The political acceptability of urban tolling some European examples

This article follows those published in “Transports” N° 377 and 379, concerning time values and traffic models in urban areas.

Introduction

The development of the market economy has lead to an increasing proportion of the cost of services being paid for directly by the end user and not by the taxpayer through the public purse. The development of motorway tolls, and of road and crossing tolls in urban areas are in keeping with this logic. With the increase in the costs of infrastructure that results from a better integration of town planning and environmental considerations and the reduction in capital expenditure, it is no longer possible to carry out master plans within a time scale that is compatible with the desired development of the city.

Why not then attempt to use the motorists’ desire for mobility to levy a toll which would simultaneously serve two purposes :

• *  provide a source of finance, in addition to taxes, allowing construction work to be accelerated
• *  limit the volume of traffic by increasing the cost of private car use and directing the public towards other modes of transport, such as public transport, two-wheeled vehicles or walking ?The first objective presents no problems and has already been applied for centuries. The second, however, encounters two major unknowns : the reaction of the public to the toll and its impact on the working of the city or the country. Let us first of all define the terms.When we talk about the toll level for a road or a crossing, we must distinguish between three notions :– the toll considered as being politically acceptable : this is the maximum toll rate which it will be possible to levy;

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– the toll which will produce maximum income : for a road or crossing requiring subsidies, this is the toll which will minimise the cost to the taxpayer through contributions paid by the city or the state.

– the toll which maximises the surplus for the whole of the community; this is the toll which would result from modelling the entire city !

Major difficulties are encountered when we attempt to determine each of these toll levels.

• –  the interpretation of “politically acceptable” depends greatly on the culture of each country the level and the taxes allocated, the freedom of the customer to choose free routes or other modes of transport, the level of knowledge of the decision-makers in matters of transport, the long term strategy of the political system, in particular in terms of environmental policy, and the effort of the decision-makers to communicate and promote the idea to the public.
• –  The maximum level of revenue is difficult to establish using traffic models as they are still too imperfect, in particular for urban areas. This can only be determined by testing several different scales of charges in real life but this would require the managing company to take the risk of low revenues or political rejection before finding the optimum toll level.
• –  the scale of charges which would maximise the surplus for the whole of the community is all the more difficult to define, as we do not know the mathematical expression of the surplus function. Despite constant research into global modelling by the public authorities, who would claim to have developed a model which truly takes account all of the fundamental parameters which define a city in all its socio-economic complexity. Can we be sure that so called “second order” terms are actually so ?The direct application of current economic models would lead toll levels to be set according current rarity of assets, i.e., to apply high tolls to urban roads and, generally, to the use of rare urban spaces, leading to selection of users by wealth. But this would accelerate the dedensification of cities and the creation of ghettos: not exactly a vision for a lasting city.Next come the players involved, the number of whom makes the decision process so complex :
  • *  the users (who become the customers), with a distinction being made between professional customers (companies) and final consumers (households);
  • *  public works contractors, transport companies and infrastructure management companies, which construct the schemes and operate them, together with the essential financial partners;

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• *  third parties, and in particular local residents, who are not considered as customers, but who suffer negative external effects or benefit from positive effects. They belong either to the intermediate consumer category (companies) or the end consumer category (households);
• *  the state and other public authorities.Finally, there is time, the instrument with which complexity is measured and the major player, for the time required for designing, financing and constructing a project is so long that the decision-makers who launched it are not generally those who inaugurate it, and it even risks to come into service when the economic conditions are no longer favourable to it, which often makes the launching of a project a politically delicate exercise.In this article we shall only be considering the end consumers (households) and, of these, we shall only be considering those for whom the toll is not reimbursed by their company or by a third party. Furthermore, we shall only consider the aspect of tolls which are considered to be politically acceptable. No attempt shall be made, either, to develop the theory of surplus as founded by Dupuit, then Pigou, nor its concrete applications, about which numerous papers have been written (Arnott, Ben-Akiva, Nash, Ramjerdi, de Palma, Thisse Vickrey, Wardrop, le Setra, le Certu, etc.).We shall content ourselves with observing the principal schemes already in place in Europe and making some interpretations at the limit between political analysis and the “housewife’s point of view”

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The car in the household budget

In order to define the amount of money represented by the car in the household budget, we shall base ourselves on data gathered over a long period and obtained from the INSEE, the Ministry of Finance and the Association of French automobile constructors.

Graph N° 1 shows the GNP, the gross disposable income, household consumption and total car expenses in French Francs adjusted for inflation at 1996 values.

We note that despite the economic downturns of 1973, 1979 and 1993 the consumption of households has increased extremely regularly, the savings rate serving as an adjustment variable. Only in 1993, the blackest year of the period of slow growth which we have been experiencing since 1990, has shown stagnation in levels of consumption. The supposed crisis does not exist : the “average” Frenchman has never consumed as much as in 1996.

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Where does the money go that households spend on their basic needs ? The answer is given by graph N° 2 : mainly on accommodation. It is striking to note that the housing expenditure per inhabitant (excluding house purchase) have not dropped once since 1959. The French housing stock was in a very poor state in 1945, because of two world wars, with an economic crisis in between. But France has been building new housing for the past 50 years. Less than before, of course, since the rate of construction has been practically divided by three since the peak of 1973 and since housing purchase has become cyclical. New, better quality, housing has higher operating costs : this is the price to be paid for a better living environment.

Since 1990, the slowdown in growth and the technical improvements to cars have resulted in car expenditure per inhabitant stabilising. These figures need to be interpreted with care : stabilisation does not mean stagnation of the traffic nor of the number of cars on the road. Indeed between 1990 and 1996 the number of cars has increased by 10% and the volume of traffic by 15%. It is the reduction in the cost of purchasing and running cars that has balanced the growth in mobility.

Graph N° 3 shows that the proportion of the household budget spent on the car peaked in 1982, then dropped gradually, while at the same time reflecting the economic cycles. The proportion of the total sum represented by the purchase of the car, fuel costs and operating costs has varied with a net reduction in the first two, in particular the cost of fuel.

The household car budget for the whole of France represents FF. 600 billion, i.e., an average of FF. 24,000 per car per year.
The amount spent on tolls remains very small. The total income from all motorway tolls in 1996 was FF. 26 billion. Of this total, approximately FF. 8 billion was paid by HGVs and, of the 18 remaining billion, 40% are reimbursable expenses. The final cost of motorway tolls for the budgets of households thus represents approximately FF. 11 billion, or 1.8% of the household car budget if we ignore foreign vehicles,. For a total of 25 million cars on the road, this represents FF. 440/year per car, which represents a sum equivalent to that of the road tax. Urban tolls currently represent less than 0.5 billion per year in France.

Period of 6 years

For an urban journey of about 10 km, the perceived cost (excluding parking expenses, i.e., fuel and maintenance only) shall be between FF. 5 and FF. 6, the actual average cost excluding parking varying between FF. 12 and FF. 17. These perceived costs are of the same order of magnitude as those of public transport : the car has become a popular mode of transport and no longer an elitist one. By way of comparison, we have shown on the graph the cost to a household paying FF. 450/month to use public transport on a regular basis.

Of course the problem of the introduction of a road toll will be of more concern to those on the lowest incomes, with a perceived cost of F. 5 to FF. 6 for a typical journey between home and work, i.e., FF. 250 to FF. 300 per month.

Distribution of income and running costs of a small car

The figures given above are global figures which give an indication of average values, which are only of use when considering the macro-economics of the whole country. If it is wished to describe the individual behaviour of motorists, however, only a fine segmentation will avoid masking reality and committing errors of interpretation. Could one say of a man with his head in the oven and his feet in the fridge that he is moderately OK? This sums up the problem of the acceptability of urban tolls.

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We now have at our disposal household income figures for 1994. The distribution of income is traditionally log normal (graph N°4). The adjustment parameters vary slowly, with the standard deviation showing an upward trend having increased to 0.71 from a value of 0.65 ten years ago. This increase shows that the difference in earnings between the richest and the poorest households is growing. The lower quartile income extends up to FF. 100,000/year, the median income is FF. 172,000/year and the upper quartile income starts at FF. 280,000/year.

Using the following overall figures, we then attempted to establish a relationship between the annual income and motorcar expenses by type (purchase, number of cars, mileage, willingness to pay) :

• –  the percentage of spending allocated to the car within each of the different socio- professional groups is constant (confirmed by INSEE surveys);
• –  80% of households have at least one car;
• –  20% of households have no car; we have assumed these to be the poorest.
• –  multi-car ownership concerns 25% richest households.The total spent on buying new cars and the number sold, together with the same information for used cars then allow us to determine the distribution of expenditure in absolute terms. We can then make plausible assumptions concerning standard budgets and standard journeys by income bracket and present the results for a household at the upper limit of the lower quartile, the type of household which in theory would be most sensitive to a toll being imposed.Graph N° 5 shows the purchase price (depreciation = balance of purchase price – resale price) and running costs, year by year, for three different types of small car :

– a new petrol-driven car – a used diesel-driven car – a used petrol-driven car

(15,000 km/year) (15,000 km/year) (10,000 km/year)

The single annual payments correspond to insurance and road tax; the slope of each segment represents the cost perceived by the motorist, which is of the order of .FF. 0.60/km. The differences in average costs per kilometre for different car types are summarised in the following table. An average car bought new and sold six years later costs on average FF. 1.67/km and a small car bought second-hand and kept six years will cost FF. 1.21/km.

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The main parameters affecting the political acceptability of a road toll

The study of various toll schemes has led us to identify three major parameters :

• –  the frequency of use of the road or crossing;
• –  the degree of obligation which the potential customer feels he has to use it;
• –  the culture of the country.1) FrequencyThe moment one talks about road tolls, the potential customer will evaluate the cost that the service offered represents for him. In our Western culture, most households now reason in terms of a “monthly budget” and, for certain large expenses, in terms of an “annual budget”. While taxes and the buying and insuring of a car are paid for out of the annual budget, housing, food and fuel are perceived rather as monthly expenses and compared to the monthly salary. A toll which is paid frequently, such as for a cordon type toll zone (Oslo, Singapore) which has to be crossed in order to get from home to work will immediately be evaluated in terms of a monthly cost and compared with the income and the ability to save. This is not the case for a toll on a motorway which is infrequently used, the cost of which will normally be included in some larger expense (holidays, journeys made for family reasons etc.). In this article we shall reason in terms of “annual” costs and consider the annual cost of travel between home and work to be 11 times the monthly cost.

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Whether or not a toll will be considered to be acceptable is directly related to the frequency of use of the toll route in the case of a road or a crossing, or of entry into the zone in the case of a toll cordon.

Let us take for example the urban cordon toll of Oslo or that of the Tage bridge in Lisbon. The respective distribution of business areas and residential areas is such that the majority of the inhabitants in complete districts of the town are obliged to pay a toll in order to get between home and work. With a few additional journeys at the weekend or in the evening the total cost each month is approximately 45 to 50 times the toll charge, i.e., approximately 550 times the toll charge each year.

We observe, on the other hand, on toll routes such as the Prado-Carénage tunnel in Marseilles or the A 14 in Paris, that the majority of journeys are made by people who pay the toll only 4 or 5 times a week, generating a monthly cost of 20 to 25 times the corresponding toll rate, or an annual cost of the order of 250 times this rate. We are not able to say at this time whether these are professional journeys or not.

When we look at connecting motorways, the frequency falls even further, to the extent that journeys have to be counted on an annual basis. For a family having a secondary residence in the country for holidays and summer weekends which is easily reached via the motorway, a total of 25 to 30 journeys might be made over the course of a year, i.e., 20 times less than journeys between home and work.

In certain cases, the difference between urban and interurban toll routes is very distinct, the extreme cases being toll cordons (Oslo, Singapore) in the case of urban toll routes, and the annual holiday journey for interurban motorways.

In other cases the reality is less clear-cut : operating in networks of cities, or “metapoles” in the sense referred to by Ascher leads to frequent (200 times a year) and fairly short (40 to 50 km) motorway journeys. It is for this reason that certain motorway operating companies offer specific subscription rates.

2) Degree of obligation to pay

The degree of obligation is a complex parameter that we use to express the degree of choice that a traveller has as to whether or not he pays the toll. A few examples can be used to illustrate this concept.

Payment of car insurance and road tax has a 100% degree of obligation of course. The degree of obligation to use a toll road is measured against the capacity of the toll route over the total capacity provided by the corridor, including the public transport option.

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The construction of a toll bridge following the removal of a ferry presents a high degree of obligation whereas that of a toll motorway parallel to a free dual carriageway presents a low degree of obligation. The tunnels through the Alps have a high level of obligation, as to avoid them considerably increases the distance, and therefore the time and the cost of the journey. Providing a public transport service in parallel with a toll route reduces the degree of obligation.

When public money (from taxes) is invested in the construction of a toll road or crossing it is always possible to argue that the same money could have been spent on the construction or improvement of a free road or crossing, possibly of a lower standard. There is then a certain obligation to use the toll route imposed by the public authorities, all the more so because the alternative routes or modes of transport are less attractive.

It is thus natural to classify toll routes according to two parameters :

• –  frequency of use
• –  the degree of obligation to which the motorist is subjectGraph N° 6 shows a few typical operations. Certain of these appear twice as the route is used by two types of customer : one frequent, the other rare. In this case, all types of user of the route are found, from the exceptional user (once or twice a year) to the daily user This is the case, in particular, of the A 14 motorway the Ile de Ré bridge and the Nice bypass. Where a route is paying in one direction only, we have divided the toll by two to represent the actual charge per passage . The same logic has been applied to the Dartford crossing.Four types of route emerge :

• –  those for which usage is frequent and obligatory among which we find urban bridges, the toll cordons of Oslo and Singapore, the Lyon Northern bypass (TEO) before the restoration of Boulevard Laurent Bonnevay to two-lane traffic in each direction and the Toulouse South access (Roques toll) .
• –  those for which usage is frequent but the degree of obligation is low. These include the Parado-Carénage tunnel in Marseilles, the A 4 motorway, the Toronto bypass (A 407) and a toll expressway alongside a free expressway in California (SR 91).

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• –  those for which usage is rare for family drivers who do not have their expenses reimbursed and for which there is a alternative mode of transport (Channel tunnel, frequent train service) or even a free alternative (good quality free road).
• –  those for which usage is rare, but virtually obligatory (Ile de Ré for holidaymakers). The cost of this type of toll crossing will be included with obligatory expenses such as car tax.In the four types of use shown in graph N° 6, we can clearly distinguish :

• –  frequently used, with little obligation, charging between FF. 10 and FF. 15, for a wealthy clientele (upper quartile);
• –  frequently used, with a high level of obligation, charging only between FF. 5 and FF. 6, as the clientele starts from the second quartile.
• –  infrequently used, with prices linked to that of the alternative and its degree of obligation.It can immediately be seen that the TEO in Lyon, charging F. 16 in the rush hour, is too expensive to be within the means of the whole of the second quartile : it is for this very reason that the population expressed its displeasure at the opening of the route. This was not the case for Prado-Carénage, the A 14 or the SR 91, whose recent entry into service caused no particular emotion. The Tage bridge in Lisbon, o the other hand is very under priced, charging three times less than the Bosphorous bridge in Istanbul, while the population has a much higher standard of living. The public authorities are giving some thought to this on the occasion of the entry into service of a second Tage crossing, and the start of a public transport on the old bridge.To take account of the frequency of use, the toll operator will propose subscriptions intended to segment the clientele and maximise the economic surplus for the whole community by maximising the use of the route.
  • –  single passage (exceptional journey)
  • –  ticket for a set number of journeys
  • –  monthly season ticket
  • –  six monthly or yearly season ticket.In 1997, the cost of a single journey on the A 14 is at FF. 30 , a ticket for a set number of journeys reduces this to FF. 20 and a monthly season ticket to FF. 12.

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Traditionally, the price charged for a toll route is based on traffic models which represent the working of the city at peak hours. An optimum toll is then sought by adjusting the tariff according to the supposed “acceptance to pay” of the population. This acceptable toll is a marginal value used to evaluate the sum that a person would be willing to pay in order to save time, given a choice between two routes or two mode of transport (public transport or private car).

As we have already noted (Transport N° 377 and N° 379), this acceptance to pay will greatly depend on the wealth and the lifestyle of the households.

Its marginal aspect obliges decision-makers to dispose of an accurate and well documented lifestyle segmentation of the population concerned (generally situated close to the route), as reasoning on the basis of average values is too inaccurate to serve a basis for an evaluation of traffic and revenues, and would risk to result in negative political reactions on the part of low paid households. The taking into account of low incomes (lower quartile) can take the form of specific assistance (e.g. reimbursement of part of the cost of the season ticket by the company).

The toll obtained must be reviewed in the light of the three parameters already identified : frequency of use, degree of obligation and culture of the country. In all evidence, where there is a high degree of obligation on the user to use a toll route, the models lead to a high toll level, but this prevents those on the lowest incomes from using it. From a political point of view, the opposite decision will be made : if the corridor is provided with an alternative, good quality option, it will be possible to retain a high toll rate; otherwise it will be necessary to set the toll rate well below that given by the model.

The prices applied on well accepted toll routes leads to an annual cost per car of FF. 2,200 for a virtually obligatory route (Oslo), to FF. 6,500 for one for which there is little obligation (A 14). The Nice bypass, for which the toll rate is particularly low, is a bypass and not an urban motorway, which thus generates less pressure of demand. The same approach will be adopted for all bypasses if it is wished to avoid through traffic passing through the city centre. TEO is one example of this.

3) The culture of the country

The third parameter which comes into play in the political acceptability of a toll is the impression of having to pay a sum in addition to normal taxes. This is a fundamental psychological parameter which varies considerably from one country to another, and even from one link to another. Let us take a few examples.

It Norwegian culture, a country of archipelagos, the use of a ferry is taken for granted. When the ferry is replaced by a bridge, and the bridge toll is set at the same level as the cost of the ferry crossing, no difficulty is encountered. The same could be said of the Prince Edward Island Bridge in Canada, the first bridge in Lisbon opened in 1966, or the Ile de Ré Bridge . The replacement of a ferry by a bridge does not change the obligation to pay : it already existed, rooted in the users’ culture. Even so, the toll rate must keep track with inflation otherwise the service provided would become undervalued, a situation that is difficult to rectify.

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France and Italy have had toll paying interurban motorways for the last half century. Motorists have understood and accepted that it is better to pay a toll and benefit from the motorway for long, infrequent journeys than to only have a saturated road. This was not the case in the other countries of Europe which had an infrastructure of much better quality.

But motorways close to cities have, until now, remained free : the discussions which lead to the partially buying back of the A 4 Toll in the vicinity of Paris, the A 43 one next to Lyon and those of A 64 at Toulouse are still fresh in people’s memories. The inhabitants of the suburbs which is poor by definition could not after all, be expected to “pay to go to work”, when they were already paying in journey times !

People reason and base themselves on the principle of “something in return”. Taxes normally serve to pay for the infrastructure, the use of which “must, normally” remain free as the service it provides is considered to already have been paid for by the taxes. If a toll is levied there must be something extra in return. This could be either accelerated construction of the route, the consensual renovation of an area of the town, no increase in taxes as the route is financed by the customer and not the taxpayer, or any other gesture which is recognised, understood and accepted by the population. The City of Oslo had conducted investigations to establish people’s preferences several years before taking the decision to create the toll cordon and continues today to carry out inquiries to establish the level of satisfaction, with publication of the results. One of the essential subjects is the level of understanding that the inhabitants have of the way in which the money collected is used.

Let us consider again the graph of out small car, highlighting that part of the cost which is made up of taxes. Graph N° 7 shows the distribution of the industrial cost excluding taxes, the cost including all taxes (French domestic duty on petrol products (TIPP) and VAT), of urban tolls (FF. 3,000 per year), and possible parking costs (FF. 4,500 per year). It can clearly be seen that the urban toll is only one more payment on top of other taxes and charges and perceived as such : all the more reason for explaining it.

A special case arises when the degree of obligation is high, as a result of a determined effort of those responsible for transport to reduce the road service which was previously provided free of charge. This only occurs in urban areas but the subject is a sensitive one, as for that section of the population which does not make use of the new facilities, but which pays taxes and sees journey times increasing, there is reason to be dissatisfied.

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We observe that the destruction of a free road or an urban space poses no problems as long as the tax paying user understands that this reduction in capacity is indissolubly linked with an advantage to which he is receptive (urban projects in connection with tram routes in Strasbourg or Grenoble, creation of pedestrian areas, transformation of the sea front in Oslo, etc.)

The same is not true however, when the capacity of a road is reduced with the sole purpose of increasing traffic on the toll route, without any compensating urban improvement. The reaction of the public will then be directly proportional to the level of toll levied and the wealth of the population concerned, as demonstrated by the strong reaction to the entry into service of the Lyon TEO or the Bordes toll road on the A 64 south of Toulouse.

Graph N° 8 shows the increase in cost of a 10 km urban journey covered 600 times a year by car with a low degree of obligation, consistent with a FF. 12 toll rate. Those on low incomes rarely use the route and the monetary impact of the toll is small. For those persons regularly using the route, the increase varies between 50% and 120% of the initial journey cost wether it is compared to the average cost or to the perceived cost .The corresponding toll amount varies between FF. 3,000 and F. 9,000 depending on the wealth of the household.

Conclusion

However good the studies carried out beforehand, the introduction of a toll, and in particular an urban toll faces three unknowns :

How will the public react to the toll road or crossing and its pricing structure ?
How will the decision-makers react in the face of an unknown public reaction ?
How to communicate with the public in order that the toll is understood and accepted ?

As time passes, experiences and lessons build up to form a store of information from which emerges a certain behavioural logic which will allow better prediction of public reaction to tolls and thus allow the quality and the financing of projects to be better refined. A reasonable approach consists in considering all modes of transport together within the framework of an urban transport plan having obtained widespread public support and able to be paid for without excessive effort. The Dennis package of Stockholm, a global urban infrastructure and transport plan which, in seeking a consensus, attempts to combine the requirements of all of the political parties, has become too expensive to be able to be carried out as initially planed : it will now be necessary to rethink the complete balance of the project and its financing.

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The principle of tolls proceeds from three essential advantages :

• –  a reduction of public debt and spending;
• –  the creation of an economic surplus which transforms itself into financial revenue ;
• –  the payment of the service by the customer and not by the taxpayer, which confirms the economic approach in the decision process.It would be regrettable that passed or present errors should damage the image of a source of finance which not only is in keeping with the vision of a lasting city with its centre freed of part of its car traffic, but still having a strong redistributing effect between businesses to households and between the wealthy and the less wealthy, as the creation of an economic asset is given monetary value in order to reduce taxes.The previous examples have illustrated some of the main principles for estimating the acceptability of a toll.

• –  If the customers are reimbursed part of the toll by their employer, they become unconcerned by the toll rate : all that remains is the nuisance of having to pass through the toll booth.
• –  If a toll road or crossing provides additional capacity without reducing that of existing free routes, it is well accepted. It is an additional choice of route to be used by those who wish to or are able to afford it.
• –  If a toll route requires public subsidies the toll levied must remain low, otherwise taxpayers on low incomes who rarely use the route will have the impression of having paid for the rich.
• –  The area controlled by the public authority paying the subsidy must be sufficiently large to contain the majority of the customers of the toll route.
• –  The price of the toll must be of a similar order of magnitude to that of a everyday consumer product (newspaper, refreshment, scratch card game).
• –  Said everyday consumer product must obviously be that of the area within which the toll route is established. Equality under the law does not result in equality of consent to pay. The Oslo urban toll cordon has been designed to include the poorest areas of the city inside the toll cordon. A uniform toll rate around Paris would cause problems, as what would be considered acceptable in the West would not necessarily be so in the East.

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– what an urban toll road offers is more a guarantee of journey time, liable to modify the habits of city dwellers, than simply a means of saving of time.

Finally and maybe essentially, a transport operation cannot be dissociated from a town- planning operation. The best proof of this is the Lyon North bypass (TEO). This consists of a Western section which has a very clear town planning role as it improves the Vaise district, and of an Eastern toll road section which is currently associated with no town planning scheme and which provoked strong negative reaction.

Only a complete and shared desire to embellish the city will make urban tolls acceptable.