Tuesday, July 28, 2009

U.S. DOT Guidance for Road Pricing to Benefit Highway and Transit Users

This is hot off the press from the federal Department of Transportation:
Economics: Pricing, Demand, and Economic Efficiency

The 24 page report can be found here: http://www.ops.fhwa.dot.gov/publications/fhwahop08041/fhwahop08041.pdf

In their words:
The application of tolling and road pricing provides the opportunity to solve transportation problems without Federal or state funding. It could mean that further gas tax, sales tax, or motor vehicle registration fee increases are not necessary now or in the future. Congestion pricing is not a complete plan of action. It has to be coordinated with other policy measures to maximize success.

This volume describes the underlying economic rationale for congestion pricing and how it can be used to promote economic efficiency. It lays out the basic theory of travel demand and traffic flow and shows how inefficient pricing of the road network helps create an economic loss to society, as well as the means by which this can be alleviated through pricing. The impact of congestion pricing on highway infrastructure investment and the revenue implications of congestion pricing will be discussed in a separate volume in this primer series.

Justification as to why road pricing should not be a strange concept since it's already applied in many other areas:

By charging higher rates during high demand periods, proprietors are able to better allocate demand to optimize the utilization of the available capacity.

Examples of such common practices include higher rates for lodging and other amenities in tourist areas during the “high season,” discounts for afternoon showings at movie theaters, and evening and weekend discounts for telephone use. More recently, other industries have moved in this direction, including professional sports teams (which have begun charging more for tickets to more desirable games, reflecting long-standing practices in the aftermarket for tickets) and electric utilities (in which advanced electronic meters now allow usage at different times of day to be recorded).

What are HOT Lanes and why are they "win-win"?

HOT lanes are a special case of tolled express lanes, in which high-occupancy vehicles (HOV; including carpools, vanpools, and transit vehicles) are allowed to use the special lanes for free, whereas low-occupancy vehicles are required to pay a toll to use the lanes.

Because most toll-paying users of the HOT lanes are likely to shift from the other lanes, congestion on these lanes will be reduced and travel times will be improved, whereas existing HOV users will see no reduction in the quality of the service they receive. The result is a pure gain to highway users.

It is important to note that the value of time savings reflects to the total value of all passengers in a vehicle, not just the driver. Thus, some of the highest value trips are likely to be those in buses or other transit vehicles.