    Reducing Congestion: Congestion Pricing Has Promise for Improving
    Use of Transportation Infrastructure (06-MAY-03, GAO-03-735T).

    The nation's transportation systems have become increasingly
    congested, and pressure on them is expected to grow substantially
    in the future. Most transportation experts think a multifaceted
    approach is needed to address congestion and improve mobility.
    One potential tool is congestion pricing, that is, charging users
    a toll, fee, or surcharge for using transportation infrastructure
    during certain peak periods of travel. Pilot projects to test
    this approach are currently under way in the United States and
    the technique has been used more extensively abroad. Interest in
    the usefulness of congestion pricing has been growing, as
    evidenced by several recent proposals. However, there have also
    been concerns raised about the fairness of such practices to some
    users of transportation systems. GAO was asked to identify (1)
    the potential benefits that can be expected from pricing
    congested transportation systems, approaches to using congestion
    pricing in transportation systems, and the implementation
    challenges that such pricing policies pose, and (2) examples of
    projects in which pricing of congested transportation systems has
    been applied to date, and what these examples reveal about
    potential benefits or challenges to implementation. This
    statement is based on prior GAO reports and other publicly
    available reports.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-735T
        ACCNO:   A06829
      TITLE:     Reducing Congestion: Congestion Pricing Has Promise for
    Improving Use of Transportation Infrastructure
         DATE:   05/06/2003
      SUBJECT:   Prices and pricing
    	     Program evaluation
    	     Public roads or highways
    	     Transportation research
    	     User fees

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    GAO-03-735T

    Testimony Before the Joint Economic Committee U. S. Congress

    United States General Accounting Office

    GAO Not to Be Released Before 10: 00 a. m. EDT Tuesday, May 6, 2003
    REDUCING CONGESTION

    Congestion Pricing Has Promise for Improving Use of Transportation
    Infrastructure

    Statement for the Record of JayEtta Z. Hecker, Director Physical
    Infrastructure Issues

    GAO- 03- 735T

    Congestion pricing can potentially reduce congestion by providing
    incentives for drivers to shift trips to off- peak periods, use less
    congested routes, or use alternative modes, thereby spreading out demand
    for available transportation infrastructure. Congestion pricing also has
    the potential to create other benefits, such as generating revenue to help
    fund transportation investment. Possible challenges to implementing
    congestion pricing include current statutory restrictions limiting the use
    of congestion pricing, and concerns about equity and fairness across
    income groups. In theory, equity and fairness concerns could be mitigated
    depending on how the revenues that are generated are used.

    Evidence from projects both here and abroad shows this approach can reduce
    congestion. Such projects have also shown they can generate sufficient
    revenue to fund operations* and sometimes fund other transportation
    investment as well. However, projects were not necessarily able to
    demonstrate benefits for the full range of transportation users. For
    example, those who were able to use the special freeway lane saw a
    decrease in travel time. But, in some cases, there was little systemwide
    reduction in travel times, and congestion increased on alternative routes.
    Nonetheless, there is some evidence that equity and fairness concerns can
    be mitigated. Some projects have

    shown substantial usage by low- income groups, and other projects have
    used revenues generated to subsidize low- cost transportation options. In
    addition, some recent proposals for refining congestion- pricing
    techniques have incorporated further strategies for overcoming equity
    concerns. For example, the Fast and Intertwined Regular (FAIR) lanes
    proposal in New York suggests crediting users of the non- tolled lanes to
    partially pay for them to use public transportation, or to use the express
    lanes on other days.

    On this highway in Orange County, California, a pilot project allows
    drivers to pay a toll to use newly added express lanes.

    The nation*s transportation systems have become increasingly congested,
    and pressure on them is expected to grow substantially in the future. Most
    transportation experts think a multifaceted approach is needed to address
    congestion and improve mobility. One potential tool is congestion pricing,
    that is, charging users a

    toll, fee, or surcharge for using transportation infrastructure during
    certain peak periods of travel. Pilot projects to test this approach are
    currently under way in the United States and the technique has been used
    more extensively abroad. Interest in the usefulness of

    congestion pricing has been growing, as evidenced by several recent
    proposals. However, there have also been concerns raised about the
    fairness of such practices to some users of transportation

    systems. GAO was asked to identify (1) the potential benefits that can be
    expected from pricing congested transportation systems, approaches to
    using congestion

    pricing in transportation systems, and the implementation challenges that
    such pricing policies pose, and (2) examples of projects in which pricing
    of congested transportation systems has been applied to date, and what
    these examples reveal about potential benefits or challenges to
    implementation.

    This statement is based on prior GAO reports and other publicly available
    reports.

    www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 735T. To view the full
    statement, including the scope and methodology, click on the link above.
    For more information, contact JayEtta Hecker at (202) 512- 8984.
    Highlights of GAO- 03- 735T, a statement

    for the record to the Joint Economic Committee, U. S. Congress

    May 6, 2003

    REDUCING CONGESTION

    Congestion Pricing Has Promise for Improving Use of Transportation
    Infrastructure

    Page 1 GAO- 03- 735T Reducing Congestion Mr. Chairman and Members of the
    Committee: We appreciate the opportunity to offer this statement for the
    record about

    the role that charging fees for the use of congested transportation
    infrastructure can play in improving mobility in our nation*s
    transportation systems. There is widespread agreement that mobility is
    essential for a strong economy. It provides people with access to goods,
    services, recreation, and jobs; it provides businesses with access to
    materials and markets. It also promotes the movement of personnel and
    material to meet national defense needs. However, our transportation
    systems* for surface, maritime, and air transportation* have become
    increasingly congested. By some measures, for example, overall roadway
    congestion has increased more than 50 percent between 1982 and 2000 in
    some of the largest

    metropolitan areas. Congestion results in significant costs to the
    environment through increased pollution, and to individuals and businesses
    through wasted energy, time, and money.

    In recent reports covering all three of these transportation systems, we
    have analyzed ways to make these systems operate more efficiently*
    including ways to do so without major new capital investment. 1 One such
    approach involves congestion pricing* that is, charging a higher price to
    use the system during peak periods or on congested routes. Doing so

    provides incentive for users to shift to less congested times or make
    other adjustments. Those who value the service enough will pay the
    additional price; those who value it to a lesser degree will shift their
    use accordingly. Currently, there is renewed interest in the role that
    congestion pricing can

    play in enhancing mobility, as evidenced by several recent proposals to
    institute pricing policies from industry, interest groups, and the
    Department of Transportation.

    My statement for the record is meant to provide some overall perspective
    on what we have learned about congestion pricing. It addresses (1) the
    potential benefits that can be expected from pricing congested
    transportation systems, approaches to using congestion pricing in
    transportation systems, and the implementation challenges that such

    1 U. S. General Accounting Office, Surface and Maritime Transportation:
    Developing Strategies for Enhancing Mobility: A National Challenge, GAO-
    02- 775 (Aug. 30, 2002);

    Marine Transportation: Federal Financing and a Framework for
    Infrastructure Investments, GAO- 02- 1033 (Sept. 9, 2002); National
    Airspace System: Long- Term Capacity Planning Needed Despite Recent
    Reduction in Flight Delays, GAO- 02- 185 (Dec. 14, 2001).

    Page 2 GAO- 03- 735T Reducing Congestion pricing policies pose, and (2)
    examples of projects in which pricing of congested transportation systems
    has been applied to date, and what these

    examples reveal about potential benefits or challenges to implementation.
    My statement today is based in large part on our prior work in all three
    types of transportation systems. We have also gathered additional
    information by reviewing publicly available reports on a number of
    projects that are part of the Federal Highway Administration*s Value
    Pricing Pilot Program, a program that funds projects that demonstrate the
    potential of congestion pricing to address congestion problems, and on
    selected projects in other countries.

    In summary:  According to several reports from the Transportation
    Research Board and

    others, applying congestion- pricing methods to our nation*s
    transportation systems could have potential to help reduce congestion and
    enhance mobility by providing incentives to shift travel to off- peak
    periods or less congested routes, thereby more efficiently using
    transportation infrastructure. Congestion pricing also has the potential
    to create other benefits, such as generating revenue to help fund
    investment in transportation systems directly from users. While there are
    a number of potential benefits, implementing pricing methods for our
    transportation systems faces numerous challenges. Opportunities to pursue
    congestion pricing are limited because of current statutory restrictions
    limiting the use of congestion pricing and concerns about equity and
    fairness. For example, federal statutes restrict the charging of tolls on
    interstate highways, except where tolls previously existed or where
    exceptions have been made for pilot projects. Concerns about equity center
    around the

    effect that congestion pricing may have on lower- income groups. The
    economics literature suggests that these concerns can be mitigated
    somewhat because all income groups could conceivably benefit from
    congestion pricing, depending on how the revenues generated are used.

     A number of congestion pricing projects are in place in surface and air
    transportation systems, both here and abroad. For the most part, they
    demonstrate that congestion pricing can be successful in generating
    greater economic efficiency and reducing congestion within transportation
    systems. Pricing projects have also successfully shown that they can
    generate revenue sufficient to fund their operation and, in some cases,
    fund the operation of additional transportation projects as well. For
    example, in San Diego, where users pay a toll to use a less crowded
    freeway lane, some of the revenues are used to operate a new express bus
    service, providing commuters with more travel options. However, in at
    least one circumstance, congestion pricing was not as effective in
    reducing

    Page 3 GAO- 03- 735T Reducing Congestion travel during peak periods,
    either because travelers had little or no choice other than to travel at
    peak times or on peak routes, or the congestion toll was set too low to
    influence demand. Projects were also not necessarily

    able to demonstrate benefits for the full range of transportation users.
    For example, those who were able to use the special freeway lane saw a
    decrease in travel time, but in some cases there was little systemwide
    reduction in travel times, and congestion increased on alternative routes.
    Nonetheless, there is some evidence that equity and fairness concerns can
    be mitigated. Some projects have shown substantial usage by low- income
    groups, and other projects have used revenues generated to subsidize
    lowcost

    transportation options. In addition, some recent proposals for refining
    congestion- pricing techniques have incorporated further strategies for
    overcoming equity concerns. For example, the Fast and Intertwined Regular
    (FAIR) lanes proposal in New York suggests crediting users of the non-
    tolled lanes to partially pay for them to use public transportation, or to
    use the express lanes on other days.

    Major capital investment in highways, public transportation systems,
    waterways, and airports are currently funded, in part, through various
    taxes and fees on users, such as fuel taxes or sales taxes; landing fees
    and docking fees; and tolls on certain roads, tunnels, and bridges.
    However,

    these revenue- raising instruments do not always provide strong incentives
    for efficient use of transportation infrastructure. For example, the tax
    rates on gasoline, which are the same regardless of whether vehicles are
    traveling during congested or uncongested periods, provide no incentive
    for travelers to use the infrastructure more efficiently. Similarly,
    landing fees at airports that are based on aircraft weight help create
    incentives for

    airlines to shift to smaller, lighter aircraft providing more frequent
    service, which results in increased demand for runways at peak times and
    therefore increased congestion.

    Due in part to increasing volumes of traffic, as well as these built- in
    disincentives to the efficient use of the transportation infrastructure,
    congestion on our nation*s highways, airways, and waterways remains a
    national problem. On already crowded roadways, passenger vehicle travel is
    expected to grow by almost 25 percent this decade, and freight movement by
    trucks may grow by a similar amount. In the nation*s air transportation
    system, before the terrorist attacks on September 11, 2001, an
    unprecedented number of delays in commercial airline flights

    occurred* a substantial part of which were due to airport and airspace
    congestion, particularly during peak morning and evening hours. At 31 of
    the nation*s busiest airports, 28 percent of the domestic flights arrived
    late Background

    Page 4 GAO- 03- 735T Reducing Congestion in 2000. While flight congestion
    declined significantly with reduced traffic after the attacks, a more
    robust economy and less public apprehension

    about flying will likely lead to renewed demands on the air transport
    system. At locks on our inland waterways and at major seaports, congestion
    has also been growing. For example, the U. S. Army Corps of Engineers
    estimated that 15 key locks would exceed 80 percent of their capacity by
    2020 as a result of the expected growth in freight travel, as compared to
    4 locks that reached that level in 1999, resulting in significantly
    increased delay.

    Numerous methods can be used to address congestion, including building new
    infrastructure, improving maintenance and operation of infrastructure, and
    using the existing infrastructure more efficiently

    through demand management strategies, including pricing mechanisms.
    Experts with whom we talked said that consideration of a full range of
    these methods is likely necessary to ease our nation*s transportation
    congestion. 2 In theory, congestion pricing, as one of these methods, is
    useful for mitigating the delay costs of congestion. If highway, aviation,
    and waterway users were charged extra for peak- hour use, some would shift
    to less busy times, or make other adjustments, thereby alleviating delay
    at the peak periods.

    Many other areas of the economy frequently use peak- period pricing
    mechanisms when demand varies considerably by time of day or season.
    Electricity providers, for example, often charge higher prices at peak
    periods and lower prices when demand is reduced. Other industries with
    common peak- pricing practices include telecommunications, airlines, and
    hotels and resorts. In addition, Amtrak and some transit systems use
    peakperiod pricing.

    2 GAO- 02- 775.

    Page 5 GAO- 03- 735T Reducing Congestion In theory, using congestion
    pricing has the potential to enhance economic efficiency, as well as
    provide other benefits, such as providing market

    signals that can guide capital investment decisions, and generating
    revenue to help fund such investment directly from users of the system. 3
    There are several approaches to implementing congestion pricing on roads

    and at airports. However, incorporating pricing into our transportation
    systems involves overcoming several implementation challenges, such as
    current restrictions on using congestion pricing on our highways and on
    runways, and equity and fairness concerns.

    Economists generally believe that charging automobile, truck, vessel, and
    aircraft operators surcharges or tolls during congested periods can
    enhance economic efficiency by making them take into account the external
    costs they impose on others in deciding when, where, and how to travel. In
    congested situations, external costs are substantial and include

    increased travel time, pollution, and noise. The goal of efficient pricing
    on public roads, for example, would be to set tolls for travel during
    congested periods that would make the price (including the toll) that a
    driver pays for such a trip equal or close to the total cost of that trip,
    including external costs. In theory, these surcharges could help reduce
    congestion and the demand for road space at peak periods by providing
    incentives for travelers to share rides, use transit, and travel at less
    congested (generally off- peak) times or on less congested routes.

    Peak- period pricing may have applicability to other modes as well. For
    example, congestion pricing for using locks on our nation*s inland
    waterways might be a way to reduce delays experienced by barge operators.
    Similarly, congestion pricing at commercial airports* that is, charging
    higher landing fees during congested periods* would cause aircraft
    operators, both airlines and general aviation operators, to consider
    external costs in making their decisions. As a result, there would be
    incentives to shift some operations to off- peak hours or secondary
    airports or to provide the same carrying capacity by operating fewer but
    larger aircraft.

    In addition to increasing the efficiency with which current transportation
    infrastructure is used, congestion charges may be helpful in guiding
    capital 3 For further discussion of the research on congestion pricing,
    see National Research

    Council, Transportation Research Board, Curbing Gridlock: Peak- Period
    Fees to Relieve Traffic Congestion (Washington, D. C.: 1994). Research
    Suggests

    Significant Benefits, but Some Challenges, to Implementing Congestion
    Pricing

    Congestion Pricing May Encourage Greater Economic Efficiency, and Provide
    Other Benefits

    Page 6 GAO- 03- 735T Reducing Congestion investment decisions for new
    facilities. As congestion increases, the delay cost that an additional
    user of the system causes for other users also

    increases. If congestion charges are set such that they reflect external
    costs, then as congestion increases, congestion surcharges will increase.
    Rising surcharges provide signals of increased demand for specific
    increases in physical capacity, indicating where capital investment
    decisions to increase capacity would be most valuable. At the same time,
    congestion charges will provide a ready source of revenue for local,
    state, and federal governments and transportation facility operators to
    fund these investments in new capacity that, in turn, can reduce delays.
    In some cases and over a longer period, in places where external costs are

    substantial, and congestion surcharges are relatively high, this form of
    pricing might influence land- use plans and the prevalence of
    telecommuting and flexible workplaces.

    Congestion pricing could be applied to transportation systems in a variety
    of ways, and there are several possible approaches related to which
    facilities are priced, how the price is set, and how the toll is
    collected.

    In one possible form of congestion pricing for public roads, tolls would
    be set on an entire roadway or road segment during periods of peak use. In
    another form, sometimes known as value pricing, peak- period tolls would
    be set on only some lanes of a roadway, allowing drivers to choose between
    faster tolled lanes and slower non- tolled lanes. High- occupancy toll
    (HOT) lanes, under which drivers of single- occupancy vehicles are given
    the option of paying a toll to use lanes that are otherwise restricted to
    high- occupancy vehicles, 4 are an example of value pricing. Fast and
    Intertwined Regular (FAIR) lanes is a recent proposal that is another
    variation of value pricing. Under the FAIR lanes approach, revenues
    generated from travelers using electronically tolled lanes would be
    transferred to travelers using adjacent non- tolled lanes on the same
    roadway. These transfers would be done through electronic transponders in
    the vehicles using the toll lanes, as well as the non- tolled lanes. Those
    in the non- tolled lanes would receive a credit equal to 25 to 50 percent
    of the

    current effective toll, which could then be used toward public 4 Sometimes
    cars with two riders (including the driver) qualify as high- occupancy
    vehicles, while in other cases more than two riders are needed. Various
    Possible

    Approaches to Setting and Collecting Surcharges Exist

    Approaches for Roads

    Page 7 GAO- 03- 735T Reducing Congestion transportation fares or toward
    the use of the toll lanes on another day. In this way, drivers in the non-
    tolled lanes would receive compensation for the additional congestion that
    may result from increased use of those

    lanes once tolls are placed on other lanes. In a third form of congestion
    pricing for public roads, known as cordon- based pricing, drivers would be
    charged a fee for entering a specific area of a city, such as a central
    business district, at peak hours.

    Two commonly mentioned methods of applying the concept of congestion
    pricing at airports are differential pricing and auctions. Under
    differential pricing, airports would set landing fees higher at times when
    demand for takeoff and landing slots exceeded their availability, and
    lower at other times, in effect applying a surcharge for using the system
    at peak- demand periods. An auction approach would allow airports to
    periodically auction

    a fixed number of takeoff and landing slots* equal to the airport*s
    capacity* to the highest bidders. For example, an airport, in conjunction
    with the Federal Aviation Administration, could determine its per-
    quarterhour takeoff and landing capacity, and a competitive bidding
    process among carriers could determine fees during each period, which
    would also result in surcharges for using the system at peak- demand
    periods.

    Congestion pricing tolls could be levied using either a predetermined or
    variable approach. Under the predetermined approach, drivers would pay
    tolls that are preset and fixed according to the time of day they travel.
    In contrast, under the variable approach, drivers would pay tolls that
    vary according to the level of congestion on an affected roadway. For
    either approach, the amount of the toll to be levied would likely be set
    by state or local officials, or other toll facility operators, based on
    information from

    roadway usage and traveler surveys. The toll structure may also be
    influenced by the judgment of the toll facility operators. These tolls
    could then be adjusted upward or downward based on the use of the toll
    facility in relation to the optimal flow of traffic on the facility.

    Electronic methods of collection from users of public roads offer vast
    increases in efficiency compared to traditional tollbooths, which are
    labor intensive and relatively expensive to operate, and create congestion
    as drivers line up to pay their tolls. And, over the past decade,
    electronic road pricing technology has become more reliable and, as a
    result, more widely Approaches for Airports

    Structuring and Setting the Tolls

    Collecting Tolls

    Page 8 GAO- 03- 735T Reducing Congestion adopted on many toll facilities.
    5 According to a report issued by the Transportation Research Board,
    technologies that are currently used at

    some toll facilities to automatically charge users could also be used to
    electronically collect congestion surcharges without establishing
    additional tollbooths that would cause delays. 6 In application of
    cordonbased pricing, drivers would typically purchase and display permits
    that allow them access to the cordoned section of the city before
    entering. Daily or monthly permits could be differentiated by color and
    shape for easy enforcement.

    One challenge in implementing congestion pricing for transportation
    systems is that, at present, greater use of pricing is limited by
    statutory restrictions. For example, tolls are prohibited on the
    Interstate Highway System, except for roads that already had tolls in
    place before they were incorporated into the system (e. g., the New Jersey
    and Pennsylvania

    Turnpikes) or where exceptions have been made for the implementation of
    pilot projects. 7 Also, there are a variety of statutory restrictions on
    landing fees at airports that can limit use of congestion pricing. Landing
    fees are typically based on aircraft weight and are required to be set at

    levels designed to recover the historical costs of providing landing
    services. Costs imposed by congestion and other externalities cannot be
    considered in the calculation of the cost base and, hence, cannot be

    recovered in landing fees. Congestion fees, as well as most other types of
    fees, are also prohibited on the inland waterways because of the
    Interstate Commerce clause, according to the Army Corps of Engineers.
    Therefore,

    addressing some of these restrictions would be necessary to make greater
    use of congestion pricing.

    Another challenge involves effectively addressing concerns raised about
    equity and fairness. Because of this issue, political opposition to using
    this

    5 Under electronic road pricing approaches, users of a toll facility can
    open accounts of fixed amounts. The account information is stored in
    electronic transponders that drivers mount on their windshields to
    *communicate* with an antenna at a signpost (or mounted on an overhead
    gantry) when their vehicles pass by. User accounts are then automatically

    debited. In case users have insufficient balances in their accounts or
    their transponders malfunction, a video enforcement system automatically
    takes a picture of the offending vehicle. See also David J. Forkenbrock
    and Jon G. Kuhl, A New Approach to Assessing Road User Charges, Public
    Policy Center (Iowa City: University of Iowa, 2002). 6 Curbing Gridlock:
    Peak- Period Fees to Relieve Traffic Congestion. 7 23 U. S. C. S: 301.
    Challenges to

    Implementing Congestion Pricing Include Legal Restrictions and Concerns
    about Fairness and Equity

    Page 9 GAO- 03- 735T Reducing Congestion approach to address mobility
    challenges has been substantial. One equity concern that has frequently
    been raised about congestion pricing of public roads has been the
    potential effects of surcharges or tolls on lower- income

    drivers. Because a surcharge would represent a higher portion of the
    earnings of lower- income households, it imposes a greater financial
    burden on them and, therefore, is considered unfair. 8 The economics
    literature suggests that these concerns can be mitigated to some degree.
    For example, proponents of congestion pricing have noted that all income
    groups could potentially benefit if there is an appropriate distribution
    of the revenues obtained through congestion pricing. These revenues could
    be used to build new road capacity, given back as tax rebates tilted
    toward lower- income households, or used in some other way so that, in
    theory, the net benefits for each income group would exceed its costs.

    Although equity considerations could potentially be addressed by
    constructing a congestion pricing system for roads so that all income
    groups received net benefits, there could still be individuals who would
    be negatively affected. In theory, the cost of a surcharge or toll would
    be less for those who could more readily make adjustments to their driving
    behavior that would allow them to avoid paying the toll. Conversely,
    drivers who had little flexibility to alter their work schedules to avoid
    a toll by traveling at off- peak hours could potentially be more affected
    than workers with such flexibility. Similarly, those whose commuting
    patterns make it harder for them to form carpools or use transit could
    also be more affected.

    The arbitrary nature of these distinctions, as well as opposition from
    those who find the concept of restricting lanes or roads to people who pay
    to use them to be elitist, raises fairness concerns and accounts for some
    of the political opposition to congestion pricing. More generally, there
    is often opposition to paying a charge to use something that was formerly
    provided *free.*

    8 Economists note that even if the burden of congestion charges is greater
    on low- income households, the same is true of fuel taxes, which are
    currently paid by users, and sales taxes, which are paid by users and non-
    users of transportation systems, both of which are

    relied on for transportation investments. For a discussion of equity
    concerns associated with increased use of voter- approved local sales
    taxes to pay for transportation infrastructure, see Martin Wachs,
    Improving Efficiency and Equity in Transportation Financing (Washington,
    D. C.: Brookings Institution, April 2003).

    Page 10 GAO- 03- 735T Reducing Congestion A number of existing congestion-
    pricing transportation projects, both here and abroad, show that pricing
    can influence travelers* behavior to the

    point of reducing congestion and thus increasing economic efficiency. For
    example, value pricing pilot projects in the United States show
    considerable usage and have provided users with a less congested
    alternative, thus improving traffic flows and reducing delays. In
    addition, congestion- pricing mechanisms, in general, have demonstrated
    that they can generate revenue sufficient to fund their operation and, in
    some cases, fund investment in transportation alternatives. The available
    evidence also suggests that implementation challenges can be mitigated,
    although to

    what extent is not yet clear. A number of the congestion- pricing projects
    we identified enhanced transportation mobility through improved traffic
    flows, increased speeds and reduced delays for some users. One way in
    which some projects have done so is by channeling some drivers into
    infrastructure that is not being fully utilized even at peak periods. In
    several locations in the United States, for example, HOT lane projects
    have been implemented in which vehicles with fewer passengers than would
    normally be needed to use high occupancy vehicle lanes have been allowed
    to use such lanes by paying a toll. 9 High occupancy vehicle lanes are
    generally less congested than other highway lanes, and drivers who use
    them are thus able to shorten their trip

    times. The toll for such use varies, increasing during periods of peak
    congestion. In such HOT lane or value pricing projects in Orange County
    (as shown in figure 1) and San Diego, California, and Houston, Texas,
    drivers willing to pay to use the HOT lane saved an average of 12- 20
    minutes per trip in the peak period. In addition, some projects were able
    to shift demand on congested infrastructure to less congested time
    periods.

    In San Diego, officials were also able to spread out peak period traffic
    on the toll lanes over a longer period of time by charging a lower toll
    just before and just after the peak period. 9 Under the Federal Highway
    Administration*s Value Pricing Pilot Program, the restriction on using
    tolls on the interstate is lifted for approved projects. Existing Projects
    Show That Benefits

    Can Result, and Some Evidence Suggests That Implementation Challenges Can
    Be Mitigated

    Projects Provide Evidence of Increased Economic Efficiency

    Page 11 GAO- 03- 735T Reducing Congestion Figure 1: Tolled Lanes on State
    Route 91 in Orange County, California

    In many instances, however, a congested transportation system may have no
    equivalent to a high occupancy vehicle lane with additional capacity. In
    these cases, some other congestion pricing models have been used to
    encourage travelers to shift their behavior, either by traveling at
    another time or by using alternative transportation modes, such as buses,
    trains, or carpools. For example, in Singapore, London, and Norway,
    congestion pricing has taken the form of cordon- based pricing, where
    drivers pay to enter entire regions. These projects have demonstrated
    significant decreases in the level of congestion on roads in the cordoned
    area and some significant shifts to other alternative modes, as follows:

     In Singapore, the city government instituted a $1 charge in 1975 for
    private vehicles to enter the central business district in the morning
    rush hours. Carpools, buses, motorcycles, and freight vehicles were
    exempted from the charge. The result was an immediate 73 percent decline
    in the use of private cars, a 30 percent increase in carpools, and a
    doubling of buses* share of work traffic.

     In London, recent implementation of cordon tolls resulted in traffic
    decreases of roughly 20 percent, and about a 14 percent increase in the
    use of buses during the morning commute.

    Page 12 GAO- 03- 735T Reducing Congestion  In Trondheim, Norway, cordon
    tolls produced a 10 percent reduction in traffic at peak times and an 8
    percent increase in traffic in off- peak times

    in the central business district. Such projects have similarly been used
    to relieve congestion at crowded airports. In one case, the Port Authority
    of New York and New Jersey imposed surcharges beginning in 1968 for peak-
    hour use by small aircraft at Newark, Kennedy, and La Guardia airports.
    These small aircraft, known as *general aviation* aircraft, were not part
    of scheduled airline operations. The need to accommodate takeoffs and
    landings for these aircraft during peak periods was adding to passsengers*
    delays on scheduled airline flights. The port authority raised the peak-
    period minimum take- off and landing fees for aircraft with fewer than 25
    seats from $5 to $25, while keeping the off- peak fee at $5. As a result
    of the surcharges, general aviation activity during peak periods decreased
    by 30 percent. The percentage of aircraft operations delayed more than 30
    minutes declined markedly over the same period. Similarly, in 1988 at
    Boston*s Logan Airport, the Massachusetts Port Authority adopted a much
    higher landing fee for smaller aircraft. Like the three New York and New
    Jersey airports, Logan experienced a large drop- off in use by smaller
    aircraft. Much of the general aviation abandoned Logan for secondary
    airports, and delays at Logan dropped. 10 Proponents of congestion pricing
    have noted that others besides those

    who can afford to pay congestion pricing costs can share in the benefits
    through an appropriate distribution of any revenues generated. A part of
    these revenues will be needed to administer the system* for example, to
    collect tolls. However, existing projects also contain a few examples of
    situations in which the revenues generated from congestion pricing have
    been used to benefit other transportation alternatives. For example, the
    revenue from the HOT lane project in San Diego has been sufficient not
    only to pay for toll takers and other administrative expenses, but also to

    10 These practices in New York, New Jersey, and Boston have since been
    discontinued because of a successful lawsuit brought by small commuter
    airlines and the Department of Transportation. Projects Can Also Provide
    Support for Other

    Transportation Alternatives

    Page 13 GAO- 03- 735T Reducing Congestion fund the operation of a new
    express bus service. This has increased travel choices for all area
    commuters, including lower- income populations. 11 International
    experiences with congestion pricing have been somewhat

    more extensive and revenues generated from congestion tolls have been
    substantial. In Singapore, only about 12 percent of the revenue generated
    from their cordon- based tolls have been needed to cover the costs of
    operation. In Trondheim, Norway, revenues have exceeded capital and
    operating expenses of the toll facility by 5 times. Trondheim*s toll
    facility currently generates about $25 million in profit per year. These
    profits have been used to enhance the capacity of the entire
    transportation system, including financing additional road infrastructure
    as well as subsidizing public transportation facilities and services, and
    pedestrian and bicycle facilities.

    There is some encouraging evidence with regard to mitigating equity and
    fairness issues in implementing congestion pricing, although the extent to
    which these concerns can be mitigated is unclear. At least one project we

    reviewed indicates that implementation of congestion pricing needs to be
    carefully evaluated as an alternative in some circumstances, because it
    provides no automatic guarantee of benefits. In Lee County, Florida, the
    county instituted variable tolls on two bridges based on peak travel
    periods. The county reduced the toll for using the bridges in off- peak
    periods. On one bridge, traffic increased during the off- peak period but
    decreased very little during the peak period. A study from the University
    of South Florida 12 found that peak- period demand for the bridge was not
    as flexible as compared to demand during off- peak periods. That is,
    drivers at peak periods may not have readily available alternatives to
    commute at different times, use a different mode of transportation, or
    take another route, and therefore have little choice but to use the bridge
    during the peak period, or the price of the congestion toll was set too
    low to influence the demand of those users. The example illustrates the
    fact that a pricing mechanism may not be very effective at reducing peak-
    period

    11 A recent proposal for *HOT networks* promotes the use of HOT lanes in
    conjunction with operating bus rapid transit services, utilizing the
    revenues from the toll lanes. For more information, see Robert W. Poole,
    Jr. and C. Kenneth Orski, *Policy Summary No. 305* (Los Angeles, CA:
    Reason Foundation, 2003).

    12 Chris Swenson, Alasdair Cain, and Mark W. Burris, *Toll Price- Traffic
    Demand Elasticity Analysis on Variable Priced Toll Bridges* (Tampa: Center
    for Urban Transportation Research * College of Engineering, University of
    South Florida, July 1999). Extent to Which Equity

    and Fairness Issues Can Be Mitigated Is Not Yet Clear

    Page 14 GAO- 03- 735T Reducing Congestion travel if the price is not set
    properly, or without additional measures that provide travelers with other
    choices. Although the congestion pricing projects we reviewed produced
    little

    evidence of congestion reductions in adjoining lanes or in other
    alternative routes, they also produced little evidence that congestion
    increased in the non- tolled lanes or on alternative routes. For example,
    while the value pricing projects in California and Texas resulted in less
    congested

    alternatives for individuals willing to pay the toll, only one of the
    projects was able to demonstrate any decreases in congestion on the
    remaining *free* lanes of the highway. In Orange County, California, a
    study found that opening two new lanes, which were designated as
    congestion toll lanes, decreased delays on the other *free* lanes from 30-
    40 minutes to about 12- 13 minutes, while traffic remained stable on
    alternative nearby freeways. However, there is also some evidence that
    pricing can increase congestion on alternative routes. In Singapore, where
    the city used cordon pricing, there was deterioration in traffic
    conditions just outside the cordoned area caused by travelers attempting
    to bypass it. Such congestion would adversely impact individuals who do
    not pay the toll or individuals not using the congested facility. However,
    at least one study said that the costs of increased traffic on alternative
    routes did not outweigh the benefits of reduced congestion in the cordoned
    area.

    There are other encouraging signs in relation to distributional impacts
    from existing projects, although there is no conclusive evidence on the
    distributional impacts of congestion- pricing techniques. A report on the
    value- pricing project in Orange County found that there was significant
    usage of the toll facility by individuals at all income levels. This
    demonstrates that low- income individuals also value the time they save,

    and that some value their time enough to be willing to pay a toll that
    amounts to a higher percentage of their income than that paid by
    individuals with greater income. However, in value- pricing pilot projects
    in Orange County, San Diego, and Houston, those using the toll lanes
    tended

    to have higher incomes than those using the adjoining lanes. Experts have
    noted that tolls might become more acceptable to the public if they were
    applied to new roads or lanes as demonstration projects, so that tolls*
    effectiveness in increasing commuter choices could be evaluated. For
    example, in the Orange County pilot project, where two new toll lanes were
    added to the highway, opinion surveys have shown a high rate of public
    acceptance. Other pilot projects in Houston and San Diego have also
    demonstrated public satisfaction. In addition, recent

    proposals, such as FAIR lanes and HOT networks, show promise to further

    Page 15 GAO- 03- 735T Reducing Congestion mitigate equity and fairness
    concerns. FAIR lanes, as previously discussed, and which have been
    proposed in New York, would credit users of the

    adjoining lanes, using revenues generated by the toll lanes, allowing
    those users to use the toll lanes on another day for a reduced or no
    charge. The HOT network proposal couples HOT lanes with bus rapid transit
    initiatives, similar to the experience of the pilot project in San Diego,
    thereby using the revenues from the tolls to broaden the transportation
    alternatives available for all commuters, including lower- income
    populations. Traffic on already congested surface, maritime, and air
    transportation

    systems is expected to grow substantially over the next decade. This
    congestion can be considered a shortage; it occurs when more services*
    from lanes of highway, airport runways, locks on rivers* are demanded than
    can be supplied at a given time and place. A range of approaches and tools
    must be applied to solve the pervasive transportation congestion

    problems that our nation faces in the next decade and beyond. Congestion
    pricing* although only one of several approaches that can be used to
    reduce congestion on our nation*s roads, airways, and waterways* shows
    promise in reducing congestion and better ensuring that our existing
    transportation systems are used efficiently.

    Pilot projects and experiences with congestion pricing abroad demonstrate
    the promise of this approach for reducing congestion and promoting more
    efficient use of transportation systems by users. Despite this promise,
    there continue to be concerns over fairness and equity in the application
    and implementation of congestion pricing, which current

    projects have not fully alleviated. Some proposed projects, such as FAIR
    lanes, which use revenues generated to compensate other users of the
    transportation system, could help alleviate some of the fairness and
    equity concerns that have been raised. Experts suggest and some projects
    demonstrate that public opposition to congestion pricing will lessen as
    these projects show that equity and fairness concerns can be mitigated.
    However, if congestion pricing is to be more widely applied to
    transportation systems, the Congress will need to ease statutory

    restrictions on the use of congestion- pricing applications on
    transportation systems. Concluding Observations

    Page 16 GAO- 03- 735T Reducing Congestion For further information on this
    statement, please contact JayEtta Hecker at (202) 512- 8984 or heckerj@
    gao. gov. Individuals making key

    contributions to this report include Nancy Barry, Stephen Brown, Jay
    Cherlow, Lynn Filla Clark, Terence Lam, Ryan Petitte, Stan Stenersen,
    Andrew Von Ah, and Randall Williamson. Contact and

    Acknowledgments

    (544071)

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