Congestion charging for roads: local pressures and international experience Road Australia Pricing Forum John Daley CEO, Grattan Institute 31 January 2011

Roads and regional development Annual population growth: 2001-06

Population 100,000

Victoria

1.3%

Annual population growth: 2006-10

2.0%

200,000 Ballarat

95,000 2.1% 90,000

190,000

Bendigo 180,000

1.1%

2.0%

85,000

1.3%

1.6% Geelong (RHS)

170,000

80,000

1.0%

1.5%

160,000

0.3%

75,000 70,000 2001

150,000 140,000

2003

Melb – Geelong Freeway upgrade completed Source:

Latrobe Valley

2005

2007

Regional Rail Link Upgrades completed

Australian Bureau of Statistics; Grattan Institute

2009 Melb - Bendigo Freeway upgrade completed

Australian population location Proportion of Australian population

100%

100%

90%

< 25,000 people

90%

80%

Inland cities Coastal cities Capital satellites

80%

70% 60%

70% 60%

50%

Capital cities

50%

40%

40%

30%

30%

20%

20%

10%

10%

0% 0% 1914 1924 1934 1944 1954 1964 1974 1984 1994 2004 2014 Source:

Australian Bureau of Statistics; Grattan Institute analysis

P3

City structure: influences but doesn’t dictate public transport Public transport share of trips to work 50% Stockholm Madrid

Helsinki

40%

Berlin Chicago

Amsterdam

30% Sydney

20% Brisbane

Melbourne

Los Angelos

10% Houston 0% 0

10

20

30

40

50

Density (persons per hectare) Source:

LEK, Meeting the Funding Challenges of Public Transport (2011, Tourism and Transport Forum), p.16; Grattan Institute analysis

60

Urban road use, Australia Proportion of Vehicle km travelled x Passenger car equivalent units (Percent)

100%

Trucks

90%

Light commercial vehicles

80% 70% 60% 50% 40%

Cars

30%

Cars will remain the dominant issue for transport policy

20% 10% 0% 2005 Source:

2020 (F)

Infrastructure Australia, National Land Freight Strategy, Discussion Paper, 2011, p15

P5

Drivers for change in road pricing •  Increasing congestion costs due to population growth and car growth (2% GDP) −  $13b/yr in 2010, $20b in 2020 (BTRE 2007): vehicle operating costs, lost productivity, reduced −  Reduced long-run employment growth - 4% impact on Los Angelos −  Reduced air quality and higher carbon emissions •  Increasing understanding of social costs of congestion •  Technology enabling cost-effective congestion charging •  Fuel excise revenue at risk (improved fuel efficiency, potential switch to electric cars) −  $10b fuel excise (Cth) −  $6b vehicle registration, stamp duty on transfer, parking space levies (Vic) −  About 5% of total tax revenue −  Similar to total road spending $12b (2006-7) + policing ($1b) + accidents ($15b) •  Desire to increase revenue for road funding Source:

Australia’s future tax system: Report to the Treasurer 2009 (Henry Tax Review)

P6

Long commutes are bad for you % who worried much of the previous day 0% 0-10 Minutes from home to work

11-20 21-30 31-45 46-60 61-90 91-120

Source:

10% 20% 30% 40% 50%

Similar deterioration in •  Overall wellbeing •  Health − Recurrent neck or back pain − High cholesterol − Propensity to heart attacks − Obesity •  Wellbeing − Overall − Not feeling rested − Negative moods − Social connection − Volunteering •  Productivity − Absenteeism − Cognitive performance − Motivation − Confidence Exacerbated by crowded commutes (i.e congestion)

US Gallup poll 2010 reported in Crabtree “Wellbeing lower among workers with long commutes, 13/8/2010; literature summary in Flood and Barbato, “Off to Work, Commuting in Australia”, Australia Institute, 2005

P7

Henry tax review recommendations Core recommendation •  Congestion charging varied by time of day •  Revenue initially used to finance public transport Related recommendations •  Heavy vehicle charging at real cost based on mass and distance traveled −  reduce game-playing around route choices, vehicle configurations −  recover costs of road-wear: 32% to 100% of maintenance costs −  ensure comparability with rail freight •  Rationalise compulsory 3rd party insurance – relate to distance travelled, accidents •  Abolish stamp duty, taxi licensing

Source:

Australia’s future tax system: Report to the Treasurer 2009 (Henry Tax Review)

P8

Overseas experience of implementation City

Reduced congestion

Reduced accidents

Revenue investment

Public opinion after implementation

London 2003/2007

30%

2% to 5%

11,000 new bus seats

Supported

Singapore 1975/1998

40%

N/A

None

Accepted

Stockholm 2006

19%

5% to 10%

197 new buses, reinvestment in trains

Supported in centre, opposed by surrounds

None

N/A

None

Opposed, but political party consensus

San Diego 1996/1998

N/A

N/A

New buses for tolled corridor

Supported

Minnesota 2005

N/A

N/A

More buses for tolled corridor

Supported

Edinburgh 2003

Not implemented

Promised, but not Opposed – seen as “big believed new tax”

New York 2007

Not implemented

Mass transit improvements

Oslo

Source:

Opposed – seen as inequitable for suburbs

Albalate & Bl, “What local policy makers should know about urban road charging: lessons from worldwide experience, Public Administration Review, Sept 2009; Bipartisan Policy Commission, “How fair is road pricing? Evaluating equity in transportation pricing and finance 29/9/2010

P9

Public support is likely to increase after congestion charging is introduced 65 Support for congestion charging in London

60 55

Talk of Western Extension

Introduction of congestion charging

50

Pay Next Day

45 40 35 30 25

Opposition to congestion charging in London

20 Nov 02 Source:

Jan 03

Feb 03

Mar 03

Apr 03

Jun 03

Sep 03

2005

2006

IPSOS Mori, “Political Commentary - Public: Government Should Intervene On Climate Change … Just Don't Tax Us”, 6 August 2007

P 10

Voter psychology of road pricing Issues

Implications

Efficiency arguments struggle for support •  Devote funds to public transport •  Hard to communicate – the invisible −  Easier argument to understand hand is invisible −  Perceived as improving equity •  Congestion charging seen to “benefit the rich” and increase inequity Roads seen as a “free right” – always hard to take vested benefit away

•  Run a trial period to create vested interest in reduced congestion •  Consider express lanes rather than cordon pricing – higher support because “paying for something extra”

Boundary resident opposition

•  Focus pricing on congested areas/times (consistent with efficiency analysis •  Dedicate some revenue to “suburban” roads •  Analyse trial: suburban drivers probably pay less

Suspicion of a “big new tax”

•  Advocate through trusted sources – academics, traffic engineers, RACV, hospitals, not gvt •  Modify design in response to consultation

Source:

Albalate & Bl, “What local policy makers should know about urban road charging: lessons from worldwide experience, Public Administration Review, Sept 2009; Bipartisan Policy Commission, “How fair is road pricing? Evaluating equity in transportation pricing and finance 29/9/2010

P 11

Road and rail spending has already expanded over the last 5 years Engineering construction work done – all sectors % of GDP, year ended 30 June 7 6

Other

5

Oil & gas, mining

4 Sewers, drains Water

3

Electricity

2

Telecoms Ports Railways

1

Roads, subdiv’s

0 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source: ABS

12

Summary – congestion pricing Promote congestion pricing, particularly given impact on individual well-being Focus on areas where congestion is obviously a major problem Spend congestion revenue on public transport, and perhaps some “border area” road improvements Consider trial periods coupled with bona fide consultation and commitment to reverse if no public support after trial Political courage required – build alliance of non government groups and transparently adapt plans in response to consultation

P 13