Value Pricing for Transportation in Washington, D.C. Martin Wachs, Director Institute of Transportation Studies University of California, Berkeley

What is Value Pricing?  Use of prices, charges and fees for traveling in order to produce needed revenue and simultaneously to influence travel behavior so that travelers make decisions that use highway & transit systems more efficiently and equitably

Value Pricing in Transportation is Not New  Toll Roads in US  Used Extensively by Air Lines  Already Exists to Some Extent on Public Transit  In Use in Singapore, Five Cities in Norway, California, and London  Historically, Was Preferred to the Gas Tax; Second Best approach was adopted

Value Pricing Works…Evidence from Parking  Employer-Paid Parking is Very Common in US  Ten Mile Journey = Twenty Mile Round Trip  Roughly One Gallon of Gas  If Parking Costs More than Two Dollars/Day, Employer-Paid Parking is Worth more than Free Gas

Average Among Seven Cases in USA & Canada Drive Alone Share to work: 67% when employer pays for parking 42% when worker pays for parking Cars Driven to Work per 100 Employees: 72 when employer pays for parking 53 when worker pays for parking

8 Cases of Parking Cashout in Santa Monica, California  Cars Driven alone to work: Before = 75%; After = 63%; Difference = 13%  Vehicle Trips per employee per day: Before = 0.82; After = 0.73; Difference = 11%  VMT per Employee per year: Before = 5,348; After = 4,697; Difference = 12%

Value Pricing is No Panacea; but Better than Many Alternatives  Construction of Many New Expressways which are not priced?  Construction of Rail Lines; Expensive?  Command & Control Measures? Rules like Truck Restrictions Odd/Even Rationing Converting Lanes to HOV Use (Heavy Fines and Police Requirements)

Pricing Is Better Because:  It allows travelers more choices, not fewer  Complements Land Use Policies  Allows Highway & Transit to be Managed Rationally & Systematically Together  Produces Needed Revenue while Managing Traffic Flow More Effectively

But is Value Pricing Equitable?  Compared with what?  Are higher fuel taxes and traffic jams MORE equitable?  Many alternatives are less equitable on their face…..sales taxes?  Depends on the use of the revenues?  Equity can be a red herring/ Ask who is complaining

Value Pricing Needed As a Source of Revenue Motor Fuel Taxes are falling short as a source of revenue Resistance to Raising Motor Fuel Taxes DOES NOT Eliminate the Need to Finance Highways and Transit The Alternatives, Like Voter-Approved Sales Tax Measures, Are Less Equitable and Less Efficient

Motor Fuel Taxes  Usually expressed as “Cents per Gallon”  Must be raised by act of legislature  Revenue does not rise automatically with inflation as does income tax or sales tax  Improving Fuel Economy lowers revenue per mile of driving  Revenue declining precipitously in relation to VMT

Fuel Tax Changes,  Average of Fifty States  State Fuel Tax in 1957: 5.7 cents/gal  If adjusted for inflation to 2002: 31.0 cents/gal  Actual current fuel tax: 20.3 cents/gal  Difference: 10.7 cents/gal

Change in Combined State & Federal Fuel Taxes  Change from 1957 to 2002 in Constant 2002 Dollars per VMT: District of Columbia: -38.4% Maryland: -32.8% Virginia: -42.4%

But Costs Keep Rising  Engineering Newsrecord General Construction Cost Index Increased During Same Time Period ( ) by: 807 %

Quiet Revolution Under Way  State legislatures reluctant to raise user fees  Increasingly reluctant to directly raise fees or taxes at all  Putting measures on ballot for voters to enact instead of taking action in legislatures

Changes in State & Local Transportation Revenue,  Billion$/Year % Change  State User Fees %  Local Property Taxes %  Local General Funds %  Other State Taxes %  State/Local Sales Taxes %  State Borrowing %

Change is Happening Quickly  44 Transportation Finance Ballot Measures in the US in Calendar Year 2002  32 Local or Regional 9 Statewide  20 Dealt with Sales Taxes  5 Property Taxes 1 Gasoline Tax  9 Bond Issues  Just about half passed and half failed

Change in Direction of Unsustainability  Sales Taxes is Less Equitable  Reduces incentives to use system efficiently  No penalty for creating congestion or using resources  No linkage between use of system and payment for it  Borrowing requires other tax increases later

Counter-trend Also Underway in US and Elsewhere  Electronic Toll Collection on Bridges and Tunnels; Suggests principal means of charging for transportation after fuel tax fades away  Using GPSS and Monitors in Vehicles to Levy Tolls Based on Time and Place of Use  Introduction in USA of Projects and Programs based on User Fees which contribute to sustainability

Examples of Fees & Charges Contributing to Sustainability  Florida Toll Road Policy  HOT Lanes in California: SR91 and I-15 Have Proven Extremely Popular Among Users  Truck Use Fees in Holland, Germany, and other European Countries  Congestion Pricing in London leading to a change in Attitudes among Politicians

Concluding Remarks  Legislators and Transportation Interest Groups (e.g. Trucking Associations, Automobile Clubs) after years of opposing increased use of prices, fees, and charges to promote sustainability seem to be more accepting of the concept.  Promoters of these Concepts Need to Act Now