Winners and Losers from Congestion Pricing in NYC

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You don’t need to spend much time in New York City to understand that in recent years, everyone has developed their own book of horror stories featuring nightmarish delays on the city’s long-deteriorating subway system and countless hours spent locked in traffic jams in and around Manhattan.

On March 31, 2019, Governor Andrew Cuomo and the New York State legislature took steps to fix the subway system by passing a budget which includes a “congestion pricing” plan for New York City.[1]  Congestion pricing is a policy which imposes fees on drivers in crowded urban environments in order to reduce traffic and promote reliance on public transportation.[2]  New York voters are sharply divided over the plan – with 51% opposed and 41% in favor.[3]  The details of how exactly congestion pricing will work in New York City largely remain to be determined at a later time, as New Yorkers are already fighting for various exemptions from the policy.[4]  Below, I explore: (1) where congestion pricing comes from, (2) how it might work in New York City, and (3) winners and losers from congestion pricing in New York.

New York’s congestion pricing plan is imported from other global hubs such as London, Stockholm, and Singapore.[5]  London’s plan, adopted in 2003, is instructive on how congestion pricing works.  British drivers are charged £11.50 every time they enter into the crowded center of London – known as the “cordon” – which is particularly plagued by traffic congestion. Since the program was implemented, car traffic has decreased 10% while public transportation has increased 9% and bike trips have doubled.[6]  After adopting similar plans, traffic in Stockholm and Singapore dropped 25% and 15%, respectively.[7]  Further, air quality in London improved with a 12% reduction of air pollution from vehicles within the zone.[8]

In Manhattan, between 2010 and 2018, average traffic speed has dropped from 9.1 to 5 miles per hour – almost twice as slow – in large part due to the rise of ride sharing services such as Uber and Lyft.[9]  This increase in traffic congestion coincided with a decrease in the efficacy of the city’s subway system, particularly following Hurricane Sandy.[10]  The city has invested substantially in subway repairs over the past year[11] and some benefits are beginning to show – but New Yorkers still struggle with the subway.[12]  It is estimated that it could cost $37 billion to fix the subway system.[13]  Considering the current predicament, it is easy to see why congestion pricing is seen as a viable solution to restore New Yorkers’ lost mobility.

It is estimated that congestion pricing in New York could raise $1 billion annually from which $15 billion in bonds could be secured for improvements to public transit.[14]  Starting in 2021, an electronic tolling system will begin to charge drivers as they drive south past into the “cordon,” set at 60th Street in Manhattan; it is estimated that cars will pay $12 – $14 and trucks will pay $25.[15]  The fees will likely be offset, to an extent, by other tolls paid by drivers as they enter the city over bridges and through tunnels.[16] Various groups are lobbying for exemptions or reductions from the fee but it remains to be seen which, if any, of these groups will be successful in doing so.[17]

The reaction to the policy has been mixed, with a majority of New Yorkers opposing congestion pricing.[18]  This is unsurprising as there are clear positives and negatives to the implementation of the policy. Here are some winners and losers from congestion pricing in New York City:

Winners:

  • Subway Riders: The $15 billion bond that can be supported by this policy will go a long way towards the $37 billion needed to fix the system.[19]  Subway riders should expect to see more subway cars and more reliable service as a result of this investment.
  • The Environment: If the congestion pricing plans overseas are reliable precedent, New York should see a material decrease in air pollution from vehicles in Manhattan.[20]
  • New Train/Bus Commuters: As the system becomes more reliable, people could find a cheaper and more convenient means of commuting into the city as an alternative to their cars. Once the subway system is fixed, it is possible that the fees from congestion pricing could be used to increase the efficacy of public transit in the areas immediately outside of Manhattan.
  • Whoever Gets Exempted: Various groups are already lobbying for exemptions from the fee. For example, several police unions have already argued that police who commute by car should not have to pay the fee because they have no control over where they are stationed throughout the city.[21]

Losers:

  • Car Commuters: Unfortunately, there are many people who come into the city who will not be able to avoid the fee. This policy has the hallmarks of a particularly regressive tax as it is imposed equally on all drivers, regardless of their income.  If the policy has its intended effects, at least these drivers will have less congestion on the roads and shorter commutes.
  • Taxis/Ubers: Taxis and Ubers will be subject to the fee and that price will likely get passed along to consumers.[22]  Again, if the policy has its intended effects, hopefully New Yorkers will have an efficient alternative in a revamped public transit system to avoid more expensive rides in taxis and Ubers.
  • New Jersey: As of now, drivers from New Jersey who come over the George Washington Bridge and subsequently travel south of 60th Street will have to pay both tolls.[23]  New Jersey Governor Phil Murphy has expressed dissatisfaction with this situation but has yet to make any progress on a solution.[24]  As of now, it seems that all of the revenue from the congestion pricing plan will go to improvements in New York State, despite the fact that many drivers from New Jersey will be paying for it.

In New York today, there are roughly 5,580,800 subway riders on a given day.[25]  Within the “cordon,” which would be effected by congestion pricing, there are approximately 2,159,000  subway riders and 414,000 drivers.[26]  If car traffic were to decrease by 10%, as it did in London,[27] that would increase subway ridership by about 41,000 riders per day.  This amounts to a 0.7% increase in total subway ridership for the city.  Concerns that the subways will be overrun by a flood of former-drivers are therefore unlikely to be realized.

That the plan will not come into effect until 2021 is a good thing.[28]  By waiting until 2021, commuters will have time to adjust to the policy – whether that means selling a car, moving closer to the subway system, lobbying for an exemption, etc.  Further, through reliance on future revenue from congestion pricing to float a $15 billion bond in the near term,[29] the city can jump start the overhaul of the subway system which is already shown signs of progress.[30]  The debt can be repaid in the future through the fees generated by congestion pricing. By the time the plan comes into effect, hopefully these investments will have been paid off and drivers and commuters will feel confident in the ability of the public transit system to reliably get them where they need to be. In the long term, funds raised through congestion pricing can help New York reclaim its historical reputation as a leading innovator in public transportation.


[1] Jesse McKinley, New York State Budget Deal Brings Congestion Pricing, Plastic Bag Ban and Mansion Tax, N.Y. Times (Mar. 31, 2019), https://www.nytimes.com/2019/03/31/nyregion/budget-new-york-congestion-pricing.html?module=inline.

[2] Winne Hu, Over $10 to Drive in Manhattan? What We Know About the Congestion Pricing Plan, N.Y. Times (Mar. 26, 2019), https://www.nytimes.com/2019/03/26/nyregion/what-is-congestion-pricing.html.

[3] Jesse McKinley and Vivian Wang, New York State Budget Deal Brings Congestion Pricing, Plastic Bag Ban and Mansion Tax, N.Y. Times (Mar. 31, 2019), https://www.nytimes.com/2019/03/31/nyregion/budget-new-york-congestion-pricing.html?module=inline.

[4] Winne Hu, Over $10 to Drive in Manhattan? What We Know About the Congestion Pricing Plan, N.Y. Times (Mar. 26, 2019), https://www.nytimes.com/2019/03/26/nyregion/what-is-congestion-pricing.html.

[5] Marc Lee, Mobility Pricing in Practice: A Look at London, Stockholm, and Singapore, PolicyNote (Apr. 30, 2018), https://www.policynote.ca/mobility-pricing-in-practice-a-look-at-london-stockholm-and-singapore/.

[6] Id.

[7] Id.

[8] Winne Hu, Over $10 to Drive in Manhattan? What We Know About the Congestion Pricing Plan, N.Y. Times (Mar. 26, 2019), https://www.nytimes.com/2019/03/26/nyregion/what-is-congestion-pricing.html.

[9] Danielle Furfaro, et al., Why Driving in NYC has Somehow Gotten Even Slower, New York Post (June 15, 2018), https://nypost.com/2018/06/15/why-driving-in-nyc-has-somehow-gotten-even-slower/.

[10] M.T.A. Delays: How Did the Subway Get So Bad?, N.Y. Times (Feb. 20, 2018), https://www.nytimes.com/2018/02/20/nyregion/mta-train-delays.html.

[11] Emma G. Fitzsimmons, They Vowed to Fix the Subway a Year Ago. On-Time Rates Are Still Terrible., N.Y. Times (July 23, 2018), https://www.nytimes.com/2018/07/23/nyregion/nyc-subway-delays-failure.html.

[12] Andy Byford, MTA Report Reveals Improvement in Subway On-Time Performance, But Riders Say They Don’t See It, CBS N.Y. (Apr. 10, 2019), https://newyork.cbslocal.com/2019/04/10/mta-on-time-performance-andy-byford-congestion-pricing/.

[13] Mark Matousek, The MTA Revealed its $37 Billion Plan to Save NYC’s Crumbling Subway System – But There’s One Big Problem, Business Insider (May 24, 2018), https://www.businessinsider.com/nyc-subway-37-billion-plan-for-repair-unveiled-2018-5.

[14] Winne Hu, Over $10 to Drive in Manhattan? What We Know About the Congestion Pricing Plan, N.Y. Times (Mar. 26, 2019), https://www.nytimes.com/2019/03/26/nyregion/what-is-congestion-pricing.html.

[15] Id.

[16] Id.

[17] Danielle Furfaro, et al., Why Driving in NYC has Somehow Gotten Even Slower, New York Post (June 15, 2018), https://nypost.com/2018/06/15/why-driving-in-nyc-has-somehow-gotten-even-slower/.

[18] Jesse McKinley and Vivian Wang, New York State Budget Deal Brings Congestion Pricing, Plastic Bag Ban and Mansion Tax, N.Y. Times (Mar. 31, 2019), https://www.nytimes.com/2019/03/31/nyregion/budget-new-york-congestion-pricing.html?module=inline.

[19] See notes above

[20] Marc Lee, Mobility Pricing in Practice: A Look at London, Stockholm, and Singapore, PolicyNote (Apr. 30, 2018), https://www.policynote.ca/mobility-pricing-in-practice-a-look-at-london-stockholm-and-singapore/.

[21] Dean Meminger, Police Officers Demand to be Exempt from Future City Congestion Pricing Fee, NY1 (Apr. 12, 2019), https://www.ny1.com/nyc/all-boroughs/transit/2019/04/13/officers-demand-to-be-exempt-from-future-nyc-congestion-pricing-fee.

[22] Winne Hu, Your Taxi or Uber Ride in Manhattan Will Soon Cost More, N.Y. Times (Jan. 31, 2019), https://www.nytimes.com/2019/01/31/nyregion/uber-taxi-lyft-fee.html.

[23] Matt Arco, Murphy Tells Cuomo N.J. Commuters Shouldn’t Get Hit with a Double Tax under N.Y.’s Congestion Pricing Plan, NJ.com (Apr. 1, 2019), https://www.nj.com/politics/2019/04/murphy-tells-cuomo-nj-commuters-shouldnt-get-hit-with-a-double-tax-under-nys-congestion-pricing-plan.html.

[24] Id.

[25] Average Weekday Subway Ridership, MTA, http://web.mta.info/nyct/facts/ridership/ridership_sub.htm (last visited Apr. 13, 2019).

[26] Charles Komanoff, Why Congestion Pricing Won’t Overwhelm the Subways, StreetsBlogNYC (Jan. 2, 2018), https://nyc.streetsblog.org/2018/01/02/why-congestion-pricing-wont-overwhelm-the-subways/.

[27] Marc Lee, Mobility Pricing in Practice: A Look at London, Stockholm, and Singapore, PolicyNote (Apr. 30, 2018), https://www.policynote.ca/mobility-pricing-in-practice-a-look-at-london-stockholm-and-singapore/.

[28] Winne Hu, Over $10 to Drive in Manhattan? What We Know About the Congestion Pricing Plan, N.Y. Times (Mar. 26, 2019), https://www.nytimes.com/2019/03/26/nyregion/what-is-congestion-pricing.html.

[29] Id.

[30] Andy Byford, MTA Report Reveals Improvement in Subway On-Time Performance, But Riders Say They Don’t See It, CBS N.Y. (Apr. 10, 2019c), https://newyork.cbslocal.com/2019/04/10/mta-on-time-performance-andy-byford-congestion-pricing/.

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Fordham Journal of Corporate & Financial Law