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January 2001
Speakers say value pricing could ease Twin Cities congestion
The annual cost of road congestion in the Twin Cities tops $1 billion in lost time and wasted fuel, equivalent to $900 per driver. Value pricing, in which drivers are charged relatively higher prices for travel during peak demand periods, is one technique that many states and cities are beginning to explore as an effective response.
Speakers from across the country discussed value pricing and other market-based solutions at a conference November 28-29 titled "Congestion in the Twin Cities: Who's Paying the Price?" Sponsors were the U.S. Department of Transportation, Federal Highway Administration, and the State and Local Policy Program (SLPP) at the University's Humphrey Institute of Public Affairs. Cosponsors included Mn/DOT, CTS, and the Metropolitan Council.
The principal moderator of the event was Lee Munnich, director of SLPP. He introduced Patrick DeCorla-Souza, team leader of Highway Pricing and System Analysis at the FHWA, and Adeel Lari of Mn/DOT's Office of Alternative Transportation Financing, for welcoming remarks. DeCorla-Souza explained that it costs millions of dollars to add a lane mile of freeway—an average of 15 to 25 cents per mile for vehicles traveling in peak hours. However, people actually pay only about 2 cents per mile (in fuel tax) to use that freeway. "Clearly, there is a grave disparity—an imbalance—between what people pay versus what it actually costs to provide that supply," he said.
Keynote speaker Matthew Kitchen called conventional road finance a death-spiral. "We levy a low charge on all mileage, creating excessive congestion during peak periods." The congestion prompts road authorities to build, but the low charges cannot cover the costs. Value pricing stops the death-spiral, said Kitchen, senior researcher with Puget Sound Regional Council. Charges are levied selectively on certain vehicle miles, effectively controlling congestion during peak periods. Value pricing also generates the revenue to build capacity when it's really needed.
Next was a panel moderated by Kenneth Buckeye of Mn/DOT's Office of Alternative Transportation Financing and featuring Carl Ohrn of the Met Council, State Senator Sandra Pappas, and Randall Halvorson of Mn/DOT's Program Delivery Group. Halvorson stated that value pricing has been a tough sell in this region, even in highly congested areas. He reiterated his desire to continue the value-pricing dialog in Minnesota and show the motoring public the benefits.
Ohrn discussed some of his office's key transportation directions, including a goal to double the capacity of the metro bus system by 2020. Predictions are that the Twin Cities will see a loss of mobility even after making transit investments of about $3 billion. This loss of mobility will become a major economic issue, he said.
Pappas stated that the legislature is now looking at pricing alternatives that include toll financing, mileage-based taxes, and congestion pricing. The legislature is also investigating property-based revenue sources such as transportation benefit districts, transportation utility charges, parking taxes, and impact fees.
The next session was a roundtable discussion with representatives of value pricing projects in California, Florida, and Texas. The speakers reported that pricing works'travel behavior can be changed and revenue generated to solve supply issues.
The first afternoon panel was moderated by Robert Johns of CTS and opened by Barry Ryan of Applied Economics, who reviewed his research for the Transportation and Regional Growth Study. David Forkenbrock of the University of Iowa's Public Policy Center then introduced a flexible new approach to charging road users that could replace the motor fuel tax. "Our research is based on the fact that intelligent transportation systems (ITS) will be a big part of user-based financing in the future," Forkenbrock explained. (This research is part of a pooled-fund study with the Center's ITS Institute and seven other states.) His proposed system would use global positioning systems (GPS) to levy user charges. Computers would integrate information to create a log of road use. Data would be downloaded periodically and customers would get a billing statement based on actual travel. The advantage of a GPS-based approach is that user charges could match the actual road damage caused, he added.
Munnich then gave some background on the Minnesota Value Pricing Study under way by SLPP, which includes research, education, and outreach elements. "This workshop is part of the outreach." The team is creating a value pricing task force and is looking for volunteers. For additional information on the project, visit www.valuepricing.org.
The next panel, moderated by Allen Greenberg of the FHWA, was on complementary market-based approaches. Robert McMillan of Progressive Casualty described his company's pay-as-you-drive insurance program. Rolled out in Houston, the program features an on-board system that records a car's location every six minutes. The customer gets a monthly bill based on mileage and time of day driven. He gave an example of two pilot "customers" who lived next door to each other who had the same insurance profile and traditionally paid the same insurance rates. With the pay-as-you-drive program, one of these customers saves 40 percent. About 65 percent of insured drivers would save money on a per-mile system, McMillan said, because with traditional insurance systems low-mileage drivers subsidize those who drive more. One unanticipated finding is that inner city participants save the most money. Traditionally, this group pays the highest theft rates, but under a pay-as-you-drive plan, they save money because they generally have a shorter commute. Progressive has reported high customer satisfaction with the program.
David Van Hattum of the Downtown Minneapolis Transportation Management Organization then talked about parking pricing issues. The problem? Parking is often employer paid. "Thus—if you build it—and give it away—they will drive alone." Van Hattum offered these policy recommendations: prohibit public parking subsidies; expand the state transit tax credit to include "cash-out" for employees who use transit; discourage private parking subsidies; and create smart growth incentives to discourage overbuilding of parking in suburban locations.
Next, Rebecca Dennison of the U.S. Environmental Protection Agency/Duke University talked about converting vehicle ownership costs from fixed to mileage-based. More than 80 percent of the costs of owning and operating a vehicle are fixed. Once a person has chosen to acquire a vehicle, there is typically little financial incentive not to use it heavily. Automotive leasing and taxation are promising places to look for converting some fixed vehicle costs to pay-per-mile, thereby financially rewarding consumers for reducing their driving and related congestion and vehicle emissions, she said.
The closing panel, moderated by Lyle Wray of the Citizens League, was titled "Setting an Action Agenda: Local Officials Panel." Roy Terwilliger, assistant minority leader with the Minnesota State Senate, noted that even as Minnesota continued to generate budget surpluses, infrastructure was neglected. He wants to keep working on a permanent source for transportation funding. "We went backwards when we lowered license tabs because we didn't put in place a permanent source," he said. "Second, if we are to start using value pricing, carpools, etc., we need to provide the means for that to occur. We need to make it possible that you can actually get someplace, and right now it isn't working. There's no alternative for people other than to get into their car. "
Phil Riveness of the Met Council pointed out that Twin Cities residents rate congestion as their top concern. "Clearly, managing congestion needs to take on a different tone," Riveness said. "I think that our goal to double transit needs to be more than that if it is to work." Riveness also feels that parking is another area to investigate. "I think we need to look at a parking tax, or maybe assess all parking spaces but forgive that dollar for dollar for alternatives employers would put in place."
David Schaaf, mayor of Oak Park Heights, feels there is incredible ignorance regarding transportation. "Frankly, it's the system we've set up. There are mathematical equations that are in the constitution on how we spend transportation funding. The public sees that we have surplus, and sees government trying to raise the gas tax. It doesn't make sense to the public." In general, Schaaf said, local communities can participate intelligently in the transportation issues. He also encouraged Mn/DOT to work more closely with the private sector.
CTS is creating a proceedings of this workshop; check the Report and the Web for availability.