A Better New New Deal

How can we get the most bang for our transportation buck? Here are six ideas for the new president and cash-strapped governors.

Adrian Moore & Sam Staley from the March 2009 issue

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Variable rate tolling is essential because users value free-flow speeds, not the traffic volume prized by too many road planners and engineers. While maximum throughput could be achieved by allowing average speeds to fall to 45 miles per hour, the service that customers are actually willing to pay for is quick access to their jobs, homes, and appointments. Many also pay the premium for the added certainty provided by the reliable express lanes.

Variable pricing provides another increasingly important benefit: It helps identify the sections of the road network in greatest need of new capacity. In effect, it’s a market test for the viability of new road investments. The more tolls can cover the costs of new facilities, the more viable the projects should be.

SWIFTER IN SAN DIEGO

Orange County’s 91 Express Lanes may be the most heralded example of variable pricing in the U.S., but it’s not the most advanced. The I-15 express lanes north of San Diego were created about the same time as the ones in Orange County, under the same bill. But the I-15 project uses realtime pricing to maintain free-flow speeds. Two reversible lanes in the median of the freeway allow for uninterrupted traffic along an eight-mile corridor. Southbound traffic toward San Diego begins at 5:45 a.m. At noon, the direction of the traffic flow is reversed to accommodate northbound traffic toward Riverside County. Car pools and public transit buses use the lanes for free, but solo drivers pay a toll that’s billed electronically.

The I-15 Express Lanes is one of the first cases in which high-occupancy vehicle (HOV) lanes have been converted into high-occupancy toll (HOT) lanes. Minneapolis converted a section of I-394 into a privately operated HOT lane, where variable pricing maintains free-flow speeds. Denver, Salt Lake City, and Houston also have HOT lanes open and running. One of the most ambitious projects is a 56-mile HOT lane outside heavily congested Washington, D.C., on the I-95 and the I-395 beltway in Northern Virginia. Two private companies, Fluor and Transurban, combined to win the $1 billion contract from the Virginia Department of Transportation, based on toll revenues generated by solo drivers paying a premium to drive on uncongested lanes. Eighteen other cities are planning or implementing HOT lane proposals.

Public agencies simply don’t have enough money to pay for many of these projects, nor can they borrow at the levels necessary to finance them. So policy makers have brought in private capital to pay for anywhere from 25 percent to 100 percent of construction costs on these projects. The tolls generate enough revenue to cover road maintenance and pay back both private investors and public bondholders.

MARKET-RATE PARKING IN ANCHORAGE

Up to 30 percent of congestion in urban central business districts is caused by vehicles cruising around looking for curb parking, according to Donald Shoup, a professor of urban planning at the University of California at Los Angeles. In his 2005 book The High Cost of Free Parking, Shoup recommended that cities price parking to reflect market demand, recognizing that the best spots should cost the most. Shoup believes that only about 85 percent of curbside spaces should be filled at any given time, leaving enough spots empty that drivers can readily find parking rather than circle blocks searching and creating more congestion. As demand changes, so would prices, so that some spaces probably would always be empty. New meters would be required, but they would pay for themselves.

Anchorage, Alaska, and Portland, Oregon have adopted the 85 percent target and are using demand-driven pricing to achieve the goal. Two California municipalities, San Francisco and Redwood City, also price their parking spots according to desirability, although they have not adopted an explicit 85 percent occupancy target.

Shoup also advocates cash-out programs for employee parking. In these schemes, rather than pay for employees’ parking spaces as a benefit, employers give workers a cash amount roughly equivalent to the value of the subsidy, to spend however they want. A handful of California companies who tried the system found that when employees faced an explicit cash parking cost to weigh against the benefit of driving, the number driving to work fell by 13 percent on average.

These ideas are not without problems. Drivers, who are also voters, are never happy to start paying for something they thought they were getting for free, a fact that obviously doesn’t escape the elected officials who determine parking policy. Downtown merchants object because free city-provided parking helps draw business.

There are also pressures to overprice or undersupply parking. The “demand management” culture found in most transportation agencies sees parking as a problem in that it enables driving, which is the behavior planners are always trying to reduce. Parking policies often function as a tool for discouraging mobility, rather than a crucial adjunct to the road network that could be tweaked to produce significantly less congestion.

That said, market-based parking prices have worked in many places that have tried them. Such a scheme in Old Town Pasadena, California, not only reduced congestion but improved access to, and total spending in, the shopping and entertainment district.

TRAFFIC JUMPING IN MANHATTAN

Most of the people causing gridlock in Manhattan don’t even want to be on the island in the first place. Many drivers are merely passing through the borough on their way to destinations outside or on the outskirts of the world’s most famous chunk of bedrock.