State of the Planet

News from the Columbia Climate School

Congestion Pricing Again

Recently, New York City Mayor Bill de Blasio accepted the reality that his millionaire’s tax was not going to pass and joined Governor Cuomo in supporting congestion pricing to fund most of the capital costs required to rebuild the subway system. In response to the city’s mass transit crisis, the two elected officials finally displayed some real leadership and released a plan to fund and save the mass transit system. The proposal restructures the MTA and includes a variety of revenue streams designed to pay the debt service on about $22 billion of capital funding for mass transit. According to Emma G. Fitzsimmons and Jesse McKinley from the New York Times:

“The two leaders embraced an idea that is popular among subway riders: using revenue from a state tax on cannabis sales in New York City to pay for subway upgrades, which state officials said could generate $125 million per year for the system. A separate tax on purchases like furniture from online retailers could raise an additional $320 million per year. Those two sources could allow the authority to issue bonds to raise $7 billion. Congestion pricing is expected to generate $15 billion, for a possible total of $22 billion in new revenue for the transit system, officials said.”

Since this is New York, easy and rapid enactment of this proposal is unlikely as a group of state legislators from the New York City suburbs conditioned their support for the proposal on funding for suburban commuter train improvements. Senate Majority Leader Andrea Stewart-Cousins supports congestion pricing, but wants the benefits spread around the region.

The funding deal will dominate the politics of mass transit for a while as resources are finally found for the decaying system. Last month an added fee of $2.50 for yellow cabs and $2.75 cars such as Uber and Lyft driving south of 96th street in Manhattan. The fees are supposed to generate about a million dollars a day for mass transit operations.

A goal of all of these fees is to move people from cars to mass transit. The idea is to charge more for driving on the most congested streets in the city and direct those funds to making mass transit more efficient and perhaps even pleasant. This will allow traffic to move faster and will provide desperately needed capital funding for the transit system. One unknown is how much traffic will be diverted and how much funding will be generated. The tax can’t be so high that no one will drive in, since that would eliminate the funding stream. And it can’t be so low that people simply absorb the fee into the already expensive price of living and working around here. That would help the MTA but leave the streets gridlocked. Since the fee will be set by elected officials, you can be sure that the calibration of the fee level will be far from rational and always suboptimal.

Nevertheless, the concept of congestion pricing is the correct one, even if it is applied imperfectly. The congestion pricing concept was developed well over a half century ago by my late Columbia colleague, the brilliant and policy-oriented economist William Vickrey. Professor Vickrey died just days after being awarded the Nobel Prize in economics, and in a New York Times piece written shortly after his death, Janny Scott related the story of how Professor Vickrey developed congestion pricing:

“It was on a weekend trip home to Scarsdale from New Haven by train that one of his most provocative ideas took root. Noticing how many seats were empty, he thought: What a waste. He figured that his fellow students would enjoy a trip to New York in off-peak hours if the railroad would drop the price to fill the seats. Out of that, he said this week, emerged many years later some of his proposals for so-called congestion pricing. If the price of traveling from place to place varied by time of day, toll-booth tie-ups would vanish, subways would run pleasantly full and people would waste less time. In 1959, for example, Professor Vickrey suggested that one way to control traffic in congested cities would be to equip every vehicle with a transponder, then monitor when and how often each vehicle entered and left the congested area and bill the owners for the so-called social cost of their trips. The fees would be highest during rush hour and diminish gradually at other times.  He had little luck, however, getting his ideas enacted.”

Six decades later, Vickrey’s vision may become a reality in his home town. On a more crowded planet, its clear we need to manage our resources more effectively and efficiently. This is a key concept in the growing field of sustainability management. Sustainability managers search for wasted resources, such as empty seats in a moving train, or party clothes worn once and then hung in a closet for a year, or heat vented by a factory when it could be used to warm an apartment building.  Vickrey’s insight was to use price to motivate the behaviors that could make crowded resources less crowded and underutilized resources more fully utilized. In New York City street surface is scarce in the central business district. Congestion pricing is a way to allocate some of that space.

Today, congestion pricing is used to price airline seats, set the cost of an Uber, and caused the MTA to create peak and off-peak commuter train fees. It is an accepted method of using price to motivate behavior. The concept makes sense, and for New York City’s congestion and mass transit crises, I don’t see an alternative. But the local politics of congestion pricing is far from settled in New York City.  One fear is that suburbanites will park their cars in the areas just outside the congestion pricing zone. Another is that elected officials will simply campaign against the new fees because opposing new taxes is always popular.

Until congestion pricing is in place and functioning we can’t be confident that it will find its way through our political process. The difference between today and when Mike Bloomberg first proposed the policy over a decade ago is the Governor and Mayor are in synch and the legislature is controlled by their political party. Another difference is that our population has grown while our mass transit system has gotten more crowded, older and less reliable.  The horrible deterioration of our mass transit system has transformed the politics of congestion pricing. People may not like the tolls, but they know that the subway is a wreck that needs to be fixed.

Transportation is an essential feature of the modern sustainable city. People come to cities to work with, play with, socialize with, and be with other people. They want to interact in-person not via electronic media. That requires transportation. If navigating the transportation system is an ordeal, people will try to avoid it and the city will deteriorate. Mass transit is like the city’s cardiovascular system: it’s heart, blood vessels and blood. The city should be seen as a living organism. If the circulatory system breaks down, the economy and very life of the city is compromised. Congestion pricing is like a medication that moves the system forward. If we wait and fail to take corrective action now, we should expect a breakdown resembling a heart attack and a stroke. We’ve waited six decades to take the congestion medication once prescribed by Dr. Vickrey: Let’s take it now before it’s too late.

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