South Africa's controversial toll system goes live - but faces serious non-compliance

To be fair, for personal reasons, I have neglected the issue of the Gauteng Freeway Improvement Project in South Africa, which undoubtedly has been the most controversial road pricing issue in Africa in the past year. It involves introducing free flow tolling on a 201km network of mostly upgraded and some new highways in South Africa.

Map of entire Gauteng Freeway Improvement Project including all toll gantries

I've written a few articles about this project in the past three years, including noting the risks of non-compliance, when tracing vehicle owners and fining them hasn't been fully developed.

Unfortunately, those risks weren't properly heeded.  I wish I hadn't been right, but I was, there are some serious problems - not with the technology, but with the business processes and preparation for the toll system's introduction.  

You'll find almost all of my articles about South Africa are about this project, by looking at this page and the older articles here (unfortunately I used links to SANRAL - the government's highway company - website for images which are no longer valid).

Tolling was launched on 3 December 2013 and whilst Kapsch, the well-known equipment and system supplier for the scheme, reported that the launch had been a success, there are other stories indicating some nuances to this.   It should, of course, have been technically successful, given the launch date was put back nearly a year.  Given it uses what is now (EU) standard DSRC 5.8GHz technology with ANPR cameras, it would have been a surprise had there been a major failure. 

However, the Times (South Africa) reports that there is a shortfall in revenue of just under R500m (US$48m) from recovery of overdue tolls.   Bills of around R543m have been sent but less than 10% have been paid.  It had cost R50m in debt recovery costs (around US$4.8m), of which R32.8 is postage and invoicing costs (US$3.1m) and the remainder in processing the invoice (from detection to identifying the vehicle owner).  

Therefore, in my view, whilst the on-road systems are working, the customer management function has been disastrous, not because those undertaking it are incompetent, or that the technology is wrong, but because adequate provision was not made for handling the human factors. So, motorists are by and large driving and ignoring bills, and the longer this goes on, the more they are going to do it.

News briefs - Australia, China, USA (California, Texas, Washington)

Australia - CEO of South Australian borough calls for congestion pricing

Unley is one of the boroughs of Adelaide and according to the Herald Sun, the Unley Council  Chief Executive, Peter Tsokas has proposed to the South Australian State Government, that congestion charging be introduced to raise revenue for public transport.  He specifically called for charges on some roads at peak times to manage congestion.  The reaction has been negative from the Royal Automobile Association of South Australia, although not completely dismissive:

Automotive policy manager Mark Borlace said congestion charges were more suitable in heavily gridlocked traffic zones.  He said the priorities for Adelaide should be improving traffic flow on the city rim, upgrading the north-south transit corridor and improving public transport connections. "When you know that people have ways of going around the congested areas where you don't want cars, then you can have those kind of behavioural things (such as congestion charging)," 

A South Australian state government spokewoman said the government was opposed to tolls and congestion charging.  It's notable that all of the comments under the article were anti congestion charging, except for one that advocated tolling for a new road as long as the toll paid for the road and ended after the debts for constructing the road were paid.

Of course, any debate about congestion charging in Adelaide ought also to include whether it would be an option to replace some existing taxes.

China - Future for congestion charging

Charles Komanoff writes in Streetsblog about his view on where congestion pricing might head in China.   He notes rightly that air pollution is as much an issue as congestion, but revenue generation is not important.

However, the key problems China faces in implementation are around the vested interests and potential losers from any sort of implementation. China needs a comprehensive strategic approach to how road vehicles are taxed and charged, which simply doesn't exists at present.  A key part of this is having the legal framework to enforce any fines or violation notices in a country where traffic safety violation enforcement is haphazard at best.

China has a long way to go, and it could do worse than encourage Hong Kong to implement one of the options extensively studied well over a decade ago, and to encourage at least one mainland city to introduce a cordon charge.

California - Orange County rejects tolling new lanes on I-405

Further to the post I wrote in December on this,  Orange County voted to add an additional lane to the I-405, but rejecting tolling according to the LA Times. It appears that there was little argument made about making highway expansion more sustainable and efficient, but rather that because improvements are partly funded out of a sales tax (don't ask, it's a weird socialist concept that some in the US adopt of dedicated taxes on retail activity to pay for roads).  Voice of OC describes the rather shallow debate.  Whereas NBC reports that the new lanes will cost around US$700 million, which of course will come predominantly not from those using them or directly benefiting from them.  

Texas - HOT lane fines unenforceable

Associated Press, carried by The Trucker, reports that  Houston Metro has no means to legally force non-compliant motorists to pay fines.  Apparently US$740,000 in fines have been issued, but although violators are notified three times of the fines and asked to pay, there is no legal means to enforce it.

This is absolutely laughable as a public policy failure.  Questions ought to be asked.  Who approved for such lanes to be introduced without a legal means to enforce violations?  Was it an oversight by policy makers, or did politicians ignore warnings and decide to press on regardless?  Is this a case of a system being introduced designed by engineers, without advice from lawyers or policy consultants?

Given this is now news, I wouldn't be surprised if, within a few months, the lanes prove to be an abject failure when it becomes well known that the fines are simply requests to pay with no means to do anything about it.

Enforcement is a core component of any electronic free flow tolling system, and needs to include the legal means to treat non-payment of tolls, and fines, as debts that can be recovered like any others.  At the very least, it seems absurd that such fines can't be treated as a penalty for trespass - for unauthorised usage of HOT lanes might be seen as such, if the law would properly define it.

Meanwhile, a report from local TV station KFox14 in El Paso notes that the new toll lanes on the Border Highway are not physically separated from the untolled lanes, but separated by double white lines.  This raises concerns that some road users will weave to avoid detection in the lanes and weave back across the lines, but the answer to this is to enforce the existing prohibition on crossing double white lines on the road. Enforcement of that law is expected to effectively enforce the separate toll lanes.   Hopefully, this should work if done resolutely and sufficiently.

USA - Trucking lobby sceptical about distance based taxation

I read with some amusement an article in The Trucker.Com commenting about Oregon's plans to introduce a vehicle mileage tax.  The key points being:

The American Trucknig Association being concerned about "collection costs, privacy and information security issues, significant potential for evasion and various very difficult institutional issues, including the potential for a lack of interstate interoperability".  Given almost all of these issues are resolvable, I think there may be a bigger concern that the charges set will inevitably mean the heaviest trucks travelling the longest distances will pay more.  The problem is that there is little evidence in the US as to whether there is an appropriate recovery of infrastructure costs now.

What is needed is not resistance, but a reasoned economic debate about the true infrastructure costs of highways and how to efficiently allocate those costs among types of vehicles.  Sadly in the US there is precious little decent analysis about this, and insufficient political will to let charges for road use be based on objective values.  

Washington - State discusses options for future revenues

The Kent Reporter notes that the Washington State Transportation Commission is completing an evaluation of the business case for ways to replace the gas tax with a road usage charge system.

It is intended to report in January 2014 about options to move forward with charging vehicles according to how much they use the roads, rather than fuel, with this work being informed substantially by the trials underway in Oregon.  The findings of work done so far can be found in this presentation, which outlines the key issues very well.  According to this paper, the final report will be issued on 11 January.

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.

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

Australia - Transport Reform Network calls for treating highways as utilities

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

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

New Zealand - NZTA enforcing tolls against recidivist violators

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

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

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

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

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

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

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

UK - MP suggests tolling road to pay for maintenance

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

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

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

USA - Texas - toll tag options

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

News briefs - Australia, Florida, Indiana, Ireland, New Zealand, Philippines, South Africa, Virginia

Australia - Sydney to pursue three new toll funded highways

The Australian Daily Telegraph (via the Herald Sun) reports that the New South Wales State Government’s 20 year infrastructure strategy includes three new major highways in Sydney which are proposed to be funded through tolls, including reforms of existing tolls toward distance based pricing.  Let’s be clear this does not mean a change in technology or full network based charging, but by setting the tolls on toll roads at rates to reflect the distance between tolled points on the network.  The price is estimated to be A$10 billion, although it is thought the price could be lowered by private sector innovation and cut and cover construction techniques. 

The New South Wales Government has been studying options for reforming tolls in the Sydney metropolitan area, to normalise what vehicles pay across the tolled network to reflect distance.  The logic seems simple, but the difficulties are around addressing the costs of different concessionaires, as the motorways that have been built had different construction costs (e.g. tunnels are far more expensive than more rural highways).

Florida - Customers paying in high denomination banknotes can be detained at booth

According to the Newspaper.com, in the case of Chandler vs. Florida Department of Transportation, the US Court of Appeals has found that "Motorists can be held indefinitely at toll booths if they pay with large denomination bills".

The report says: "Under FDOT policies in place at the time, motorists who paid with $50 bills, and occasionally even $5 bills, were not given permission to proceed until the toll collector filled out a "Bill Detection Report" with data about the motorist's vehicle and details from his driver's license".

The court decision, responding to a claim that it was a constitutional violation to stop the vehicle from proceeding is as follows:

"In Florida, a person's right and liberty to use a highway is not absolute; it may be regulated in the public interest through reasonable and reasonably executed regulations."

The judges found it was reasonable for Fanueil to set regulations for use of the road -- including the types of acceptable payment. The court decided that drivers implicitly agreed to those conditions by choosing to use the toll road.

Florida - State Road 408 collects 43% of all toll revenue of the Orlando Orange County Expressway Authority.

The Orlando Sentinel reports that the 22 mile long SR408 toll road generated $108 million in 2011, or 41% of the Orlando Orange County Expressway Authority's total revenue.  It carried over 126 million toll transactions in that year and its revenue effectively cross subsidises the rest of the Expressway Authority's network.

Indiana - toll road privatisation touted as success

According to the Newark Advocate, Michael Cline, Indiana Department of Transportation commissioner, has been touting the successes of the privatisation of the Indiana toll road.

He said that the lease paid off old debt and provided "millions" of dollars to counties the road passes through to complete major projects including the extension of Interstate 69 from Evansville to Bloomington and Indianapolis and the reconstruction of U.S. 24 between Fort Wayne and Toledo "dubbed the highway of death for its high number of fatal crashes".

He claimed it "made sense for Ohio to study a similar plan for its section of the toll road".

The report said:  

The Ohio Department of Transportation is conducting a $3.4 million study with Texas-based KPMG Corporate Finance LLC to examine the ways to maximize the financial benefit of the toll road for the state. Jerry Wray, ODOT director, said the study will be completed by mid-November and he hopes to have a recommendation to the state legislature by Jan. 1.

During Cline’s presentation, he tried to eliminate some myths about the Indiana Toll Road lease, including that toll rates have doubled since 2006. Although the cost to drive the entire stretch across Indiana has risen from $4.65 in 2006 to $9.40 this year for drivers paying cash, tolls have remained frozen for drivers using electronic toll pass technology. Those rates can’t increase until 2016.

Tolls for many Ohio drivers have risen at higher than the cost of inflation during the past two decades. The turnpike operates entirely on its own revenue. It had $11 million in profits last year, and turnpike officials previously stated that more can be found through savings.

It is helpful to have this sort of information, because it is easy for privatisation advocates and opponents to both use slogans and cliches to justify their positions.  The best thing for Ohio will be to weigh up the evidence of what went right and wrong in Indiana, but it seems like a balanced approach has been taken that suits the needs of that state.

Ireland - Sacyr looking to offload debt ridden toll roads

The Independent (Ireland) reports that Spanish owned toll road concessionaire Sacyr is looking to sell its toll road concessions in Ireland.  Infrastructure fund Globalvia is said to be interested in these assets.  The concessions in Ireland are:
- N6 (56km motorway/dual carriageway between Galway and Ballinasloe, with a 7km connection to the Loughrea bypass);
- M50 Dublin (operation and maintenance contract for the 41km of Dublin's part-ring motorway);

New Zealand - unprofitable toll road gets revenue boost but still not enough

According to the Bay of Plenty Times, the Route K toll road has seen a 37% increase in revenues following a 50% increase in the toll for cars.  However, it still remains insufficient to cover the interest costs on the debt of the local authority financed road.

Philippines - Two new toll roads to be pursued in 2013 and Metro Pacific to expand Northern Luzon Expressway

Rappler reports that:

The CALAX project, which will connect the Manila-Cavite Expressway (CAVITEx) and South Luzon Expressway (SLEx), will be among the two projects under the Public Private Partnership (PPP) scheme the Department of Public Works and Highways (DPWH) will pursue in 2013. The PPP section is the 36.01 km length of the expressway from Kawit, Cavite to Sta. Rosa, Laguna. The ODA section is the remaining 11.01 km part of the road from Sta. Rosa, Laguna to SLEx at Mamplasan Exit in Laguna.

"The private proponent shall be responsible for the financing, designing and constructing of the PPP section, and the subsequent operations and maintenance (O&M) of the entire CALAX," the PPP Center explained.

The project is estimated to cost US$1.01 billion.

Meanwhile, Rappler also reports that Metro Pacific Investments Corp  is allocating P2.5 billion (US$61 million) in 2013 to expand and repave parts of the Northern Luzon Expressway.  This includes a P1.6 billion-worth (US$39 million) toll road that will link NLEx Cloverleaf and McArthur Highway near the Valenzuela City Hall with a 2.1-kilometer, 4-lane highway. Depending on how fast the government is in securing right-of-way, construction for Segment 9 will likely start by November or December and will be completed in 2013

South Africa - Gauteng e-tolling allowed, Moody's approves

According to Business Day Live (South Africa), the decision by the Constitutional Court of South Africa to allow the implementation of electronic free flow tolling as part of the Gauteng Freeway Improvement Project, will make a substantial difference to SANRAL's financial position.  Tolling on the project was due to be implemented in April 2012, but was stopped due to a court injunction.  The tolling has been opposed in South Africa on various grounds, but which largely appear to be about the injustice seen in tolling existing as well as new roads, because the existing roads have been upgraded, and because of fears of corruption in the contracts with the foreign suppliers of equipment and tolling services (which have not been substantiated).  The delay has cost SANRAL US$309 million since April.

The report outlines how taxpayers have been providing bridging finance to SANRAL to cover the gap:


Government responded by providing the roads agency with R5.8bn in funds to compensate for the lack of e-toll revenue and to defray operating costs, including debt service payments on the GFIP debt, a large proportion of which government guarantees.

Moody’s said the GFIP was mainly responsible for the rapid surge in Sanral’s debt, which rose to R37.5bn or five times its 2012 annual revenue as of August this year, from R6.2bn in March 2007.

Moody’s downgraded Sanral’s rating to Baa2 from Baa1 in May due to negative pressure on the roads agency’s liquidity.

The rating agency noted that at the end of June, Sanral’s cash reserves and government’s funds totalling R7.1bn were sufficient to cover operating expenditures and short-term obligations, including debt service, over the next 16 months.

Moneyweb reports further on SANRAL's financial position.

Virginia - I-95 HOT lane contract criticised, but doesn't tell the full story and I-495 express lanes about to open

The Newspaper has published an article critical of the PPP contract between the State of Virginia and TransUrban for the I-95 HOT lane project.

The reasons it cites are:

- It is a 73 year contract offering revenue to the concessionaire with no new lanes being added; 

- Casual carpooling will be dissuaded, as all carpoolers (only HOV 3 – meaning at least three people must be in the vehicle to be eligible) must use an EZ Pass tag to “declare” their presence. Those without will be fined; 

- If more than 35% of lane users are HOV (i.e. not paying tolls), the state must pay for each additional HOV vehicle an equivalent to 70% of the tolls that would have applied The state must pay an amount equal to 70% of the toll that would apply TransUrban if more than 35% of lane users are HOV (i.e. not toll paying); 

- If the State wants additional lanes, it must first negotiate an addition with Transurban. If it decides not to adopt an approach including Transurban, it must compensate the firm. The same applies to additional capacity on specific parallel routes. 

- Two-thirds of the project's financing is backed by taxpayers. Virginia is providing US$71 million in grants and US$242 million in revenue bonds. US$300 million comes from the Federal Government with a TIFIA loan.

Certainly it appears like Transurban has a good deal, although it doesn't look that good if traffic levels are flat, and there is a low volume of users with less than 35% of road users being HOV not toll payers.  That's the risk Transurban carries.  If car pooling takes off (which the article suggests is less likely because of the inconvenience of getting an EZ Pass tag), then it will be positive for the state (and users of the existing lanes), and will be because Transurban has encouraged it.   However, it is also understandable that Transurban gets first right of refusal to build new capacity, and that if taxpayers pay for new capacity elsewhere, Transurban gets compensated.  Such is the environment of privately owned lanes vs. government owned lanes. 

Furthermore, the article is plain wrong in asserting no new lanes are being provided.  In fact there will be some new lanes, and some extensions to existing lanes.  The press release announcing Transurban has won the extension specified these, and after all, it does not cost $940 million to do a HOV-HOT lane conversion.  There is a lot of new construction to make these lanes a more complete corridor congestion bypass system.   If you were paying for such improvements, you wouldn't want the state to be suddenly paying for parallel ones to enable motorists to bypass your improvements (and the tolls you need to recoup the costs).

Meanwhile, WAMU reports that the I-495 express lanes are due to open on November 17th.  The report says:


The two new lanes in each direction spanning 14 miles between the Springfield interchange and the Dulles Toll Road will be E-ZPass only.

Everybody needs an E-ZPass to use the express lanes. Carpools need the E-ZFlex for the toll-free trip. So far the Virginia Department of Transportation says signups for E-Z Pass are going well in the local area.

Stewart Schwartz, the executive director of the Coalition for Smarter Growth, criticises the project claiming that it will result in induced demand, filling up the space from vehicles shifting to the express lanes.  This has long been a criticism of any projects involving building new highway capacity, but in an environment where traffic growth has stabilised and there may be a long term trend of flat traffic, does this hypothesis still apply?  If so, does it matter if the new capacity is being charged to ensure it remains efficiently used?

News briefs - Indiana, New Zealand, SANEF, Texas

Indiana

As it spends down the proceeds from the privatisation of the Indiana toll road, the state is now contemplating how to maintain funding for its highway network.  NWI Politics reports that approaches being considered include more toll road projects, using PPPs and a vehicle mileage tax (VMT) to supplement or replace the gasoline tax.  Both major candidates for Governor are promising tax reductions, which will not make it easier to increase gasoline tax to pay for roads.  One can only hope that the state can pull together a plan that it can sell to voters.  Considering a mix of tolls where viable, and a longer term transition to VMT is likely to be following the steps of many others.

Meanwhile, a report from NWI Times notes that 65% of users of the Indiana toll road are out of state, indicating how important the toll really is to ensuring that users of the road pay for it.  Motor registration taxes and gas taxes for such vehicles are more likely to be predominantly paid out of state.

New Zealand

Having recently restructured its national distance-weight based road user charging system so that it charges by maximum allowable vehicle weight, not average vehicle loading, New Zealand is finding a few feeling unfairly hit by the changes.

The change made some policy sense in that it meant that there were no longer issues of enforcing vehicles according to actual weight (when this would vary from trip to trip) and vehicle owners would no longer need to buy supplementary road user charges licences for blocks of 1000km for heavier weights.  Keeping it at the maximum allowable also incentivises more efficient vehicle usage, but it does mean some lose out - mainly those with larger vehicles which permanently carry much smaller weights.   The Timaru Herald reports on Mervyn Tyree, who owns a customised bus converted into a motor home that has a maximum permissible weight of 21 tonnes, even though it only ever weighs 14.7 tonnes.  He is facing an increase in road user charges of nearly 100%, even though he isn't actually carrying any more or creating any more damage to the roads.

I did road user charging policy in NZ when it was actual weights, and whilst it was inherently attractive to simplify the system by moving to maximum weights, it was expected to create these sorts of problems and in particular, problems for trucks that would never carry the full load for much of their trips (milk tankers).

The only way this could be avoided is by having a special vehicle category for those which are no longer capable of carrying the full load in ordinary usage.  Converting a bus to a motor home effectively does that, because Mervyn probably can't fit enough people in to reach the 21 tonne limit.

SANEF's Standard & Poors credit rating reconfirmed

SANEF's Standard & Poors credit rating dropped to BBB in July, and this rating has been reconfirmed by S & P on 10 September according to Reuters.  The outlook remains negative.

The statement included this:

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.

The rating is directly related to the rating given to its primary shareholder, Abertis, which is also BBB.

Texas

The Examiner writes a fairly critical article about the forthcoming SH130 toll road in Texas, which is to be the first foreign privately owned toll road in the state.  It's not particularly flattering, which is unfortunate, as Texas does sometimes have the image of being a state that believes in a free market approach, but this article gives the impression of an underlying xenophobia around the road being foreign owned, and a belief that fuel taxation is inherently fairer.   The article descends into little more than rhetorical polemics with this:

So there can be no doubt that the state is cozying up with big business to incentivize truckers and motorists to use Cintra’s tollway, and effectively grant Cintra a monopoly for the next 50 years through various revenue sharing schemes and other incentives, like slowing free alternatives and ensuring any expansion of I-35 will also be tolled, not free. God help Texas with such sinister agents in charge of transportation. Eventually, you won’t have a choice but to pay.

Lippincott was sure to dodge the glaring hypocrisy of Governor Rick Perry, who is so obviously starving the gas tax in order to hand Texas roads to his corporate buddies. Perry claims to be all about state sovereignty, the primary subject of his latest book, Fed-Up, while selling off Texas to the highest bidder.

Terri Hall, the writer "is the founder of the San Antonio Toll Party and Texans Uniting for Reform and Freedom. She started a taxpayer revolt upon learning of plans to convert Highway 281 into a tollway and charge taxpayers again for what they already built and paid for."

I am curious as to whether Ms Hall actually believes that when you build anything that you don't ever have to pay anything more to ensure that it retains its value.  A common mistake in economics that is used too often in arguing against tolls.

Meanwhile, the Wall Street Journal notes that the State of Texas receives $100 million for approving the 85mph speed limit for the toll road, $33 million more than had the concession been for an 80mph speed limit road.   Quite simply the concessionaire believes it will get more users at a higher speed, but safety advocates and opponents to privately owned roads believe it is "reckless".

Texas free flow tolling violations

A report in KeraNews indicates that the proportion of users of North Texas Tollway Authority toll roads that violate by not having a toll tag and not paying invoices sent in the post is 1%, and Texas is about to crack down on them.  The approach appears to be to treat it as a civil debt, and seek recovery like other debts, but also to treat violators as trespassers by allowing such vehicles to be impounded on the toll roads if stopped.  The violator with the highest debt owes $182,000.

Maryland's toll enforcement inadequate says report

The Washington Post has reported that the state of Maryland has been inadequate in enforcing tolls against motorists who drive through free flow toll lanes without EZ Pass transponders.  The story is a damnable indictment on poor legislation and policy.  15,000 motorists owe over $500 each in unpaid tolls and nine rental car companies also owe tolls ranging from $80,000 to $209,000, with violations dating back up to eight years.  A total of nearly 650,000 vehicle owners owe the state $6.7 million in unpaid tolls and fees.   

Maryland toll roads

A table produced by the newspaper indicates violations have increased substantially in the past year, from 386,000 in 2011 to 692,000 in 2012, with a $2 million increase in the value of violations.

The Maryland Transportation Authority threatens to suspend vehicle registrations of violators, but hasn't done so for two years because it has failed to issue $50 citations which it must do in advance of suspension.

What does it do?

the authority, which operates the state’s eight toll facilities, mails vehicle owners a “notice of toll due.” After 30 days of nonpayment, the authority tacks on a $25 fee. Repeat violators are referred to the state’s central collection unit, which continues to send periodic letters requesting payment. But unlike its practice with other types of debt owed to the state, the unit never reports chronic toll violators to credit-rating agencies.

Tony Fugett, the unit’s director, said toll violators receive two letters and an occasional automated phone call requesting payment. After that, they receive a letter once a year. The state can deduct money owed from lottery winnings, contractor payments or state income tax refunds, Fugett said. If none of those is applicable, he said, “I guess there’s nothing we’d have in our arsenal other than continuing to contact people.”

So the letters are toothless.  Yet the Maryland Transportation Authority regards this level as manageable as violations only cost 0.2% of total revenues.  Manageable until now, because why would anyone continue to pay when the state doesn't actually do anything beyond negotiate for payment?

It has become more of an issue because toll rates are planned to rise in July 2013, and those that do pay are less than happy that "being good" seems a bit unfair, when those who don't pay face few consequences.  The Authority's reason for not issuing the $50 citation is that it wants to be more "customer friendly", but at what point is being customer friendly letting violations accumulate over years whilst seeking to put up prices for those who do pay?  A quarter of unpaid tolls are out of state and the state has no reciprocal enforcement agreements with other states.

A bill had been drafted to allow the Authority to suspend registrations and to allow for interstate agreements, but it went nowhere.

The article claims that the Authority sends details of vehicle owners who incur debts of over $30 to the state debt collection unit, referring 700 to it in the 2012/2011 fiscal year. 

The article is interesting in reporting violation rates of toll roads in neighbouring states:

New Jersey 1.4%

Virginia  1.7%

Delaware 3.4%

It also describes the enforcement procedures in other states:

New Jersey has arrested some of its most flagrant toll cheats on ­theft-of-services charges and recently posted a “Wall of Shame” on the Internet listing toll scofflaws by name and home town. Three states — Massachusetts, Maine and New Hampshire — recently entered the first-ever reciprocity agreement to pursue vehicle registrations of out-of-state toll violators.

In Virginia, vehicle owners with three or more unpaid violations are summoned to a court hearing, where a judge may impose a civil penalty of up to $500 for multiple violations. If an owner ignores the court-ordered fines, the state puts a hold on the vehicle’s registration renewal.

Conclusion

The primary blame for this appears to lie in two places.  First, the state legislature which has refused to change the law to make it easier to enforce tolls and to enable more efficient enforcement of out of state violations.  Secondly, the Authority seems unwilling or unable to issue citations, and wanting to appear "customer friendly" doesn't seem like a good enough reason.  If it is legal, then the laws needs changing.

Compared to free flow tolling elsewhere, this practice simply seems absurd.  Fines should recover more than the cost of enforcement and be a deterrent, and the state should be able to recover debt like any other.   Not having a robust enforcement process will undermine future revenues as more and more realise that they are unlikely to face serious consequences if they don't pay ( the state can take the tolls and fines out of lottery winnings and tax refunds, but this affects few).  It is core to any robust electronic tolling system to have serious sanctions for not paying.   Maryland oddly seems unable and the legislature unwilling to address it.

Road User Charges evasion in New Zealand - some changes come into force

For all of the talk of distance based road user charging or VMT as it is called in the US, New Zealand has been quietly charging all vehicles over 3.5 tonnes and all diesel cars on a weight/distance basis on all roads since 1978.

One of the perpetual issues with any form of road pricing is evasion.   In New Zealand, the Road User Charge (RUC) collects about NZ$900 million  (US$728 million) a year, and Radio New Zealand now reports that around NZ$51 million (US$41million)  on top of that is lost through evasion, about a factor of 5%.

The report also indicates the cost of operating the system at up to NZ$17 million (US$13.7 million) a year, a factor of only about 2% of total gross revenue.  These are costs of administration, collection and enforcement.  It's worth noting that the only minimum requirement in New Zealand for heavy vehicles is to have a working certified hubodometer that measures distance travelled, and for distance to be bought in advance, although GPS based electronic options are available.  This relative simplicity (with vehicles buying licences according to their maximum permitted weight, now) has resulted in such low operating costs.

However, enforcement itself as of yet only recovered NZ$2.2 million (US$1.8 million) in unpaid charges (fines go to the government and are not counted as revenue to the National Land Transport Fund). 

A series of reforms of the system come into effect as of today to help reduce evasion:

-  All heavy vehicles will have a permanent "RUC weight" instead of being charged according to the maximum carried on any single particular trip;

-  As a result, no longer will supplementary licences to carry additional weight be necessary;

-  Time licences for a small category of vehicles that primarily work offroad are abolished;

-  Administrative charges for purchases of RUC licences are to be reduced by 39% (from NZ$3 (US$2.42) to NZ$1.83 (US$1.48)).

More details on the Ministry of Transport and NZ Transport Agency websites.

Meanwhile, it's worth noting that RUC also applies to diesel cars, but some journalists don't understand why.

The reasons are:

-  There is no fuel excise duty on diesel as a significant proportion of diesel is not consumed on public roads (and in New Zealand as fuel excise duty revenue is hypothecated to the National Land Transport Fund, such tax would need to be refunded adding an administrative burden to those users);

-  The correlation between fuel consumption and the infrastructure costs of roads used is poor.

Alastair Sloane of the New Zealand Herald says that it makes the fuel efficiency of new diesel cars not so relevant against petrol cars, but then RUC isn't intended to be a tool to promote fuel efficiency, it is to pay for roads.  In fact, the issue with tax on petrol is that it isn't keeping pace with fuel efficiency to reflect the growing costs of highway capital.

David Linklater in the same newspaper make a similar mistake.  He's upset that the RUC paid offsets the fuel efficiency savings, which again indicates that tax on petroleum is relatively cheap and not reflective of highway costs as much as RUC is.  However, I don't expect writers of car reviews to have a grasp on the economics or policy ramifications of different forms of charging for road use.

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

France

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.

Nigeria

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

Philippines

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)

UK

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.

Cross border toll enforcement - Colorado style

One of the perennial problems for toll violations is when people from outside the national or state jurisdiction fail to pay a toll on a free flow toll system. In London it is a problem with foreign registered vehicles from Europe violating the congestion charge. Having said that, the solution has been for Transport for London (as has been the case for parking violations) to sub-contract enforcement of such vehicles to a private company which has arrangements with the authorities in other countries. One report I saw suggested around one-third of foreign vehicle violations were being captured.

In the USA, between states, it should be easier. A recent report indicated that violators from Nebraska who had used the E-470 Denver toll road were now receiving notices of bills. With the withdrawal of toll booth in 2009, an ANPR system was instituted to send bills to those without accounts and to capture violators. Of course it was limited by the ability of the toll road to access name and address details only of owners of vehicles registered in Colorado.

The toll road operator now has access to the Nebraska DMV, and can send bills. About 12,650 were expected to be sent (the toll road operator chose to ignore violations of more than six months previous).

The Omaha World Herald had this quote:

“We sell our license plate data to toll companies across the country,” DMV director Beverly Neth told me. Neth said the Nebraska DMV, in accordance with state law, releases the names of vehicle owners and their addresses when selling its information about the 2.2 million licensed vehicles in the state.

This database information can be sold “for only a few reasons” — toll roads, insurance companies, law enforcement agencies, motor-vehicle-recall data collectors.
“I don't want to leave the impression that we just willy-nilly sell data,” Neth said. Sales of DMV records bring in about $250,000 each year for the DMV, $2 million for the state's general fund and about $1 million for the state agency that handles recordkeeping, she said. So the state collects more than $3 million from DMV database sales, money that would come from Nebraska taxpayers without those sales.

States selling database information to toll road operators ought, of course, to ensure that they don’t onsell the information to others. As long as other states have similar rules to Nebraska about selling such private data, I’m relaxed about that being a way of pursuing enforcement. Otherwise, such government data could be used for marketing purposes or people may use it to snoop on others.

In Europe, it is clearly a big issue for toll operators with freeflow systems, particularly in the Schengen area (borders with no border control). The European Commission has been trying to broker an agreement among Member States to enable cross-border enforcement of a wide range of traffic violations, but has run into some opposition from Member States who want a right of appeal for their citizens. This isn’t an issue that is easy to fix between countries with different legal systems and approaches to handling citizens’ private data, but will need to be addressed if free flow tolling is to be encouraged in Europe.