Tuesday 30 April 2013

One way of incentivising a shift towards distance based congestion charging

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

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

Tuesday 23 April 2013

Denmark abandons lorry road pricing programme

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.


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.

Monday 22 April 2013

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

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).


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.

Friday 5 April 2013

News briefs - Australia, Germany, UK

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 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.

Thursday 4 April 2013

Welsh toll road report incorrect, says UK and Welsh governments

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

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.

Wednesday 3 April 2013

North Carolina's Triangle Expressway strictly penalising late payment

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

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.


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.

Tuesday 2 April 2013

News briefs - Indonesia, Philippines, South Africa, USA

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 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.