Congestion and User Fees, Someone will Ultimately Pay

Commentary, Economy, Ian Madsen

Recently, the US state of Oregon has become the latest devotee of a variation of congestion charging; a sort of tax on road use, that is more commonly directed at motorists and commercial vehicle drivers who access the central area of a city, presumably adding to traffic congestion, increased commuting times, increased air pollution, and Greenhouse Gas emissions (mostly CO2, but also nitric and nitrous oxides, or ‘NOx’). This plan has attracted a fair bit of attention, and a version of it is being studied in various Canadian cities, particularly Metro Vancouver, as it struggles to pay for new bridges.

The Oregon plan is for electric vehicles – ‘EV’s’ – and high fuel economy vehicles such as hybrids and compact, or ‘smart’, cars to be registered for an alternative tax to the fuel tax, of USD$0.018 per mile driven, or about CAD$0.013 per km. As these vehicles pay little or no) fuel tax (in the case of EV’s), this is principally a way to induce those motorists and commercial vehicle operators to pay something to help finance road maintenance, repair and construction, as well as bike lanes, paths, and public transit, which they would not otherwise directly support. 

As most of these vehicles are in and around metropolitan Portland, the state’s largest city, it is, effectively, a sort of congestion charge. Commuters generally have shorter drives than those that live and work in more exurban or rural areas. There is a coercive aspect to it: if they do not enrol, they not only pay regular fuel taxes if they use an internal combustion engine, but a much higher registration fee for their vehicle. Devices connected to their vehicle will calculate their mileage. This is a novel variation of an old idea: the toll road.

Road tolls or similar user fees can make some sense as a means to directly charge those using a piece of infrastructure, in this case, a road, since those are the individuals or companies deriving a direct benefit from doing so, and also, in the process, contributing to the wear and depreciation of said road.

However, there are drawbacks to this approach. The fees that commercial vehicles and drivers would pay would serve to drive up the costs of delivering goods to businesses and consumers, and to institutions such as schools, colleges, hospitals, clinics, and government agencies. It seems unlikely that fuel taxes would be reduced on other drivers and vehicles; there is every possibility that they would be raised anyway; they never seem to decline. Commuters using EV’s or low-emission vehicles may receive a net benefit from the plan, but they are not the only low-emission vehicle drivers affected.

There are a large number of such drivers, vehicles and companies: not just delivery services, taxis and ride-sharing services, but plumbers, electricians and other tradespeople; florists; restaurants; telephone, internet, gas and other service persons; building maintenance and repair people; retailers and distributors of goods to consumers, businesses and institutions. Many of them now use low-emission vehicles or EV’s. They will be penalized, whichever way this sort of plan is applied, since they drive far more in a day than commuters typically do; often hundreds of kilometres. Their extra costs will be passed on to other businesses, and, ultimately, consumers. Minimizing effective double taxation is vital. This is a plan that could have merit if the ramifications and consequences are fully explored and costed.  

The congestion charge for vehicles entering the city centre that was pioneered in London was considered a success:  in lowering traffic levels and pollution; increasing average vehicle speed, including buses, thus reducing commuter times; and raising needed funds for traffic signal and network improvements, road redesign and repair, and public transit improvements. Other cities have imitated it, with similar positive results in Stockholm and Singapore, for example. New York City just adopted it, with much opposition, mainly as a way to pay for expensive subway repair and improvements.

Another approach, hated by motorists, is to reduce or eliminate roadside or metered parking, or escalating the meter fees. In European cities, this is accompanied by making central or historic areas private passenger vehicle-free. This does not work as well in North America, with its more sprawling, decentralized, automobile-oriented, designed and structured cities. 

Very often, working people do not work in or commute to the centre of a metropolitan area, but to another part of it. Eliminating or severely restricting parking or introducing a congestion charge in these sorts of cities may just incur anger and attempts to evade or game the system. 

There are no good, let alone perfect solutions to fund road construction, expansion, maintenance or repair, bridge or tunnel construction, or bus, light rail or subway systems or expansions. The people at the Department of Transportation in Oregon may have created a way to fund transportation in the future that will evolve with the forms of transportation themselves.  However, it will have to be re-crafted to be a truly equitable, market-oriented and consumer- and taxpayer-friendly method of making users pay for something, they may not be able to avoid using – or paying for, eventually.

 

Ian Madsen is a senior policy analyst with the Frontier Centre for Public Policy.