September 20, 2001

Congestion-free roads, by popular demand

Photo courtesy of California Private Transportation Co. Electronically tolled highways such as the 91 Express Lanes in Orange County, Calif., maintain free-flow conditions by setting rates that limit demand.

The most obvious transportation problem in Seattle, Portland or any other major city is peak-period traffic congestion. In order to solve this problem, it’s important to understand the cause of congestion.

Traffic gridlock reflects an imbalance between road supply and road demand. The reason for the imbalance is that most highways are priced incorrectly. The primary method of paying for roads is the gas tax.

Unfortunately, that tax tells the motorist nothing about the relative scarcity of roadway space at certain times of day; it is just a sales tax on fuel. Once paid, the motorist perceives the cost of road access to be “free.” Since other motorists have similar perceptions, they logically converge on highways at the same time. The result is traffic congestion.

The solution to this problem is peak-period road pricing (also known as congestion pricing). Peak-period pricing is a road user fee that varies by the time of day, location and direction of travel. The fee changes at certain times of the day because demand for road space is constantly changing.

For example, at periods of high demand, we each impose delay costs on every motorist behind us. At 2 a.m. those delay costs are essentially zero. A rational user fee system has to reflect these variations, otherwise the motorist will not understand what the relationship is between supply and demand.

This concept is not a new one to most consumers. We see it used widely in such applications as matinee movie pricing, time-of-day rates for long distance telephone calls, and off-season discounts for vacation resorts.

In these and many other situations, suppliers of goods or services use fluctuating rates to help spread out the demand, thus minimizing “congestion” and eliminating the need for expensive new facilities that might only be used for short periods.

Peak-period tolls are collected through electronic systems that allow users to pay on the fly. Transponders (or potentially global positioning system devices) are placed on all vehicles using a priced facility. Motorists establish private accounts to keep track of payments and the transactions are made through a computer.

This approach has been used in the United States since 1995, with great success. The most well-known example is the 91 Express Lanes in Orange County, Calif. State Route 91 is a privately built, privately operated, 10-mile expressway that is electronically tolled and has 14 different prices, ranging from 75 cents to $4.25. The rates are set to maintain free-flow conditions, and as a result, SR 91 never suffers from congestion problems.

Users report high levels of satisfaction, not just for the time savings, but for the reliability. Motorists place a high value on knowing how long a trip will take. With peak-period pricing, trip time is very predictable.

Other facilities using peak-period pricing include Interstate 15 near San Diego, and all Hudson River crossings between New York and New Jersey. In April, the largest-grossing toll bridge in the world — New York’s George Washington Bridge — began implementing peak-period pricing, and the change received strong endorsements from The New York Times and every other local paper. Motorists are beginning to understand that the only way to unclog highways is to implement market-based pricing.

Obviously, one concern with this approach is that people would be forced to “pay twice” for roads currently maintained through a gasoline tax. The way to address this concern is to begin reducing state and federal gas taxes, and replace them with electronic tolling, at least for all major highways. If those facilities are supported solely through tolls, motorists will still pay only once for their use.

Although some people might prefer to continue paying gas taxes, electronic tolling is inevitable due to the rising fuel efficiency in vehicles. Major auto manufacturers are already marketing hybrid-electric cars that get over 60 miles per gallon. Within another decade, we are likely to see vehicles capable of traversing the entire country on a single tank of gas or vehicles using hydrogen-powered fuel cells.

When that day arrives, the fuel tax will be unworkable, because too many motorists will be free-riding on the system, and elected officials will be unwilling to raise the gas tax to the levels that it would take to make up for the revenue lost by higher-efficiency vehicles.

The regional government in Portland (known as Metro) recently finished a three-year study of peak-period pricing, and found that it would increase peak-hour speeds by an average of 54 percent on regional highways, without the need for any new highway construction. And in measuring all costs against all benefits — including time savings, reduced fuel consumption, lower air pollution — Metro found that the social benefits of road pricing would exceed the costs by at least $130 million annually.

Peak-period pricing will not solve all traffic problems because in some cases the region simply needs to build additional lane capacity. However, the advantage of road pricing is that it tells decision-makers where expansion is most needed, and it provides a ready source of cash. This eliminates the long delays associated with projects that have to wait in line for financing from gas tax trust funds that are typically over-subscribed.

Peak-period pricing in Seattle would benefit both private auto users and transit customers. Currently, one of the arguments against buses and other forms of road-based transit is that riders get stuck in traffic. This is the reason many transit advocates, including some in Seattle, have become champions of expensive fixed rail.

With peak-period pricing, that problem would disappear. Not only would transit vehicles be able to travel quickly anywhere in the region, riders would get this benefit at little cost, because the congestion fee would be split among many passengers.

Road-based transit would also benefit from deregulating and privatizing the system. Large, municipal transit monopolies are notoriously inefficient and overpriced because they lack market competition.

Putting all existing bus routes out to competitive bid would instantly bring down costs, freeing up funds for improved service. Opening the transit market to allow unlimited entry by privately operated shuttles, vans and jitneys would increase transit options, helping to further reduce traffic congestion.

Seattle’s transportation challenges are not unique. They are shared by virtually every major city, and for the same reasons: improper road pricing and prohibitions on free-market transit. Enacting these two policies would place Seattle in the vanguard of transportation reform.

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