The Fast Lane

As gridlock gets worse and technology improves, the use of toll lanes and other market-based tools to regulate rush-hour driving is gaining acceptance.
by | May 2005

Ken Livingstone, the one-time socialist rabble-rouser and current mayor of London, isn't your typical free-market disciple. But when Livingstone, who still goes by the nickname "Red Ken" in some circles, talks about how cities can tackle traffic congestion, he sounds like a conservative economist.

When Livingstone took office in 2000, traffic in central London was perpetually gridlocked. The streets were so clogged with cars and trucks, as well as the city's famous double-decker buses and black taxi cabs, that they all poked along at an average speed of 8 mph. In 2003, Livingstone devised a plan, which combined market principles with new technology, to get London moving again. He drew a ring around the 8 square miles of central London, and set up cameras alongside all roads into town. Whenever a car passes into the "congestion charging zone" on a weekday between 7 a.m. and 6:30 p.m., its license plate is photographed and entered into a database. Drivers are assessed a toll of about $9.50, and have a choice of paying online, by phone, at kiosks, stores or gas stations. Anyone who hasn't paid up by midnight on the day of travel receives a $190 ticket by mail. "I nicked the idea off Milton Friedman," Livingstone once said.

Livingstone's critics predicted that congestion pricing would prove a spectacular disaster. The technology would overload, they said. Even if it did work, the scheme wouldn't put a dent in congestion anyway-- and it might just spark a commuter rebellion. "CONGESTION CHAOS IN STORE," predicted the London Evening Standard.

None of the doomsday scenarios came to pass. Rather than revolting, drivers did one of two things: They either paid up, as 100,000 a day now choose to do, or they changed their commuting behavior. Many people who used to drive to work switched to mass transit, which became a more attractive option because Livingstone pumped toll revenues into expanded bus service. Other commuters bought scooters or bikes, either of which they can ride downtown for free. All in all, 60,000 fewer automobile trips are made into central London today than before the charge. Traffic moves more quickly, there are fewer accidents, and taxis and buses are more plentiful. Livingstone got re- elected handily last June, some say because of--not in spite of--his congestion-charging scheme.

London's experiment with road pricing has sparked a lot of discussion in the United States. The reason is not because lots of American cities will want to copy London. With the exceptions of Manhattan, San Francisco, Chicago or Washington, D.C., traffic congestion in this sprawling country is much more a highway phenomenon than a matter for the downtown street grid. Rather, people are talking about London because Livingstone showed that voters might agree to putting a price tag on driving--so long as they get a better ride in return.

Could the same principle apply in the car-crazy United States? Conventional wisdom says no: Americans are accustomed to their freeways being free. But a dramatic shift in thinking is going on among highway planners and the politicians who give them orders. More and more, it seems, American policy makers are coming around to the idea of charging rush-hour commuters. That's because three important trends are converging all at once: Congestion in many metro areas is getting palpably worse; states are running out of money to build new roads; and "smart" tolling technology is making it possible to charge drivers according to when, where or how often they use the roads.


One version of that future will be unveiled this month in Minnesota. Starting May 16, congestion pricing is coming to Interstate 394, west of Minneapolis. The highway's carpool lanes will open up to solo drivers, who may buy their way into the lanes using a transponder attached to their windshield. Sensors in the pavement will monitor traffic volume, feeding data into a central computer every 30 seconds. The price will fluctuate as often as every three minutes, depending on how heavy the traffic is, and will be determined based on an algorithm intended to keep traffic moving in the toll lanes at 55 mph. During rush hour, the total price for an 11-mile trip could rise as high as $8. Late at night, when fewer drivers are on the road, it will cost a flat 50 cents to use the toll lanes (the price will be posted on electronic highway signs). Carpoolers and buses can still use the lanes for free.

Minnesota's approach isn't entirely new. A similar system has been operating on a patch of Interstate 15 in San Diego since 1996. Other congestion pricing experiments are running in Orange County, California, and in Houston. But Minnesota's variable pricing plan, called MnPass, is significant in two ways.

First, Minnesota is leading a new wave of these so-called "high occupancy toll" or "HOT" lane projects. Colorado, Washington State, Georgia and Virginia all have HOT lane projects under construction or under review, while Maryland, the Bay Area of California and San Diego are looking at creating regional networks of toll lanes. "For about the cost of a good cup of coffee, drivers have another option to get to where they need to go on time," says Federal Highway Administrator Mary E. Peters. "And advances in technology mean drivers aren't inconvenienced by having to stop at toll booths."

Minnesota's HOT project also proves that the politics of road pricing have changed. The early experiments with congestion charging in California were continually dogged by a social-justice critique that said only rich people could afford to buy into toll lanes. Critics called these projects "Lexus lanes," invoking an image of luxury cars breezing past lower-income drivers, stuck in their Chevys and Hondas amid the red glow of brake lights. Today, however, the Lexus lane argument seems to be fading. For one thing, California's experience is proving it wrong. It isn't just rich people using the fast lane. But there also is a new consensus on road pricing, between many on the political right and the left, that didn't exist just a few years ago.

Historically, it was free-market conservatives who gravitated to the idea of using tolls to manage congestion. Economists have been talking about it since the 1950s; Friedman himself once co-authored an essay on the topic. Through the 1990s, the conservative Reason Foundation made congestion pricing one of its most celebrated causes, promoting it as a market-oriented tool for dealing with traffic. Lately, however, the idea is catching on with the political left--not just in the United Kingdom but in the United States, too. Environmentalists have come to see congestion pricing as a way to improve air quality by keeping traffic moving. Transit supporters see toll revenues as a source of funding for public transit systems. And advocates of "smart growth" see any movement to put a price tag on driving as a good thing--hopefully inspiring more people to use transit or to buy homes located closer to where they work. "Road pricing 15 years ago was a bit of a gleam in an economist's eye," says Michael Replogle, a transportation specialist with Environmental Defense. "Today, we see that it works, it's efficient and it can produce a lot of winners."

To see how much the political equation has changed in Minnesota, you only have to go back eight years. In 1997, the state legislature approved a toll plan for I-394 that is almost exactly like the one in motion now. But a public backlash, which revolved largely around the Lexus-lanes argument, forced the state Transportation Department to cancel the project. At the time, Curt Johnson was head of the Metropolitan Council, a regional planning agency in the Twin Cities area. It was his job to run a public hearing on the proposal. "It was the one time in my four years as chairman that I knew if the fire marshal saw how many people were packed in the council chambers, he would have ordered an evacuation," Johnson says. "It was packed, wall to wall with people. It was an angry group. Everyone who wanted to talk was emotional, they were dead set against it. And the few people who said maybe this is a good thing for us to experiment with were drowned out by boos and hisses."

Since then, however, traffic congestion in the Twin Cities area has gotten much worse. According to the Texas Transportation Institute, which measures congestion nationwide, rush-hour delays due to traffic backups in Minneapolis have doubled in the past decade. Meanwhile, an anti-tax mood that has prevented Minnesota from raising its gas tax since 1988 makes financing new roads or expansions difficult. So it was desperation, more than anything else, that turned Minnesota back to HOT lanes. When the legislature debated the issue again in 2003, nobody seemed too concerned about the prospect of turning I-394 into an autobahn for the rich. The plan passed with broad bipartisan support. "There is now a much clearer recognition that the pricing tool is the most powerful way to manage congestion," Johnson says. "We'd be absolutely silly not to give this a try."

Public opinion seems to have shifted, too. In March, the University of Minnesota released a survey of 1,000 people who drive I-394 frequently. Sixty-four percent thought the toll plan was a good idea. Most tellingly, support is just as strong among people whose household incomes fall below $50,000 as it is among those above $150,000. Minnesota's data tracks with surveys from San Diego, where focus groups show that lower-income drivers use the HOT lanes, too, especially when they're in a pinch. "Even for the less well-off, it's affordable, and probably smart, to use the lanes on days when their value of time is higher," says Ken Buckeye, the program manager for MnDOT. If the choice is between paying $1-per-minute late fees at the day care center or a $4 toll, for example, people of all income levels are likely to pay the toll.

Part of the political support for congestion pricing in Minnesota came from transit advocates. One reason is because some of the toll revenues--half of whatever is left after paying to administer the system--will support expanded bus service along the corridor. A second factor is that transit advocates like the idea of sending drivers another price signal, in addition to the cost of a gallon of gasoline, which might induce them to consider alternative modes of transportation. Ann Rest, a Democrat and transit supporter, sponsored the HOT lane bill in the Senate. "I hope that when people begin to see the actual price of driving their single-occupant car, that they will realize the savings they could get from carpooling, vanpooling or taking the bus," Rest says.

Evidence from San Diego suggests that those price signals make a big difference. After I-15 switched over to variable tolling, the number of carpoolers on the road doubled. This is very exciting stuff for transportation planners, because it means that the existing highway capacity is being used more efficiently. "When you've got a finite resource like highway lanes, you've got to manage it in a way that provides you with the greatest return on your investment," Buckeye says. "The variable fee is just a very logical step to manage demand."


While a political consensus is emerging around HOT lanes, other ideas for pricing the commute remain controversial. Mayor Livingstone's scheme in London, for example, has been discussed in several big U.S. cities, but none yet seem willing to copy it. New York Mayor Michael Bloomberg proposed putting tolls on the Brooklyn Bridge and other East River bridges, a plan that he called congestion pricing. But Bloomberg yanked the idea under political pressure. "New York City is an obvious place to do congestion pricing," says Robert Dunphy, a transportation analyst with the Urban Land Institute. "The problem is that New York City politics says you can't get elected mayor by ticking off people in Queens and Brooklyn."

Dunphy, who works in Washington, D.C., says that a London-style system could help the nation's capital relieve its downtown congestion problems. Only 39 percent of Washington commuters take transit to work--a high figure compared with other U.S. cities but relatively low for a dense place with such an extensive subway and bus system. According to Dunphy's back-of-the-envelope analysis, transit's share would rise 5 percent if Washington used a downtown car charge. The problem, though, is that downtown might also lose businesses to suburban office districts where the roads are free.

San Francisco is the one U.S. city that is seriously studying the London plan. In fact, Livingstone will visit local leaders there in June to discuss his system and changes he's making to it, including raising the toll to $15 and possibly expanding the toll zone. The San Francisco County Transportation Authority is looking at what boundaries would make sense for a potential toll zone, how much money a charge might raise and what the impact on traffic would be. "Clearly Mayor Livingstone has done a successful job with it," says San Francisco Mayor Gavin Newsom. "It's worth exploring."