Opinion: Questioning the Value of Value Pricing
By Adam Cashman
I>Manager of Highway Operations
merican Trucking Associations
Patrick DeCorla-Souza, a policy analyst for the Federal Highway Administration, argued in this space July 15 for a move toward value pricing as a means of reducing and shifting the flow of cars and trucks from highways [Opinion: "A Congestion-Free Alternative for Metropolitan-Area Trucking," p. 9]. While reducing congestion is an admirable goal, value pricing is a questionable way to accomplish it.He asserts that value pricing for roads should be considered in the same category as airline flight prices and hotel rates that vary with the time and season. This is a poor comparison, as those are private goods while roads are public goods, paid for by public tax monies.
Mr. DeCorla-Souza’s analysis is inaccurate in several critical ways. He has analyzed the construction costs of only the most expensive type of highways and assessed the income that might be collected on such a road section by measuring the user fees generated. There are several problems with this methodology.
He uses the revenue generated through fuel, which is only a portion of the user fees collected. He uses a revenue stream for just one year, while the road will be operated for decades without major reconstruction. He includes revenue collected from federal user fees, and excludes state user fee revenue.
Moreover, he has overlooked the fact that there has always been federal support given for urban highways at levels higher than user fees alone.
ne of Mr. DeCorla-Souza’s arguments involves the expense of adding capacity to congested roads. While there is no debate that road building is expensive, so too are the user fees already paid by road users. Those user fees finance a $30 billion-per-year federal highway program; the money does not come from the general fund of the Treasury.
Mr. DeCorla-Souza also claims that “more lanes bring more traffic.” That could appear to be simply because this country has habitually added capacity at a rate far less than driver population or vehicle-miles traveled have grown. This has given rise to an ever-increasing gap between transportation needs and highway space. The phenomenon Mr. DeCorla-Souza has witnessed may be the result of such long-term underinvestment in new capacity that there is a preexisting demand for new roads. They therefore become quickly congested.
Mr. DeCorla-Souza asserts that “introducing value pricing on the added lanes brings transportation supply and demand into balance.” This statement fails to acknowledge that the laws of supply and demand are in balanced operation on our nation’s highways.
The currency is time rather than dollars. If he expects a radical transformation in people’s travel patterns simply because the currency being charged commuters is dollars instead of hours, I think he is mistaken. That would just cause a further shift of monies from drivers to toll-collecting authorities, and that doesn’t even take into account the pricey electronic devices that drivers would have to purchase and the infrastructure that would have to be bought, installed and operated to make value pricing possible.
Mr. DeCorla-Souza cites numerous polls of motorists who he says generally support value pricing schemes in their communities. While some of the respondents no doubt do support such schemes, saying so on a phone is different than supporting it through one’s wallet.
Furthermore, it is likely that many of the respondents thought the tolls would somehow fall upon the other guy, costing them nothing but still reducing their commuting time.
One other thing is likely: few of the respondents were those whose livelihoods depend on driving at times outside one’s control, such as truck drivers who frequently are operating on a just-in-time delivery schedule.
To deal with some of the inegalitarian aspects of value pricing, such as charging identical amounts for public goods to the rich and poor alike, economists have developed the idea of FAIR (Fast And Intertwined Regular lanes). FAIR lanes are an interesting twist on regular value pricing lanes, permitting both the charging of value pricing tolls and the offering of credits for drivers who do not use the less-congested fast (tolled) lanes.
While FAIR lanes avoid the worst of the financial inequities of conventional value pricing schemes, they nevertheless have serious problems.
First, they will permit transportation policy makers to deal with congestion by building toll lanes instead of adding to our nation’s supply of free travel lanes. Second, they will practically compel all drivers to install costly transponders in their vehicles in order to drive on FAIR lanes.
While this might not be a significant issue to the one-car commuter who operates in one urban area, it poses enormous costs and problems to the operators of national fleets. Some fleet owners operate more than 10,000 power units, any of which might have to use FAIR lanes at any time.
This would compel the fleet owner to outfit all 10,000 of his units with transponders — at a cost of millions of dollars. And, since there is no nationwide transponder system, the fleet owner would have to equip at least part of his fleet with multiple transponders.
I believe although some of the conclusions are flawed, this article will be a very useful starting point for further discussions of congestion reduction techniques.
American Trucking Associations, Alexandria, Va., is a trade association representing the motor carrier industry. ATA owns Transport Topics Publishing Group.
This story appeared in the July 29 print edition of Transport Topics. Subscribe today.
