Minnesota DOT Evaluates Promise of Congestion Pricing

Minnesota DOT Evaluates Promise of Congestion Pricing
December 1, 1997

A report from the Minnesota Department of Transportation concludes that presently available electronic technologies would allow converting all 1,200-1,500 miles of congested roads in the Twin Cities to toll roads without the cost and inconvenience of toll booths and toll collectors.

According to David Anderson and Herbert Mohring, authors of Congestion Costs and Congestion Pricing for the Twin Cities, a 1 percent increase in the time-plus-money cost of automobile travel would lead to roughly a 1 percent reduction in the rate at which those trips are taken. If their calculations are correct, tolling all of the Twin Cities roads would reduce traffic volumes by about 12 percent on average, and by about 25 percent on the most heavily congested stretches of freeway. On those stretches, congestion tolls would average about 21 cents per vehicle mile.

Very well-off drivers and commuters who use mass transit would benefit from the faster trips that reduced congestion would provide, and from the increased service frequency that would result from diverting auto travelers to transit. However, note Anderson and Mohring, imposing congestion tolls would make most travelers worst off; they would lose an aggregate of about $250,000 during the morning peak hour and about $1,000,000 daily from the higher time-plus-money prices of trips they continue to take and from foregoing the relatively low-value trips they would no longer make at their new, higher prices.

At the same time, optimal congestion tolls would eliminate those low-value trips, say Anderson and Mohring. As a result, the road network would be used more efficiently. Toll revenues would exceed the direct losses that congestion pricing would impose on travelers. For example, Anderson and Mohring calculate that under their proposal total toll collections would be about $390, 000 per weekday-morning peak hour and about $1,500,000 for the day as a whole. Tolling thus would yield between $1.50 and $1.75 in revenue for each dollar of cost incurred by the average traveler, making it possible to compensate the “losing” travelers fully, with substantial money left over.

Because most travelers would be made worse off, gaining support for congestion pricing from a majority of Twin Cities peak-period travelers will require coupling tolls with a plan for distributing toll revenues in a way that would benefit them more than the tolls would cost them.

If peak hour auto-travel rates are completely independent of travel cost, low-income travelers would have the worst of all worlds. Seeking uncongested routes to avoid tolls would result in their trips becoming so circuitous that they would be burdened not only by tolls, but also by spending more time on the roads then they would in the absence of tolls. Anderson and Mohring estimate that congestion pricing would increase their travel cost by 93 percent, as opposed to 24 percent and 42 percent for the high-income group and all travelers respectively.

The effects of congestion pricing would vary by type of road, according to Anderson and Mohring. Tolling the expressways only would, not surprisingly, shift traffic from them to the surface road network. But even pricing all congested roads would result in greater traffic reductions on the expressways than on surface streets. Anderson and Mohring calculate that if all roads were tolled, expressway vehicle miles would fall by 19 percent; non-expressway vehicle miles would fall by 8 percent.

In no place has a spontaneous groundswell arisen for congestion pricing. In San Francisco and the Twin Cities, claiming that congestion pricing would enhance transportation efficiency or solve a transportation funds shortage generated little enthusiasm for the concept.

Anderson and Mohring suggest that it may still be possible, however, to sell congestion pricing by emphasizing an important implication of its efficiency: getting something for nothing. While their calculations suggest that the immediate effect of congestion pricing would be to make all but a small fraction of the population worse off, they also suggest that tolling the entire road network would generate between $1.50 and $1.75 in revenue for each dollar the travelers would lose. By using electronic technologies that can reduce toll collection costs to a modest fraction of total revenues, sufficient funds ought to be available to compensate losers while leaving substantial resources to finance reduced real estate, fuel, and other taxes as well as transportation projects. Finding such distribution schemes, conclude Anderson and Mohring, should be primary emphasis on congestion-pricing research.

Congestion Cost and Congestion Pricing for the Twin Cities, by David Anderson and Herbert Mohring (August 1996), is available from the Minnesota Department of Transportation, 395 John Ireland Boulevard, Mail Stop 330, St. Paul, MN 55155. [TD100:MN96-32]