Tuesday, August 14, 2007

CONGESTION PRICING | Federal $ for Plan Is Good Value

The U.S. Department of Transportation did the right thing and promised (provided legislators support the Mayor's plan) a $354 million grant to New York City, out of $1.1 billion earmarked for reducing traffic and promoting mass transit. Since Manhattan is the densest and most congested place in the United States, it would have been peculiar if NYC had been left out, even if a gridlocked Albany was slow to give the plan immediate support. The grant will provide help primarily for mass transit improvements, with a small amount for installing systems to charge drivers entering congested parts within Manhattan (New York Times, August 14 and 15, 2007).

However, the Federal money does not pay for the cost of installing systems to charge vehicles for coming into Manhattan. Some of that infrastructure may already be in place through the existing EZ Pass system at bridge and tunnel entrances, but hundreds of millions of additional installations and software will be needed. Newspaper accounts suggest that the Mayor could look for corporate support to make up the difference. CityEconomist wonders if Homeland Security could chip in to ensure that every entrance to Manhattan is monitored.

Also, Transportation Secretary Mary E. Peters pointedly made the grant contingent on legislators approving the Mayor's congestion pricing plan in some form this fall. "I share the mayor's confidence that the support will be there," she said. The City Council leadership has supported the Mayor's plan but Albany has been slow to respond to it.

The Manhattan congestion pricing plan would be the first in the United States, although it is well established in London and is spreading to other UK cities. It is also in place in Singapore. Nobel Prizewinner William Vickrey proposed congestion pricing for NYC as early as 1992 in economic hearings held by the City Comptroller Liz Holtzman (see Testimony on Congestion Pricing); he felt strongly that on-street parking regulations and fees should be considered strategically at the same time.

While the mayor’s plan has extensive support among people who see congestion pricing as inevitable given the long delays caused by gridlock in Manhattan, it has been opposed on the following kinds of grounds: (1) the charge will simply make driving easier for the wealthy and will be a severe burden for small businesses or low-income drivers (but: the number of bicyclists has doubled in London since congestion pricing has been introduced), (2) it will discriminate against the other four boroughs and will add tolls where none exist now (but: it will allow easier travel in Manhattan and may encourage new economic activity in the other boroughs), and (3) deliveries will be more expensive to make (but: the existing mess is already very expensive in time and parking fees). The CityEconomist perspective is that New York City's streets are a scarce resource that must be allocated in some way or they will become useless for anyone wanting to get anywhere promptly.

Some of the details of the Mayor's plan are subject to debate. For example, parking lots on one side of 86th Street are inside the congestion zone and on the other side are outside of it. The flat fee of $8 for cars and $21 for trucks is an issue - the late Prof. Vickrey recommended toll systems that would charge a fee that reflects actual congestion. However, these details can be addressed by a planned 17-member commission, yet to be appointed. The commission will have the responsibility to propose changes to the plan – within the overall objective of reducing traffic congestion by 6 percent.