Toll Bridges and Tauranga Traffic Woes

Some years ago now Tauranga City Council was in great debate with the Tauranga public over whether they should be allowed to keep a toll on the Tauranga Harbour bridge or whether it should be removed completely.

NOBODY was interested in ANY kind of reasoning other than TAKE IT OFF or LEAVE IT ON - REGARDLESS of the consequences.

The pressure groups eventually won, and the toll was lifted.

The very next day saw beginning of Tauranga's major traffic congestion problems.

This is all over and done with now, but at the time, a small bunch of FREE THINKING individuals put their heads together and presented the Tauranga Council with an alternative solution to the MINDLESS TAG Pressure Group (headed by present Tauranga Councillor Rick Curaq) bleating TAKE IT OFF, TAKE IT OFF!!

The mindless morons in power at the time were so blinkered by the argument (take it off or leave it on!!!) that they couldn't even be bothered to read Our 10 page submission and it was TOTALLY IGNORED.

NOW some years later some brilliant councillor has come up with some ideas - and guess WHAT! - They are some of the ideas WE presented all those years ago.

Please read the following submission prepared by Russell Watkins, Graham Clark and Mike Gordge concerning the Tauranga Toll Bridge, the effect of removing the toll, and some SOLUTIONS to the problem.
The mindless bureaucrats at the Tauranga City Council could not have developed a solution to match this in their DREAMS, but I suppose its not in their interest to really! If they found solutions to the problems, they would do themselves out of a job now wouldn't they! and lets face it, Why are they there? Let's face it, if they were doing it for the COMMON GOOD, they would be doing it for NOTHING wouldn't they?

A MODEST PROPOSAL REGARDING
TOLL BRIDGES

Presented to
The Tauranga District Council
By Tauranga Libertarianz

Executive Summary

Proposals to remove tolls from the Tauranga to Mt. Maunganui toll bridge are understandable but short-sighted. Removal of tolls will not only reduce road revenues but will also increase “costs” by increasing traffic flow thus increasing travel time for all bridge consumers. Additional traffic means higher maintenance costs and greater pollution.

Keeping tolls in place makes economic sense. Yet the bridge was financed with tax monies and bridge users paid off the debt. The most sensible solution is to turn the bridge into a company owned by shareholders who are made up of bridge users. Users would buy monthly or yearly passes and through the purchase of such passes would also be purchasing shares for that year. At the end of the years a percentage of any profits from the bridge would be set aside for future major renovation and the remainder distributed to the owners; i.e. to the users themselves.

New technologies allow traffic to flow smoothly without having to stop for tollbooths. And it is possible to use variable pricing techniques to reduce congestion during peak traffic times.

The Toll bridge from Tauranga to Mt. Maunganui was built on the premise that once it was “paid for” that the tolls would be removed. Such a promise was easy to make years ago when the final installment was not due for some time. But now that the bridge has been paid for the political question is whether or not unrealistic promises made years ago should be kept.

The first option facing policy makers is to remove the tolls as their predecessors have promised. But what does this mean? Will the bridge, in fact, become free? The obvious answer is: No. As the saying goes: There’s no such thing as a free lunch. In this case there is no such thing as a free bridge.

The bridge and the roads leading up to it will still require maintenance on a regular basis. At some point the bridge will probably require major renovations. The traffic that the bridge generates also creates secondary costs in the form of street cleaning, maintenance of non-main roads, traffic control, etc. The fact that the toll may be removed does not mean that all the primary and secondary costs of the bridge disappear as well.

With costs remaining a new source of revenue must be found. The alternative would be using tax funds to cover these costs. So while it appears that bridge users are saving on the one hand they will be spending more on the other. There is a second way in which the “costs” of the bridge will be passed on to drivers. This will be in the form of additional congestion.

Tolls are a form of road pricing and as such they help allocate scarce resources. Demand for the bridge will, at times, exceed supply. This is inevitable. Even with a crude price system, in the form of a toll fee that remains the same throughout the day, this problem occurs and congestion results. Road consumers refer to these peak times as “rush hour”.

Thus the “free” bridge is not free at all. And the taxation method for financing the bridge creates some major problems, which are too often ignored by policy makers.

First, tax funds are centralised in one tax pool from which various projects are financed. Where this is done for road and bridge maintenance the results, too often, are that funds which should be used for maintenance are diverted to politically beneficial projects. The temptation is great for police makers to divert the funds to projects, which will win them support. Since elected officials are elected for short terms (the other option is not acceptable either) then the incentive is for them to accept short-term solutions. What happens ten or twenty years down is not a major concern to someone facing an election in the next few months.

Experience from around the world indicates that this phenomenon is not particular to any city, region, or nation. In the US state of Connecticut taxes were used to finance road maintenance yet the funds collected always exceeded the amount spent. Funds were then diverted to projects favoured, not by those who paid the taxes, but by those who spent them. The result was tragic. On June 28, 1983 the Mianus River Bridge on a major interstate highway collapsed killing three and injuring three more.

An investigation showed that road related revenues were only partially used to pay for road costs. A significant amount of the funds were instead diverted to the general budget of the state. In just a five year period revenue exceeded expenditure by US$223,576,000

The centralised tax pool method of financing bridge and road maintenance is highly deficient because the incentives in this system encourage policy makers to postpone maintenance in favour of new projects that appeal to special interest groups.

The second major problem is that a reduction in direct costs for use of the bridge will increase demand while reducing income. So as income to maintain the bridge drops the number of bridge users will increase. One of the functions of pricing in a modern economy is to help allocate scarce resources.
When a good or service is “free” the result is that the demand for said good or service will increase. So we end up with diminished revenues but increased costs. Combined with the political incentives to divert tax funding to favoured projects a potentially destructive combination of policies is created.

Increased demand will result in increased congestion. This inflicts additional costs on road consumers and also has residual effects on non-bridge users as well. Drivers will see an increase in travel time as more cars attempt to enter a limited space. As the cars idle or slow down the amount of petrol used per car will increase and the amount of pollutants released will increase as well.
The former imposes an additional cost on the drivers and the latter imposes an additional cost on the surrounding area.

Kiran Bhatt, of The Urban Institute, notes:

...in a congested situation, each additional vehicle disturbs
and slows down the traffic flow with the result that
not only does that vehicle suffer time loss and experience
increased operating costs, but that it also imposes these
disadvantages on all other vehicles on the same road.1


Congestion, however, is much more. It is also passed on to non-road users as carbon monoxide pollution. A report by Thomas Higgins notes: “In areas where dense traffic occurs primarily at peak periods, traffic congestion and large volumes of carbon monoxide emissions go hand-in-hand. In most cities, peak period traffic accounts for about one-third of total traffic in an eight-hour period; as a result, reductions in peak traffic alone will substantially reduce carbon monoxide pollution.”2 Higgins notes that in Los Angeles morning congestion alone was responsible for 40 percent of vehicular smog and that a 25 percent reduction in peak traffic would reduce all smog by 7 percent and vehicular smog by ten percent.

With “free” roads there is one rule of thumb that has proven true over and over: demand will rise to meet capacity. As the US Department of Transportation admitted: “new roads soon reach capacity, and the problems become worse than before”. 3 Economist Anthony Downs calls this the Law of Peak-Hour Expressway Congestion: “On urban commuter expressways, peak-hour traffic congestion rises to meet maximum capacity.”4

Thus the three main problems discussed here are interrelated. The removal of tolls will mean in an increase in demand and thus an increase in congestion. As the number of users increases the cost to maintain the bridge increases as well. But the increase in costs was directly related to the abolition of tolls. Thus just as expenses increase revenue drops to zero. Meanwhile bridge consumers are paying more in the form of time and higher petrol costs due to slower traffic and non-users, and users alike, are paying through the increase in vehicular pollution caused by longer travel times. Every problem associated with the bridge is exacerbated by the removal of tolls.

As presently structured the tolls on the bridge mean that consumption of bridge services is directly related to the costs, one pays. Those who do not use the bridge do not pay for the costs except to the degree that these costs are passed on to them as consumers of products, which are transported across the bridge. The fact that there is a one-to-one relationship between use and cost is important.

Under a “free” bridge scenario this link is broken. Instead payment is via the political process where there is no corresponding relationship between taxes paid and the amount of political goods consumed. “Your tax bill will be the same whether you like or dislike the national defense, agriculture, or antipoverty policies of the government. You will be taxed for subsidies to higher education, television stations, airlines, cultural centers, and many other political goods regardless of whether you consume or use them.”5 Thus public sector organisation breaks the individual consumption payment link.

One result is what economists, particularly environmental economists, call the “tragedy of the commons”. Communal property, such as “free” bridges, is used by everyone regardless of the costs they inflict on the resource. Since these goods are “free” the amount of use is not reflected in direct costs to the user. Therefore, the user gets his “money’s worth” by using as much of the resource as possible and as often as possible. Environmental economist Robert J. Smith noted: “By its very nature a common property resource is owned by everyone and owned by no one. Since everyone uses it, there is overuse, waste, and extinction. No one has an incentive to maintain or preserve it. The only way any of the users can capture any value, economic, or otherwise, is to exploit the resource”.6 In the case of bridge use everyone has paid prior to any use, through taxes, and this payment is not directly tied to the amount of the resource consumed. Therefore, the more road use expended the better the financial return to the user. In a pricing system, such as tolls, the more use expended the higher the cost: use and cost are proportional.


Equity and Pricing

Tolls, or road pricing, is a system where cost equity is encouraged. Economist A.A. Walters pointed out:

The common denominator of existing user charge
theory and practice is the idea that “the user should pay for
the roads”. A larger fraction of of the expenditure on the roads
has been incurred only because of the existence of cars and
trucks, and so the owners of these vehicles, rather than the
general taxpayer, should foot most of the bill for the roads.


Several variations are played on this basic theme. Probably the
two best known are the benefit principle — that users should
pay for the roads in proportion to the benefits received — and
the so-called “incremental cost” principle — that users should
pay according to the highway construction costs required for
their type of vehicle. The basic idea is one of equity; it was
thought fair and proper that users pay the highways.7


According to a study done by the Greater London Development Plan, “the effects of introducing road pricing are more likely to be progressive than regressive”.8 An article in the Journal of Transport Economics and Policy also concluded that the per capita income of road users is higher than the per capita income of those who use public transportation. Commuters, the very people most likely to use the bridge, are usually more affluent than other workers.

A Fair Alternative

Removal of the tolls completely is economically insane. As we have seen it will create numerous problems which were not anticipated by those who originally promised the removal of the tolls once bridge costs were paid in full. On the other hand tolls bridge users were promised that the tolls would be removed.

The question then is whether or not both problems can be addressed in a fair and equitable manner. And while the most sensible alternative is the privatisation of the bridge the problem of how to achieve such a goal has to be addressed. Politically such a move is likely to upset bridge users. After all they have been paying for the building costs for several years. Sale of the bridge would mean windfall profits for the government but those who actually paid for the bridge would get nothing back. It would be quit surprising if bridge users did not oppose such a move.

One alternative, which takes this problem into account, is privatisation where bridge users become bridge owners. This alternative is not only fair but sensible. The process would not be particularly difficult and politically it is not likely to arouse consumer anger.

The first step would be to delineate exactly what properties would be “privatised”. In this case the bridge itself and arterial roads directly leading to the bridge should be included. Funds raised by tolls would be used to maintain the bridge and these critical links to the bridge.

The second stage would be the creation of a company which would be vested with ownership in these properties. This company would be made up of share-holders who own stock for a one year period. Stock in the company would be distributed to bridge users as outlined below.

The bridge itself would remain a toll bridge. Rates for use would vary for casual automobile users (that is those who use the bridge on an irregular basis), those who qualify as commuters, and commercial users. Toll rates for casual users can remain, to begin with, as they are today. A higher fee would apply to commercial users such as trucks, busses, etc., for the simple reason that such vehicles impose more maintenance costs on the bridge. Commuters would pay a monthly rate equal to the costs they would normally pay for commuting to and from work five days a week.

Bridge customers would have the option of paying for use on a daily, casual basis, at a tollbooth. Or they would have the option of purchasing a pass that will allow them unlimited usage for one month or for one fiscal year at a time. Technology currently available would allow these consumers to use the bridge without having to wait in line at a tollbooth. It would be these customers who would become stock holders in the bridge itself.

A one year usage prepaid by a customer would give them 12 shares in the company. Any one who purchased a one month pass for the bridge would receive one share for each month purchased. This allows customers who do not need a full years worth of service to become stock holders as well. Stock shares are good for one fiscal year of ownership and each year shares are again purchased by customers. A shareholder who purchases 12 shares thus has the right to unlimited use of the bridge for that fiscal year. Commercial customers can also buy shares but the rates would be higher for them as they are inflicting higher costs for their usage.

A management company would be hired to keep the books for the bridge company and to hire contractors to maintain the infrastructure. They would also pay salaries for toll collectors as well. But the management company would not own the bridge but be employed by the owners or the shareholders. In this sense management is just as much an employee as are the toll collectors. The management company would have a contract with the shareholders and the length of the contract would be determined by the parties to the agreement.

At the end of each fiscal year the management company would present a report to all shareholders. In that report they, using common business practices, would determine the costs for bridge maintenance and the revenues received. They would decide how much of profits should be invested for future expenses and what amount should be paid out to share holders as dividends.

This type of “privatisation” where users become owners the basic economic incentives are still in tack. The end of year profits would reimburse regular users for tolls paid in excess of actual costs. But no individual consumer would be tempted to over-use the bridge.

The Technology

Instead of using old-line tollbooths modern technology could be used instead. The most sensible is the Automatic Vehicle Identification (AVI) method. The Port Authority of New York and New Jersey noted that: “AVI offers the possibility of fully automatic, non-stop toll collection, with time and fuel savings plus convenience and safety offered to the motorists, as well as greater efficiency and security of funds for the toll road agencies, and less noise and air pollution for roadside residents.”

An AVI system is made up of three main components. The first component is the transponder, which is a small sealed package similar to a thick credit card. The transponder is either mounted inside the windscreen, under the vehicle. or elsewhere. This piece of equipment identifies each vehicle with a unique code number, which is picked by an interrogator and transmitted to a central computer system. The transponder unit is passive and relies on the interrogator to activate it. The transponder unit can be placed over the road in a fashion similar to road direction signs, by the side of the road, or it can even be placed under the road and activated as the vehicle drives over it. The interrogator receives the weak signal emitted and, once the information is gathered, it is sent to the computer, which can identify the vehicle type and time of day.

This system would mean that vehicles need not slow down to be processed when it comes to verifying payment. All monthly and yearly customers would receive a transponder code for the period of time for which they have prepaid. Casual bridge users who do not drive across the bridge frequently enough to make it beneficial to purchase a monthly or yearly pass could still arrange for a transponder in their vehicle.

There would be two possible uses of the transponder for casual users. First, it would be possible for them to prepay a specific amount in toll fees. Each time they use the bridge the computer reduces their balance accordingly. A sign over the lane they use could transmit back to them the balance in their account. It is also possible to use this system to send an end of month statement to consumers the way the phone company sends a bill. The statement would show date and time of bridge use. This may be beneficial to commercial users in that it records where their vehicles were at specific times thus improving efficiency.

Once a AVI system is put into place greater economic efficiency can be generated by the use of a true pricing system. Bridge use is very time sensitive but the cost of tolls usually remains the same regardless of varying demand. In the private sector this is addressed through variable pricing.

A theatre ticket at prime time on Friday night is more expensive than the same ticket on Tuesday afternoon. Some bars and restaurants charge a cover charge during their “rush” hours while offering discounts at other times of day.

The way this could work is relatively simple. During rush hours when the bridge is congested extra costs are imposed on all users and non-users because of the additional time it takes to travel across the bridge and because of the higher use of fuel and higher emissions of pollution. One function of prices would be to lower demand during rush hours and shift some traffic to slower hours. This would smooth out traffic patterns benefiting all bridge users and the environment.

During rush hour an additional fee could be charged. Regular commuters, who use the bridge during rush hours, would receive a bill for the additional amount at the end of the month. Casual consumers would have the higher rush hour fee deducted from their account or billed for it depending on which alternative is chosen for use. During non rush hours the toll fee could be, lowered to reward consumers who use the bridge during non rush hours. The net result should be smoother traffic use, less pollution, and a more efficient use of petrol and vehicles. There would definitely be a shift in consumer usage toward non rush hours and when that happens the consumers are rewarded by lower costs.

Regular and semi-regular bridge users would be channeled by this system to the automatic lanes. So only infrequent users would be required to slow down in the manual toll lanes. Efficient use of the bridge would be encouraged but bridge users, being the owners, would not pay more than necessary for keeping the bridge in working order. Revenues in excess of expenditures are returned to the user/owners in the form of year-end dividends. A portion of such revenue could be invested and saved for future anticipated major renovations thus avoiding the necessity of emergency expenditures by government.

FOOTNOTES

1 Kiran Bhatt, What Can Be Done About Urban Traffic Congestion? (Washington,
DC: The Urban Institute, 1976). p. 5.
2 Thomas Higgins, Comparing Strategies for Reducing Traffic-Related Problems
(Washington, DC: The Urban Institute, 1978) p. 5.
3 A Transportation Improvement Package for the Relief of Traffic-Related Problems, US
Department of Transportation, Urban Mass Transportation Administration,
Washington, DC. No date or pages.
4 Anthony Downs, “The Law of Peak-Hour Expressway Congestion” Urban
Problems and Prospects, Second Edition. Chicago: Rand McNally, 1976, p. 185-99.
5 James D. Gwartney and Richard Stroup Economics: Private and Public Choices,
(New York: Academic Press, 1982). p. 71.
6 Robert J. Smith, “Resolving the Tragedy of the Commons,” The Cato Journal,
Vol. 1. No. 2 (Fall, 1981), p. 457.
7 A.A. Walters, The Economics of Road User Charges, (Baltimore: John Hopkins
University Press, 1967), p. 1-2.
8 C.D. Foster, Evidence to the Greater London Development Plan Inquiry on the
Regression of Road Pricing, GLDP Inquiry, 1972.