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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