding existing logging roads — won't hurt the environment. Even if he makes it past the bureaucrats, he'll have to contend with court challenges and other actions by environmentalists. And by then, it'll take more than Vigue's six bodyguards to quell the angry mobs.

UPDATE:   The Morning Sentinel says that Quebec authorities have heard nothing of the company Ciabro since 2008 about the proposal.  Quebec Ministry of Transportation spokesman Mario St-Pierre said that although there has not been any contact for some time, the project is viewed positively by the province.

Wednesday 11 July 2012

Seattle's SR520 toll reduces overall traffic volumes

Famous US political journalist and commentator, Michael Kinsley, writes in the LA Times about the SR520 bridge toll that I reported on last year here (noting the congestion pricing that has since been applied), with this interesting statistic:

Since the toll was imposed, traffic on the toll bridge has dropped about 40%, while traffic on the free bridge has risen 10%. Overall traffic to and from the east side has dropped about 6%. 

Of course, the main point of his article isn’t about the traffic or economic implications about it, he’s being philosophical about it as an example, saying it makes society less egalitarian because people can pay to avoid congestion. I’m not going to engage on that, except to say that I’m sure he’s flown in premium cabins on airlines happily bypassing queues at airport check-in and boarding, and people pay for TV, pay for valet parking, pay for the best seats in theatres etc, and he doesn’t seem to mind that. Indeed, the SR520 toll is to help pay for the replacement bridge.

The interesting result is that a 40% drop of traffic on one bridge (with two lanes each way) has resulted in only a 10% increase on the other bridge (with three lanes each way excluding the reversible two HOT lanes on the I-90 bridge), resulting in a 6% overall reduction in crossings.  The report I blogged about last year predicted a 50% reduction.

What this demonstrates is that the toll has made more motorists think about whether driving is the correct option (I don’t have figures for public transit use) or whether people consolidate trips, travelling less when faced with paying the cost of the infrastructure they use. In either case, it shows that tolling one route whilst leaving another free does not just result in a 1 for 1 diversion, it does mean that there is some trip suppression and some mode shift. 

As I said before, what's particularly interesting is that congestion pricing has been introduced on the SR520 bridge.  The effect of this means different patterns of behaviour change, with more mode shift and trip suppression likely at peaks than other times (and no toll overnight).

For cities considering tolls on one crossing but not another, it may be an  interesting case study because the automatic concern will be gridlocking the other bridge.  In this case, the other bridge also has a tolled alternative in the form of express lanes. The simple response to congestion concerns is that users of either crossing have uncongested options, and a free one.   Washington State has introduced tolls on SR520 for financial reasons, but has cleverly designed it to also maximise efficient utility of the crossing as well.  

Tuesday 10 July 2012

News briefs - France, Nigeria, Philippines, UK, Macquaries


Romania Insider reports that two Romanian truck drivers, contracted to Spanish company Giraud Iberico, (which itself is a subsidiary of French company Geodis, which is owned by SNCF (the French state owned rail operator)) are subject to legal action for toll fraud on French toll roads owned by concessionaire Vinci.  The drivers claimed they were under pressure to keep rates low, and it is alleged they were "leaving tickets with low tariffs at an olive tree next to a lay-by for other drivers to pick up".  The roads appear on motorways linking France with Spain.  The toll system is a closed toll system whereby tickets are issued to motorists at toll booths entering a motorway, and used to determine distance travelled and tariff at exiting toll booths.   The claim is that 1.25 million Euro (US$1.55 million) was evaded.


Congestion at toll plazas on the Lekki-Epe expressway (Lagos) is causing enormous frustration according to This Day Live. Delays are in part due to sheer volumes of people paying by cash and issues with the reliability of payment systems. Although there are electronic toll options (with a conventional DSRC tag system that allows free flow through barrier gates) one problem noted is that:

"of the five lanes on both sides, road-users revealed that those that opt for cash payments to purchase their tickets are allocated only two lanes, whereas three lanes are dedicated to those using the electronic payment option. They contended that since the majority of those plying the route use cash, LCC (Lekki Concession Company) should have dedicated more toll points to this category of road users"

Although no statistics is available yet on the number of vehicles plying the revamped Lekki-Epe Expressway and the figure for users of the toll plaza, over one million vehicles are believed to ply Lagos roads every day with about 500,000 of that number commuting between the Lagos Mainland and Lagos Island on a daily basis.

The obvious answer is to have a serious price incentive to move to the free flow electronic option, so that people make the transition, and to ensure that there isn't such a delay that it block people using that option from using the road.  If people are reluctant, make sure it can be prepaid and that it is tailored to be attractive to a greater proportion of users.

Lekke-Epe Expressway

According to the Inquirer (Philippines) the Filipino Government is considering privatising the 30-kilometer Kennon Road which is operated today as a toll road by the Department of Public Works and Highways (DPWH).

Public Works Secretary Rogelio Singson said that the government is thinking of privatising the road to improve its maintenance and the riding comfort of motorists and commuters.

We are looking at the best option for the government to improve the maintenance and riding comfort for Kennon road because there is an alternative non-toll road,” Singson said. “If you don’t want to pay a toll fee, you could take Marcos Highway.” 

It also plans to connect Kennon Road to the ongoing Tarlac-Pangasinan-La Union Expressway, to reduce travel time from Metro Manila to Baguio City from the current six to seven hours to three to four hours. The big fear among locals is that the price will go up too much, so options to exempt residents are being considered.

Kennon Road (in red)

The London Evening Standard reports that the UK government is increasing tolls on its lucrative Dartford Crossing from October 2012 by 50p for most vehicles, except HGVs which will pay £1.30 more.  The reason?  To "pay for" conversion to fully electronic free flow operation.

I think this move is foolish and inequitable.  Why?  Well nobody should be "paying for electronic free flow" until it is up and running.  The appropriate step would be to borrow the necessary funds and have the people benefiting from free flow pay sufficient to pay back the debts over the depreciate life of the asset.  Pay As You Go is not how the government funds most capital, it shouldn't be how it funds this.

Secondly, let's not pretend that this increase will be dropped when the system is "paid for".  It wont be, and by linking the increase to that it creates a false impression that this is what should happen.

Thirdly, the whole point of freeflow is to generate both economic benefits from reduced congestion and savings in operations.  Charging people more counteracts those benefits, especially since net revenue from the Crossing is now surplus to the capital spent on the crossings (debt has been paid off) and the ongoing maintenance and operating costs.

There is to be another increase two years after that, but that doesn't have a justification.  It could be inflation, but the ineptness in communication shows up exactly what has been wrong with the political and  bureaucratic handling of road charging in the UK for the past 15 years.  Motorists think they are treated as cash cows to be milked on demand.  This step simply proves that this is exactly what Treasury thinks and the government is unwilling to take an alternative approach.

A far more strategic view of lessening the toxic noise around tolls would be to pay for the upgrade without an increase, by a combination of:
- Acknowledging the surpluses generated by toll users over recent years, and seeing this as a way of giving them back something because of the inertia in moving the toll system onto modern technology;
- Having new prices after the conversion that reward those with accounts, and charge more those who are occasional users;
- Charge peak tolls to manage congestion and significant off peak discounts.

In other words, actually let the price mechanism deliver optimised revenue when the system itself is optimised.  Let people pay more when they have improved service, not before and charge the most those who cost the system the most in how they interact with it.

Why does the UK government insist on treating motorists in a manner that sees them treat the tolls with utter contempt?

Macquarie Atlas Roads

Nine MSN reports that Peter Trent, Chief Executive of Macquarie Atlas Roads expects that revenue from the company's main asset the APRR motorway network, a 2,264km road linking Paris and Lyon in France, would be higher in 2012 than 2011. It was also expected that more motorists in the US would take to Macquarie's toll roads in Chicago and Virginia despite a slightly negative first quarter.

However, Macquarie does not expect to see an improvement in the low volume of traffic on its British M6 toll road, a major bypass north east of Birmingham. Chairman David Walsh flagged the company may consider selling the M6, but said there were currently no plans to do so.

Abertis sees credit rating drop due to Spanish toll road demand

Spanish toll road investor Abertis and its French subsidiary SANEF have both had their credit ratings cut to BBB by Standard & Poors according to Reuters.

Abertis has a network of 1500km of toll motorways in Spain via 8 subsidiaries (59% of toll roads in Spain by length), and a minority stake in another 200km of toll roads in Spain. It also has a nearly 15% share of Portuguese toll road operator Brisa, and 25% ownership of RMG (company holding non-tolled concessions on two UK roads). It also owns or partly owns companies responsible for around 700km of Chilean toll roads, has a part share in concessions over 89km of roads in Puerto Rico and has a controlling stake in the concession of one road in Argentina.

SANEF has a network of 17570km of almost entirely toll motorways in France, in the north and east.

The reason given for the downgrade is “of volatility in traffic volumes experienced by its Spanish toll road network operators”

Interesting statistics from the press release:

- Average daily traffic declined by 24% between 2007 and 2011 on Abertis's Spanish toll roads;
- In 2012, S&P forecasts a further contraction by 9% on Spanish toll roads;

- This is driven by very high unemployment, weak economy;

- Abertis's Spanish toll roads have greater exposure to competition from untolled roads than similar roads in France or Italy.

- 80% of dividends in past three years originated from Spanish toll roads, with concessionaire Acesa (541km of road) contributing 70% of that. This decline will be partly offset by good performance on toll roads elsewhere, and expected tariff increases and cost savings.

However, S&P sees risks in the proposed acquisition of the Brazilian and Chilean toll road operators of Obrascon Huarte Lain (OHL) which includes over 3100km of roads in Brazil and around 340km of roads in Chile because it Brazil is:

-- An emerging economy, with a soft currency that could suffer  depreciation vis-a-vis the euro. 
-- A relatively dynamic regulatory environment in Brazil, where the bulk of the operations to be integrated are located. Unilateral changes to concessions are allowed in Brazil, although appropriate remuneration must be provided to the toll road operator to restore the concession's economic
-- A greater proportion of heavy vehicle traffic, which we view as more volatile than light vehicle traffic. Heavy vehicle traffic volumes account for more than 30% of total traffic volumes on the roads to be integrated, compared with 15% on average on Abertis' network.

On SANEF, S&P says:

Sanef operates the third-largest interconnected toll road network in France. Although the company is exposed to variations in traffic volumes, it benefits from a strong competitive position; favorable concession agreements, including yearly inflation-linked tariff increases; high profitability, and positive free cash flows. We consider the risk of acquisitions and diversification to be low. These strengths are partly offset by Sanef's high indebtedness, and its relatively rigid dividend policy.


Even a casual observer of Spain's economy can see the crash of property and construction dramatically affecting overall demand, and it appears far too many concessions were predicated on forecasts of demand that now look unattainable in the medium term.  Abertis may be big enough to hold onto most of what it has, but it is likely this sector will remain tough for some time, and there is pressure to have consolidation and refinancing so that such roads can be on a sustainable footing.  There is rumour that the Spanish government is considering how to address these problems, and it may even think about having some form of charges on existing roads.

Monday 9 July 2012

Shenzhen planning for congestion charge but no details yet

Environmental website Cleanbiz Asia reports that Chinese city Shenzhen (located just across the border from Hong Kong SAR has announced it intends to introduce congestion pricing by 2016. It reports:

Shenzhen has 2 million registered vehicles; five years ago it had one million and its maximum capacity is thought to be 2.1 million vehicles. According to Shenzhen’s traffic bureau the city’s vehicle density is the highest in China, with 300 vehicles for every kilometer of road.

70 per cent polled in a recent survey said they opposed the measure.

Shenzhen will introduce a number of green measures alongside its congestion charging plans. These include awarding drivers for taking their vehicles off the roads for 30 days with discounted parking and insurance premiums. The city also plans to add electric buses and taxis to its streets, in a bid to reduce pollution.

There is no more information about the proposal, which given it was first mooted in 2007, is surprising.  Clearly not a lot of detailed work has been done or made publicly available. 

Xinhua News Agency reports further:

Wang Guowen, a researcher from the Shenzhen Comprehensive Development Institute, said the collection of congestion fees indicates the government is learning the experience of some other countries and regions to tackle traffic problems by introducing market principles.

Lu Huapu, a professor from Tsinghua University, said collecting congestion fees would certainly help ease traffic jams in Shenzhen, but it cannot tackle the problem at its roots.

The city is also expected to introduce HOV lanes, which begs the question as to whether these might end up being HOT lanes, if the city can overcome obvious enforcement issues.  There is, as can be expected, ambitious plans for road building and expansion of public transport networks.  

As can be seen below, the issue with Shenzhen is where it ends and another metropolis begins.

Shenzhen with Hong Kong border in yellow
Shenzhen connected to its wider metropolis

The bigger question is whether it or Beijing will be the first Chinese city to introduce congestion pricing.

Congestion charging recommended for Perth, rejected by politicians

The West Australian reports that Committee for Economic Development of Australia Chief Economist Nathan Taylor has proposed that Perth introduce congestion charging because the city’s congestion is only at peak times, meaning road improvements to address congestion are underutilised the rest of the day. 

The Committee produced a report indicating that by 2020, congestion will cost the city A$2.1 billion a year. 

 However, the idea has been rejected by the Transport Minister Troy Buswell (Liberal Party), who says the state is widening freeways and expanding bus services, bus and cycle lanes. The Shadow Transport Minister, Ken Travers (Labor Party) also rejected the idea. 

 Clearly in the boom times Western Australia is experiencing, spending money on new infrastructure is far preferred to getting better utilisation out of what is already there. I suspect congestion pricing of some form is far more likely to be seen in Sydney and Melbourne before it is followed in Perth.

A key issue would be what sort of scheme Perth could take that would be effective.  

A central city cordon is easy to conceive of, but would create a very artificial boundary to the north and west of the CBD if it simply followed the freeways that encircle the area.

Perth congestion charge single cordon option
Yet I doubt that would achieve very much, because as a proportion of metropolitan Perth, which has a population of over 1.7 million people, it is small, and much employment and travel is not about trips to and from the centre.   

Perth's commuter catchment area is on a long strip along the coast

There aren't enough freeways to consider tolling them, so the most optimal solution is likely to be a time, place, distance based charge, which would involve vehicles paying by usage on all roads.  In the absence of the state pursuing this as an option to replace other taxes, it is highly unlikely that this idea will get any traction.   However, given the discussions underway in New South Wales of that idea, especially for trucks, could there be some value in Western Australia looking to replace some existing taxes used to pay for roads with a distance based option?