New Zealand Transport Minister recognises road pricing as a tool to defer new road capacity

It’s extraordinarily rare for politicians leading transport policy to understand road pricing beyond one dimension. Either they think it is a great way of raising money they can spend on projects that they can sell to the public, or it is a great way of reducing traffic, it’s rare to see an understanding of economics.

In New Zealand it is seen with the current Minister of Transport, Hon. Chris Bishop.  For context, New Zealand has recently passed legislation to allow for time-of-use road charging, the term used in New Zealand for congestion pricing. It will allow local authorities, in partnership with central government, to set up road pricing schemes specifically targeted to reduce congestion. Auckland is already some way ahead in developing recommendations for congestion pricing and is expected to advance proposals in the coming year.

The primary purpose of congestion pricing in New Zealand will be to reduce congestion, noting that such pricing will also generate net revenues, which will be used subject to agreement between central and local government. This will likely see net revenues directed towards a range of transport projects in the city or district where the pricing scheme operates.  

However, there is another feature that road pricing enables, beyond raising money and getting better use of existing road infrastructure, which is to provide information on where better to direct future road capital spending.

Bishop hinted at this in February 2026 when the National Infrastructure Plan was released by the Infrastructure Commission. It noted that road pricing could “defer the need for expensive capacity expansions”.

Radio New Zealand reported on 18 February 2026:

Asked whether time of use charging should be used first before committing funds to two tunnels, Bishop said it was an option under consideration and he would have more to say soon.

"I'm not cancelling the tunnel, but we are giving active consideration to what time-of-use pricing might do to our transport projects. You have to factor these things in, because thay are a mechanism for demand management and making more efficient use of our infrastructure, which is exactly what the commission says."

The project referred to is to duplicate two tunnels in Wellington city (known as the SH1 Wellington Improvements project), both of which are subject to significant congestion at peak times (and frequently off-peak times). It's a project primarily about congestion, but also resilience (the Terrace Tunnel has one-lane southbound, and Mt Victoria Tunnel is 95 years old with only one-lane in each direction) and helping to move traffic from the waterfront highway (which acts as a backup to the network, but separates the waterfront from the central business district). 

Wellington State Highway 1 network issues

Proposed second Wellington Terrace Tunnel (northern end)

Proposed second Mt Victoria Tunnel (western end)

Both tunnels are part of State Highway 1, which is the main highway into the city, but also bypassing the city centre towards the airport, eastern and southern suburbs. Congestion pricing would be likely to reduce traffic on this route, particular traffic using the tunnels to drive into the central city.

The current New Zealand Government went to the previous election promising to build the project. That may still happen. Finance Minister, the Hon. Nicola Willis, has said it will proceed. 

Of course the simplest, and possibly least controversial option, would be to proceed with the project, and introduce time of use road charging to help pay for it, but also manage demand from the additional capacity, by placing a cordon within the boundaries of State Highway 1. This would mitigate fears that the new capacity would induce demand away from public transport for trips into the central city, ensure that the new capacity worked efficiently.

Yet the most economically efficient option is to introduce pricing in advance, to determine if it would sufficiently reduce demand to defer the need for the new tunnel capacity.  That is certainly worth investigating.  There are two key elements to this approach:

• What sort of road pricing scheme should be proposed in Wellington, that would optimise network use?
• Can that proposed be sufficiently publicly acceptable to proceed?

I've doodled on a map of Wellington suggest a basic cordon concept that might work (inbound AM peak, outbound PM peak) that puts most of the central city behind it, which is also the area with the most intense public transport service (and is accessible on foot and cycle for inner city suburbs as well). 

Wellington Time of Use Road Charging cordon concept

Leaving aside a lot of details (e.g. keeping Oriental Bay and Mt Victoria outside the cordon, where to draw the line in Te Aro), the idea is the through route of SH1 isn't priced, because use of it is much less amenable to modal shift, so the first priority should be to encourage modal and time of use travel shift to and from the central city, with a second priority being to encourage time of use shifting predominantly through traffic (see below with lines on the main routes towards the central city from the north and the east).  Again the details on whether someone pays twice or just once, whether it be through the cordon or on State Highway 1 is a moot point, and the timing of operation might vary to manage demand, but this is only conceptual at this stage.

Second stage Wellington time of use road pricing, tunnels in addition to cordon

What matters more fundamentally is that a Transport Minister is talking about it.  Demand and traffic assignment modelling would identify whether a reasonable price for a downtown cordon would sufficiently reduce traffic numbers to relieve congestion at the two tunnels, or whether by pricing the waterfront route, the 15-20% of traffic on that route that is bypassing the city relocates onto the unpriced tunnels, effectively leaving congestion at those tunnels where it was before.  Although some routes into the city would be relieved, and traffic flow within the city would improve, if it meant no net improvement to traffic along the route the SH1 Wellington Improvements project was intended to fix, then it would be likely to generate some public and political opposition. Moreover, it would not dissipate calls to build the highway improvements.

However, if pricing was also placed on the tunnels, as well as the downtown, then it might make a difference if there was sufficient traffic with enough demand elasticity to be priced away from driving in the peaks.  

What next?

The New Zealand Government has a fiscal problem, in that it (like so many governments) has ambitions for capital spending on transport projects that it is struggling to fund. The temptation to delay or defer a project like the SH1 Wellington Improvements project is significant.  I expect there to be considerable analysis on the potential for tolling the project (as is the policy of the government), but just tolling the tunnels is problematic, as there are alternative routes (which are inferior, and which analysis has indicated it is preferable to attract traffic from as it is an urban setting, rather than encourage traffic onto). I very much doubt tolling is suitable for this project given tolls are likely to worse congestion on key bus routes rather than improve them.

Time of use road pricing in Wellington is likely to have merit regardless of the SH1 Wellington Improvements project, so should proceed, but there will be a political debate about use of the net revenues. I expect the Mayor and City Council to want to use net revenues to further their preferred projects, but the Minister will likely prefer supporting the tunnels project.

One option could be to use pricing to phase the SH1 Wellington Improvements project, so that the elements with the highest net benefit are advanced first (e.g. around the Basin Reserve, which is a troublesome bottleneck only partly related to tunnel capacity), and tunnels are built in a sequence reflecting demand impacts from pricing.  

Whatever happens, it's a great illustration of the key benefit that road pricing can bring, which is a reassessment of the merits of transport capital projects in the light of pricing. For example, it is also possible that road pricing could improve traffic flow for buses, that the need for additional bus priority measures erodes. That has its own political implications for those advocating taking road space from general traffic to give to other modes. It makes it easier to do it, but also reduces the case to do it.  What helps is there is the political will to be rational about this, hopefully this will persist regardless of the outcome of the New Zealand General Election later this year.

For the sake of my many overseas readers, some might note that Bishop is from the centre-right National Party, which is in coalition with the free-market liberal ACT Party and the nationalist-conservative NZ First Party. New Zealand's Parliament passed the  Land Transport Management (Time of Use Charging) Amendment Bill unanimously, including the three opposition parties.  I am unaware of any national Parliament anywhere in the world which showed unanimous support for enabling road pricing by time of use.

Oregon inches forward with RUC for EVs from 2031 mandated (sort of)

The Oregon Senate has finally passed a transportation funding bill that at last extends the scope of Oregon’s light vehicle road usage charging (RUC) system around 10 years after MYOREGO was launched in 2015.

From 2031, electric vehicle owners in Oregon will be required to be on RUC (it is currently an “opt-in” system) or pay an annual fee of US$340 (which means it isn’t a requirement). RUC for light EVs will be charged at US$0.02/mile (US$0.032/km).

The bill also includes:

• Increasing state gas tax from US$0.40 to US$0.46 per gallon (US$0.106 to   US$0.122 per litre

• Increasing annual registration fees by between 66 and 90% (e.g. from US$43 to US$85 for cars)

• Increasing title fees (change of ownership tax) for car from US$77 to US$216

• Increasing registration surcharges for EVs and highly fuel efficient vehicles (intended to offset their lower gas tax consumption) from US$115 to US$145 per annum for EVs, and US$35 to US$65 per annum for cars with a higher than 40+ mpg rating (essentially hybrids).

• Doubles payroll tax used to fund public transport subsidies, for one year, from 0.1% to 0.2%.

It’s worth remembering Oregon has long has a weight-mileage tax – RUC for heavy vehicles, which also exempts those vehicles paying it from paying tax on diesel. This exemption is implemented by providing fuel retail outlets with proof of enrolment in the weight mileage tax programme. However, this is entirely separate from the RUC system for light vehicles.

Oregon was a pioneer for RUC in the US, running the first major studies and pilots from 2001 till 2013 and implementing the first revenue generating system on 1 July 2015. MyOReGO has been capped at 5,000 participants, but has been languishing in recent years with only 800 enrolled this year.  In the meantime, Utah, Virginia and Hawaii have overtaken Oregon in the scale of their light vehicle RUC programmes in the US.

MyOReGO charges participants US$0.019 per mile instead of the registration surcharge, but has not been extensively promoted for some time. Now it will come into its own, but Oregon Department of Transportation will need to review the current system as it moves to mandate it for EVs. Fo

Around 2% of light vehicles in Oregon are EVs.

For Oregon, this transportation bill is one of despration as it struggles to fund essential road maintenance and operations such as snow removal and graffiti cleanup along highways. Half of the revenue will go to the state budget with 30% to countries and 20% to cities.

Opposition to RUC comes from the “Move Oregon Forward” group which advocates for “climate and equity” claiming it “unfairly penalises” EV drivers, although it is unclear quite the basis for this.

The Bill is seen by some as being a temporary fix, it is clearly not going to be enough, but is a start. 

All in all, this is a positive move, although it is going to take some years before it is implemented and appears very unambitious compared to the likes of Hawaii which is mandating RUC for EVs from 2028. Given the many many times there have been attempts to advance RUC in Oregon over the past decade, it is clearly a significant step. Let's hope there is no further backsliding.

US Federal Government looks to fund more state pilots and a Federal RUC pilot : Part Two - A National RUC pilot for the USA

Following on from proposed additional funding for state led RUC pilots is the proposal for what is called the National Motor Vehicle Per-Mile User Fee Pilot (NMVPMUFP!). It is always intriguing how Americans can generate new terms for what could just be called a National Road Usage Charge Pilot (although I’ve also heard that officials in one state didn’t like the acronym RUC because it rhymed with a well-known pejorative). 

Objectives

The Infrastructure Investment and Jobs Act would establish a pilot program to demonstrate a national RUC system. The objectives of RUC are stated as being:

· To restore and maintain the long-term solvency of the Highway Trust Fund; and

· To improve and maintain the surface transportation system.

This is all very well, but there is no way it can restore the solvency of the Highway Trust Fund without setting fees that are substantially higher than what is paid now with the Federal Gas Tax, because it hasn’t been increased since 1993. To make the Highway Trust Fund solvent, it will need to be increased by more than inflation over the next decade or so. It seems unlikely there is much political will for that. To improve and maintain the surface transportation system is laudable, and presumably means raising enough funds to spend on the network. However, it could also improve it by subtly using tools around pricing, particularly around heavy vehicles and configurations, by encouraging more road-friendly configurations. It seems highly unlikely that location and time of day pricing would be explored (which would really make a difference).

The objectives of the national pilot are stated as:

(A) to test the design, acceptance, implementation and financial sustainability of a national motor vehicle per-mile user fee;

(B) to address the need for additional revenue for surface transportation infrastructure and a national motor vehicle per-mile user fee; and

(C) to provide recommendations relating to the adoption and implementation of a national motor vehicle per-mile user fee.

Elements

This largely parallels other programmes, which is fine, although the second objective is somewhat tautological. Other interesting elements of the proposal are:

· Multiple methods of measuring miles travelled will be tested.

· Volunteer participants will be sought from ALL states and DC, and even Puerto Rico;

· The distribution of participants will be an equitable geographic distribution (although it is unclear how this will factor in population size);

· Both “commercial vehicles” and “passenger motor vehicles” will be included, so not just light vehicles, but also trucks and potentially buses.

· The pilot will co-ordinate with states pursuing pilots, to consider using the components of their systems or pilots.

All of this seems largely sensible, although one unanswered question is the scale of the proposed pilot program, which seems likely to be in the thousands of vehicles.

It’s unclear whether the pilot will collect money (either from those that pay no gas tax or by crediting gas tax paid), or will just generate mock invoices, but the Bill states that the Secretary of Transportation will set rates for the pilot and the amounts may vary between vehicle types and weight classes (which is dead right for heavy vehicles) to reflect estimated impacts on infrastructure, safety, congestion, the environment, or other related social impacts.

Infrastructure is obvious, but safety seems odd, as nowhere charges differentially based on safety ratings of vehicles. Congestion is only possible if there is location and time of day measurement as well as distance, which limits technical solutions (but is likely to generate huge benefits if feasible). Environment could be reflected in different rates for levels of emissions. Related social impacts is unclear but would need to be explored further. Let’s be clear though, the gas tax does none of this well.

Technology

Tools for measuring distance are mentioned in the Bill, specifically:

· Third-party OBD-II devices (plug-in devices, suitable for most light vehicles up to a certain age);

· Smart phone applications;

· Automaker installed telematics;

· Data collected by car insurance companies;

· Data from States that have piloted RUC under the FAST Act;

· Data obtained from fuelling stations; and

· Any other method considered appropriate by the Secretary.

Interestingly this does NOT include commercial vehicle telematics, widely used for truck fleet management. It also doesn’t include more manual options, but of course there is scope to include these obviously. 

A Federal System Funding Advisory Board will be set up to develop recommendations related to the structure, scope and methodology for developing and implementing the pilot programme, carrying out the public awareness campaign and developing a report to Congress. That report will be on whether the pilot has achieved its objectives, how protections for participants were complied with and some estimate of administrative costs and equity impacts.

Members of the advisory board will include representatives of:

• State Departments of Transportation
• Entities that led pilots under the FAST Act
• Representatives of the trucking industry (note, these have been vehemently opposed to RUC for many years)
• Data security experts with expertise in personal privacy (though I would have thought it needed legal expertise as well)
• Academic experts on surface transportation systems
• Consumer advocates, including privacy experts
• Advocacy groups focused on equity
• Owners of motor vehicle fleets
• Owners and operators of toll facilities
• Tribal groups or representatives
• Anyone else deemed appropriate by the Secretary

This is potentially recipe for an utter mess, but is demonstrative of the US approach to public policy, which is to consult with whatever interests are seen to be relevant (interestingly it doesn't include railroads, doesn't include automotive manufacturers, doesn't include telematics system suppliers, doesn't include customers of transportation systems, doesn't include bus or coach operators, doesn't include agriculture or business).  

Conclusion

This is potentially a BIG deal, and has the potential to be quite some success, but also the potential to fail spectacularly due to complexity, scale and overlapping objectives. It seems likely to be much more appropriate to first undertake a desktop study of options for RUC and to then consider why a pilot is a good idea. There are really only two main reasons in this case, given pilots are underway at the state level:

• To build public acceptability by demonstrating that RUC would be unobtrusive and not cost more than the Federal gas tax;
• To test how a Federal system might interact with State ones.

US$10 million per annum is being proposed to fund this pilot, which is a great deal of money, but likely to be necessary.  However it begs a lot of questions particularly around scale, duration and how a wide range of participation will be enabled and ensured. What matters most of all is ensuring that a national pilot can avoid being dominated by negative publicity and negative narratives, which requires a lot of work to be done around communicating objectives to a public that is highly sceptical.

The US needs more rational debate and discussion about how roads are paid for and are managed, and this ought to help. It just needs to be done with a great deal of thought and care, because the world is littered with countries that have tried to advance road user charging on a wide scale (see the Netherlands, UK and Finland) and have failed, due to public backlash.

US Federal Government looks to fund more state pilots and a Federal RUC pilot : Part One - More state and local RUC pilots to be funded

The Infrastructure Investment and Jobs Act, currently before the US Federal Congress, would “establish a pilot program to demonstrate a national motor vehicle per-mile user fee to restore and maintain the long-term solvency of the Highway Trust Fund and achieve and maintain a state of good repair in the surface transportation system”.

It is also continuing the successful partnership between state and Federal Governments to fund investigations into RUC.

So this is big news in the world of road pricing.  It effectively means that there could be a National US RUC pilot, but it also supports the continuation of the past few years of funding state based RUC pilots.

So what does this mean?

That first is a continuation of the FAST Act programme by which the Federal Government funded States investigating “user-based alternative revenue mechanisms” which includes RUC.  That programme has been funding pilots in the US since 2015 and most recently announced funding in March for California, Delaware, the Eastern Corridor Coalition (seven states), Hawaii, Kansas/Minnesota, Ohio, Oregon (for RUC West), Texas and Utah to progress a range of projects.

The Act would provide additional funding so States, local government or metropolitan planning agencies can pilot RUC, with some specific objectives:

• To test the design, acceptance, equity, and implementation of user-based alternative revenue mechanisms, including among--

                            (i) differing income groups; and

                            (ii) rural and urban drivers, as applicable.

• To provide recommendations regarding adoption and implementation of user-based alternative revenue mechanisms.

• To quantify and minimize the administrative costs of any potential user-based alternative revenue mechanisms.

• To test a variety of solutions, including the use of independent and private third-party vendors, for the collection of data and fees from user-based alternative revenue mechanisms, including the reliability and security of those solutions and vendors.

• To test solutions to ensure the privacy and security of data collected for the purpose of implementing a user-based alternative revenue mechanism.

• To conduct public education and outreach to increase public awareness regarding the need for user- based alternative revenue mechanisms for surface transportation programs.

• To evaluate the ease of compliance and enforcement of a variety of implementation approaches for different users of the surface transportation system.

• To ensure, to the greatest extent practicable, the use of innovation.

• To consider, to the greatest extent practicable, the potential for revenue collection along a network of alternative fueling stations.

• To evaluate the impacts of the imposition of a user-based alternative revenue mechanism on—

(i) transportation revenues

(ii) personal mobility, driving patterns, congestion, and transportation costs; and

(iii) freight movement and costs.

• To evaluate options for the integration of a user-based alternative revenue mechanism with-

(i) nationwide transportation revenue collections and regulations;

(ii) toll revenue collection platforms;

(iii) transportation network company fees; and

(iv) any other relevant transportation revenue mechanisms.

This is quite a list of objectives, indicating exactly the issues around RUC that exercise politicians in the US.  Concerns about whether RUC might be less fair on people on low incomes (although this needs to be compared to the gas tax and paying for roads from general taxes such as sales taxes), and concern that paying by distance hurts rural communities ignores past work that indicates that this is largely not the case (and sometimes the contrary). 

Other issues around administrative costs, enforceability, privacy, use of the private sector to collect revenue. There is the odd case of a system based on paying through “alternative fueling stations” which appears to be code for taxing electricity charging stations, which is not a good idea at all.

One boost is the proposal that funding be 70% of the costs of a proposal put forward by an entity that has previously received funding, and 80% for a new one. This is clearly designed to incentivise states and other entities that have not pursued such studies in the past.  For each year from 2022-2026 US$15 million will be available to be spent on such studies or pilots. 

Expect more states to study and pilot RUC, but also expect more implementations.  

So far in the US, only Oregon and Utah have revenue-collecting operational RUC systems for light vehicles (Oregon, New Mexico, Kentucky and New York all have weight-mileage taxes for heavy vehicles), although there are mandates for RUC in Virginia and Connecticut as well.

The US Federal Highways Administration has a useful list of ALL of the grants given to states under the FAST Act so far. It has been for the following states:

California (US$6.68 million) 

Colorado (US$0.5 million)

Delaware/Eastern Transportation Coalition (Seven states plus DC) (US$13.513 million)

Hawaii (US$4.248 million)

Kansas (US$3.25 million with Minnesota)

Minnesota (excluding Kansas US$1.3 million)

Missouri (US$4.8 million)

New Hampshire (US$0.25 million)

Ohio (US$2 million)

Oregon (US$9.412 million)

Oregon for RUC West Consortium (US$5.42 million)

Texas (US$5 million)

Utah (US$3.245 million)

Washington (US$13.972 million)

Wyoming (US$0.25 million)

In my next article, I'll write about the prospective US National pilot

Australia: Industry briefing of National Heavy Vehicle Charging Pilot Large Scale On-Road Trial Procurement

The Australian (Federal) Government's Department of Infrastructure, Transport, Regional Development and Communications has published a Notification of Industry Briefing, for its National Heavy Vehicle Charging Pilot.  The industry briefing will be held THIS FRIDAY 1 May from 0815-1030 Australian Eastern Standard Time (2215-0030 UTC/GMT 30 April-1 May) and then 1715-1930 the same day (0715-0930 UTC/GMT 1 May).  The first session is timed for Australian, New Zealand and North/South American interest, and the second one for Asian, European/African interest.

The text below is a verbatim extract directly from the notice:

The purpose of this industry brief is to provide information to, and obtain information from, potential tenderers for three planned solutions procurements for the National Heavy Vehicle Charging Pilot’s Large Scale On-Road Trial.

    Provision of telematics devices and services

    Provision of third-party invoicing services

    Provision of manual collection devices and reporting services

This briefing is not a procurement and does not form part of any Commonwealth procurement process. The Commonwealth will not select or exclude (from future participation in above procurements) any companies based on their attendance or non-attendance at the Industry Brief.

Following the Industry Briefing sessions, there will be a period in which the department will accept feedback submissions from industry on the proposed technical approaches to gathering data and generating invoices and mock permits.

The National Heavy Vehicle Charging Pilot (National Pilot) is an innovative industry partnership testing potential direct road user charging options for heavy vehicles. The Large Scale On-Road trial is anticipated to involve up to 100 participants providing more than 1000 vehicles across diverse industries and fleet sizes.  

Trial Participants will test several operational models for collecting and reporting distance travelled. Existing and charging-specific telematics systems will be tested, as well as non-telematics distance measurement technology (hubodometers).

No money will be collected from trial participants. Instead, the data collected will be used to generate mock invoices. The mock invoice will be used to calculate and compare alternate mass-distance and location-based charges with an estimation of annual registration and fuel-based road user charges (current PAYGO model) collected for each participant. 

END

Further details on the National Heavy Vehicle Charging Pilot are found on the Department's website. 

Disclaimer: D'Artagnan Pacific is technical advisor to the Department of Infrastructure, Transport, Regional Development and Communications

ACCC/AER Regulatory Conference presentation on road reform

Last Thursday I presented to the annual ACCC/AER Regulatory Conference in Brisbane, Australia.  The ACCC is the Australian Competition and Consumer Commission, which is Australia's anti-trust authority and consumer protection agency, the AER is the Australian Energy Regulator (which regulates the wholesale gas and electricity markets).  The presentation was about road reform, more specifically about whether roads could be transformed into regulated utilities, similar to energy and telecommunications networks.

The differences between roads and other networks are palpable, not least because roads are often funded directly by government, rather than from revenues collected from road users.  Even if road users pay taxes or fees related to road use (such as fuel tax), the relationship between what is charged and what is spent on the network is often weak.  Rarely are the road managers involved in setting the rates charged by those using the network they manage, nor is there much input from those who pay into what is spent on the network.

In some cases, road networks are managed by a very traditional government agency, which is primarily incentivised to lobby for more money, has budgets determined entirely by a political process, and is dominated by a culture of engineering and bureaucracy.  This is a vast contrast from utility networks, which are increasingly subject to competition, but more importantly bill their customers directly and decide themselves how to spend that money on maintaining, renewing and expanding network capacity.  Some use price to incentivise changes in demand, such as more off-peak utilisation.

In part this is historical, but it is also because roads are ubiquitous and such a dominant part of modern infrastructure.  Roads usually provide access to land, not just for motor vehicles, but for pedestrians and bicycles.  Roads range from having purely arterial to purely access functions, and some roads are not for motor vehicles at all.  They are also corridors for other utilities, such as pipelines and cables, and provide locations for street furniture ranging from postboxes to street lights to seating.  Yet none of that means that roads should just be treated as a public good that "everyone" pays for, not least because wear and tear is a function of the use of motor vehicles, particularly heavy vehicles.  Furthermore, there are often challenges around congestion, safety and route security and resilience due to external factors ranging from weather to earthquakes and flooding.  It isn't "everyone" generating demand for road capacity at peaks, or bridges that can withhold higher axle weights.  Roads are used by businesses to deliver goods, provide services and attract customers.

Road reform internationally

The result of a system that resembles that of other elements of government is that roads are often suffering from a lack of funding for basic maintenance let alone new capital spending, but also the political system tends to prioritise high profile, politically noticeable projects over mundane but essential maintenance.  The political system may be reluctant to increase charges on road users.  Rarely are politically rationed services seen as being exemplary in service to the public.  However, the big impacts of having an unreformed system are seen in systematic congestion (because prices mean demand exceeds supply), poor standards of maintenance in parts of the network and network gaps (such as mass restricted bridges) that hinder the efficiency of users.  Furthermore, the responses to these problems are often ad-hoc, or to focus on increasing the attractiveness or reducing the price to users of alternatives, rather than the problems of a network that isn't managed for users, paid for by users and priced to reflect cost.

So my presentation is here it runs through where others have embarked on major structural reform, with case studies of Austria, England (not the UK) and New Zealand.

In the context of road pricing, Austria's motorway network funds itself, through heavy vehicle charges based on distance and light vehicle charges based on buying access by a number of days.  England still has non-hypothecated charges on ownership and fuel, but will soon be hypothecating Vehicle Excise Duty (equivalent to registration fees elsewhere) to fund Highways England.  New Zealand has mass/distance road user charges for heavy vehicles and light diesel vehicles, fuel tax for petrol and LPG powered vehicles only and registration fees, all of which are hypothecated to fully fund state highways and on average, half fund local roads (and public transport subsidies).

New York toll reform plan goes to State Assembly

Some years ago there was hope that New York would join London, Stockholm and Singapore in implementing some form of congestion pricing.  Mayor Bloomberg had a plan for a lower Manhattan congestion charge cordon, but it failed to get support.  However, since then a much more nuanced and cleverer plan has emerged.

It's been a while since I've written about the Move NYC Fair plan, not least because a lot was going on behind the scenes to tweak it and get a coalition of support behind it.  I endorsed it two years ago, and believe that again - although it is not perfect - it is a great leap forward for New York City.

The plan introduces tolls on untolled crossings of the East River, but cuts tolls on seven other crossings by up to 48%, essentially changing the philosophy of the tolls from one of local cost recovery and revenue maximisation to one that reflects demand and congestion.  Given the chronic state of congestion in New York, this makes a lot of sense.  It would have peak time charges, have a cap on charges (which in the medium term might need to be revised compared to raising toll prices). 

The New York Times and New York Daily News both appear to endorse the plan.

An illustration of the plan is here:

Move NY Fair Plan to reform tolls

The net revenues are forecast to be $1.35 billion of which just under $1 billion would support public transit improvements, the rest would be to adequately maintain the bridges and address the significant maintenance deficit on New York's roads (I did say two years ago that those who pay will need to see some benefit from doing so).

The news now is that the proposal has finally reached the State Legislature as Assemblyman Robert Rodriguez (D - Manhattan) has introduced a Bill to implement it according to Crains New York.  The Bill has 14 co-sponsors, but may face problems in the Senate which is Republican controlled, and so needs a Republican sponsor to get it introduced there. 

Disappointingly, neither Governor Andrew Cuomo, nor Mayor Bill de Blasio has shown any enthusiasm for the plan, demonstrating that neither are interested in pushing something they think it politically controversial - notwithstanding that it ought to fit right into agendas both share on improving public transit, reducing pollution, reducing contributions to climate change and improving economic activity.   It ought to be a "no-brainer" in principle, even if some of the details should be ironed out (e.g.  although helpful in selling the concept, what the net revenues are spent on should be subject to independent appraisal of the net benefits of each project).

What about the FAST Act?

The FAST Act provides 50% Federal Funding for states interested in progressing various forms of road charging.  This proposal would appear to be able to be supported by that, although I have a better idea that is much wider than that.  The deadline for funding applications this year is May 20th, so it is getting almost too late for New York to make an application for funds.  Yet this would look like a project that could do with funds to consider the implementation issues for a more integrated and fully electronic free flow tolling system, including questions around enforcement.

What about heavy vehicles?

New York has a Highway Use Tax applied to heavy vehicles  that resembles the weight/distance taxes seen in Oregon, New Zealand and Europe.  Yes, it is not widely known. However, it uses manual technology, is cumbersome to collect and imposing considerable compliance costs on those that pay it.  

New York ought to consider funding a pilot that trials GPS and other technologies to update that tax and to link this towards it being used to automatically collect tolls on crossings in the state.  It could investigate how charging in New York could evolve in coming years, not only to accommodate reform of tolls around NYC, but also to better charge trucks for road us and provide an alternative to state gas taxes.  Such a pilot could be sold to the trucking industry as a way of reducing its costs, ensuring they do not pay for out-of-state miles and that they could get refunds in gas tax in exchange for a reform in distance based charge rates.

Yes, again it may be too late for New York to apply for the first tranch of funds to do this, but Oregon has shown success in a low cost transition towards electronic technology for its weight-mile tax.  It would be good for the economy and for sustainable revenues for New York to pilot reform of its Highway Use Tax.

 

Australian Federal Minister comments on road pricing

Australian Federal Minister for Major Project, the Hon Paul Fletcher, made a speech on 3 April about infrastructure spending (full speech is here).  Although the main point was that large infrastructure projects need to improve productivity for them to be worthwhile public investments, he also discussed road pricing.  The speech as a whole is worth reading for anyone interested in the modern day challenges of funding and managing transport infrastructure (it cuts across road, rail and airports), but I am focusing here on road pricing. 

The key point is that road pricing is supported over the long term, and that it requires community acceptance and understanding, which itself means demonstrating that there are net benefits in moving towards road pricing.   He wants the Federal Government to work with the states in developing answers to key issues, such as rate setting, but also minimum standards of service (this can be both in terms of maintaining infrastructure but also congestion levels) and what is called "community service obligations".  In Australia, this term is used in other sectors to mean provision of a basic service at a common price across the whole geography of the country, regardless of the cost of provision and typically includes postal services and the basic landline telephony service among others.  Clearly in Australia one issue is very long lightly trafficked roads that, if the users were charged the full costs to recover the fixed costs of those roads, they would simply not use them (and the consequences at the communities and properties they access would be abandoned).    

The Minister indicates that road pricing for heavy vehicles is a "logical first step" and the Heavy Vehicle Road Reform programme is the current process for progressing that.  Certainly I agree, although the experience of private vehicle pilots in the US may well be helpful in the long process of incorporating light vehicles in due course.  The line between commercial vehicles and private vehicles is a big one to cross in terms of public acceptability.

The segment from the Minister's speech on road pricing is reproduced below in full, the footnotes are links to specific reports and sources:

UK government freezes fuel duty again, establishes Roads Fund and fiddles with Vehicle Excise Duty

Since 1936, when the previous Road Fund was wound up, the UK Treasury has been vehemently opposed to any form of tax hypothecation (dedication of revenue for one purpose).  The primary argument against it is that it reduces the flexibility of government in the use of its revenue, and can result in the hypothecated fund having too much money, and so spending on that purpose ends up being wasted.  

It would appear that all of that has been pushed to one side with yesterday's budget by Chancellor of the Exchequer, George Osborne, who announced three measures relevant to the charging and management of roads:

- Reform of Vehicle Excise Duty for cars (the tax on owning cars);

- Establishment of a hypothecated Roads Fund in England with the revenue generated in England from VED;

- Another year of freezing fuel duty.

No, it doesn't mean that there is any move to road pricing soon.  However, the setting up of a Roads Fund in particular will establish a closer relationship between what is paid by motorists (for owning a vehicle if not using it) and what is spent on roads.

News shorts: Vancouver, Washington State

Vancouver debates a sales tax to pay for transport

Although evidence and professional opinions would suggest that road pricing is the best way forward for Vancouver, it is instead going to hold a referendum on a sales tax that will be hypothecated to pay (primarily) for more public transport.  The tax will be 0.5% on all sales.  The North Shore news reports  that the tax will raise C$250m (US$201m) per annum, at a cost of between C$125 and C$250 per household, depending on which side of the argument you believe.  Of course that includes households that wont use any of the proposed transport projects and those who will use it everyday.  Equity and economic efficiency are thrown out of the door in the quest to raise tax revenue.

Hypothecated general taxes for transport are no more intelligent than such a tax for health or for subsidising farms.  However, it is a question of what can be done politically and legislatively, versus economic rationale.

A better approach would be at least some increase in taxes on owning and operating vehicles, a more rational appraisal of where benefits lie with some of the projects (and then charging accordingly) and looking at expanding tolling.  It is always unclear quite why everyone should pay regardless of their use of the transport network or the benefits they obtain (whether they be users, property owners or businesses).

Ballots will be sent out March 16, and votes must be in by May 29, 2015.  It's none of my business, but I'm hoping for a no.  Sales taxes are very poor ways of raising money for specific purposes, and it is telling that advocates of it clearly don't think they could convince the users of the new infrastructure to contribute much of the capital cost.

Washington state consulting on higher HOV thresholds for HOT lanes

According to the Bothell/Kenmore Reporter, the Washington State Transportation Commission in consulting on tightening up the eligibility for vehicles to use the I-405 HOT lanes that are currently under construction.  The idea being that high-occupancy vehicles (HOVs) will need three occupants to use the new lanes untolled.  This is inconsistent with the current approach to such lanes in the state, whereby two occupants are sufficient. 

I wrote about these lanes before, questioning their financial viability, but now it seems like this move is designed to partially address this.  However, the report indicates that having a three occupant HOV threshold is needed to cover operating costs, re-emphasising my point that new capacity HOT lanes invariably are a form of subsidised new capacity.  Those paying to use the lanes are not paying the capital costs of the capacity, but paying as a market mechanism to manage demand.  That's positive in terms of ensuring a high quality of service (and bearing in mind that users of parallel untolled lanes benefit from the transfer of traffic onto the new lanes), but it is not a solution for funding new capacity.  It appears that the key goal is meet the federal and state guidelines of maintaining a 45mph average speed, and it is more fair to target the HOV users, rather than hiking the tolls.

In terms of pricing the report says:

The recommended average toll for the express lanes will be between 75 cents and $4 at the start of the tolling system. More congested days would fall between $4 and $10, the latter being the maximum and expected only 10 percent of travel days. Seventy-seven percent of trips are expected to be below $1, according to the WSDOT.

As I've said before, I see value in converting underutilised HOV lanes to HOT lanes, and even in considering whether new lanes should be toll lanes.  However, as HOT lanes you leave some users benefiting whilst paying nothing more for vastly improved levels of service.  It is more equitable and financially prudent to simply build them as toll lanes.

Fair tolling for New York? Not perfect, but a step in the right direction

Let's start out by not painting a picture of utopia.

Congestion in New York City is not going to be solved by tolling a few of the East River Bridges or putting a cordon to the north of 60th Street.

Move NY fair tolling plan

There are going to be some distortions in economic activity because of the placement of the cordon on 60th Street, and by the adding of tolls on some crossings.

Roads aren't going to be better managed, nor is public transit going to be better managed just because New York City gets some more money from motorists.  There are more fundamental governance, incentive and management issues with all of that infrastructure.

However, on balance the plan by Move NY called "Fair Tolling" will make a positive difference.  It will reduce congestion, it will encourage more use of public transit, walking and cycling, it will improve mobility to those locations to the east with higher tolls, and will improve air quality.

No other single policy measure can have such a positive difference on New York transport and the environment, whilst also having positive impacts on the economy.  It wont be sufficient, but it will be a very positive change indeed.  There will be less car use around downtown Manhatten, and possibly a little more on the periphery where tolls will reduce.  There will be more efficient use of crossings, as some motorists don't divert to avoid tolls.  Buses, trucks and taxis should have much easier trips, and there will be more public transit usage.  There may even be more cycling if the infrastructure is up to it.

There will, of course, be more money to spend on transport infrastructure, but it will take some convincing for enough people to be willing to pay for something they don't pay for now.  That's what needs to happen in the coming years.  Years I say, because it takes patience and time, and for it to be known that this isn't going to go away.  There may be one or two more failed attempts politically at pursuing similar reforms, but the logic about doing so is difficult to undermine completely.  At best opponents don't like it because they don't believe they can convince voters to like it.

So let's go through some of the key issues.