Illinois proposal for vehicle mileage tax well intentioned but needs rethink. UPDATED

UPDATE:  Senator John Cullerton has announced that he is suspending his proposed Bill SB3267. I hope that it isn't the end of the idea, as there would be more merit in thinking more about policy and considering a pilot that looks at all of the issues and concerns raised in the past few days.
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Bloomberg reports that Illinois Senate President John Cullerton has proposed both a 30c/g increase in the state's fuel tax and the introduction of a vehicle mileage tax.  The proposal for the latter is well intentioned.  As with many states, Illinois faces both the revenue challenge of declining gas tax revenues and the equity problem that those who can afford a Tesla or another new electric car end up not paying for the roads.

A 30c/g (7.9c/l for those of us used to metric measures) is a lot to swallow, and probably is a negotiating position to seek a smaller increase, but even if it progresses it, that isn't sustainable.

However, the proposal for a 1.5c/g distance tax (with three concepts to implement it) has a number of flaws, and unfortunately the scathing coverage the proposal is getting in some of the Illinois media reflects this. 

The proposal

All vehicles from July 2017 would pay a mileage based tax, at 1.5c/m.   They would also pay the state gas tax, but have to apply for a refund at regular intervals (some reports say annually).  There would appear to be three options to pay:

- GPS-based on board unit that measures distance travelled on roads in Illinois and transmits this data to a back office to bill the user;

- Odometer linked on board unit that measures all distance travelled and transmits this data to bill the user;

- A flat fee of $450 for a year, equating to 30,000 miles.

What is good about the Illinois road user charge proposal

Firstly, the concept on its own is worthy of further study and to pilot.  The mere fact of suggesting it is positive.   Secondly, the concept of user choice is incorporated into the proposal, which is a good thing.  That is key to building acceptability in Oregon and now the California pilot.

What Illinois could do better?

Don't set rates now.  A rate should be based on what it is meant to be paying for.  That means first establishing an expenditure plan based on addressing deferred maintenance and network rehabilitation and high value capacity and safety projects, then allocate those costs among road users by economic analysis.  Some costs are fixed and should be common to all vehicle classes, some are weight based, which means the heaviest vehicles pay the most, some are capacity based, which means it should be based on road space occupancy.   Set principles for rate setting, don't just identify a rate that looks like a whim.  

Refund the gas tax at time of purchase:  Few are going to believe they should apply for a refund of gas tax and accept paying a new tax.  This is not only going to be unacceptable, but it is unnecessary.  Oregon did pilot a "pay at the pump" model that it did not progress, but could mean anyone using a technology based approach could be set up to pay gas with the tax refunded.  

In due course, Illinois could simply scrap the gas tax and create a new option for out-of-state visitors (also available to locals), which could be a trip pass or a time-based pass (the annual pass is a version of this, a one month and a one week pass could also be issued).  Scrapping the gas tax will prove that Illinois genuinely wants to change how vehicles are charged rather than tax them more.  However, having instant refunds would make it much more acceptable.

Address the privacy issue better: The "Big Brother" "government knows where you are" narrative is an easy one and could have been better deflected by deciding that any option involving technology will not be run by the state, and wont transmit location data from the device.  The fact that even the odometer option is seen by some as "invading privacy" demonstrates how woeful communications have been on this.   The GPS option. as in Oregon and various countries around the world, can be managed by a private company with the on board unit using location data just to assist in calculating the charge (and only charging data gets transmitted).  Failure to address these concerns well could kill this idea.

Set up a pilot:  There are reasons Oregon and California are doing pilots of distance based charging.  They aren't to prove the technology, or to prove that it can be done.  There are many years of experience proving this.  It is to get the public involved, get feedback from users and understand what works for people.   Announcing a pilot is different from a Bill that imposes a new system of charging from on high.

Increase confidence in how revenues will be used:  Many people think money raised now is wasted, and so consideration of reform as to how Illinois roads are funded and managed can not only save money, but also improve confidence in any new system of user pays.   Introduce state wide asset management systems, establish road management on a more commercial, user oriented basis and think "outside the box".  Look at what Australia is doing to optimise life-cycle management of roads, do better with what revenue there is now, and be world-class in how you manage roads and spend the revenue raised.  There are claims that Illinois has "outlandishly high workers’ compensation costs and prevailing-wage requirements", these should be tested.

What has been the media response?

The Daily Herald in Chicago editorial is one of the most positive pieces saying it makes some sense given fuel efficiency.  It is sold on the idea as a way of managing congestion, but I'd urge caution on that.  Although that could be a long term option, with one way of charging by distance, it is not the objective here.  It is difficult enough convincing people of the importance of a new way of paying for road use without adding congestion pricing to the mix.   It proposes that there be weight based charges to make up for the lack of a gas tax, which has merit for broader economic reasons.   It also wants environmental signals, which could exist too (they do with heavy vehicle systems in Europe), but let's not be distracted by multiple policy goals.  

Jim Muir in the Southern Illinoisan says it is "tax and spend", presuming that there is no refund in gas tax.

WSIL3 TV interviewed people who were worried about privacy.  Would they be so concerned if none of that data ever left the vehicle?

Jacksonville Journal Courier said people wouldn't be impressed, but makes the disproven claim that rural people drive further so would pay more (disproven by research in Oregon).  

Even TimeOut Chicago claims it is anti-environmentalist, presumably because cars should get to use the roads for free?

The Illinois Policy Institute is scathing about the idea, which is unjustified.  It is nonsense to suggest that distance based road charging needs a large bureaucracy.  Plenty of jurisdictions do this nimbly and efficiently, and most recently by having competitive private sector service providers collecting charges as a service.   Privacy is an issue, but I would have thought a think tank looking to promote personal freedom and prosperity would want solutions that embrace user pays and a more market oriented approach to providing roads.

Conclusion

Good on Senator Cullerton for advancing the idea, but it needs some rethinking and reworking because it looks fairly clear that the public will reject it outright without a pilot and without a wider consideration of how to reform road funding, charging and management in Illinois.  

Chicago congestion pricing proposal involves HOT lanes and peak tolls

Chicago may get congestion pricing, so says Illinois media.   However, it isn't quite what most of us in the wider tolling/highways sector know as congestion pricing.  The proposals released by the Chicago Metropolitan Agency for Planning (CMAP) are NOT to charge vehicles for using an existing untolled road or lane.  There will be no cordon, area, zonal or distance based charge on existing roads.  So there wont be the kind of behaviour change or modal shift seen in Singapore, London or Stockholm.

What is proposed are two new roads to be tolled, with pricing that will vary by time of day and new HOT lanes to be constructed on existing corridors.  The proposal is for new capacity which will be tolled.

The new capacity will obviously mean significant travel time savings (and commensurate fuel/vehicle operating cost savings) for those using that capacity.  The shift of those users from existing capacity will deliver incremental savings to those remaining on the existing network.

However, what CMAP is proposing is tolling the new capacity, which creates two benefits.  The obvious one is recovery of at least part of the capital cost of the new capacity.  However, the more significant benefit is ensuring the new capacity is sustainable.   I don't mean to use the word as a cliche, but rather than by having peak pricing, the new roads and the HOT lanes in particular, will be able to be managed to always have a minimum standard of free flow conditions with pricing managing demand.

Critics of any new highway capacity frequently claim that it induces demand so that it ends up being filled up and congested, much as the situation before it was built.   Pricing that capacity manages this so that demand can be effectively capped by pricing off users for whom the marginal cost of the toll outweighs the marginal benefit of travelling on that road at that time.

In short, it is a way of ensuring new capacity, where and when it can be funded by the users, is optimally utilised.

It is great step forward in debating transport policy in Chicago.

CMAP's plans for more tolled capacity in Chicago

CMAP has published a website outlining its plans, which are interesting and resemble the scale of development currently underway in Los Angeles.  The technical report behind the analysis is here.

It's worth noting that it appears CMAP has published findings and proposals largely to gauge reaction to them.  The peak surcharge on tolled routes (i.e. not including the HOT lane only routes, where the alternative is free) would range from 25-83%, with a price surcharge of between US$0.05-US$0.09 per mile. 

A map of the proposed network consists of:

Illinois Route 53 north extension and Illinois Route 120 bypass: A 12.5 mile long four lane parkway, with an operating speed limit of 45mph and all lanes priced, with peak pricing to maintain steady traffic flows.

Elgin-O'Hare West Bypass: Widening (from four to eight lanes) and extending the existing Elgin-O'Hare Expressway to a new north-south expressway at the western edge of O'Hare to connect I-90 and I-294.  Modelling was on the basis of tollling all lanes including peak pricing.

I-90 Addams Tollway widening: A new lane to be added in each direction on the Addams Tollway from I-294 to Rockford, with those lanes being HOT lanes with peak pricing.

I-290 Eisenhower Expressway widening: Additional new HOT lane with peak pricing.

I-55 Stevenson Expressway widening: Additional new HOT lane with peak pricing.

Travel time savings were expected to range from 11-25 minutes in the tolled lanes, and 4-9 minutes in the untolled lanes (with other time savings for the new corridors more related to a better route than pricing)

CMAP advocates the new "congestion pricing" (which is effectively tolls on new capacity with peak pricing, not congestion pricing as it is known elsewhere) as offering the typical benefits of tolled lanes, of new capacity and a choice of road users to pay for free flow conditions or to remain in congested traffic (which will be less congested given the impact of those making the choice to pay).  It indicates that time savings in express lanes could be between 31% and 66% of existing travel times.  In addition, it sees the express lanes as enhancing the attractiveness of bus services, as they effectively create new corridors for bus rapid transit services.

Issues identified

It lists and addresses challenges such as equity, saying:

"The median income of express lane users would be 13 to 19 percent higher than users of the general purpose lanes -- somewhat higher, but not dramatically so"  Astonishing that this issue comes up, given Americans are comfortable with wealthier people being more able to afford taxis, cars and first class air travel.  Bear in mind the lanes are optional.

However, it floats some more ideas to address perceived distributional issues:

Policies should be adopted to address equity concerns. For example, transit vehicles could use express lanes for free, and surplus revenues from congestion pricing could be used to fund transit service. In another approach, drivers in the region could be given a base number of "lifeline" travel credits for free travel, then they would only pay for travel above that level. Another possible alternative is that lower-income drivers could be charged a discounted toll rate or be allowed to deduct tolls from congestion pricing on their state income taxes.

Free use by buses is fairly obvious, but having travel credits for free travel will destroy their usefulness in the initial period, as everyone uses their "free" credits early on.  Having a low income discount is also fraught with problems, although deducting tolls from income taxes would be an interesting form of tax recycling.  Yet none of this is necessarily.  New toll routes or toll lanes don't disadvantage anyone, but offer a new opportunity.

Other concerns such as "traffic spillover" and "engineering feasibility" are manageable. If all such lanes are new capacity, the traffic effect would be generally positive, but engineering matters can be complex to allow for convenient access/egress from such lanes.

The "public acceptance" page indicates a majority of those surveyed are in favour of the option of tolled lanes that guarantee free flowing traffic conditions.   Hopefully this will prove to be the case to encourage the proposal to proceed further.

Media Reports

Media coverage has been fairly open minded:

- Huffington Post Chicago has a short factual report and has video from ABC7 and strangely the BBC (talking about tolling in the UK), but also has an online survey of attitudes to toll lanes.

- Chicagoist is open minded about it, and claims "This is not a new idea. Mayor Rahm Emanuel previously proposed a downtown parking surcharge to help fund transit initiatives like a new Cermak / McCormick Place El stop and bus rapid transit routes along Jeffery, Western and Ashland avenues."  Although parking surcharges bear little resemblance to toll lanes. 

- Chicago Magazine titled its report "Why Congestion Pricing Works, and Why People Don’t Like It", gets the basic economics right and quotes the success of Singapore, but notes people don't always like others paying to get past a traffic jam.  It has an interesting conclusion that helps people understand the tradeoffs being made, and notes that whatever people say, users of the untolled lanes get a benefit:

Let's assume you save 15 minutes on Mannheim. That's one-quarter hour, at $3.41. If you make $20 an hour, and value your commute at $10 an hour, it's not worth paying $3.41. It's close to worth it on I-55. But if you make $40 an hour, it's (theoretically) worth it. (I look forward to traffic reporters trying to integrate variable congestion pricing into their reports: "40 minutes to the Dan Ryan from 355 in the free lanes, 25 in the express lanes, which are running at eleven cents a mile right now.")

Is it unfair ? Sort of—the more you make, the more affordable it is, which is frustrating if you don't make much. But it also shaves time off the free lanes, which building more roads has never done.

- Radio Station WBEZ unsurprisingly mentioned London, even though there is little in common between London Congestion Charging and the Chicago proposal.

- ABC gave a fair report but indicated it "may be a tough sell to many who are weary of the higher cost of everything, including the most recent toll hikes" and that "Many public hearings ahead will determine the direction of travel".  It noted that just building new untolled lanes is likely to not be sustainable.

It will be interesting to see if there is any significant opposition, and if not, if Chicago will start to advance these proposals.  Bear in mind Chicago already has toll roads in the form of the Illinois Tollway, and the privately owned Chicago Skyway.  If you combine the proposals for new roads and HOT lanes with these, you get the map I have hastily pulled together below.  Red is for toll roads, both existing and proposed, yellow is for untolled roads with HOT lanes (one existing toll road, the I-90 Adams tollway is proposed to have a toll premium lane added, so that it costs yet more to use it compared to the existing toll road).  (Note the state line immediately to the east for Indiana, as the Indiana Toll Road connects to the Chicago Skyway).

Toll roads and lanes in Chicago existing and proposed

If the proposals come to pass it will mean a great deal of major corridors in Chicago will have tolls, which starts to look like some form of network tolling.  

As a footnote, perhaps one of the more interesting pieces of work on the website is a summary of "congestion pricing" across the United States.  These examples include toll roads with peak pricing and HOT lanes, all with links to the websites about the current and planned projects.  It's not a bad summary of such pricing in the US (there is only one example I know of HOT lanes outside the US, being in Israel).

Macquarie Atlas Roads revenue up in June 2012 quarter

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

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

Illinois toll increase approved to fund major upgrade

The Illinois Toll Highway Authority has approved the increase in tolls of an average of 88% to help pay for a $12 billion expansion and upgrade programme as reported previously. It will be the first increase in 28 years for those paying with I-Pass (a 915MHz DSRC system). The Authority receive no federal or state funding. Milwaukee-Wisconsin Journal Sentinel reports:

Toll road officials said the improvements would ease traffic jams, cut air pollution and encourage economic development. They touted the building program as their "cleanest and greenest," with an emphasis on using recycled materials, minimizing waste and improving public transit access on I-90

At the Waukegan Plaza on I-94, the I-PASS rate will jump from 75 cents to $1.40 next year. The cash rate will increase from $1.50 to $1.90 in 2012 and $2.65 in 2015.

For both the Edens Spur Plaza on I-94 and the South Beloit Plaza on I-90, I-PASS rates will rise from 50 cents to 95 cents next year. Cash rates will increase from $1 to $1.25 in 2012 and $1.90 in 2015.

The Daily Herald reports that the average toll would become 6c per mile after the increase, comparing to 3c per mile on the Indiana Toll Road, 4.2c per mile on the Ohio Turnpike, 7.7c per mile on the Pennsylvania Turnpike and 9c per mile on the Massachusetts Turnpike.

Note how the privatised toll road is the cheapest!   As I said before, what the Illinois Toll Highway Authority is doing is effectively making a deal - you pay more tolls, you get better highways.   It seems so simple, but then with many many years of tolls not increasing, perhaps it is that which has enabled motorists in the state to trust the Authority to spend their tolls wisely.

News briefs: London, Illinois, San Diego, Texas, Pennsylvania

Short items from the UK and US today..

London

One of the problems for Transport for London (TfL) is enforcement of the congestion charge against foreign registered vehicles. They are not exempt (unlike in Stockholm), but can pose a problem for enforcement if the vehicles have left the country. TfL uses the SPARKS network, which was set up by London local authorities to form partnerships with motor vehicle registration and enforcement agencies across all 27 EU Member States. As a result, there are now agreements with several of them to recover congestion charging fines from vehicle owners in their home countries. Now the problem of evasion is not high. I recall a figure from two years of around 12%, but have no source for that. However, around a third of that is able to be recovered through SPARKS (let's exclude the non-payment of several embassies, notably USA, from that figure, which totals £50 million from those non-compliant embassies).

Yet there is one way TfL can enforce - it can impound vehicles that have fines beyond a certain threshold.  One group that has been particularly problematic are the expensive luxury and sports cars of the super-rich who fly them to London for summer, from the United Arab Emirates.  UAE paper The National reports that Emirati cars owe TfL £8,280.  The problem is not just the congestion charge, but parking fines, illegal use of bus lanes, running red lights and speeding.  In short, they are young carefree and carless Emirati men who care not a jot for the delays and danger they are placing Londoners in (and of course they are not unable to pay).

The paper continued:

London’s Metropolitan Police have seized cars worth millions of dirhams in a clampdown on groups of young Arabs who gather on the quiet backstreets of affluent Knightsbridge to race their luxury motors.

Police conducted random checks on high-performance vehicles in the area during July to make sure drivers had valid UK driving licences, insurance and number plates.

Seems like the only appropriate approach.

Illinois

Woodridge Patch reports that the Illinois Tollway plans a 35c toll increase to help fund a $12 billion programme of capital investment. The plan includes reconstructing the Jane Addams Memorial Tollway (Interstate 90) to link Rockford to O’Hare Airport, a new interchange to connect Interstate 294 to Interstate 57 and a new all-electronic Elgin O’Hare West Bypass that can provide western access the airport. (Full map here)

It is supported by the as it is the first toll increase in 28 years!  The tollway is quite a network of 460km of toll roads in the environs of Chicago.

The Mundelein Review is endorsing the plan, saying:

Tollway officials have analyzed the existing system and developed projects that keep the current roads in good repair, but also position the region for growth. The widening of I-90, for example, will include room for a bus rapid transit lane one day. The Elgin O’Hare west bypass should prove to be an engine for economic development. All these changes, we hope, will lessen the intense traffic jams that make the Chicago region the nation’s most- congested.

A good example of how tolling a network of highways can help maintain that network, but provide a basis to allow that network to be upgraded and expanded with a source of revenue.  It is especially encouraging that the increase in tolls is accepted because it will deliver improvements for those paying and help improve public transport.

San Diego

The San Diego Reader reports that the bankruptcy court put the value of the bankrupted, and now re"nationalised"(by SANDAG) South Bay Expressway toll road at $285 million.  SANDAG bought the road off the creditors for $345 million. I’ll leave it to taxpayers of San Diego to decide if they think it is a good deal to spend more than the market price for a toll road that is intended to be subsidised.

Landline magazine reports: "When it was opened in November 2007, the South Bay Expressway was projected to lure 60,000 vehicles per day from Interstate 5 and other roadways connecting the Otay Mesa Port of Entry to State Route 54. But just two years after opening, the South Bay Expressway was only realizing 22,600 vehicles per day. The operator filed for Chapter 11 reorganization in March 2010 in an effort to restructure $510 million in debts."

Texas

US TV network ABC reports on how the Texas Department of Motor Vehicles has issued a number plate twice resulting in a man receiving toll violation notices for roads he hasn't been on.

"Scott loves to show off his 1929 Model-A Ford, but he insists he's never driven it to the Austin area, not when its top speed is just 45 to 50 miles an hour...Sure enough, wouldn't get in it and drive it over there," he said. "That'd be an all day drive!"...The Texas Department of Motor Vehicles admits it has issued some plates twice with the very same numbers...We do recognize that it's a problem and we're working to resolve that problem as we speak," said Randy Ellingston with the Texas Department of Motor Vehicles"

By far one of the more important things to get right is to ensure the motor vehicle number plate database does not contain such errors.  Anecdotal evidence is that there are plenty of such agencies with dated databases without the budgets or political will to tidy them up.  Electronic free flow tolling demands this as an enabler, and it is a major threat to the success of such systems when they have errors such as this.

Pennsylvania

Morning Call reports the Pennsylvania Turnpike Commission is considering moving to fully electronic free flow tolls, and is surveying users to establish their opinion.  Wilbur Smith and McCormick & Taylor were hired to conduct a year long study (honestly shouldn't take that long) into such a conversion.