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Highway Toll Plans Profit From Congestion

On July 24, the last 7-mile stretch of the 210 Freeway opened from Rialto to San Bernardino. In a way, it was the end of an era.

The 210 has been on the books for 60 years, connecting Pasadena with San Bernardino at the base of the Angeles National Forest foothills. The 210 has been opening section by section for many years. It greatly increases highway capacity in a fast-growing part of Southern California. And it's a freeway.

That's right: Driving on the 210 is free. No tolls, no special lanes built by private contractors, no "Lexus Lanes". The 210 was paid for with tax revenue, built by private contractors working directly for the government, and is available to drivers on a first-come, first-served basis.

Transportation experts talk a lot about different ways to deal with traffic congestion in California these days, but usually new freeways built with tax revenue are last on the list. We might see a few more of these – especially in the Central Valley – but in Southern California, at least, the 210 might be the last.

Freeways in California are free mostly because of the state gas tax, which was passed 60 years ago. But the gas tax isn't indexed to inflation or the price of gas, and fuel efficiency is on the rise once again. Combined with the rising cost of construction materials and environmental mitigation, California is in a bind. State bond funds like Proposition 1B and county sales taxes help fill the gap, but they won't be enough.

So now, California is experimenting – with toll roads built by government agencies and with toll roads built by private companies that receive long-term franchises from the government. Most radically, somebody in California will probably soon begin experimenting with "Lexus Lanes" that allow solo drivers priority access to the freeway if they pay.

But will any of this make a real dent in traffic congestion? Or, to mix metaphors, are we just nibbling around the edges?

When experts talk about innovation in highway financing, tolls, and pricing, they're really talking about three different things: using toll revenue to pay for new construction; using privatization to reduce the cost of construction; and using pricing as a market mechanism so that capacity is used more efficiently. The first two are nothing new. The third is a radical idea.

Toll roads built and maintained by public agencies are pretty common elsewhere in the country and the world. It's impossible to drive the interstate system in the Northeast, the Mid-Atlantic states, or the Midwest without hitting a toll booth every now and thenΈ especially in big cities. We've already seen more public toll roads built in California. The three toll roads in southern Orange County are the most prominent example. They're not drawing as much traffic as predicted so far, but surely more will be built.

The idea of having private companies own and operate toll roads is an old idea revived by privatization advocates arguing that the private sector will be more motivated to construct needed roads and more able to control costs. Prior to the rise of "big government" during the 20th Century, it was not uncommon for both state and federal governments to use private entities – franchise-holders or concessionaires – to construct, own, and operate transportation corridors. Even the transcontinental railroad of the 19th Century – a story known in detail by every California fourth-grader -- was a good example of this "public-private partnership" approach. The private railroads received both money and land in exchange for building the railroads, and after construction was complete they had a monopoly.

But public accountability was always a problem – that's why all astute California fourth-graders can explain Union Pacific's Credit Mobiliere scandal – and good-government reformers of the early 20th Century pushed the idea that the public sector, not the private sector, should do both the financing and the building.

Now we're swinging back in the other direction. But public accountability and risk can still be problems. Private investors on the 91 Freeway toll lanes between Orange and Riverside counites had to be bailed out when traffic and revenue did not meet expected levels – partly because of competition from one of the public toll roads (see CP&DR Public Development, February 2003, February 2000). The 91 toll lanes are now run by a public agency and charge the highest tolls in California – close to $10.

Which leaves congestion pricing. Except on the 91 – where the toll structure has certain congestion pricing aspects – congestion pricing is an idea that has been kicked around a lot but not implemented many places. Promoted largely by the market-oriented Reason Public Policy Institute in Los Angeles, congestion pricing allows drivers premium spots on the existing freeway – in the carpool lane — if drivers are willing to pay for access.

This idea is often derided as Lexus Lanes providing rich people with a way to avoid congestion while the poor are stuck in traffic. But Reason's idea is backed up with some polling that suggests most people would pay to use the carpool lanes only when they are in a hurry, not all the time. On the I-15 in San Diego, the public appears to have accepted a variable pricing experiment in place since the late 1990s.

Underlying the congestion pricing concept, however, is a radical shift in the way we think about highways. In the freeway era, space on the highway was viewed as an unlimited public resource available to anyone. Whenever we ran out, we just created more.

Congestion pricing acknowledges there is a limited amount of freeway space and argues that space should be allocated, like most everything else in our society, through price. In a sense, congestion pricing – promoted largely by Reason's conservative economist Bob Poole – is not much different than the parking views of UCLA's more liberal economist Don Shoup, who argues that parking should be priced at market rates as well (see CP&DR Q&A, May 2005).

In some ways, the idea of selling space on the freeway is not so different than the current situation. Most urban freeways in California have already diminished the first-come, first-served idea. Instead, they allocate some freeway space to those who engage in what might be called a social good – carpooling, riding a bus or a vanpool, or, more recently, driving a hybrid.

By simply adding people willing to pay money to those engaging in a social good, congestion pricing can be viewed as an adaptation of an existing idea. Of course, there's only so much space in the carpool lane – especially with those fussy Prius drivers slowing things down – so choices will have to be made there as well.

In fact, Reason's plan in Los Angeles would do just this. It would increase the carpool minimum from two to three people. Essentially, the Reason proposal would take the freeway space currently allocated to two-person carpools and reallocate it to solo drivers willing to pay.

Of course, nobody is talking about reallocating first-come, first-served lanes to special drivers – either drivers who pay or drivers who pursue a social good. The last person to try that was Jerry Brown 30 years ago, and he's still regularly skewered around the state for trying it. So what we have is, pardon the expression, a hybrid system. Most people ride their brakes while in the regular lanes, while a few people who pay money or do special things get to slip through in the few express lanes we've created.

Which is why I say that all this is nibbling around the edges. Until we're willing to overhaul the entire freeway system to eliminate the first-come, first-served idea, other approaches – whether market-oriented or based on social good – won't make much difference. For now, I'll keep riding Metrolink.