Congestion charge, the case for Vancouver

Congestion in Vancouver

The cost of congestion in greater Vancouver has been priced at up to $1.3 Billion per year in 2002 [1] (for matter of comparison, all combined motorist gas taxes will raise less than $800 million in metro Vancouver in 2011 [8]). Thought the Congestion numbers could look high, it is eventually not high enough to justify to invest billions of $ in new road infrastructures, which are not the most efficient allocation of capital to address congestion issues observed usually no more than 4 hrs a day.

The discussion below, grounded on a previous article as well as traffic data [6], starts of the viewpoint of what it takes to alleviate the congestion in Metro Vancouver using a road pricing model. From this conclusion, we have 2 questions to answer:

• What is the most efficient road pricing model? that is what is the one involving the less overhead cost and still achieving its goal to reduce the congestion?
• What is the better use of the money raised by a road pricing model?

Thought that in the context of Vancouver, road pricing schemes are mostly invoked to address Translink woes, it shouldn’t be the primary goal:

• The cost of a congestion toll should not be designed to match the Translink deficit

The primary goal should be to get the most efficient use of a scarce, because expensive to create, resource: space on our Transportation network.

The allocation of the proceeding of a congestion toll needs to be seen through this lens:

• What is the more efficient use of this transportation revenue stream?

It could not be always the case, but as mentioned in introduction, the general level of congestion in Vancouver-mostly due to SOV- and the general cost of new road infrastructure, suggests it is better to invest it in the Public Transit network. This to provide alternative and efficient transportation means, able to effectively keep the level of the congestion charge under control. This option could be revisited overtime if necessary.

Pricing model

It could be discussed at length about what could be the better road pricing scheme for Vancouver:

• Area charge (London)
• “ideal” Road pricing (all road are priced according a complex formula and complex tracking of vehicles thru GPS…)
• Cordon pricing (Stockholm)
• …

The today municipal politicians mood, is to not oppose to the road pricing idea, but it is to rationalize the inaction toward it:

Anything other that the “ideal” road pricing is not “fair” to the motorists

They could be right, assuming the generalized economic gain largely offset the implementation and operating cost of the proposed model. Considering the overwhelming complexity of implementation of such a model, and the limited amount of congestion in the lower mainland, which limit the potential revenues, it is probably wrong headed:

The model could be fair to the individual motorists, but could be unfair to the general interest: It could cost more to operate than the general economic gain it allows

..and if there is a drawback to the model followed by London, it is this: the operating cost of its pricing scheme absorb largely the economic gain expected of better traffic conditions [7].

Considering the Vancouver topography and the choke points responsible for most of the lower mainland congestion, the equivalent of a “cordon pricing” on the bridges seems the natural way to go.

It is probably the best one from a benefit/cost perspective. Due to the relatively insulated location of Vancouver, we consider an all “transponder” technology (on the model of Singapore), this to limit the operation cost.

Cordon pricing Model for Vancouver

Below, is a list of the Vancouver area bridge with their number of lanes, where toll gantries could take place, to give an idea of the required gantries investment

Bridge	Number of lanes	Estimated annual revenue (M)
George Massey Tunnel	4	38
Arthur Laing Bridge	4	7
Oak Street Bridge	4	7
Knight Street Bridge	4	10
Queensborough Bridge	4	7
Alex Fraser Bridge	6	48
Pattullo Bridge	6	14
Port Mann Bridge	10
Lions Gate Bridge	3	15
Second Narrows Bridge	6	15
Cambie Street Bridge	6	0
Granville Street Bridge	8	0
Burrard Street Bridge	5	0

Cost: $25 Millions/year

If we consider all or part of the bridges above, we can easily see than the gantries investment is pretty limited, and should be apriori lower than in the Stockholm case, and is estimated at $100 millions. Furthermore, as previously mentioned, the geographical location of Vancouver make worthy of consideration the outfitting of at least all lower mainland vehicles (they are around 1.5 millions) with a transponder. Here we consider the outfitting of all of the 2.5 millions vehicles registered in BC:

• Transponder investment: ~$30 millions (2 million of on board sticker at $1.6 + 500,000 exterior unit at $8)

The total initial capital cost of the system can be conservatively fixed at lower than $150 million. Assuming an all transponder based scheme, the maintenance and operating cost couldn’t be higher than the one in Singapore, and is estimated around $10 millions/year. the cost to operate the system is summarized below

Capital	cost (M)
Gantries	$100
Transponder	$30
Annual cost	cost (M)
capital Amortization (15years)	$15
Operating & Maintenance (15years)	$10

Revenue, ~$150 million annually

Traffic on Main bridge of the greater Vancouver area. Toll could be in effect once traffic reach max capacity of the bridge (red line), this is 4hr or less per day. in yellow example of toll fare for some bridges (see (6) for more detail)

It is probably the greater unknown of such a scheme. Based on traffic counting [6], and pricing modelization of a previous study [9], the estimated revenue per bridge is given in the above picture, and achieved by charging bridge crossing an average of 4hrs per weekday only…letting plenty of opportunities for people to move across the region free of charge.

The Impact on the transportation system

While some part of the peak hour traffic will shift toward off-peak, a significant part of it will shift to Transit. For this reason, one could expect:

• a lowered revenue from Gas and parking tax : we estimate this in the tune of $20 millions loss for Translink
• a significant demand increase for Transit : based on the Stockholm experience, the congestion charge could be responsible for an increase of 10% in Transit usage [2]

Whether there is an impediment to the implementation to a road pricing scheme, it is not as much the implementation cost or the effectiveness to reduce the congestion than the capability of the transit network to absorb the modal shift involved by a congestion pricing scheme.

In that aspect, the relatively low public transit usage in the Vancouver region, compared to other jurisdictions which have introduced a road pricing scheme, creates certainly some challenges for Translink:

For that reason, as well as political acceptance, a significant Translink service extension could be required, and that means the $70 million moving forward plan, could be only a starting point in transit increase.

On the other hand, the congestion reduction will help to increase the buses productivity, while that the increased demand will improve the fare-box revenue.

With a congestion charge, this bus could be probably travelling twice faster, and offering twice the frequency – so dramatically improving the service to transit customers- this for virtually the same operating cost. Same could apply to the truck industry.

In Brief

After deducting operating cost and infrastructure amortization, as well as accounting the lost revenue in gas tax, the congestion charge could generate a revenue of $100 millions/year for the Translink coffers.

The lost of gas revenue affects also the Provincial and Federal Government, but one can fairly assume that this is more than offsetted by lower healthcare cost, due to accident reduction, reduction of greenhouse gas emission as well as more active living style associated to public transit use…

From it $70 millions could be already earmarked for Translink extension program as stated in its “moving forward plan”, but due to the effect of the congestion charge, such plan could prove much cheaper to implement.

That lefts extra money to address other woes in the transportation network, like on Broadway.

When to build new road infrastructure?

After good but reasonable alternative transit has been provided and the toll price need to be at a price point considered too high to alleviate congestion: it is time to question the need for new infrastructure…But when the revenue of the congestion toll could not even cover the debt service of a new infrastructure: it indicates not only there is no need for that, but that it is a bad investment if the matter is to address the congestion. That is eventually what illustrates the table above.

The Pattullo bridge congestion toll needs to be priced at a point where it raises “only” $14 million to alleviate the Congestion on it: the debt service of a new $1 billion bridge could be anywhere north of $50 million…

Where Translink stands?

• Mayors of Metro Vancouver have already spent money on road pricing studies [4]. They are apparently not publicly available, but it is not like there is no material around.
• Some mayors of the region have explicitly called on a road pricing scheme, which is also supported by a host of influential people, like the Translink commissioner Martin Crilly or former premier Mike Harcourt and Dale Parker [5], as well as organization like the Surrey Board of Trade
• Mayors of Metro Vancouver have explicitly expressed the request to fund transit on transportation based revenue source only

Considering this favorable environment for a road pricing scheme.

• Why Translink has been unable to come with nothing better than a $0.02/l gas tax?

It seems the main obstacle to a road pricing implementation strategy is now Translink itself: it should have at least put on the table such an option as a base for discussion.

That could help to clarify all the points raised in this blog, eventually debunks some myths …but unfortunately it is not the route chosen by Translink so far…

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[1] this number could look suspicious, since pretty much at odd with the one provided by Statistic Canada, but it is the one used by our government to justify investment in road infrastructure ( Canada pacific’s gateway ) which not only include time lost in congestion but also extra burnt fuel and cost of GHG, so it is only fair to use the same metric.

[2] The introduction of the congestion charge in Stockholm has translated in an increase of 5% of transit usage ( Transport planning in the Stockholm Region, Hans Hede, METREX International workshop, Moscow, June 2006 ), but the modal split was already at 30% for public Transit. It is at 16.5% in metro Vancouver.

[3] That is at least the opinion expressed by the Mayor of Richmond.

[4] GVRD votes to continue study of road tolls, The Province, February 25, 2007

[5] Opportunity for Metro Vancouver transit foundation is now, Mike Harcourt and Dale parker, Vancouver Sun December 7, 2010

[6] Traffic to downtown and traffic on Metro Vancouver’s bridge

[7] The London congestion charge: a tentative economic appraisal, R. Prud’homme and J.P. Bocarejo, Transport Policy Volume 12, Issue 3, May 2005, Pages 279-287

[8] 29.06c provincial tax including 15c Translink tax + 10c federal tax per liter. number from Ministry of Finance Tax Bulletin as in June 2011

[9] From Freeway to feeway: Congestion pricing policies for BC’s Fraser River crossing, Peter Wightman, Simon Fraser University, 2008

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Some toll economics

…in the context of a congestion charge…

Toll Revenues

They are mostly driven by the price elasticity of demand (PED). In a nutshell, it is about how the demand for a service (here road access) is affected by a price change.
The greater the decrease in demand for a given price increase, the greater the elasticity will be.

It is an important concept since it can allow to estimate what should be the price of a toll to reduce the congestion to a certain level or what could be the revenue of a tolled infrastructure at a given price.

It is a common occurrence to see the PED under estimated: it has been under estimated in London, in Stockholm, on the Golden Ears Bridge as well as on most of the tolled urban road infrastructure around the world.

According to [5], the elasticity to a congestion charge has been notoriously under estimated by the MOT in the case of Port Mann bridge study. One reason here like elsewhere is that the lower the elasticity is, the easier it is to justify a new infrastructure…while the greater the elasticity is, the lower the congestion charge need to be to address the congestion (or the more difficult it will be to charge high price on a new tolled infrastructure).

That is, the common denominator is that usually a congestion charge scheme is successful at achieving its main goal of reducing the congestion, but that also means it yield usually to less revenue than expected. Here after are some elasticity numbers. the bigger (in absolute), the easier it is to reduce congestion

Study	Estimate	Comment
Vancouver 2008 study [5]	-0.25	Public transit as in 2008
Vancouver 2006 study [3]	-0.32	from survey (variance -0.23 to -0.41)
Seattle [4]	-0.9 to -1.6	from a pilot project (2003-2005)
Toronto 407 ETR [5]	-0.7
Spain [5]	-0.2	Congested bridge
France Expressway	-0.3	Government recommendation
New York bridge [5]	-0.1	Average parking price in Manhattan is $431/month
Singapore cordon [5]	-0.19 to -0.58	average tax on car purchase is S$45,000 (~$37,000)
London Congestion area [4]	-0.53 to -0.96	computed on the initial £5

Operation cost

A toll system incurs some operating, maintenance and capital cost. Usually it is a reason advanced to not implement it:
“the most part of the revenue could be absorbed by the operating cos of the system”, and skeptic people will advance the case of London [9][10]. figures hereafter show that doesn’t necessarily need to be the case, like Stockholm or Singapore examples show

City	Capital cost (M)	Operating&maintenance cost (M)	Revenue (M)	Gantries	Transponders
London [4]	$180	$150	$280
Stockholm [4]	$150	$26	$120	18	unknown
Singapore [6]	$116	$10	$90	45	700,000
Golden Ears Bridge [1]	$60 (8 years)			1	5,000
Port Mann Bridge [2]	$18 (5 years)		NA	1	200,000

But if we talk more of road pricing today than yesterday, it is not because there is more congestion today than yesterday but because it is dramatically much more cheaper to implement it nowadays.

Below are the answers to a recent procurement to equip a HOT lanes on the I85 by the Georgia DOT the terms of the contract being [7]

• 410,000 sticker tag transponders ( 350,000 regular interior windshield tags + 60,000 external readers at 37 gantry locations
• 37 readers at 37 gantrries location

Bidders	TransCore	neology	SIRIT	Kapsch
Transponders	1,005,300	1,076,500	1,697,500	8,680,000
RFID Reader Subsystems Equipment	134,665	175,299	297,66	1,600,975
Support Service	22,400	28,000	34,000	22,086
Total Bid Pric	1,165,235	1,279,799	2,019,163	10,303,061

Detail of the Transcore winning bid shows that the contract is based on

• $1.59 per sticker tag transponders [8]
• $3000 per RFID reader and matching antenna

What seems costly is the video identification (not included in the procurment above), but when a sticker (transponder) can cost as low as $1.59, one has to consider the alternative to outfit the whole vehicle park of its jurisdiction with it

That is what has been done in Singapore. Metro Vancouver is not a city state, but 65% of the BC vehicles are registered in Metro Vancouver and Vancouver could be considered isolated enough of out of Province road access, to make this option certainly worth of consideration for the whole province park.

Effect of the Congestion charge

By virtue of the PED, it reduces the congestion and make trip more predictable, for the remainding users, so those get some value (in time) for the toll.

That applies on Transit as well. bus speed has increased by 6% in London congestion charge area, and 3% in the surrounding (notice that is including an increasing dwelling time due to significant higher patronage, and previously existing bus lanes) [4], but more important is the very significant increase in reliability allowing the agency to reduce lay over and realize significant operating saving.

The shift on public transit can be very significant (numbers from [4])

• In London, the bus service got a 37% patronage increase in the congestion charge area (notice that people also shift from subway to bus, eventually due to more attractive bus ride which became more predictable and faster after the CG came in service).
• In Stockholm, patronage has increased 5% network wide, in a city already having a high modal split in favor of transit (30% trip on transit region wide [11])

Thought that could be the goal of the policy maker, the shift on the public transit system could be a cause of headache if he is not designed to absorb the increased patronage. In Stockholm, the introduction of the congestion charge has been coupled with a significant increase in the public transit offer.

The congestion charge in addition to reduce traffic, has also allowed to increase the road safety wherever applied, and obviously reduced the pollution and inherent health hazard due to it [4]

All in one, though initially not necessarily well received by the opinion, the congestion charge, wherever applied long enough, has sustained the test of time, and greater acceptance by the public [4], that eventually in recognition of the social benefits it is able to deliver.

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[1] Open road tolling for BC Golden Ears Bridge – $60m contract TOLLROADSnews, feb 05, 2007.

[2] CS signs $18m toll system contract with BC gov toiler for Mt Mann Hwy 1 AET TOLLROADSnews May 11, 2010.

[3] “Estimating commuter mode choice: A discrete choice analysis of the impact of road pricing and parking charges“, K. Wasbrook, W. Haider and M. Jaccard, Transportation (2006) 33:621–639.

[4] Road Congestion Pricing In Europe: Implications for the United States H. W. Richardson and C. H. C. Bae , Edward Elgar Publishing, 2008.

[5] From Freeway to feeway: Congestion pricing policies for BC’s Fraser River crossing, Peter Wightman, Simon Fraser University, 2008.

[6] Road Pricing Volume 9, Theory and Evidence, Georgina Santos, Elsevier 2004.

[7] TransCore win GA/I-85 HOT lanes tag-reader contract with $1.59/tag 6C GEN2 TOLLROADSnews, Sep 16, 2009.

[8] For matter of comparison, Translink leases Golden Ears bridge transponder at $1 per month

[9]Without denying the efficiency improvement, in direct economic term as well as in more indirect term (pollution…), some experts consider that those efficiency gains or social benefit, are not enough to offset the operating cost of the system [10]

[10] The London congestion charge: a tentative economic appraisal, R. Prud’homme and J.P. Bocarejo, Transport Policy Volume 12, Issue 3, May 2005, Pages 279-287.

[11] Transport planning in the Stockholm Region, Hans Hede, METREX International workshop, Moscow, June 2006