Reducing Congestion: Congestion Pricing Has Promise for Improving Use of Transportation Infrastructure

Published by the Government Accountability Office on 2003-05-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                        United States General Accounting Office

GAO                     Testimony
                        Before the Joint Economic Committee
                        U.S. Congress

Not to Be Released
Before 10:00 a.m. EDT
Tuesday, May 6, 2003    REDUCING CONGESTION
                        Congestion Pricing Has
                        Promise for Improving Use
                        of Transportation
                        Statement for the Record of
                        JayEtta Z. Hecker, Director
                        Physical Infrastructure Issues

                                               May 6, 2003

                                               REDUCING CONGESTION

                                               Congestion Pricing Has Promise for
Highlights of GAO-03-735T, a statement
for the record to the Joint Economic           Improving Use of Transportation
Committee, U.S. Congress

The nation’s transportation                    Congestion pricing can potentially reduce congestion by providing
systems have become increasingly               incentives for drivers to shift trips to off-peak periods, use less congested
congested, and pressure on them is             routes, or use alternative modes, thereby spreading out demand for
expected to grow substantially in
the future. Most transportation
                                               available transportation infrastructure. Congestion pricing also has the
experts think a multifaceted                   potential to create other benefits, such as generating revenue to help
approach is needed to address                  fund transportation investment. Possible challenges to implementing
congestion and improve mobility.               congestion pricing include current statutory restrictions limiting the use
One potential tool is congestion               of congestion pricing, and concerns about equity and fairness across
pricing, that is, charging users a             income groups. In theory, equity and fairness concerns could be
toll, fee, or surcharge for using              mitigated depending on how the revenues that are generated are used.
transportation infrastructure
during certain peak periods of
travel. Pilot projects to test this            Evidence from projects both here and abroad shows this approach can
approach are currently under way               reduce congestion. Such projects have also shown they can generate
in the United States and the                   sufficient revenue to fund operations—and sometimes fund other
technique has been used more                   transportation investment as well. However, projects were not
extensively abroad.                            necessarily able to demonstrate benefits for the full range of
                                               transportation users. For example, those who were able to use the
Interest in the usefulness of                  special freeway lane saw a decrease in travel time. But, in some cases,
congestion pricing has been
growing, as evidenced by several               there was little systemwide reduction in travel times, and congestion
recent proposals. However, there               increased on alternative routes. Nonetheless, there is some evidence that
have also been concerns raised                 equity and fairness concerns can be mitigated. Some projects have
about the fairness of such practices           shown substantial usage by low-income groups, and other projects have
to some users of transportation                used revenues generated to subsidize low-cost transportation options. In
systems. GAO was asked to identify             addition, some recent proposals for refining congestion-pricing
(1) the potential benefits that can            techniques have incorporated further strategies for overcoming equity
be expected from pricing
congested transportation systems,              concerns. For example, the Fast and Intertwined Regular (FAIR) lanes
approaches to using congestion                 proposal in New York suggests crediting users of the non-tolled lanes to
pricing in transportation systems,             partially pay for them to use public transportation, or to use the express
and the implementation challenges              lanes on other days.
that such pricing policies pose, and
(2) examples of projects in which
pricing of congested transportation
systems has been applied to date,
and what these examples reveal
about potential benefits or
challenges to implementation.
This statement is based on prior
GAO reports and other publicly
available reports.


To view the full statement, including the
scope and methodology, click on the link
above. For more information, contact JayEtta
Hecker at (202) 512-8984.                      On this highway in Orange County, California, a pilot project allows drivers to pay a toll to use newly
                                               added express lanes.
Mr. Chairman and Members of the Committee:

We appreciate the opportunity to offer this statement for the record about
the role that charging fees for the use of congested transportation
infrastructure can play in improving mobility in our nation’s transportation
systems. There is widespread agreement that mobility is essential for a
strong economy. It provides people with access to goods, services,
recreation, and jobs; it provides businesses with access to materials and
markets. It also promotes the movement of personnel and material to meet
national defense needs. However, our transportation systems—for surface,
maritime, and air transportation—have become increasingly congested. By
some measures, for example, overall roadway congestion has increased
more than 50 percent between 1982 and 2000 in some of the largest
metropolitan areas. Congestion results in significant costs to the
environment through increased pollution, and to individuals and
businesses through wasted energy, time, and money.

In recent reports covering all three of these transportation systems, we
have analyzed ways to make these systems operate more efficiently—
including ways to do so without major new capital investment.1 One such
approach involves congestion pricing—that is, charging a higher price to
use the system during peak periods or on congested routes. Doing so
provides incentive for users to shift to less congested times or make other
adjustments. Those who value the service enough will pay the additional
price; those who value it to a lesser degree will shift their use accordingly.
Currently, there is renewed interest in the role that congestion pricing can
play in enhancing mobility, as evidenced by several recent proposals to
institute pricing policies from industry, interest groups, and the
Department of Transportation.

My statement for the record is meant to provide some overall perspective
on what we have learned about congestion pricing. It addresses (1) the
potential benefits that can be expected from pricing congested
transportation systems, approaches to using congestion pricing in
transportation systems, and the implementation challenges that such

 U.S. General Accounting Office, Surface and Maritime Transportation: Developing
Strategies for Enhancing Mobility: A National Challenge, GAO-02-775 (Aug. 30, 2002);
Marine Transportation: Federal Financing and a Framework for Infrastructure
Investments, GAO-02-1033 (Sept. 9, 2002); National Airspace System: Long-Term
Capacity Planning Needed Despite Recent Reduction in Flight Delays, GAO-02-185
(Dec. 14, 2001).

Page 1                                               GAO-03-735T Reducing Congestion
    pricing policies pose, and (2) examples of projects in which pricing of
    congested transportation systems has been applied to date, and what these
    examples reveal about potential benefits or challenges to implementation.
    My statement today is based in large part on our prior work in all three
    types of transportation systems. We have also gathered additional
    information by reviewing publicly available reports on a number of
    projects that are part of the Federal Highway Administration’s Value
    Pricing Pilot Program, a program that funds projects that demonstrate the
    potential of congestion pricing to address congestion problems, and on
    selected projects in other countries.

    In summary:

•   According to several reports from the Transportation Research Board and
    others, applying congestion-pricing methods to our nation’s transportation
    systems could have potential to help reduce congestion and enhance
    mobility by providing incentives to shift travel to off-peak periods or less
    congested routes, thereby more efficiently using transportation
    infrastructure. Congestion pricing also has the potential to create other
    benefits, such as generating revenue to help fund investment in
    transportation systems directly from users. While there are a number of
    potential benefits, implementing pricing methods for our transportation
    systems faces numerous challenges. Opportunities to pursue congestion
    pricing are limited because of current statutory restrictions limiting the
    use of congestion pricing and concerns about equity and fairness. For
    example, federal statutes restrict the charging of tolls on interstate
    highways, except where tolls previously existed or where exceptions have
    been made for pilot projects. Concerns about equity center around the
    effect that congestion pricing may have on lower-income groups. The
    economics literature suggests that these concerns can be mitigated
    somewhat because all income groups could conceivably benefit from
    congestion pricing, depending on how the revenues generated are used.

•   A number of congestion pricing projects are in place in surface and air
    transportation systems, both here and abroad. For the most part, they
    demonstrate that congestion pricing can be successful in generating
    greater economic efficiency and reducing congestion within transportation
    systems. Pricing projects have also successfully shown that they can
    generate revenue sufficient to fund their operation and, in some cases,
    fund the operation of additional transportation projects as well. For
    example, in San Diego, where users pay a toll to use a less crowded
    freeway lane, some of the revenues are used to operate a new express bus
    service, providing commuters with more travel options. However, in at
    least one circumstance, congestion pricing was not as effective in reducing

    Page 2                                        GAO-03-735T Reducing Congestion
             travel during peak periods, either because travelers had little or no choice
             other than to travel at peak times or on peak routes, or the congestion toll
             was set too low to influence demand. Projects were also not necessarily
             able to demonstrate benefits for the full range of transportation users. For
             example, those who were able to use the special freeway lane saw a
             decrease in travel time, but in some cases there was little systemwide
             reduction in travel times, and congestion increased on alternative routes.
             Nonetheless, there is some evidence that equity and fairness concerns can
             be mitigated. Some projects have shown substantial usage by low-income
             groups, and other projects have used revenues generated to subsidize low-
             cost transportation options. In addition, some recent proposals for refining
             congestion-pricing techniques have incorporated further strategies for
             overcoming equity concerns. For example, the Fast and Intertwined
             Regular (FAIR) lanes proposal in New York suggests crediting users of the
             non-tolled lanes to partially pay for them to use public transportation, or
             to use the express lanes on other days.

             Major capital investment in highways, public transportation systems,
Background   waterways, and airports are currently funded, in part, through various
             taxes and fees on users, such as fuel taxes or sales taxes; landing fees and
             docking fees; and tolls on certain roads, tunnels, and bridges. However,
             these revenue-raising instruments do not always provide strong incentives
             for efficient use of transportation infrastructure. For example, the tax
             rates on gasoline, which are the same regardless of whether vehicles are
             traveling during congested or uncongested periods, provide no incentive
             for travelers to use the infrastructure more efficiently. Similarly, landing
             fees at airports that are based on aircraft weight help create incentives for
             airlines to shift to smaller, lighter aircraft providing more frequent service,
             which results in increased demand for runways at peak times and
             therefore increased congestion.

             Due in part to increasing volumes of traffic, as well as these built-in
             disincentives to the efficient use of the transportation infrastructure,
             congestion on our nation’s highways, airways, and waterways remains a
             national problem. On already crowded roadways, passenger vehicle travel
             is expected to grow by almost 25 percent this decade, and freight
             movement by trucks may grow by a similar amount. In the nation’s air
             transportation system, before the terrorist attacks on September 11, 2001,
             an unprecedented number of delays in commercial airline flights
             occurred—a substantial part of which were due to airport and airspace
             congestion, particularly during peak morning and evening hours. At 31 of
             the nation’s busiest airports, 28 percent of the domestic flights arrived late

             Page 3                                          GAO-03-735T Reducing Congestion
in 2000. While flight congestion declined significantly with reduced traffic
after the attacks, a more robust economy and less public apprehension
about flying will likely lead to renewed demands on the air transport
system. At locks on our inland waterways and at major seaports,
congestion has also been growing. For example, the U.S. Army Corps of
Engineers estimated that 15 key locks would exceed 80 percent of their
capacity by 2020 as a result of the expected growth in freight travel, as
compared to 4 locks that reached that level in 1999, resulting in
significantly increased delay.

Numerous methods can be used to address congestion, including building
new infrastructure, improving maintenance and operation of
infrastructure, and using the existing infrastructure more efficiently
through demand management strategies, including pricing mechanisms.
Experts with whom we talked said that consideration of a full range of
these methods is likely necessary to ease our nation’s transportation
congestion.2 In theory, congestion pricing, as one of these methods, is
useful for mitigating the delay costs of congestion. If highway, aviation,
and waterway users were charged extra for peak-hour use, some would
shift to less busy times, or make other adjustments, thereby alleviating
delay at the peak periods.

Many other areas of the economy frequently use peak-period pricing
mechanisms when demand varies considerably by time of day or season.
Electricity providers, for example, often charge higher prices at peak
periods and lower prices when demand is reduced. Other industries with
common peak-pricing practices include telecommunications, airlines, and
hotels and resorts. In addition, Amtrak and some transit systems use peak-
period pricing.


Page 4                                        GAO-03-735T Reducing Congestion
                           In theory, using congestion pricing has the potential to enhance economic
Research Suggests          efficiency, as well as provide other benefits, such as providing market
Significant Benefits,      signals that can guide capital investment decisions, and generating
                           revenue to help fund such investment directly from users of the system. 3
but Some Challenges,       There are several approaches to implementing congestion pricing on roads
to Implementing            and at airports. However, incorporating pricing into our transportation
                           systems involves overcoming several implementation challenges, such as
Congestion Pricing         current restrictions on using congestion pricing on our highways and on
                           runways, and equity and fairness concerns.

Congestion Pricing May     Economists generally believe that charging automobile, truck, vessel, and
Encourage Greater          aircraft operators surcharges or tolls during congested periods can
Economic Efficiency, and   enhance economic efficiency by making them take into account the
                           external costs they impose on others in deciding when, where, and how to
Provide Other Benefits     travel. In congested situations, external costs are substantial and include
                           increased travel time, pollution, and noise. The goal of efficient pricing on
                           public roads, for example, would be to set tolls for travel during congested
                           periods that would make the price (including the toll) that a driver pays
                           for such a trip equal or close to the total cost of that trip, including
                           external costs. In theory, these surcharges could help reduce congestion
                           and the demand for road space at peak periods by providing incentives for
                           travelers to share rides, use transit, and travel at less congested (generally
                           off-peak) times or on less congested routes.

                           Peak-period pricing may have applicability to other modes as well. For
                           example, congestion pricing for using locks on our nation’s inland
                           waterways might be a way to reduce delays experienced by barge
                           operators. Similarly, congestion pricing at commercial airports—that is,
                           charging higher landing fees during congested periods—would cause
                           aircraft operators, both airlines and general aviation operators, to consider
                           external costs in making their decisions. As a result, there would be
                           incentives to shift some operations to off-peak hours or secondary airports
                           or to provide the same carrying capacity by operating fewer but larger

                           In addition to increasing the efficiency with which current transportation
                           infrastructure is used, congestion charges may be helpful in guiding capital

                            For further discussion of the research on congestion pricing, see National Research
                           Council, Transportation Research Board, Curbing Gridlock: Peak-Period Fees to Relieve
                           Traffic Congestion (Washington, D.C.: 1994).

                           Page 5                                              GAO-03-735T Reducing Congestion
                            investment decisions for new facilities. As congestion increases, the delay
                            cost that an additional user of the system causes for other users also
                            increases. If congestion charges are set such that they reflect external
                            costs, then as congestion increases, congestion surcharges will increase.
                            Rising surcharges provide signals of increased demand for specific
                            increases in physical capacity, indicating where capital investment
                            decisions to increase capacity would be most valuable. At the same time,
                            congestion charges will provide a ready source of revenue for local, state,
                            and federal governments and transportation facility operators to fund
                            these investments in new capacity that, in turn, can reduce delays. In some
                            cases and over a longer period, in places where external costs are
                            substantial, and congestion surcharges are relatively high, this form of
                            pricing might influence land-use plans and the prevalence of
                            telecommuting and flexible workplaces.

Various Possible            Congestion pricing could be applied to transportation systems in a variety
Approaches to Setting and   of ways, and there are several possible approaches related to which
Collecting Surcharges       facilities are priced, how the price is set, and how the toll is collected.

Approaches for Roads        In one possible form of congestion pricing for public roads, tolls would be
                            set on an entire roadway or road segment during periods of peak use. In
                            another form, sometimes known as value pricing, peak-period tolls would
                            be set on only some lanes of a roadway, allowing drivers to choose
                            between faster tolled lanes and slower non-tolled lanes. High-occupancy
                            toll (HOT) lanes, under which drivers of single-occupancy vehicles are
                            given the option of paying a toll to use lanes that are otherwise restricted
                            to high-occupancy vehicles,4 are an example of value pricing. Fast and
                            Intertwined Regular (FAIR) lanes is a recent proposal that is another
                            variation of value pricing. Under the FAIR lanes approach, revenues
                            generated from travelers using electronically tolled lanes would be
                            transferred to travelers using adjacent non-tolled lanes on the same
                            roadway. These transfers would be done through electronic transponders
                            in the vehicles using the toll lanes, as well as the non-tolled lanes. Those in
                            the non-tolled lanes would receive a credit equal to 25 to 50 percent of the
                            current effective toll, which could then be used toward public

                            Sometimes cars with two riders (including the driver) qualify as high-occupancy vehicles,
                            while in other cases more than two riders are needed.

                            Page 6                                                GAO-03-735T Reducing Congestion
                              transportation fares or toward the use of the toll lanes on another day. In
                              this way, drivers in the non-tolled lanes would receive compensation for
                              the additional congestion that may result from increased use of those
                              lanes once tolls are placed on other lanes. In a third form of congestion
                              pricing for public roads, known as cordon-based pricing, drivers would be
                              charged a fee for entering a specific area of a city, such as a central
                              business district, at peak hours.

Approaches for Airports       Two commonly mentioned methods of applying the concept of congestion
                              pricing at airports are differential pricing and auctions. Under differential
                              pricing, airports would set landing fees higher at times when demand for
                              takeoff and landing slots exceeded their availability, and lower at other
                              times, in effect applying a surcharge for using the system at peak-demand
                              periods. An auction approach would allow airports to periodically auction
                              a fixed number of takeoff and landing slots—equal to the airport’s
                              capacity—to the highest bidders. For example, an airport, in conjunction
                              with the Federal Aviation Administration, could determine its per-quarter-
                              hour takeoff and landing capacity, and a competitive bidding process
                              among carriers could determine fees during each period, which would also
                              result in surcharges for using the system at peak-demand periods.

Structuring and Setting the   Congestion pricing tolls could be levied using either a predetermined or
Tolls                         variable approach. Under the predetermined approach, drivers would pay
                              tolls that are preset and fixed according to the time of day they travel. In
                              contrast, under the variable approach, drivers would pay tolls that vary
                              according to the level of congestion on an affected roadway. For either
                              approach, the amount of the toll to be levied would likely be set by state or
                              local officials, or other toll facility operators, based on information from
                              roadway usage and traveler surveys. The toll structure may also be
                              influenced by the judgment of the toll facility operators. These tolls could
                              then be adjusted upward or downward based on the use of the toll facility
                              in relation to the optimal flow of traffic on the facility.

Collecting Tolls              Electronic methods of collection from users of public roads offer vast
                              increases in efficiency compared to traditional tollbooths, which are labor
                              intensive and relatively expensive to operate, and create congestion as
                              drivers line up to pay their tolls. And, over the past decade, electronic road
                              pricing technology has become more reliable and, as a result, more widely

                              Page 7                                         GAO-03-735T Reducing Congestion
                            adopted on many toll facilities.5 According to a report issued by the
                            Transportation Research Board, technologies that are currently used at
                            some toll facilities to automatically charge users could also be used to
                            electronically collect congestion surcharges without establishing
                            additional tollbooths that would cause delays.6 In application of cordon-
                            based pricing, drivers would typically purchase and display permits that
                            allow them access to the cordoned section of the city before entering.
                            Daily or monthly permits could be differentiated by color and shape for
                            easy enforcement.

Challenges to               One challenge in implementing congestion pricing for transportation
Implementing Congestion     systems is that, at present, greater use of pricing is limited by statutory
Pricing Include Legal       restrictions. For example, tolls are prohibited on the Interstate Highway
                            System, except for roads that already had tolls in place before they were
Restrictions and Concerns   incorporated into the system (e.g., the New Jersey and Pennsylvania
about Fairness and Equity   Turnpikes) or where exceptions have been made for the implementation
                            of pilot projects.7 Also, there are a variety of statutory restrictions on
                            landing fees at airports that can limit use of congestion pricing. Landing
                            fees are typically based on aircraft weight and are required to be set at
                            levels designed to recover the historical costs of providing landing
                            services. Costs imposed by congestion and other externalities cannot be
                            considered in the calculation of the cost base and, hence, cannot be
                            recovered in landing fees. Congestion fees, as well as most other types of
                            fees, are also prohibited on the inland waterways because of the Interstate
                            Commerce clause, according to the Army Corps of Engineers. Therefore,
                            addressing some of these restrictions would be necessary to make greater
                            use of congestion pricing.

                            Another challenge involves effectively addressing concerns raised about
                            equity and fairness. Because of this issue, political opposition to using this

                             Under electronic road pricing approaches, users of a toll facility can open accounts of
                            fixed amounts. The account information is stored in electronic transponders that drivers
                            mount on their windshields to “communicate” with an antenna at a signpost (or mounted
                            on an overhead gantry) when their vehicles pass by. User accounts are then automatically
                            debited. In case users have insufficient balances in their accounts or their transponders
                            malfunction, a video enforcement system automatically takes a picture of the offending
                            vehicle. See also David J. Forkenbrock and Jon G. Kuhl, A New Approach to Assessing
                            Road User Charges, Public Policy Center (Iowa City: University of Iowa, 2002).
                            Curbing Gridlock: Peak-Period Fees to Relieve Traffic Congestion.
                                23 U.S.C. § 301.

                            Page 8                                                GAO-03-735T Reducing Congestion
approach to address mobility challenges has been substantial. One equity
concern that has frequently been raised about congestion pricing of public
roads has been the potential effects of surcharges or tolls on lower-income
drivers. Because a surcharge would represent a higher portion of the
earnings of lower-income households, it imposes a greater financial
burden on them and, therefore, is considered unfair.8 The economics
literature suggests that these concerns can be mitigated to some degree.
For example, proponents of congestion pricing have noted that all income
groups could potentially benefit if there is an appropriate distribution of
the revenues obtained through congestion pricing. These revenues could
be used to build new road capacity, given back as tax rebates tilted toward
lower-income households, or used in some other way so that, in theory,
the net benefits for each income group would exceed its costs.

Although equity considerations could potentially be addressed by
constructing a congestion pricing system for roads so that all income
groups received net benefits, there could still be individuals who would be
negatively affected. In theory, the cost of a surcharge or toll would be less
for those who could more readily make adjustments to their driving
behavior that would allow them to avoid paying the toll. Conversely,
drivers who had little flexibility to alter their work schedules to avoid a
toll by traveling at off-peak hours could potentially be more affected than
workers with such flexibility. Similarly, those whose commuting patterns
make it harder for them to form carpools or use transit could also be more

The arbitrary nature of these distinctions, as well as opposition from those
who find the concept of restricting lanes or roads to people who pay to
use them to be elitist, raises fairness concerns and accounts for some of
the political opposition to congestion pricing. More generally, there is
often opposition to paying a charge to use something that was formerly
provided “free.”

 Economists note that even if the burden of congestion charges is greater on low-income
households, the same is true of fuel taxes, which are currently paid by users, and sales
taxes, which are paid by users and non-users of transportation systems, both of which are
relied on for transportation investments. For a discussion of equity concerns associated
with increased use of voter-approved local sales taxes to pay for transportation
infrastructure, see Martin Wachs, Improving Efficiency and Equity in Transportation
Financing (Washington, D.C.: Brookings Institution, April 2003).

Page 9                                                GAO-03-735T Reducing Congestion
                            A number of existing congestion-pricing transportation projects, both here
Existing Projects           and abroad, show that pricing can influence travelers’ behavior to the
Show That Benefits          point of reducing congestion and thus increasing economic efficiency. For
                            example, value pricing pilot projects in the United States show
Can Result, and Some        considerable usage and have provided users with a less congested
Evidence Suggests           alternative, thus improving traffic flows and reducing delays. In addition,
                            congestion-pricing mechanisms, in general, have demonstrated that they
That Implementation         can generate revenue sufficient to fund their operation and, in some cases,
Challenges Can Be           fund investment in transportation alternatives. The available evidence also
Mitigated                   suggests that implementation challenges can be mitigated, although to
                            what extent is not yet clear.

Projects Provide Evidence   A number of the congestion-pricing projects we identified enhanced
of Increased Economic       transportation mobility through improved traffic flows, increased speeds
Efficiency                  and reduced delays for some users. One way in which some projects have
                            done so is by channeling some drivers into infrastructure that is not being
                            fully utilized even at peak periods. In several locations in the United
                            States, for example, HOT lane projects have been implemented in which
                            vehicles with fewer passengers than would normally be needed to use high
                            occupancy vehicle lanes have been allowed to use such lanes by paying a
                            toll.9 High occupancy vehicle lanes are generally less congested than other
                            highway lanes, and drivers who use them are thus able to shorten their trip
                            times. The toll for such use varies, increasing during periods of peak
                            congestion. In such HOT lane or value pricing projects in Orange County
                            (as shown in figure 1) and San Diego, California, and Houston, Texas,
                            drivers willing to pay to use the HOT lane saved an average of 12-20
                            minutes per trip in the peak period. In addition, some projects were able to
                            shift demand on congested infrastructure to less congested time periods.
                            In San Diego, officials were also able to spread out peak period traffic on
                            the toll lanes over a longer period of time by charging a lower toll just
                            before and just after the peak period.

                             Under the Federal Highway Administration’s Value Pricing Pilot Program, the restriction
                            on using tolls on the interstate is lifted for approved projects.

                            Page 10                                               GAO-03-735T Reducing Congestion
    Figure 1: Tolled Lanes on State Route 91 in Orange County, California

    In many instances, however, a congested transportation system may have
    no equivalent to a high occupancy vehicle lane with additional capacity. In
    these cases, some other congestion pricing models have been used to
    encourage travelers to shift their behavior, either by traveling at another
    time or by using alternative transportation modes, such as buses, trains, or
    carpools. For example, in Singapore, London, and Norway, congestion
    pricing has taken the form of cordon-based pricing, where drivers pay to
    enter entire regions. These projects have demonstrated significant
    decreases in the level of congestion on roads in the cordoned area and
    some significant shifts to other alternative modes, as follows:

•   In Singapore, the city government instituted a $1 charge in 1975 for private
    vehicles to enter the central business district in the morning rush hours.
    Carpools, buses, motorcycles, and freight vehicles were exempted from
    the charge. The result was an immediate 73 percent decline in the use of
    private cars, a 30 percent increase in carpools, and a doubling of buses’
    share of work traffic.

•   In London, recent implementation of cordon tolls resulted in traffic
    decreases of roughly 20 percent, and about a 14 percent increase in the
    use of buses during the morning commute.

    Page 11                                           GAO-03-735T Reducing Congestion
                            •   In Trondheim, Norway, cordon tolls produced a 10 percent reduction in
                                traffic at peak times and an 8 percent increase in traffic in off-peak times
                                in the central business district.

                                Such projects have similarly been used to relieve congestion at crowded
                                airports. In one case, the Port Authority of New York and New Jersey
                                imposed surcharges beginning in 1968 for peak-hour use by small aircraft
                                at Newark, Kennedy, and La Guardia airports. These small aircraft, known
                                as “general aviation” aircraft, were not part of scheduled airline
                                operations. The need to accommodate takeoffs and landings for these
                                aircraft during peak periods was adding to passsengers’ delays on
                                scheduled airline flights. The port authority raised the peak-period
                                minimum take-off and landing fees for aircraft with fewer than 25 seats
                                from $5 to $25, while keeping the off-peak fee at $5. As a result of the
                                surcharges, general aviation activity during peak periods decreased by 30
                                percent. The percentage of aircraft operations delayed more than 30
                                minutes declined markedly over the same period. Similarly, in 1988 at
                                Boston’s Logan Airport, the Massachusetts Port Authority adopted a much
                                higher landing fee for smaller aircraft. Like the three New York and New
                                Jersey airports, Logan experienced a large drop-off in use by smaller
                                aircraft. Much of the general aviation abandoned Logan for secondary
                                airports, and delays at Logan dropped.10

Projects Can Also Provide       Proponents of congestion pricing have noted that others besides those
Support for Other               who can afford to pay congestion pricing costs can share in the benefits
Transportation                  through an appropriate distribution of any revenues generated. A part of
                                these revenues will be needed to administer the system—for example, to
Alternatives                    collect tolls. However, existing projects also contain a few examples of
                                situations in which the revenues generated from congestion pricing have
                                been used to benefit other transportation alternatives. For example, the
                                revenue from the HOT lane project in San Diego has been sufficient not
                                only to pay for toll takers and other administrative expenses, but also to

                                 These practices in New York, New Jersey, and Boston have since been discontinued
                                because of a successful lawsuit brought by small commuter airlines and the Department of

                                Page 12                                              GAO-03-735T Reducing Congestion
                          fund the operation of a new express bus service. This has increased travel
                          choices for all area commuters, including lower-income populations.11

                          International experiences with congestion pricing have been somewhat
                          more extensive and revenues generated from congestion tolls have been
                          substantial. In Singapore, only about 12 percent of the revenue generated
                          from their cordon-based tolls have been needed to cover the costs of
                          operation. In Trondheim, Norway, revenues have exceeded capital and
                          operating expenses of the toll facility by 5 times. Trondheim’s toll facility
                          currently generates about $25 million in profit per year. These profits have
                          been used to enhance the capacity of the entire transportation system,
                          including financing additional road infrastructure as well as subsidizing
                          public transportation facilities and services, and pedestrian and bicycle

Extent to Which Equity    There is some encouraging evidence with regard to mitigating equity and
and Fairness Issues Can   fairness issues in implementing congestion pricing, although the extent to
Be Mitigated Is Not Yet   which these concerns can be mitigated is unclear. At least one project we
                          reviewed indicates that implementation of congestion pricing needs to be
Clear                     carefully evaluated as an alternative in some circumstances, because it
                          provides no automatic guarantee of benefits. In Lee County, Florida, the
                          county instituted variable tolls on two bridges based on peak travel
                          periods. The county reduced the toll for using the bridges in off-peak
                          periods. On one bridge, traffic increased during the off-peak period but
                          decreased very little during the peak period. A study from the University of
                          South Florida12 found that peak-period demand for the bridge was not as
                          flexible as compared to demand during off-peak periods. That is, drivers at
                          peak periods may not have readily available alternatives to commute at
                          different times, use a different mode of transportation, or take another
                          route, and therefore have little choice but to use the bridge during the
                          peak period, or the price of the congestion toll was set too low to
                          influence the demand of those users. The example illustrates the fact that
                          a pricing mechanism may not be very effective at reducing peak-period

                            A recent proposal for “HOT networks” promotes the use of HOT lanes in conjunction with
                          operating bus rapid transit services, utilizing the revenues from the toll lanes. For more
                          information, see Robert W. Poole, Jr. and C. Kenneth Orski, “Policy Summary No. 305” (Los
                          Angeles, CA: Reason Foundation, 2003).
                           Chris Swenson, Alasdair Cain, and Mark W. Burris, “Toll Price-Traffic Demand Elasticity
                          Analysis on Variable Priced Toll Bridges” (Tampa: Center for Urban Transportation
                          Research – College of Engineering, University of South Florida, July 1999).

                          Page 13                                               GAO-03-735T Reducing Congestion
travel if the price is not set properly, or without additional measures that
provide travelers with other choices.

Although the congestion pricing projects we reviewed produced little
evidence of congestion reductions in adjoining lanes or in other alternative
routes, they also produced little evidence that congestion increased in the
non-tolled lanes or on alternative routes. For example, while the value
pricing projects in California and Texas resulted in less congested
alternatives for individuals willing to pay the toll, only one of the projects
was able to demonstrate any decreases in congestion on the remaining
“free” lanes of the highway. In Orange County, California, a study found
that opening two new lanes, which were designated as congestion toll
lanes, decreased delays on the other “free” lanes from 30-40 minutes to
about 12-13 minutes, while traffic remained stable on alternative nearby
freeways. However, there is also some evidence that pricing can increase
congestion on alternative routes. In Singapore, where the city used cordon
pricing, there was deterioration in traffic conditions just outside the
cordoned area caused by travelers attempting to bypass it. Such
congestion would adversely impact individuals who do not pay the toll or
individuals not using the congested facility. However, at least one study
said that the costs of increased traffic on alternative routes did not
outweigh the benefits of reduced congestion in the cordoned area.

There are other encouraging signs in relation to distributional impacts
from existing projects, although there is no conclusive evidence on the
distributional impacts of congestion-pricing techniques. A report on the
value-pricing project in Orange County found that there was significant
usage of the toll facility by individuals at all income levels. This
demonstrates that low-income individuals also value the time they save,
and that some value their time enough to be willing to pay a toll that
amounts to a higher percentage of their income than that paid by
individuals with greater income. However, in value-pricing pilot projects in
Orange County, San Diego, and Houston, those using the toll lanes tended
to have higher incomes than those using the adjoining lanes.

Experts have noted that tolls might become more acceptable to the public
if they were applied to new roads or lanes as demonstration projects, so
that tolls’ effectiveness in increasing commuter choices could be
evaluated. For example, in the Orange County pilot project, where two
new toll lanes were added to the highway, opinion surveys have shown a
high rate of public acceptance. Other pilot projects in Houston and San
Diego have also demonstrated public satisfaction. In addition, recent
proposals, such as FAIR lanes and HOT networks, show promise to further

Page 14                                        GAO-03-735T Reducing Congestion
               mitigate equity and fairness concerns. FAIR lanes, as previously discussed,
               and which have been proposed in New York, would credit users of the
               adjoining lanes, using revenues generated by the toll lanes, allowing those
               users to use the toll lanes on another day for a reduced or no charge. The
               HOT network proposal couples HOT lanes with bus rapid transit
               initiatives, similar to the experience of the pilot project in San Diego,
               thereby using the revenues from the tolls to broaden the transportation
               alternatives available for all commuters, including lower-income

               Traffic on already congested surface, maritime, and air transportation
Concluding     systems is expected to grow substantially over the next decade. This
Observations   congestion can be considered a shortage; it occurs when more services—
               from lanes of highway, airport runways, locks on rivers—are demanded
               than can be supplied at a given time and place. A range of approaches and
               tools must be applied to solve the pervasive transportation congestion
               problems that our nation faces in the next decade and beyond. Congestion
               pricing—although only one of several approaches that can be used to
               reduce congestion on our nation’s roads, airways, and waterways—shows
               promise in reducing congestion and better ensuring that our existing
               transportation systems are used efficiently.

               Pilot projects and experiences with congestion pricing abroad
               demonstrate the promise of this approach for reducing congestion and
               promoting more efficient use of transportation systems by users. Despite
               this promise, there continue to be concerns over fairness and equity in the
               application and implementation of congestion pricing, which current
               projects have not fully alleviated. Some proposed projects, such as FAIR
               lanes, which use revenues generated to compensate other users of the
               transportation system, could help alleviate some of the fairness and equity
               concerns that have been raised. Experts suggest and some projects
               demonstrate that public opposition to congestion pricing will lessen as
               these projects show that equity and fairness concerns can be mitigated.
               However, if congestion pricing is to be more widely applied to
               transportation systems, the Congress will need to ease statutory
               restrictions on the use of congestion-pricing applications on
               transportation systems.

               Page 15                                      GAO-03-735T Reducing Congestion
                  For further information on this statement, please contact JayEtta Hecker
Contact and       at (202) 512-8984 or heckerj@gao.gov. Individuals making key
Acknowledgments   contributions to this report include Nancy Barry, Stephen Brown, Jay
                  Cherlow, Lynn Filla Clark, Terence Lam, Ryan Petitte, Stan Stenersen,
                  Andrew Von Ah, and Randall Williamson.

                  Page 16                                     GAO-03-735T Reducing Congestion
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