Congestion Pricing

Someone showed me a broadcast e-mail from the Chicagoland Chamber of Commerce concerning possible congestion pricing policies.  There are a few minor (IMO), though legitimate, concerns raised.  I'm still unsure how private garages could be included in this, for instance, but, aside from that, the Chamber is missing an important point here: the policies are intended to make it easier for more people to travel downtown. 

The reality is that private automobiles inside the Loop during the rush hours benefit a very few people while getting in the way of the vast, vast majority who use transit.  Buses full of passengers and crowds of pedestrians have to take turns with solo drivers.  How is that fair?  There's no evidence AFAIK that congestion pricing has harmed business in either London or Singapore. 

We should however keep in mind that many executives and business owners drive to and park in the Loop, while their employees take transit.  Which of those groups-- the executives or the workers-- are likely to influence Chamber policies more?  Right.  Congestion pricing may negatively impact wealthy people with strong political representation while having a neutral or even positive impact on their businesses.  I'd argue that a similar situation exists regarding federal health insurance policies, but that's an issue for a different blog.  Of course, I'd be perfectly willing to concede that fear of change may be a larger factor for business obstinacy.  Business executives find it easy enough to tell their employees that change is good, but when the shoe is on the other foot.... 

Happy May Day, by the way!

The Chicagoland Chamber's broadcast e-mail ends with an assumption I especially want to take issue with:  "At the end of the day, 'congestion pricing' is a tax by a different name – and what will these new revenues be used for?"

No, congestion pricing is a fee, not a tax.  A tax is a payment you make to the government that has little or no direct relationship to goods you receive from the government.  A fee is a payment the government requires for a specific good that you choose to receive, like entering a national park or taking your boat over a lock or driving over a toll road.  The government owns the good or service and it's simply conducting itself like a business to charge the people using that good or service a fee in exchange.

The City of Chicago owns the streets in the Loop (mostly) and the city owns the street parking and the loading zones.  The city is within its rights to charge whatever the market can bear for those goods, with the burden of the fees falling upon those who use the goods.  What's happening now-- and let's take street parking as the example-- is that the city has decided to charge too little for those finite resources and instead to let people use them first-come, first-serve.  What happens when a finite resource is underpriced?  A shortage develops due to market distortion.  That's why you can't find any on-street parking unless you get incredibly lucky.  All the city is proposing is to charge a rational price for scarce goods so that those who are willing to pay the most for those goods can do so without standing in line behind people who value those goods less.

Granted, I don't understand how private garages will be folded into this scheme; maybe they won't.  But I don't feel the revenue has to be tied to a specific municipal function.  If this scheme leads to lower property taxes-- or puts off a property tax increase-- that's fine.  The important thing is for the market to function.

Comments

[Eric]

I think most garages in the Loop are already engaging in congestion pricing: they adjust their rates depending on when you arrive and when you leave. They offer discounts for those who arrive very early, and charge premiums at times when the Loop is at its busiest.

[FlackrBackr]

good post... however, this proposal is different from the Burke proposal considered last year which would have charged people entering or leaving the Loop. The current proposal would require people parking in garages between specific hours (lets say 7 - 9 a.m.) to pay an additional fee. That fee is still to be determined. People parking in these garages are already subject to a tax/fee, so the mechanism is already in place for the city to levy and collect an additional amount.

[AF]

"Congestion pricing may negatively impact wealthy people with strong political representation while having a neutral or even positive impact on their businesses."

I think there are some problems with this analysis.

1) Wealthy people and their business interests are likely aligned, not in conflict. People want their businesses to do well. If it cost you $10 per day to drive in, but the fee has a positive impact on your business that exceeded $10 per day, you'll be in favor of the fee (net, you'll come out ahead and you'll still get to drive).

2) Wealthy people would be affected by congestion pricing much less than poor people. For example, if you make $200,000 per year, what's $10 per day more? But if you make $20,000, you're much more likely to be unable to drive, even if you need to.

3) Following from #2, congestion pricing is in the interests of wealthy people, even ignoring the effect on their businesses. It will reduce traffic and making driving more desirable for everyone, yet less possible for poor people. The value that a wealthy person puts on not being stuck in traffic (that is, the amount the person will pay) is likely higher than that of a poor person. It's more likely to exceed the fee, making paying the fee efficient. Essentially a fee shifts the cost of driving from congestion, which everyone is in the same position to pay (it's like waiting in line--very equitable, yet inefficient), to money, which wealthy people have more of.

Congestion pricing will lead to a greater percentage of cars in the Loop being driven by the privileged. I know that if I were wealthy, I would support it (get the riffraff off the streets to make room for those who deserve the right to use them).

[withrow]

AF, your point #1 relies on the assumption that the executives are rational actors and that success of their businesses has a strong correlation to their personal wealth.

Points #2 and #3 have a "forest for the trees" problem. Sure, Loop rush hour drivers would tend to be ever wealthier as the cost of driving there increases. But that's largely beside the point. This isn't about how wealthy the drivers are; it's about how this affects working people-- the vast, vast, vast majority of whom are on transit. When transit riders get priority over automobile drivers, that tends to be better for people of limited means.

[AF]

As for #1, I think both assumptions are pretty safe to make. At least in the aggregate, people are rational actors, and it's seems fairly clear to me that one's personal wealth correlates with the success of one's business, especially when talking about those on the top of the business.

Regarding #2 and #3, when you say transit, I must assume you are talking about buses. Those on the L will be totally unaffected by congestion pricing (actually, the L will probably be more crowded, though perhaps it will also get more funding).

I agree that giving priority to transit is the best way to help working class and poor people. But there are many ways to give priority to transit, such as the bus-only express lanes or building more L lines.

The problem that you and congestion pricing ignore is that there are some poor people who need to drive into the Loop for work (it may not be many, but I can almost guarantee there are a few). Some of them will be unable to drive with congestion pricing.

One solution would be for the congestion fee to be progressive, based on income (difficult to implement, but equitable). Alternatively, the city could set the congestion fee very high and then let people apply for subsidies based on income. Another solution would be to bar all cars except those with special passes from coming into the Loop. Then give these passes to the poorest fraction of the population. They can either keep the pass and use it, or sell it to the highest bidder. This will ensure that those who need to drive will be able to, even if they couldn't afford to buy a pass.

Any time something which was previously free to do becomes subject to a fee to increase the efficiency of the activity, this also reduces the freedom of some people to participate in the activity. But maybe in the aggregate, in this case, it would be good. I'm only trying to point out issues worth thinking about.

The idea that politically-connected wealthy people would oppose this whereas poor and working class people would be in favor of it seems really simplistic. In New York, a lot of the debate was about how the fee would allow in only the rich.