Transportation Reform: The Case for Congestion Pricing

The biggest irony about Utah’s most congested traffic corridors is that they experience excess capacity more hours a day than they do congestion. Because many highways suffer congestion each day for about four hours out of 24, many are pushing for increased taxes to fund expanded lanes and new highways to relieve congestion for four hours a day.

Don’t get me wrong, Utah has legitimate highway construction needs, far beyond any present capacity to fund. But much of the congestion relief during peak traffic could be alleviated with incentives for driving off-peak.

As noted in a recent Taxing Times online article by the Utah Taxpayers Association, unless Utah implements major transportation reform, massive tax increases are underway. Election day’s 0.25% sales tax increases in Salt Lake County and Utah County for transit and roads are just the beginning. Unless several reforms are implemented, combined state-local sales tax rates will soon surpass 7% and could even surpass 8%.

State and local officials are already talking about even more tax increases for transportation. One powerful state senator recommends an annual $500 million increase in state sales taxes. One county commissioner mentioned that the equivalent of an additional two percentage points would have to be added to sales tax rates in order to fund transportation.

Transportation is one of Utah’s biggest issues because our economy depends on an effective transportation infrastructure. Unfortunately, the state struggles to fund expansion of transportation infrastructure while trying to avoid massive tax increases in a state that already has one of the highest state/local tax and fee burdens in the nation.

Three reforms in transportation are needed to avoid massive tax hikes: congestion pricing, corridor preservation, and transit/roads prioritization. In a future column I will write about the latter two reforms. Today we’ll discuss congestion pricing.

What is congestion pricing and why is it needed?
Congestion pricing is a form of variable tolling in which the toll increases during the most congested times. For example, a driver would pay more to drive during peak traffic hours but would pay little or nothing to drive during off-peak hours, outside 6:30 to 8:30 a.m. and 4:30 to 6:30 p.m.

Congestion pricing is a means to slow the growth in rush hour vehicle miles traveled (VMT). Peak VMT growth has been exceeding population growth and is imposing a huge burden on our transportation infrastructure. Congestion pricing gives commuters a financial incentive to car pool, telecommute, leave earlier or later, and live closer to work.

In the long run, government will be able to spend less on roads than currently projected if VMT growth is slowed, especially during peak hours.

Since Utah relies heavily on general tax dollars for transportation at the state and local level, Utahns who either live closer to work or car pool are subsidizing those who live further from work and don’t carpool.

Congestion pricing is better than a fixed 24/7 toll because a fixed toll rate does not provide a financial incentive for commuters to leave for work earlier or later. Utah highways have excess capacity for about 20 hours every work day, and congestion pricing provides an incentive for drivers to use highways when roads are not operating at full capacity.

Congestion pricing is also better than simply raising state and local taxes such as sales taxes since sales tax increases do not encourage commuters to change their driving habits.

In FY2007, the state’s transportation budget is more than $1.1 billion. Of this amount, more than $447 million in state general funds are being used for state roads and another $18 million in state general funds are being used for local roads. Prior to the mid-1990s, the state rarely used general fund dollars for transportation. Gas taxes and motor vehicle registration fees funded state transportation projects. While a case can be made for using some state general funds for roads – roads serve a general purpose and using ongoing cash for capital projects is a good year-to-year budget management technique – the state could use state general fund dollars for other purposes, including higher education (which would allow more income tax dollars to be used for K-12 education) or a tax cut if VMT growth is slowed.

Where is congestion pricing being implemented?
Congestion pricing has been implemented on I-15 in San Diego, I-10 in Houston, SR91 in Orange County, London, Stockholm, and two bridges in Lee County, Florida. In most areas, congestion pricing is implemented by having drivers mount a transponder on the dashboard of their car. The transponder communicates with the highway’s communication system. When a driver enters a zone where congestion pricing is in force, the driver’s credit card is billed. Drivers without a transponder are billed using license plate numbers.

Wouldn’t tolling be unfair to the west side?
Congestion pricing should be implemented on all new state roads where congestion justifies it, starting with Legacy Highway in Davis County, followed by Mountain View in Salt Lake and Utah Counties and other highways with congestion. With tolling, Mountain View Highway could be built in 6 years. Without tolling, it may take 30 years or more. Additionally, for those who live near the new highway a limited number of free passes could be available to make it more “fair.”

Current federal law severely restricts implementing congestion pricing on existing capacity that has been funded with federal gas tax dollars. However, that may change, and if that does, then congestion pricing should be implemented on existing roads that experience congestion.

What will happen if we don’t implement congestion pricing?
Massive sales tax increases, motor fuel tax increases, increased congestion, and less money for education will be the consequences if congestion pricing is not implemented.

Proponents of higher tax burdens are well organized and are trying to stop sensible fiscal policies such as congestion pricing. They are lobbying against tax cuts and are lobbying for massive sales tax increases. If Governor Huntsman and the Legislature do not act soon, they’ll be back in five years for another sales tax increase, and the next tax increase will be bigger than the tax increase they asked us to in the November election.