Enthusiasm for congestion pricing reached a fever pitch amongst New York City’s transportation advocates earlier this year, but to little avail. The state’s political process once again delayed enacting structural changes that would address congestion and transit financing directly. Instead, Governor Andrew Cuomo enacted a surcharge on taxis, for-hire vehicles, and pooled rides, calling this “phase one of the congestion pricing plan.” The move was aimed at both easing traffic and creating a sustainable revenue source to fund public transportation improvements.
Starting in 2019, New Yorkers can expect to pay an additional $2.75 on for-hire vehicles that are booked through apps or over the telephone such as a single ride Gett or Uber, $2.50 for yellow and green taxis that are hailed on the street or via an app, and $.75 for pooled rides such as a Lyft Line or Via with multiple passengers that enter Manhattan south of 96th Street. When all of these fees are added up, we are told, they will create $400 million per year for the MTA on an ongoing basis.
Based on what Cuomo has emphasized, the fees seem to be mostly about generating new revenue for transit. At that, it seems they will be effective. But the mechanics are worrisome: Yoking transit funding to a newly created “congestion fee” severs transit from the regular budgeting process and existing tax revenues. This puts transit at a further disadvantage when it comes time to negotiate budgets or face off against street pavings, highway widenings, or bridge maintenance.
First, though, will these fees have much of an effect on congestion? “The experts will say, to handle the congestion you really need to charge tolls for cars that are coming from the outside,” Cuomo recently told NY1. But while surcharges on taxis and for-hire vehicles may address a portion of the congestion problem in New York, they aren’t enough to manage it effectively over the long-run. According to Charles Komanoff, one of the principal analysts behind Move NY, an earlier congestion-busting plan, the new fees will boost travel speeds by just 3 percent. While every mile per hour counts when sitting in traffic, in practice these fees will translate to less than an extra half-a-mile per hour.
Furthermore, Komanoff argues that there will be an undesirable side effect: Driving personal vehicles will become cheaper, compared to taking a taxi or slogging through today’s congestion, because the surcharges will create some space on the road by diverting cabs and for-hire vehicles. As traffic recomposes over time, this will mean more private cars and fewer taxis because drivers will avoid the additional costs imposed on taxis and for-hire vehicles. No wonder cab companies are protesting the surcharges. Uber and Lyft, meanwhile, are pushing for a complete congestion pricing plan that applies to all vehicles.
Then there is the matter of fundraising. New York isn’t the first city to introduce per-ride fees on app-based ride services like Uber, Lyft, Gett, and Via. Chicago, Seattle, Portland, Washington D.C., and Boston all levy per-ride fees on these types of rides in order to pay for a variety of initiatives, such as transport infrastructure improvements, wheelchair accessible vehicles, financial assistance for “traditional” taxi operators, and administrative costs for regulating these services. Both Chicago and D.C. have either enacted new fees or are considering new fees that will be used to help fund transit directly. In Chicago, it is expected that a new $.15 fee will raise $16 million in 2018 and another $30 million in 2019 that will be used to fund the Chicago Transit Authority. As D.C. finalizes its budget, it, too, sees fees on app-based mobility companies as a source for about $18 million to fund the Washington Metropolitan Area Transit Authority.
The scale of these programs, however, pales in comparison to the $400 million New York anticipates collecting annually. This $400 million is already earmarked for the Subway Action Plan, an $800 million plan to stabilize and modernize the existing subway system through the replacement and repairs to existing tracks and signals. As the MTA attempts to maintain and improve its existing infrastructure and rolling stock, it will also dedicate resources to more frequent station cleanings and greater attention to keeping tracks clear of passengers’ litter that sparks track fires and slows down service.
Clearly, transit needs all the funding it can get. But there is a more structural issue here: Why does transit have to rely on levies? This stands in contrast to road projects and improvements for cars. There always seems to be room in the municipal budget for those. Elected officials and public policy researchers often repeat the mantra that budgets reflect priorities. When we examine road construction financing versus transit financing through this lens, it is impossible not to see that roads are a priority: They receive funding without protest or debate, while transit improvements are seen as exceptional and something to be taken on a case-by-case basis. A clear evocation of this difference in prioritization comes in the form of general obligation bonds that are routinely issued by cities and states to pay for key projects, such as road widenings or new bridges and even transit-related improvements on occasion.
For example, in Washington, D.C., the $1.4 billion, six-year capital program to fund the Department of Transportation’s Capital Projects is largely paid for using debt financing, such as general obligation bonds. These bonds are secured by “the full faith and credit of the District.” In the event that the full faith and credit of the District is unable to pay back the interest and principal spelled out in the initial offering, the Special Real Property Tax, which is uncapped, will increase to cover shortfalls. Some key projects covered by this program include $275 million for the “preservation, maintenance, and repair,” of 528 miles of roadway in Wards 3, 4, 5, 6, 7, and 8. Another $150 million will go towards the “rehabilitation, reconstruction, and maintenance” of 364 miles of D.C.’s alleyways. Despite the heavy tilt toward road improvements, this package also includes $100 million for a streetcar connection. Rather than use this money to plug WMATA’s budget shortfall and address existing maintenance and operations issues, capital dollars are being used for shiny new capital projects.
Back in New York, the city has already committed to
spending $14 billion repaving roads and maintaining bridges over the next 10 years. The bulk of this money will also come from general obligation bonds. There is no expectation that these improvements should go through the same tortuous and uncertain funding process that the current Subway Action Plan has endured. Looking over different capital plans from around the country, it’s clear that repavings and road improvements are normal while transit repairs and expansion to legacy systems are exceptional. This helps explain why New York has struggled to add new capacity to the subway network.
Even if New York could find the money to pay for the Subway Action Plan, we still need to spend our money more responsibly. The continuous pattern of cost overruns by the MTA and the region’s commuter rail systems poses a serious threat to our transit system by limiting our ability to maintain and expand the system in a timely and cost-effective manner. If New York is serious about managing congestion and raising revenue for transit, Cuomo’s surcharges on Uber and taxis are a small first step towards that comprehensive transportation plan. But ultimately, they’re a flawed solution.