metadata: authors: 0: author: Hau,Timothy Doe-Kwong
docna: 0: docna: Congestion charging mechanisms for roads :
            an evaluation of current practice
docty: Policy Research Working Paper
subtopic: Transport in Urban Areas,Transport Economics Policy & Planning,Urban Transport,Toll Roads,Transport Services,Intelligent Transport Systems,Global Environment
teratopic: Transport
abstracts: cdata!: The author explores 20 criteria for a
            good road pricing system and presents case studies
            illustrating the costs, revenues, and benefits of
            alternative congestion charging mechanisms.  The author
            finds that manual tollbooths are not suitable for congestion
            charging because they are land-, labor-, and time-intensive.
            Cordon pricing (as in the Bergen toll ring) can be an
            effective instrument for charging for congestion if half the
            toll lanes are reserved for seasonal pass holders traveling
            through the pricing points at regular highway speed.
            Enforcement of those driving in reserved lanes can be
            carried out by periodic videographs of vehicle license
            plates.  Area licensing schemes require that vehicles
            entering the central business district during peak hours
            prominently display a monthly or daily license.  Enforcement
            is undertaken at gantry points by traffic wardens who
            perform visual checks on the nonstop traffic.  The
            enforcement costs of area licensing schemes are prohibitive
            at motorway speeds but relatively low-cost in a standard
            congested urban setting with limited gateways.  Area
            licensing schemes, also known as supplementary licensing,
            carry the lowest cost per transaction.  Electronic road
            pricing with automatic vehicle identification (an
            off-vehicle recording system) is electronic toll collection
            by time of day writ large and made obligatory on vehicle
            owners in a jurisdiction.  The cost of the electronic
            equipment is not trivial, but is outweighed by the benefits.
            Sensitivity analysis performed on the Hong Kong electronic
            road pricing scheme in 1983-85 shows that even after
            excluding time savings, the savings in operating costs
            produce benefit figures that are greater than system costs.
            The invasion-of-privacy issues that led to the political
            failure of the Hong Kong electronic road pricing scheme can
            not be overcome by giving road users access to confidential
            numbered account arrangements with a prepaid cash deposit.
            The capital cost of electronic road pricing with smart card
            technology (an on-vehicle charging system) is higher than
            the cost for automatic vehicle identification technology
            alone, but benefits still outweigh costs (as in the Dutch
            proposal).  Together, the benefit-cost ratio and the cost
            per transaction are acceptable but this technology is still
            not widely used commercially.  The author argues that
            electronic approaches to direct road use charging are
            superior to manual approaches for road users, road
            authorities, and society as a whole.  And rapid progress in
            microelectronics, cryptology, and microwave technologies
            will continue to yield large-scale economies in the
            manufacturing of automatic vehicle identification equipment,
            read-write transponders, smart cards, and the hardware and
            software that go with them. The author ranks electronic road
            pricing with automatic vehicle identification alone higher
            than electronic road pricing with smart card-type AVI based
            on an unweighted index of all criteria.  And generally, the
            area licensing scheme is superior to cordon pricing.  If
            budgets allow, authorities should investigate the
            feasibility of electronic road pricing.  If the budget is
            tight, they should look into the area licensing scheme with
            its low cost and high benefit-cost ratio (the latter being
            the most important of the 20 criteria the author uses).
            Both conceptually and practically, the author finds that it
            is important to earmark the proceeds of road pricing to
            implement marginal cost pricing in the road sector.
repnme: repnme: Congestion charging mechanisms for roads :
            an evaluation of current practice
display_title: Congestion charging mechanisms for
            roads : an evaluation of current practice
listing_relative_url: /research/1992/12/699490/congestion-charging-mechanisms-roads-evaluation-current-practice
topicv3: Road Tolls m1326463 1818,Transport m1326661 135,Mass Transit m1327372 1726,Environment, Natural Resources and Blue
            Economy m1327391 566,Traffic Management m1583399 4231
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Transport
origu: Transportation, Water and Urban Development Department
no_of_pages: 108
author_keys: 0: author_key: 772560
model_extractions: Pclloy Research

# Transport

WPS 1071 This paper- a product of the Transport Division, Infrastructure and Urban Development Departmentis part of a larger effort in the department to evaluate options to charge for the use of roads. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jennifer Francis, room S 10-063, extension 31005 or 35205 (December 1992, 99 pages).

Hau explores 20 criteria for a "good" road pricing system and presents case studies illustrating the costs, revenues, and benefits of altemative congestion charging mechanisms.

Hau finds that _manual tollbooths_ are not suitable for congestion charging because they are land-, labor-, and time-intensive. _Cordon pricing_ (as in the Bergen toll ring) can be an effective instrument for charging for congestion if half the toll lanes are reserved for seasonal pass holders traveling through the pricing points at regular highway speed. Enforcement of those driving in reserved lanes can be carried out by periodic videographs of vehicle license plates.

_Area licensing schemes_ require that vehicles entering the central business district during peak hours prominently display a monthly or daily license. Enforcement is undertaken at gantry points by traffic wardens who perfonn visual checks on the nonstop traffic. The enforcement costs of area licensing schemes are prohibitive at motorway speeds but relatively low-cost in a standard congested urbai. fetting with limited gateways. Area licensing schemes, also known as supp;ementary licensing, carry the lowest cost per transaction.

_Electronic road pricing with automatic vehicle identification_ (an off-vehicle recording system) is electronic toll collection by time of day _writ large_ and made obligatory on vehicle owners in a jurisdiction. The cost of the electronic equipment is not trivial, but is outweighed by the benefits. Sensitivity analysis perfonmed on the Hong Kong electronic road pricing scheme in 1983-85 shows that even after excluding time savings, the savings in operating costs produce benefit figures that are greater than system costs. The invasion-of-privacy issue that led to the political failure of the Hong Kong electronic road pricing scheme can now be overcome by giving road users access to confidential "numbered account arrangements" with a prepaid cash deposit.

The capital cost of _electronic road pricing with smart card technology_ (an on-vehicle charging system) is higher than the cost for automatic vehicle identification technology alone, but benefits still outweigh costs (as in the Dutch proposal). Together, the benefit-cost ratio and the cost per transaction are acceptable but this technology is still not widely used commercially.

Hau argues that electronic approaches to direct road use charging are superior to manual approaches for road users, road authorities, and society as a whole. And rapid progress in microelectronics, cryptology, and microwave technologies will continue to yield large-scale economies in the manufacturing of automatic vehicle identification equipment, read-write transponders, smart cards, and the hardware and software that go with them.

Hau ranks electronic road pricing with automatic vehicle identification alone higher than electronic road pricing with smart card-type AVI based on an unweighted index of all criteria. And generally, the area licensing scheme is superior to cordon pricing. If budgets allow, authorities should investigate the feasibility of electronic road pricing. If the budget is tight, they should look into the area licensing scheme with its low cost and high benefit-cost ratio (the latter being the most important of the 20 criteria Hau uses).

Both conceptually and practically, Hau finds that it is important to earmark the proceeds of road pricing to implement marginal cost pricing in the road sector.

Working PaperSeriesdissemnates thermdings of workunder way in theBank. AnCobjectiveof e Policy Research Ph the series is to get these findings out quickly, even if presentations are less than fully polished. The Fndings, interpretations, and conclusions in these papers do not necessarily represent of ficial Bank policy.

Produced by the Policy Research Disscmination Center
Congestion Charging Mechnisms for Roads: An Evaluation of Current Practice by Timothy D. Hau Transport DIvision lnfrastructre and Urban Development Department The World Bank
# Congestn Charwing Mechanism for Roads: An EvaLuation of Current Ph cice

# by

# lmoihy D. Hau

# CONTENTIS

|ACxNOWLE|DEME|NTS..............<br>.<br>..........................<br>iv|
|---|---|---|
|SYNOPSIS|.<br>..|................................................<br>v|
|X.<br>CON|CETU|ALPRAm,4EwToRK<br>........................<br>.<br>...<br>.<br>2|
|Crite|ria f a|'Good'<br>Road PricingSystem .<br>......................._5_|
|A.|From|Usen'Pontof<br>w(1-4).......<br>....<br>.<br>.<br>S|
||(1)|User-friedlines<br>(SimpLcity) .......<br>.................<br>_5_|
||(2)|Tansparency (via_ex an_pdicng)..................<br>.<br>_5_|
||(3)|Anonymity<br>tcton_frm_InvaonsofPiy) ....<br>onofPrivacy.......<br>_5_|
||(4)|Prepaymen/PostpaymentOpdonfor Charging<br>.............<br>6|
|B.|Fm<br>|RoadAutbouity'sPo<br>int<br>_of_<br>_fVw_<br>(S-ll)<br>..............<br>iew(....<br>6<br>|
||_(5)_|EnhancedBfiencyvia Diect Chrging<br>. ..............<br>.<br>6|
||(6)|FlPilty(ReoqxnsivenesstoDemand)......<br>......<br>.<br>6|
||(7)|RdebbH<br>4<br>............................................<br>7|
||<br>(9)|Proviionfor Occasional<br>V-istors.........<br>..........<br>.<br>.<br>7|
||<br>(10)|'Marlkt'PriceasanInvestmentSignal<br>..................<br>8<br>|
||(11)|PaLsge ofReenu-Cstest<br>......................<br>.<br>8|
|C.|From|Society'sPoitofV.ww<br>(12-20) ............................<br>.<br>8|
||(12)|Passage ofBoefit-Cost Test..<br>...............<br>. 8|
||(13)|MinimumofRoadWokandEnvhionmentalInusdon........<br>9<br>|
||(14)|ProviionforJudTuffc. ......................<br>.<br>9|
||(15)|HIadlin of'nsitionalPhase ..........<br>...........<br>.<br>9|
||(16)|Com<br>bt<br>withOderSystms .................<br>.....<br>. 10|
||(17)|ModuaritytoAdd-onOptions...................<br>........<br>. 10|
||(18)|Tolaceto<br>C.iturofNon-compliace,<br>.....<br>............<br>10|
||(19)|TolwancetoVaried Gogrphy<br>.....................<br>. 11|
||(20)|Pim<br>sanddoAvailab<br>ofAlumives<br>lityofAltna<br>.....<br>.........<br>11|
|I.<br>TCAFR|RanA|OR<br>MADsu-.........................................<br>. 12|
|_m._<br>cWA|Rom o|RRoAm - Ie.SEcrMBoDs<br>...............................<br>_1S_|
|A.<br>Indirect Charging via Vehicle Ownership Purchase Tax and Annual|
|---|
|License Fees<br>......................................<br>_15_|
|B.<br>Indirect Charging via Vehicle Usage ........................<br>_15_<br> <br>|
|1)<br>By Amount of Use: Fuel Tax and Tax on Tires and Vehicle<br>|
|Parts ................................................<br>_1S_<br>2)<br>By Both Amount of Use and Place: Differential Fuel Tax ...<br>... 16<br> <br> <br>|
|3)<br>By Place and Time: Parkng Charge ...<br>: ......<br>.........<br>16<br> <br> <br>|
|4)<br>By Place and Time: Supplementary Licensing .........<br>....<br>18|
|IV.CHARGINGFORROADS--DIRCTMETHODS<br>....................... 20<br> <br> <br>|
|A.<br>Off-Vehicle Recording<br>.<br>....<br>20<br> <br> <br> <br>|
|1)<br>Manual<br>Chargingva Tollgates<br>..<br>21|
|2)<br>Automatic Scanning via Automatic Vehicle Identification...<br>24|
|AVI Technology<br>...<br>24|
|<br>Optical and infra-red systems<br>..<br>25<br> <br>|
|Inductiveloopsystems..<br>25<br>Radio frequency and microwave systems (including surface|
|acoustic wave technology)..<br>25<br> <br>|
|Smart card systems<br>.<br>.25<br> <br>|
|Examples of AVI systems<br>.<br>.<br>.<br>33|
|3)<br>Combination ofManual<br>and ElectronicToll<br>Collection<br>...<br>37<br>|
|i)<br>The Oslo and Trondheim Toll Rings<br>.<br>.37<br>ii)Road Pricing on a Cordon Basis in Stockholm and<br> <br>|
|Gothenburg<br>..............................<br>4<br>iii)<br>The Hong Kong Electronic Road Pricing and Area<br>Licensing<br>Schemes ......<br>...<br>................<br>iv)<br>Congestion Pricing in New Toll Roads of Orange County,<br>California<br>..........<br>.....................<br>50<br> <br>|
|B.<br>On-Vehicle Metering .................................<br>_50_|
|i)<br>The Comprehensive Electronic Road Pricing Scheme of the|
|Netherlands based on Smart Card Technology ...<br>1......<br>S<br>ii)<br>Congestion Metering in Cambridge, England ....<br>5.....<br> <br>|
|iii)<br>The SingaporeElectronicRoad Pricing System .<br>.......<br>57|
|V.<br>SUMMARY**AND**CONCLUsIONS................................<br>_59_<br>Recommendations of Congestion Charging Mechanisms for Developing<br>Counies<br>............<br>62|
|Table 1: Methods of Road Use Charging .............................<br>65|
|Table 2: Criteria for a 'Good' Road Picing System ........<br>..<br>6.<br>i|
|Table 3: Benefits, Costs and Revenues of Various Cordon Toll Schemes<br>in Oslo, by Time Period, per year (in millions of 1990 Norwegian kroner) ...<br>67|
|Table 4:<br>Are|Benefits, Costs and Revenues of Car Ownership Fiscal Restraint Measure,<br>a Licensing and Electronic Road Pricing Schemes, by Vehicle<sup>Class per year</sup><br>compared to 1991 Reference (in millions of 1985 Hong Kong dollars)<sup>....</sup><br>69|
|---|---|
|Table S: A|Comparison of Road Use Charging Mechanisms<br>...<br>70|
|Annex 1:|The Singapore Area Licensing Scheme, 1975 to present ............<br>..77|
|A.|<br>Background Information .77|
|B.|Analysis of Results (1975-89) .78|
|C.|Analysis of Results (1989-present) .80<br>|
|D.|<br>Financial and Economic Evaluation<br>81|
|E.|Lessons forImplementing AreaLicensing.84|
|Annex 2:|The Manually-Operated<br>Bergen Toll Ring, 1986 to present ....<br>........<br>86<br>|
|A.|<br>Background Information<br>..<br>86<br>|
|B.|Analysis of Results<br>..<br>87<br>|
|C.|<br>Evaluation.<br>8<br>|
|D.|<br>Lessons for Implementing Cordon Pricing via Toilgates and Reserved|
||Lanes .89|

|Annex 3: The Electronic and Manual Zone Fee Proposals of Stockholm<br>1992 .|,<sup>1989 and</sup><br>90|
|---|---|
|A.<br>The Electronic and Manual Zone Fee Proposals of Stockholm,|<sup>1989 ....</sup><br>90|
|<br>B.<br>The Dennis Package, 1991-92<br>.................|<br>91|
|**REF**<br>**NCEs**............................................|...<br>93|
# ACl - WLEDGMW

I gratefully adkowledge hlpfiul dicions with the following people on the subject of congestion pricing: Herbert Mohring, Kiran Piat, JosE Cabajo, Anthony Cbin, Ian Heggie, Davd H sher, Peter J. Hills, Peter Jonas, Odd Larsen, Hennig laidsen, Aurelio Menende, Wflliam Pson, Robert Poole, Farideh Ramjerdi, Gabriel Roth, Richard Scurfildd, Koeeh Small, Rom Toh and William Vclcrey. In addition, I thank the foilowing people for providing me with informaion on road pricing tcchnologies: Arnold Brgode (AT&T Smart Card Dision), Ed DeLazier (DuHll Tol Road), Frank Dorrance (Amtch), Al Dunn (Louisiana Department of Trsortation and Development), Robert Frak (Amtch), Wedey Freise (Harris County Toll Road Authority), BiB Harison (MVA Cosutncy), Chris Hill (Casto Rock Consultns), Robert Lambert (Lake Pontdharuain Causeway), Svend Lars (Oslo Rgen), Aa Ln y(egit of Vehicles, Government of Singapore), Alan LAvmeur (Cresceat City Conecion), La Lind (Odo Ringen), Gopinath Menon (Public Works Department, Govenmont of Singapo), Brian Oldridge (Cridgeshir County Council), Bo Peterson (S ,kholm Transport), Heero PolPitch Ministy of Transport and Public Works), Mardn Richards (MVA Consultancy), Richard Riing (Okhoma Tuhrpip3 Authorhy), John Rourlo (AT/Comm), Frank Schepis (Autostade S.p.A.), Robert Selvi (Autostade S.p.A.), Arvid Strand (Micro Design, Trondheim), Brian Taylor (Internationa Road Dynaics Inc.), Tony Thompson (MVA Consultancy), Terje Tretvik (SINTEF Transport Engineering, Trondheim) and Robert Tuckwdl (CambrdgeslIte County Council). Part of the findings of this reseach was preented at the 71st Amnual Meet of the Traportation Research Boar', Washington, D.C., January 12-16, 1992; the 6th World Confence on Transport Research, Lyon, France, June 29 - July 3, 1992; Seminario de Tarificauion Vial 1992 (Ro Pricng Semnr), sponsored by the Ministry of Transport, Santiago, Chile, July 20-21, 1992; and the Symposm on Road Pricig, sponsored by the Swedish National Road Administon and Dep of Rgional Planing, the Royal Istute of Techology, Siguna, Sweden, November 9-10, 1992. Widely disseminated, this paper has bee distibuted at places such as the Congestion Pricing Symposum, sponsored by the Fdal Hihway Administ and the Federal Transit Administration, Arlington, Virginia, June 10-12, 1992, and the Southwest Congesdon Pricing Conference, sponsored by the Univerity of Houston Cetr for Public Policy and Citins Advocat Responsible Transportation, Houston, Texas, January _4-5,_ 1993. Com-men made by pardcipas at these conerenes are acknowledged.

I retain fill responsiblity for any of the views expressed in this paper.

Timothy D. Hau
v -

## SYNOPSIS

# Congestion Charging **Mechanisms** for Roads: An Evaluation of Current Practice by

# Timothy D. Hau

This paper investigates the implementation aspects of road pricing by setting down criteria for a 'good' road pricing system. Besides analyzing the gamut of indirect and direct methods of charging for road usage, the paper surveys alternative congestion pricing technologies including: 1) cordon pricing using manual tollbooths, 2) supplementary licensing, 3) off-vehicle recording systems such as automatic vehicle identification, commonly known as AVI, and 4) on-vehicle charging systems such as smart card technology. Each of these instruments is dealt with by a relatively in-depth case study analysis based on the benefits, costs and revenues of implementing and utilizing each charging mechanism. Since benefit figures are not always readily available, the cost per transaction of operating a system over the long run is used as an index of the relative cost-effectiveness of each technology. Based on alternative quantitative and qualitative criteria, the implications of using each of these technologies for tackling congestion are summarized in a key table and conditional policy recommendations are made.

_Tollbooths_ suffer from being land intensive, labor intensive and time intensive and are clearly unsuitable for congestion charging in and of themselves. However, cordon pricing (as in the Bergen Toll Ring) can serve as an effective instrument of charging for congestion if half the toll lanes are reserved for the use of seasonal pass holders traveling through the pricing points at regular highway speeds. Enforcement of those drving on reserved lanes can be carried out by periodic videographs of vehicle license plates, just as radar technology is a socially acceptable tool to apprehend speedsters. _Area licensing schemes (ALSs)_ require that vehicles enterng the central business district during peak hours display a monthly or daily license prominently, with enforcement being undertaken at gantry points by traffic wardens who perform visual checks on the nonstop traffic. Enforcement of ALS would be prohibitively costly when carried out at motorway speeds but would likely involve relatively low cost in a standard congested urban environment with limited gateways. ALS, also known as supplementary licensing, is found to possess the lowest cost per transaction. _Electro?Jc road pricing (RP) wih AVW_ is electronic toll
- -vi

collection by time-of-day _larit_ and made obligatory on vehicle owners within a jurisdiction. Even though the cost of the electronic equipment for AVI is not considered trivial, the benefits are considerably higher than the cost. As the sensitivity analysis performed on the Hong Kong ERP Scheme in 1983-85 clearly demonstates, even after excluding time savings on philosophical or other grounds, the savings in operating cost stil yield benefit figures that outweigh the system cost. The much touted invasion-of-privacy issue that plagued the Hong Kong ERP scheme in the past can now be dealt with by providing road users access to confidential *numbered account arangements" with prepaid cash deposit. The capital cost of _ekctronic road pricing with smail card technology_ is higher than AVI alone technology, but the cost is still le than the beneilts. Put together, the benefit-cost ratio and the cost per taction can be regarded as acceptable, but this technology is stil not yet widely used on a commercia basis. Nevertheless, rapid progress in micoelectronics, cryptology and microwave technologies will continue to yield large-scale economies in the manu of AVI equipment, read-write trponders, smart cards and the hardware and software accompaniments.

Electronic approaches of direct road use chaWn are shown to be superior to manual approaches whether from the pewective of a road user, road authority or society as a whole. Within these broad categories, ERP using AVI is anked highe than ERP using smart card based on an unweighted index of all the criteria. In generl, ALS is superior to cordon pricing. Hence, if budgetary conditions allow it, the feasibility of implementing ERP ought to be investigated. However, if budget is tight, then _AMS_ (with its low cost and correspondingly high benefit-cost ratio) ought to be regarded favorably. It is argued that the most important measure (out of the twenty criteria listed) is the passage of the benefit-cos **t** est. Nevertheles, by pursuing the multicriteri **a** nalysis introduced in the paper, the road auhiority could choose from amongst other criteria for deciding on the appropriate congestion charging instument.

Finally, the disposition of the revenues collected from road pricng is crucial to its success. Based on experience as well as conceptual grounds, it appears that earmarking of the proceeds from road pricing would serve as an important prerequisite to the actual implementation of marginal cost pricing in the road sector.
# **Congestlon** Chargilg Mechanisms for Roads: An Evaluation of Current **Practce**

1. Ovwr 80 percent of the world's megacities are projected to be in developing countries by the year 2000. It is un1iky, however, that road capacity will be able to keep pace with the rapid growth in travel demand resulting from increases in population and vehicle ownership. Thus it is inevitable that urbanization yields tffic congestion as a by-product.' Some form of regulatory restraint or pricing mechaniw **i** s necessary to curtail congestion, where congestion is fonrally defined to be the additional cost that a motorist imnposes on otners.

2. This paper is the second of two papers on road pricing in theory and practice. In the previous paper, the theory of road pricing-cum-inveatment is reviewed and synthesized into an integrated analytical framework (Hau, 1992). Even though I deal only with charging for the congestion externality in this paper, congestion pricing would also have as a by-product the reduction of air and noise pollution from mobile sources. This market-based approach could serve as an effective deterrent to the ovemse of roads by intemalizing negative extemalities and would thus enhance society's welfare within an urban area. Even though congestion pricing _per se_ is practiced only in Singapore, road use charging in the form of electronic toll collection is rapidly flounshing in countries such as Norway, France, Italy and the United States. Charging by daylight hours in Trondheim, Norvay (and further discounts for electronic tag holders during the moning peak) can be viewed as crude forms of road pricing. As part of the Intermodal Surface Tansportation Efficiency Act (ISTEA) signed into law in December, 1991, the U.S. Federal Highway Adminstration invites state and local governments to participat n five federally-funded congestion pricing pilot pgrams (which include the funding of parking prcing (see U.S. Department of Transportation, 1992; Office of the Federal Register, 1992)). Further, bills to implement variants of road pricing are in the parliament of cities suffering from both L pollution and congestion such as Sandago and Stockholm.

I For estimates of congeto coa and indices an tdo United Statos, wse s **ad Idmux (1990, 1992).**
3. The first section of the piper presents a conceptual framework for congestion pricing and sets down the criteria for a 'good' road pricing system. The second and third sections review and analyze the indirect and direct methods of charging for road usage. Both sections cover a taxonomy of alternative technologies to implement congestion pricng. The several basic technologies include: 1) cordon pricing using manual tollbooths, 2) supplementary vehicle licensing, 3) off-vehicle recording systems such as automatic vehicle identification, commonly known as AVI, and 4) on-vehicle charging systems such as smart card technology. The paper introduces manual and electronic toll collection methods as precursors to the off-vehicle and onvehicle charging instruments. The varous approaches to road priing are analyzed progressively by their level of technological advance up to the increasingly popular electronic toll collection mechanisms which exploit recent developments in automatic vehicle identification and smart card technology. The benefits, costs and revenues of implementing each charging mechanism are analyzed. Since benefit figures are not always readily available, the cost per tiansaction of operating a system over the long run is used as an index of the relative cost-effectiveness of each technology. Based on both quantitative and qualitative criteria, the implications of using each of these technologies for tackling congestion are summarized and conditional policy recommendations are made.

# L CONCEVUAL FRAMEWORK

4. Urban transport is chiefly characterzed by a regular pattern of peaked demands on a diurnal basis, with the highest demand occurrng during the morning and afternoon peak perods. Because of the peaking characteristic of urban travel demand, in addition to pent-up demand, Parldnson's Law or Downs' Law of peak-hour expressway congestion holds (Downs, 1962; Mohring, 1965). Downs's law says that whenever new expressways are built in metropolitan areas, crowded conditions develop quickly when previously suppressed trips are regenerated and daily travelers switch to their pnvate automobiles and desired times of travel. Worse still, when traffic den-;y is high relative to the capacity of a facility, travelers more often than not wind up in a common gluepot in which traffic cemes to a virtual standstll during the peak - as seen in the lengthy all-day peak period of cities such as Bangkok, Hong Kong, Lagos, Santiago,
-3 -

Sao Paulo and Seoul. This admittedly untenable state of affairs persists because property rights are not clearly defined. That is, even though roads are nominally owned by the government, excessive use is made offreeways because travelers are not appropriately exzluded from using them. A road becomes 'worthless' precisely because it is free (see Vickhoy's (1967) two road example)).

5. Yet there is considerabl **e** xcess capacity in urban transport if one were to spread travel demand uniformly over a twenty-four hour basis -- as argued forcefully in The Urban TranQr1tatL Problem, by Meyer, Kain and Wohl (1965, pp. 83-88). Hence, it is the distinctive nature of the cyclic peak/off-peak period demands which leads to significant resource misallocation.

6., Indeed, economists have long held that road pricing could be a powerful tool in tackling congestion, improving social welfare significantly. For instance, as early as 1959 Professor William Vickrey was (and still is) championing road pricing via electronic means as a way of implementing the marginal cost pricing principle (when he testified before the Joint Committee on Washington Metropolitan problems of the U.S. Congress). It was his testimony which helped influence the distinguished members of a panel on road pricing set up by the Ministry of TFransport in the United Kingdom, which culminated in the famous Smeed Report of 1964. To draw our attention, he starts out his celebrated paper (1963, p. 452) on road pricing using automatic means as follows: "I will begin with the proposition that in no other major area are pricing practices so irrational, so out of date, and so conducive to waste as in urban transportation. Two aspects are particularly deficient: the absence of adequate peak-off differentials and the gross underpricing of some modes relative to others. In nearly all other operations chaacteized by peak load problems, at least some attempt is made to differentiate between the rates charged for peak and for offpeak service. Where competition exists, this pattern is enforced by competition: resort hotels have off-season rates; theaters charge more on weekends and less for
-4-

matinees. Telephone calls are cheaper at night ... But in transportation, such differentiation as exists is usually perverse." Almos **t** hirty years have elapsed since Professor Vickrey made this observation. Although some progress has been made, it is agreed by some that saturated roadways - with almost the same level of speeds - are stil a phenomenon in cities despite masive infrastructure investments (Holden, 1989). This observation seems to square with Downs' Law.

7. Indeed, the standard way of solving congestion in the long run by increasing highway capacity via investment in the road infrastructure seems to induce ever-increasing demand for travel. Clearly, when road capacity is relatively fixed in the medium run and fiscal constraints are fully binding, the economically efficient solution is to price the _use_ of roads differentially by setting congestion tolls which reflect the sarcity value of highway sevices. This is not as radical a proposal as it may seem. While some people are used to the concept of providing parling spaces themselves in garages at home, others are similarly disinclined to demand free roadside parking - which is simply scarce road space or premium real estate - at work places in the central business district (CBD). If parking is no longer free in busy destinations of commuters, as it once was several decades ago,<sup>2</sup> then why should people not be made aware of the high value of road space during peak hours by paying for its use? Road space is indeed one of the few examples of a good or service which market forces have left relatively unscathed.

8. Recently, the Institution of Civil Engineers (1989) and the Royal Chartered Institute of _Transprt_ (1990) came out in staunch support of road pricing as the best available instrument for utilizing a nation's existing infratructure. They concluded that the adoption of current deconic road pricing technology via AVI is a viable means of directly chargng for the use of

> 2 In the United Stae, th lesd tfr which (pivate) parkng wa chard for was 1917 in Detroit (_ckmn and Narin 1969).
roads in London. The United Kingdom's Department of Trnsport has since begun reinvestigating the feasibility of road pricing.

# Criteria for a 'Good' Road Pricing System

9. In order to implemen **t** he economic principles of road pricing, a 'good' road pricing system should include a number of opational requirements Listed below (Ministry of Transport, 1964, pp. 7-8; The Chartered Institute of Transport, 1990, pp. 18-20; Thompson, 1990, p. 526; and Stoelhorst and Zandbergen, 1990).3 A. From Users' Point of View (1-4) (1 Userfr -sjn . The system should be simple to understand and j convenient for motists to use. Exemdy complex and continuous pricing gradations should best be avoided because of 'bounded rationality' on the part of drivers' cognitive linitations. For safety reans, drivers' attention ought not be diverted for more than a very short time period in the proce of using the system.<sup>4</sup> (2) Transa y (via _a_ pricing). The system should inform the motorist of the prices to be charged ahead of time and place, so that the trip decision can be rationally made and rerouted if necesury. At the time when the trip decision is undertake, a user ought to be made aware of _wen, wher_ and _how mch_ the charges wil be. This is to be contrasted with _expost_ pricing, where users are charged only _qfer_ the fact (as in the proposed Cambridge road priCing scheme).

(3) Anonlymit rtecffon ffom Invasion of Prdva. The system should have safeguards - both legal and ohewis - that are capable of assuring its citizenry of their privacy. For instance, monitoring of vehicle movements for other than stricdy ttaffic- _As somm_ of to zequitmto onfict, not al of m ca be hieved Iy. 4 Similuly, th qstm shld be rlaively st Wa for ators to impl
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related purposes should be prohibited. This is regarded by some to be the _sine qua non_ of a politicaUy acceptable road pricing scheme. Be that as it may, currently available prepayment mechanisms using "numbered account arrangements' discussed below should prevent fears of such a 'big brother' government.

(4) Prepayment/Posamment Option for Charging. Periodic payment should be available to the user on both a prepayment and postpayment basis. For postpayment, users can pay by standard biling procedures -- by cash in person, by check via mail, by credit card, by electronic funds transfer, etc. For prepayment, a user can set up an account by cash, for instance, and have a pre-specified sum of money transferred every time a threshold amount is reached (as is done in the Oslo ToUl Ring). Idealy, such a Swiss-type "numbered account arrangement" which eliminates any paper trail should be avaUiable for those who wish to retain their privacy. If pre- and postpayment options are both offered to the user in a road pricing system, it would allow the user to choose the type of technology that suits him or her, thereby obviating the need for a potentialy costly system that uniformly demands anonymity as a basis.

B. From Road Authority's Point of View (5-11) _(5)_ Enhanced Efficiency via Direct Charging. In order to enhance economic - efficiency, the road pricing system should be able to charge directly as closely as - possible the external costs arising out of _road use._ Usage of the road could be defined in terms of distance or time (as in 'closed' ticket-type toil systems). Zeroing in on usage directly would help capture and internalize congestion externalities better, in contrast to merely focusing on a proxy to usage via indirect charges. Further, normal traffic flow and speed should not be impeded artificially.

(6) Flexibilit (Responsiveness to Demand). The prices charged should therefore be flexible and vary in concert, for instance, with the corresponding rise in costs caused by the increase in demand during peak periods. Sophisticated, differential pricing should vary _tentporally_ according to use by time-of-day, time-of-week, time-of-year, and also
_- 7 -_ _spaially_ according to geographical location, route and possibly mode. _Per contra,_ the lack of responsiveness to demand and the crudeness of the design of a given road pricing domain could lead to boundary problems both temporally and spatially. For example, traffic would be queued up just before and after certain pricing zones go into effect (as in the Singapore Area Licensing Scheme) if pricing gradations are not made continuous and fine enough.

(7) Reliability. The road pricing system should be able to operate reliably under harsh environmental conditions and should charge users correctly. However, charging a user - or even a nonuser - incorrectly is a much more serious error than omitting to charge. After all, a single erroneous charge could result in public relations damages that might not be salvageable (as in the case of the Gross Ile Toll Bridge, Michigan (Smoke, 1990)). On the other hand, even though a road authority may occasionally fail to charge, a vehicle which crosses a number of pricing points would still have to incur most of the charges imposed.

_(8) Sclut_ and Enf . An ideal charging mechanism should be secure at two levels. It should be: a) free from theft of proceeds by private individuals and (toll) operators and b) free from fraud and abuse to the payment system by both individuals and operators. Whether it is deliberate or unintentional, internal or extenal, fraud and malfunction should be minimized to ascertin public support for the road pricing system. The system ought to be made secure: difficult for users to evade and easy for operators to spot evasion, which may necessitate the videographing of license plates in certain situations. To create deterrent effects, violators should be suitably penalized by the law for evasion and theft. To the extent possible, the burden on the regular police force ought to be minimized to maintain an acceptable level of enforcement costs.

(9) Provision for Occasional Visitors. The system should be capable of handling the infrequent visitor driving across state lines or national borders and even the regular outof-towner. Devices for registering transactions should be made easily available for
purchase or rental from common retail oudets such as post offices, gas stations, lkosks or perhaps even automatic teller machines.

(1Q) 'Market' Price as an Investment Signal. The cost-based level of price simply reflects the intensity of demand and the revealed preference of travelers for certan tmes and locales. A high price would draw attention and mobili resources to popular routes for investment. As such, this surogate market mechanism serves as an indispensable guide in the planning of investment and the improvement of the services of highway links.

(1 1) Passe of Revenue-Cost Test. Even though revenues are transfer payments to society as a whole, the passage of the revenue-cos **t** est could serve as an additional stipulation to the benefit-cost ratio test in the light of increasingly tight fiscal constraints and consideration of the benefit principle. However, a revenue-maximizng prcing strategy may not be consistent with a benefit-maximizing pricing one. Nevertheless, from a governmental or road authority's financial point of view, the revenue-cost ratio is perhaps more relevant if the goal of cost recovery is pursued. A positive revenue-cost ratio is a necessury condition for commercial viability.

C. From Society's Point of View (12-20X (12L Passe of Benefit-Cost Test Applying the standard cost-benefit test, the benefits of a road pricing scheme (in tems of the savings in travel time and operating costs, etc.) should exceed the implementation cost of such a system. That is, from a social welfare viewpoint, any road pricing instument worthy of coderon should at least exceed a unitary benefit-cost ratio. With a Limited public budget, only the most favorable projects with highest benefit-cost rtios should be implemented. ITe opportunity costs of raising public funds or toll rvenues shoud be taken fully into account. Furth, if benefit figures are not available, the technical efficiency of the chaing mechanism could be evaluated by the cost per tranaction (or charged vehicle) - an index based on a variant of cost-effectiveness analysis applied in the long run. It should be emphasized
-9-

that cost per transacton decreases sharply with usage. In order to compare different technologies across countres, a one horse shay assumption for the capital recovery factor is used in annualizing caital cost. (Mhe capital recovery factor of 0.125 corresonds to a discount rate of 8% and a project life of 12 years.) (13) Minimum of Road Work nd l. To ensure as little disruption as possible to an already congested road network, road work for the purpose of inllng certain types of road pricing technologie **s** hould be kept to an absolute minimum (possibly using turnkey systems), especially during the day. Similarly, environmental intrusion should be minimied in an already cluttered urban environment with numerous traffic signs and stoplights, etc. Trade-offs between road work and environmental intrusion exist. For instance, microwave reader of AVI transponders could either be mounted on gantries or buried underneath the road surface.

(14) Provision for Mixed Traffic. Prices for road use should vary in accordance with the congestve effects of different claes of vehicles, be they automobiles, buses or trucks. (in order to implement marginal cost pricing of heavy vehicles proPerly, charging for the road damage cost and environmental pollution are called for). By using road damage charging instruments based on the monitoring of vehicle and axle loading, the ideal road pricing system is therefore able to differentiate the impact occasoned by different vehicle class. These instuments can be implemented with modern technologies such as weigh-in-motion systems and automatic vehicle classification equipment (see, for example, Davies, 1987; Ayland, Sommervidb and Tarry, 1990). Reimbursement for road prcing payments made by drivers of special categories of vehicles, disabled persons and/or residents who are granted exemption **s** hould be made technically feasible. However, while rebates or discounts may satisfy cerain public interest groups, they violate the criterion of economic efficiency.

(15) Hdling of T. Since tie installation of road pcing technologies and the minor ig of the tt instructure could not be made overnight,
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the system design must include a phase-in stage. For public acceptability and softening of the system's full impact, a gradual introduction in the form of a road pricing experiment may be necessary at first (as is being done in Singapore, the Netherlands, Norway and the United States (see Office of the Federal Register, 1992)). The final road pricing system should be technologically capable of handling the vehicle population of an entire city (or even a country).

(16) Compatibility with Other Systems. For the convenience of both out-of-state motorists, domestic and foreign govemnmental road authorities, it is desirable that a particular road pricing system be compatible (or at least be nonintrusive or integrable without major modifications) with other road pricing systems from other jurisdictions. (To this end, current efforts to standardize both automatic vehicle identification technology as part of the Heavy Electronic License Plate (HELP) program in the United States and road pricing systems as part of the Dedicated Road In-VEhicle Safety (DRIVE) project in Europe are consistent with this criterion of compatibility). In addition, if any electronic charging system is adopted, it should conform to the radio frequency bands and safety standards set by the International Standards Organization (ISO).

(17) Modularity to Add-on Options. If a modular system is used to electronically charge for road use, public on-street parking could in principle be charged for in this way eventually. To the extent possible, and if deemed cost effective, the uldmate road pricing system should be compatible with: a) other payment schemes such as public and private off-street parking and gasoline purchases, b) automatic route guidance, c) origindestination management information systems, and d) the control systems of commercial vehicles of private firms.

(18) Toleance to Culture of Non-omplance. Any pricing or tolling mechanism requires a reasonably law-abiding citzenry and a culture of compliance to rules and regulations. For instance, with supplementary licensing, a good rule of thumb to test
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its applicability to a particular city is to observe whether parking laws are in fact abided by generally, with double (or triple) parking regarded as a relatively uncommon occurrence. Thus a good charging mechanism should be able to have a high tolerance level of noncompliance. Yet no system is absolutely foolproof -- be it manually operated or electronically controlled.

(19) Tolerance to Varied Geography. Certain types of systems, such as cordon pricing, work well in cities with special geographica **l** ayouts. That is, a city with limited gateways (such as the island city of Bombay) may even favor a manually operated toll collection system (as in Bergen Toll Ring). Enforcement of the supplementary licensing scheme, for instance, is not amenable to traffic moving at freeway speed.

(20) Faimess and the Availability of Alternatives. It is necessary that the toll-tax incidence of the road pricing system be publicly perceived as 'fair' for it to be politically acceptable. One notion of fairness is fo. tle govemmen **t** o maintain a truly revenue neutral system, where all the revenues from road pricing net of the system cost are directly or indirectly returned to the population of users (see Hau, 1992, for the conditions). Otherwise, it would be difficult for road pricing to be implemented in a democratic society. Why? This is because those who are tolled are 'forced' into paying something which used to be free and those who are priced off are 'forced' into less desirable modes, routes or times of day. Even those who had not been tolled before (those public transport captives, for instance) may be worse off as a result of riding on more crowded buses, _ceteras paribus._ Thus, almost everyone is worse off except the government. Hence, _uness_ toll revenues are plowed back **into** the transport system in the form of: a) a reduction in first registration taxes, annual license fees, or fuel taxes, etc., b) more and better roads, and/or c) improved public transportation, it is inconceivable that congestion pricing would take off. As an illustration, good public transport and bypass routes have been provided for by the Singaporean Government to serve as viable alternatives as part of their Singapore Area Licensing Scheme, ensuring that road pricing would work reasonably well. Simultaneous with the starting date of
> - 12 -

the Oslo Toll Ring was the openng date of a newly constructed tunnel in Oslo, which underscored to the public the government's commitment to earmark toll revenues. Thus actual and proposed road use charging schemes in Europe and elsewhere attest to the theoretical finding reported in HKau (1992).s Adjustments to the current road financing instruments of first registration taxes, annual license fees and g&oline taxes should be allowed for. This is because the perceived fairness of the road charging scheme -- aside - from efficiency arguments may require some of the toll revenues to be plowed back to motorists, public transport users and the transport system. If redistribution is found to be necessary for the political acceptance of the scheme, it is desirable that the road pricing system be technologically capable of revern certin current vehicle charges.

# IL TIAmc **RESnRA** MEASU

10. Traffic restraint can be achieved via either the regulatory approach on quantity with socalled command and control measures or the market-based approach (i.e., pricing approach). Examples of the regulatory approach to roadway usage are to control the physical number of vehicles, for instance, by an *odds and evens' system and by restricting the amount and hours of parking spaces (May, 1991). The odd/even number plate system prohibits the use of private vehicle one day a week, as has been done in Mexico City since November 1989 mainly because of its air pollution problem (Carbajo, 1992). Such Draconian measures have been found to be ineffective when applied permanently (Eskeland, 1992). Aside from public transport, government and residents' vehicles, private vehicles are forbidden to enter a cordon surrounding central Milan, Italy, during the day between 7:30 am. and 4:30 p.m. Sometmes thought of as a cordon toll (Orski, 1992), Milan's cordon is actually a nonprice one. Other historical cities such as Florence, Rome and Bologna, Italy; Strasbourg, France; (36teborg, Sweden; and Tunis,

**in IHau (1992),** it is SW (di) t road pncig hit most people and dht road uers og to be oompetd dircly or indiraly, by the ch _n of X tolU revamus.
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- Tunisia have various restrictions to entry imposed on private cars a trend that has gained momentum in recent years (Jones and Hervik, 1992).

11. The most recent World Bank Urban Transport Policy Study paper notes that even though demand management measures such as road pricing and parking controls have been valued for some time, parking controls are the ones that have mainly been carried out in developing countries (World Bank, 1986, p. 42). While a combination of both regulatory and pricing approaches may ultimately be best suited for a particular transportation system, here we op for the prcing approach for two reasons. First, prcing is more lective and flexible than a regulatory approach in that it provides a better market mechanism, signaling the more efficient trips to be undertaken (Pozdena, Schmidt and Martin, 1990). Second, pricing yields revenues to the community in addition to the users' savings in travel time. These revenue transfers are beneficial to society, in contrast, for instance, to society's loss of travel dme due to the regulaory approach of gating" or planned deJays (May, 1986, p. 116). In particular, traffic restraint measures of banning certain vehicles in some cities mentioned above via the use of auto-free zones at certain places and times may create considerable inconvenience to individual drivers and are tantamoun **t** o settig prohibitively high prces on vehicle usage. Under road picing, on the other hand, motorists stl retain the freedom to choose the combination of mode, - route and time-of-day they best prefer provided, of course, they pay for the privelege of doing so. It appears that adminive simplicity and political acceptability are the principal reasons why tansport planners have traditionally embraced regulatory approaches.

12. Nevertheless, a cursory mention of other traffic management measures that include behavioral incentives such as staggered worldng hours, park-and-ride and vehicle sharing (carpooling and taxi sharing) is in order.<sup>6</sup> Flextime 'contains the seeds of its own destruction.' This measure, once deemed successful, would reduce congeston during the peak hour, thereby creating incentives for people to switch back to their preferred times (recall Downs' Iaw). It seems therefore that moal suasion would not be a sustaining force in the long run. Besides 6 A tdorouh mview of uufic _rot nm_ou_ can be ford **in** May (1986).
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being quite costly in terms of space and construction, park-and-ride facilities built near the edge of Singapore's Restricted Zone, for instance, were one aspect of the Singapore Area Licensing Scheme that was deemed to be unsuccessul (Watson and Holland, 1976). Apparently, motorists found that switching modes was onerous _despite_ the provision of shuttle bus services. Vehicle sharing has but a small effect on reducing congestion relative to incentives that increase the - provision and use of public transport - a form of 'bus-pooling' in the medium run. Cars with four or more people were considered exempt from charging in Singapore's Area licensing Scheme prior to June 1, 1989, but are now charged when they enter tl.s Restricted Zone during peak hours (ostensibly because authorities noted frequent pick-ups just before the zone boundary). (The same kind of abuse also occurs in some San Francisco Bay Area cities in response to the fiscal incentive that is inadvertently created when carpoolers are made exempt from tolls on bridges and tunnels or given preferential access to road capacity.) Carpooling can at best be considered a short-run strategy for combatting congestion given the inefficient use of road space. Taxi sharing, while popular for cities like Washington, D.C., is not as often used i some densely populated Asian cities such as Hong Kong since taxi fares are relatively cheap and maxi-cabs (or mini-buses) traverse along the main corridors, obviating the practice of shared ride. The regulatory control of taxi medallions is employed in many places. By restricting the supply, the quota instrument is not flexible in utilizing vehicles efficiently: those regulated vehicles on the road may not have the highest willingness to pay. In general, regulatory approaches do not prove to be very effective in managing demand in an efficient manner because of their inflexibility and bluntness.<sup>7</sup> Thus, so-called traffic restraint measures that planners - often aim for could be met more effectively albeit indirectly - by restraints on vehicle ownership via price rather than quantity: market-based approaches are more potent than performance-based command and control measures.

> 7 **For instance,** a policy to **restict the paskng spply in** Boston, **Masswhusetts resulted** in motorist **lookig arond** for **Less expenve off-sreet paing spaces** a **well as** bestowing **large windfll gai** for **the owners** of **private** paing **s (see section on pig chuges** below).
- _15 -_

## m. **CHARGiNG** FOR **RoADS** - **NDEcr MUTODS**

# A. Indirect Charging via Vehicle Ownershi Purchase Tax and Annual License Fees

13. Methods of charging for roadway usage can be indirect or direct (see Table 1). The most direct way of charging for road use is via electronic road use charging. The indirect methods involve charging for a surrogate of usage such as vehicle ownership. The primary instruments are acquisition/purchase taxes for vehicles, such as import duties and first registration taxes. High purchase taxes and annual license fees are often used as means of reducing the size of the vehicle fleet. They have been used quite effectively in places like Korea and Hong Kong by raising the ownership costs and dampening the rate of acquisition of private cars (Armstrong-Wright, 1986, p. 126). Hefty first registration taxes (close to 100% of the landed price) for private automobiles have been instrumental in keeping a lid on the total vehicle fleet, in contrast to low purchase taxes (around 15% of the cost-insurance-freight value) for commercial vehicles (Hau, 1989). Indeed, the resultant decrease in the aggregate number of cars means that there would be an underutilization of the road network in uncongested and rural areas, whereas the existing vehicle fleet (notably the taxi fleet) would tend to be used much more intensively in urban areas. Nevertheless, the heavy taxation via first registration taxes and annual icense fees has been regarded as administratively simple and effective albeit nonselective. While high taxes on a final consumption good (such as the private car) and low taxes on an intermediate input (such as commuting) are generally considered socially desirable, high annual license fees and purchase taxes are still sledgehammer approaches to the problem of congestion because they do not address the issue of efficient road utilization.

# B. Indirect Charging via Vehicle Usage

# 1) By Amount of Use: Fuel Tax and Tax on Tires and Vehicle Parts

14. A better method of charging for congestion indirectly is to aim for vehicle usage by the amount and the place of usage. The first instrumen **t** o consider is the ubiquitous fuel tax. Since
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fuel consumption is proportional to distance, given a certain engine class, a fuel tax is perhaps the best proxy for the awunt of usage. However, even though both stop-and-go tWafic and waiting time burn up fuel under congested conditions, this method is only regarded as marginally effective (and environmentay polluting). By uniformly taxing usage independent of time and place, the fuel tax is unable to differentiate between peak and off-peak periods and usage in congested and uncongested areas. The fuel tax may on average be adequate enough as a road user charge to cover the variable road maintenance cost of a road and perhaps the environmental externalities also. Indeed, many existing systems of road user charges in the U.K. and Europe possess a combination of both high annual entry fees and a (userelated) fuel tax, which serves more or less as a very crude two-or-multi-part tariff. Other user taxes on tires and spare parts boost the operating costs of an automobile and thereby serve to reduce demand indirecdy. - (However, caution must be exercised taxes on tires or spare parts should not be so high that vehicle safety is jeopardized.)

# 2) By Both Amount of Use and Place: Fuel Tax

15. Compared with a fuel tax, a spatially differential fuel tax with non-uniform rates would respond better to congestion. But this too, has its problems. Even though a differential fuel tax is administratively simple, it may result in wastefiul fuel-fetching journeys, and would work only, for example, if distances between the urban and rual areas were sufficiendy large. Instead of charging for vehicle use by both amount of use and place - as a differential fuel tax does - we can consider charging instruments related to vehicle usage by place only.

# 3) By Place and Time: Parling Chare

16. One of the most popular instruments which has been used to combat congestion is the parking charge on 'free' public space. The principal disadvantage of parking controls is that they lack the ability to tackle through traffic and they could actually encourage it, especally in the presence of high parking charges (footnote 7). If public on-street parkang charges are set too high (and not aligned with private off-street parking rates), then congestion may result from
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motorists' long searches for parking; also, additional trips may be induced in the form of the 'drive and drop' or 'kiss and ride' mode. The current widrd practice of offeing motorists who patronize private car parks' 'early bird discounts' before 9:30 a.m. (and charging casual motorists higher rates during the day) for instance, may not be early enough to mitigate those commuters' congestiv **e** ffects. For parldng charges to tackle congestion effectively, they should be time-of-day and/or location-dependent charges rather than present market-determined parking rates with locational monopoly element. Ideally, farther parking spaces are xiced lower and closer ones are priced higher, with the result that early and late arrivals would select themselves in an efficient manner which minimizes the time that it takes people to arrive to work behind schedule (see Arnott, de Palma and Lindsey, 1991, for proof).' Some cities such as Washington D.C. and San Francisco even institute parldng taxes. Only if municipalities control a large fraction of both on-street and off-street car parks would the parking tax be an effective instrument at combatting congestion (Departnent of the Environment, 1976). In geneal, increases in the parking tax would not be as powerful an instrument in combatting congestion and pollution as direct charges would (Kulash, 1974).

17. Nevertheless, parking charges within the Restricted Zone of the Singapore Area licensing Scheme (see below and Annex 1) were raised substanially above market rates, in addition to a sui-charge, as a matching tool to road pricing. In the absence of road pricing, a parking tax is sometimes regarded as a surrogate to charging for the use of congested urban sreets (see Burns, 1972; Churchill, 1972, p. 15). While a parking tax may or may not be desirable, parling pricing as well as controls ought to be pursued since driving and parldng are jointly demanded (Churchill. 1972, p. 15). After all, not charging the full cost would constitute subsidies (see World Bank's Transportation Sector Worldng Paper, 1972, p.23; World Bank's Sector Policy Paper in Urban Transport, 1975, pp. 9, 15 and 42; and World Bank's Policy Paper on Urban Transport, 1986, pp. 91-92). Empirical case studies of employer-subsidized A socid optimomis reached only by coning dn-of-dy road pon with a ladmaa fee (conditional an paking inward) (Arnot, de _Pan_ and Lindsy, 1991). Purdhmr, to sig comnercial taffic and shoppes propriaty, tme-of-dy and lgth-of-fty pag chages sould be used (s Wodd Bank, 1986, p. 11).
- 18 -

parldng show that parldng subsidies induce solo driving, decrease carpooling<sup>and public transport</sup> use (Wilson and Shoup, 1990; Shoup and Willson, 1992). As a consequence,<sup>people suffer</sup> from worsening traffic congestion, increasing fuel consumption as well<sup>as air and noise</sup> pollution.

# 4) By Place and Time: Supplement= Licensing

18. The most important instrument of charging for road use by place of usage<sup>is with</sup> supplementary vehicle licensing, also known as area licensing. In principle, supplementary licensing requires that traffic moving within the designated area be subject to enforcement<sup>but</sup> in practice this concept has never been carried out.<sup>9</sup> Hence this system is essentialy an admissions charge to certain congested areas (such as the central business district) during certain (peak) hours, and is reaUy a form of cordon pricing. Instead of stopping at a toll<sup>gate to pay</sup> for the entry manualy -- and creating queues in the process -- as in the conventional<sup>notion of</sup> cordon prcing, motorists are required to prepurchase a sticker. Either a daily<sup>license or a</sup> monthly license is obtained at sales outlets such as post offices and so on, and the sticker<sup>is then</sup> placed in a visible area behind the windshield. If only one (or two) restricted<sup>zone is mandated,</sup> enforcement is relatively straightforwardly carried out by having traffic wardens standing by the side of the city street and marking down the license plates of those offending<sup>vehicles and</sup> mailing them a ticket afterwards. (in general, two or three traffic wardens are required to handle one station or gantry, as has been the practice for about 17 years in Singapore.)<sup>For ease</sup> of enforcement, stickers vary by shape and color to differentiate the days on which<sup>they are to</sup> be used. It is possible to vary charges by more than one time period or zone by a<sup>combination</sup> of two different stickers but, in principle, more complex time-of-day pricing schemes<sup>would</sup> 9 **_In_** fact, **the** charging of **the presence** of vehicles **within** a **cordon** was proposed for **London**<sup>**(Grear London**</sup> Council, 1974). It was argued that the enforcement or **personnel** costs would<sup>be</sup><sup>**less**if</sup><sup>**enforcemet were**</sup> **carred** out **inside rather than** at the **numerous** entry points. Ihis vaiant is<sup>not as</sup><sup>**focused**since</sup><sup>**vehicles**</sup> **which arrved** before **dawn,** contnbuting nothing to congestion, would<sup>nonetheless be charged. Strctly</sup> **speaing, supplementary** licensing, without **the enforcement** of vehicles which have been **left**<sup>or</sup><sup>**gaaged**</sup> **within the designated** area overnight, say, amounts to direct **chargig** for entry<sup>to a cordon via</sup><sup>**manual**</sup> tollgates, to be **discussed later.**
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involve problems of enforcement which may be difficult to manage even at city traffic speeds. Thus a distinguishing characteristic of supplementary licensing vis-a-vis cordon pricing using manual tollbooths is that it is relatively easier to implement more complex pricing schemes within two or three concentric zones by using multiple stickers and increasing modestly the enforcement personnel under area licensing than with manual tollgates.

19. The superiority of supplementary licensing as an instrument over the parling charge or tax is that it is able to price for the passage of through taffic nonstop. However, supplementary licensing suffers in reality from abrupt changes inside or outside of a designated zone boundary and also from changes just within or outside a time period, whereas the parking charge could be set to taper off towards both the city edge and the end of the rush hour. Another disadvantage is that a vehicle, having paid the entrance charge, would have the incentive of contrbuting to circular traffic within the zone since the leg of the trip therein is not charged, possibly exacerbating congestion. (As a variant, this problem could potentially be overcome if enforcement of area licenses was carried out for vehicles' presence within the zone, that is, on both moving and stationary vehicles (see previous footnote).) These are what I regard as the _spatial_ and _tentporal_ boundary problems of supplementary licensing. One way of circumventing the boundary problems is to be fle:.ible in its administration, for example, by expanding or narrowing the physical boundaries after a certain period and extending the time penod(s) in which charging is in effect (as has been carried out in Singapore). A supplementary licensing scheme is very cheap to implement, requidng little capital outlay except for setting up gantries. To be cost-effective, supplementary licensing - like cordon pricing - requires that the number of entry and exit points be kept to a manageable figure. Area licensing schemes are especially suitable in labor-intensive developing economies and places that have a good track record of compliance with well-enforced traffic laws. Because operating costs involve only printing costs, the hiring of traffic wardens, and electricity, it is especially amenable to a short-term demonstration or field trial to test its feasibility in a small but congested city given its reversible and flexible nature. Other potentially minor problems such as theft and counterfeiting of daily and monthly licenses can presumably be dealt with by passing newv legislation and imposing penalties that have deterrent effects. Supplementary licensing is exemplified by the only road
- 20 -

pricing scheme in existence, albeit crudely, Singapore's Area Licensing Scheme (ALS), in operation since June 1975 (see Annex 1). Just prior to June 1, 1989, drivers of automobiles entering the Restricted Zone were required to display prepurchased stickers of about _S$5_ (US$2.84 using 1990 exchange rate] in the moring peak. Thereafter, the daily license fee became S$3 (US$1.65 in 1990 dolLars] during both the morning and aftenoon peaks.

## IV. CHRGING FOR **ROAS** - Dumcr MMODS

20. Having conidered the major indirect instruments of charging for congestion, we turn now to direct methods of charging for the use of roads. Direct charging could be broadly categorized as off-vehicle recording versus on-vehicle metering. With off-vehicle recording, as with telephone, gas and electricity charges, the actual charging is monitored off the vehicle even though a tansponder may be placed on the vehicle itself in the case of automatic scanning. On the other hand, with on-vehicle metering, actual charges are registered on the vehicle itself using automatic meters - similar to the concept of tai meters and (stored value) phone cards. All of the off-vehicle recording methods are based on point pricing whereas on-vehicle metering methods involve either point pricing or continuous pricing. Point pricing refers to the pricing of a vehicle when it passes a charging point such as a toll site. Continuous pricing, on the othd hand, involves clocking a vehicle for the time spent or distance covered between two charging points.

# A. Off-Vehicle Recording

21. Within the off-vehicle recording category are three instuments: 1) manual charging by admissions fee via tolgaltes and reserved lanes; 2) automatic scanning via automatic vehicle identification (AVI) technology, otherwise known as elctonic toll collection (ETC) or euphemistically called electronic toll and traffic management (BThO; and 3) a combination of manual and automatic scanning of vehicles. Maual and/or electonic toll collection involve point pricng and hence are es costly to opeate ta contiuous png methods.
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# 1) Manual Cbarging via Tolates

22. The first mechanism to conider is the use of manual tollgates. This is an established and well-known technology, administatively st tforward, publicly accepted for toll roads, bridges and tunnels, as well s politically palatable. However, manual charging results in low throughput, with about 350-400 vehicles per hour for a toll lane (Harte, 1991; Ardekani, 1991). In contrast to supplementary licensing, in which systems costs are relatively low and uer costs are also low because of its nonstop naure, the setting up of tollgates requires significant capital investments in toll plazas and toll collection facilities. In orde to cater to the typical need for two to three approaching toll lanes to consvatively serve every expressway lane (as in the United States (Seila and Wilson, 1991)), toll plazas require large plots of open space, not often found in urban areas.'<sup>0</sup> The construction cost of toll lanes (and tollbooths) and land acquisition costs are all fairly high in major conurbations. The opating cost is nontrivial because it is heavily driven by toll opeators' salaries. Based on a sample of six mainlinetramp barrier systems, the toll collecdon cost per tanaction ranges from _US3.6_ cents to _US7.5_ cents in 1983 (Wustefeld, 1988, Table 5)." 23. The tollgate method of direct charging is akin to supplementary licensing if one is conpidering a simple zone, and is therefore able to tackle the problem of through traffic not captured by the instrument of parldng charges, for instance. However, manual charging imposes more extrnalities than it attempts to internalize by requiring that aU vehicles come to a full stop to elicit payment, creatng long queues and waiting times inevitably. The stop-and-go traffic results in increased travel time and prafting costs (in the form of fuel and vehicle wear and tear). Besides being particularly susceptibl to these costs, heavy vehicles also create severe road damages as a result of stopping and starting. In general, less attention has been paid to the

**10** Sml wonder the Smeod Repot Minisy of TMupor 1964) dimiso dos apohi to wrtail oiguot in a mute couple of **_amtezmu_**

Th lb... gures aoe boad an toll f_ihti whch hae la1 for bod mnual opatm and automaic coin _mnn._
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increased risk of accidents and pollution levels at toll plazas. Other problems have been encountered, such as the lack of financial control of toll box revenues. Scandals periodically arise in which toll operators embezzle cash cages. The need to physically transfer large amounts of coins is another problem.

24. Besides the manual operation of tollbooths, automatic coin machines and hoppers for exact change are also used to save on personnel costs; automatic coin machines marginally improve the throughpu **t** o about 400 vehicles per hour for a toll lane. The disadvantage of these machines is that they still require vehicles to come to a stop. Note that six approach toll lanes are required to serve one expressway lane in order to ensure that the capacity of the road itself is not constricted by the capacity of the tollbooths.'2 This suggests that tollbooths could be designed in a way that does not disrupt traffic, but manual charging would involve unacceptably high set-up and operating costs relative to other mechanisms. One minor disadvantage of using automatic coin machines is that charging for one type of vehicle is only applicable on a per lane basis, unless different vehicle types are designated to use specific toll lanes, which would decrease the capacity of the toll booths and increase the complexity of the charging instrument.

25. Another form of charging is with the use of coupon books. They have similar advantages to automatic coin machines but the printing cost is not insignificant. Simila4y, problems of fraud occur. (The magnetic card method of running magnetically-striped cards, such as credit cards, through a mechanical reader may help control operator fraud, but would be the slowest and least practical method of all.) Based on a sample of five ticket system toll roads, the cost per transaction ranges from US18.4 cents to US42.4 cents in 1986 (Wustefeld, 1988, Table 6).

26. Perhaps the irony of using the tollgate approach to tackling congestion can be expressed as follows: if an urban area is congested, then the planner ought not add to the congestion extemality the non-negligible cost of transaction itself. At the other extreme, if the facility is 22 I **am** indebted to **Uchard Scrfield** for **caufymg thee points.**
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uncongested, then the planner should not impose a charge since the incremental congestion cost is nil.

27. From a financial point of view, if the system is installed for a long period of time, the large capital costs of toll plazas could also be amortized over more years. Thus, from an operator's perspective, this system is more amenable for a long-term demonstration or experiment rather than a short-term one (Bhatt, 1974). If so, the long-run cost per transaction - is a valid index for analyzing the cost-effectiveness of alternative charging instruments assuming that the aim is to curtail one (socially wasteful) trip.

28. It would be a relatively simple matter to implement cordon pricing using manual tollbooths with just one single zone. However, urban areas seldom have the necessary space for two (or more) suitably designed cordons manned with tollbooths to implement multi-zonal, cordon-based pricing. As such, this method is inferior to the ALS method of cordon pricing because it impedes traffic. Like the ALS, since charging on a continuous basis (by time or distance) is impractical, the charging basis is done via point pricing, i.e., by crossing a gantry point. Unless pricing gradations are fine enough (which as we have discussed is infeasible with the tollgate collection mechanism), boundary problems would arise with vehicles slowing down or even parking outside a zone boundary just prior to a change in the period of operation, similar to problems with ALS. Once inside the zone, however, there is an incentive for additional mileage to be undertaken, adding to congestion. The prime example of cordon priing which utilizes manual tollgates is that of the Bergen Toll Ring, in opeation since January 1986 (see Annex 2).

29. Under what circumstances are tollbooths acceptable as an instrument of charging for congestion? Only if: i) the number of entry and exit points is limited, and fi) the cpity of the road is not greatly constrained by the capacity of the toll collection facility itself. When equipped with a minimal number of toll lanes to reduce transactions delay, the few entry points to the urban area could also result in tolerable capital and operating costs. With this method, it is desirable to establish reserved lanes for those with seasonal passes (as was done in Bergen)
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to maintain nonstop traffic tirough the tollgates as well as tD limit personnel costs. As traffic growth increases along trend and the net benefits of curtiling congestion rise, the setup of the reserved lanes is ideally suited for the conversion to elctron subscriber ones (which charge on a _per trip_ basis), as is done in Oslo following a trial od of using seasonal passes.

# 2) Automatic Scanning via Automatic Vehicle Identificatin

30. The second mechanism of direcdy charging for congestion on an off-vehicle recording basis is automatic scanning via automatic vehicle identification (AVI). As with manual charging, this is considered point pricing as vehicles are charged when they pass a reader kIown as an interrogator. The third mechanism under the rubrc of charing for congestion by direct methods by registering charges off the vehicles _is_ simply a combination of manual and automatic chargng. Since the basic technology for automatic road use charging has been tested and used on toll roads, tunnels and bridges, I shall first discuss the pros and cons of electronic toll collection (EIC) using AVI in such open enviments and then discuss its applicadon and extension to road pricing within a city-wide context.

## AVI Technology

31. Automatic vehicle identification (AVI) refers to the automatic identification of vehicles in motion. The term 'automatic vehicle identification' is a bit of a misnomer since it is the transponder located in the vehicle rather than the vehicle itself that is 'identified' tThomson, 1990). Thus the less evocative term of 'ctronic toll and traffic management (EITr ' is the one currently adopted and popularized. Historically, AVI was first developed and tsted in the 1950s and the early 1960s (Vickrey, 1959; Ministry of Transport, 1964; Cading, 1987). The Port Authority of New York and New Jesey spported th development of AVI technology as early as 1963 (Foote, 1981). In fact, it was upon the inspgatn of the American Association of Railroads that AVI technology was orginally pioneered in the early 1960s for the purpose of tracking raiload boxcars. AVI technology is now wiWdy used in rail transportation and intermodal tan .
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32. Schematically, AVI consists of three functional elements: a transponder (known as a 'tag') which stores a unique identification code; an interrogator which 'reads' a transponder and decodes its identfication; and a computer system which transmits, analyzes and stores data (Davies, 1989; Sommerville, 1991). There are four broad types of AVI technology:

- Optical and infra-red systems

- hIductive loop systems

- Radio frequency and microwave systems (including surface acoustic wave technology)

- Smart card systems

33. One of the earliest generations of AVI technology involves optical means (Davies, 1989; Sommerville, 1991).'3 It is not unlike bar code scanning available in grocery store checlstands (which are not close to being considered fully reliable). With optical systems, the coded labels are placed outside the vehicle. A laser beam from an optical scanner tracks the bar code sticker placed on side windows and analyzes the reflected light. However, this technology becomes less reliable under conditions of poor visibility (e.g., when there is dirt, snow, ice, rain or fog). Further, counterfeiting of bar codes is easily caried out and a vehicle's speed is lowered when attempting to meet the exacting requirements imposed by optical systems. Computer scanning of vehicle number plates have been tried on some French toll roads but still has not reached a tolerably low error rate in readability. In the 1970s, infra-red technology based on similar pnnciples of operation as the optical-based ones also floundered when subjected to poor environmental conditions."

- 13 Optica-basd aumtic car idficaton (ACI) is so usd i om, noaroa-bd tra ai envhionm_t, u exemplified by tho Washugton Meoto's uso of ACa since 1976 (Arms, 1984).

- 1 Automac or electsc rout guidao, which does not require very stinget requimen of reliability, curntly **uses** a **_mre ancod_ info*-rd** tchnology **bsod** an a dynamic two-way communicatos between an in-vehicle uit ad a roadside bem Static rout guidanc ue self-contained, mapping informaton stored in a veicle only, whereas dynmc rute guidance obtins dital map inmaton and routi eommedatons both **auraly** and visuly. **i loer** maoges **tafflc** flow by usn road-side inf-red

- beos to **raumit** and receive dynamc d to al moving vewle in _(ahost)_ ra tm (Cading, 1990). Siemen' Buo-eo sytm - thea genertion of the ali-out stem - has been in full scale field tral
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34. A second type of AVI technology is the inductive loop system, which operates like a conventional traffic detection and counting loop mechanism embedded in the road pavement (Davies, 1987; Catling, 1987). Since an inductive loop system operates at frequencies between 50 and 500 KHz, it can also be regarded as a low radio frequency system. Operationaly, an antenna loop situated in the pavement communicates with a transponder mounted underneath a moving vehicle. Basically, there are three types of systems: active, semi-active and passive. The active system derives its power from the motor vehicle's power supply itself. Since the electronic transponders are powered externally in an active system, the security of the system may be vulnerable to external interference inadvertently. A passive transponder is one which is energized when the vehicle passes a power loop buried beneath the road surface. In response to being activated, the transponder's identification code is decoded and returned to receiver loops embedded in the road, which in turn transmits the information to a computer for data processing. Tests carried out by California's Department of Transportation confirm the known fact that the performance of inductive loop systems is adversely affected by steel-reinforced pavements (Davies, 1989). While free of the aforementioned shortcomings of an active system, a passive transponder's principal disadvantage is the limited field length within which it could be triggered and operated.<sup>15</sup> Thus, a more recent technological development which aimed at overcoming in Berlin for at least four years. GEC's Autoguide system has been tosted on an expeimental basis ice early 1988 in London and a commercial system is epeced to be available in 1993 (Caling, Harris and McQueen, 1991; Belcher and Catling, 1987). The United Kingdom's Transport and Road Research Laboratory (TRRL) estimates tbat Autoguide users could acieve average travel bme savings of around 10% and a reduction of distance driven of 6% (Department of Transport, 1988). On the other hand, because trffic is already around capacity level during peak penods, a slight decrese in traffic, as a result of diverted traffic, results in significant savings of £125 million per year for London (assuming only 400,000 users out of 3 million registered vehicles subscribe to Autoguide). The cost of the _pilot_ stage ranges fiom _£5_ - £10 million in 1988 figures. It is also estimated that the benefits of a dynamic route guidance system are substantial at about £800 million per year in the UK alone and over £4000 million per year for Europe (Jeffrey, 1986). The economic benefits are broken down as savings in direct fuel cost (15%), savings in operating costs (409%) and savings in travel time _(45%)._ In the United States, the Federal Highway Administration is comparing the benefits of different route guidance schemes such as Pathfinder a part of the Intelligent Velicle Highway Systems (IVHS). It is recommended that automic road user charging systems be designed to be compatible with rute guidance sytms in futre Dedicated Road and In-VEhicle Safety (DRIVE) projects in Europe (Cadling, 1990).

> ' A prinm example of an inductive loop system is the AVI system which was thoroughly tested for the Hong Kong Electronic Road Pricing Scheme. It uses a utsponder of the passive type - known as an electonic - number plate (ENP) which contains standard and proprietry integrated circuits and several ferrite aerials
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the shortcomings of both systems involves the production of a semi-active transponder with an intemal lithium battery which yields greater operating distance as well as relatively long life. Active inductive loop systems have been used for automatic bus identification in the United States, Europe and Australia (Catling, 1987).

35. Radio frequency (RF) transmission (otherwise known as high RF or microwave technology) forms the third and presently most popular type of AVI technology. The system is modular and the radio frequency transmissions span the officially-approved KHz, MHz and GHz ranges. Because of the higher frequency, more data can be packed and transmitted back and forth via RF technology, which is vital to enhancing system security. At the same time, lower operating wavelengths of microwave systems result in the manufacturing of a smaller and lightweight transponder that can be easily slipped into someone's shirt pocket and thus made transferable from vehicle to vehicle without any difficulty. Just as with inductive loop systems, there are three types of transponders with microwave systems, namely active, semi-active and passive transponders, and the same qualifications apply to them. Further, with microwave technology, a high frequency level is needed for use with a nonbattery powered tag, which could potentially pose a health hazard, at least psychologically.16 Thus a semi-active tag appears to possess the advantages of being able to transmit large amounts of information in a very short for receiving and tansmitting signals. Developed by Plessey Controls Ltd., the ENP is about the size of video-cassette tape, weighs 1.2 kg [2.6 lb], and would be permanently installed on a vehicle's underside, fully deserving the designation of 'automatic vehicle identification'.

16 An example of radio frequency AVI technology is US-based Amtech Systems Corp.'s TollTag°. Amtech's passive tag (priced at US$32.25 a tag in 1992) involves one-way communication, weighs 40 gm [1.4 ozl and operates at the reserved frequency of 915 MHz (with a range from 850 to 950 MHz) and possesses a maximum field length of 9 meters [30 ft]. A heavy duty Amtech transportation tag weighs four times more and operates at 915 MHz as well as 2.45 GHz (with a range from 2.4 to 2.5 GHz)-the frequency at which the industry aims to stadardize at. The three major frequency bands used are 880 MHz, 915 MHz and 2450 MHz.

In Spring 1992, Amtech came up with the IntelliTagTe, which uses the same amodulated backscatter' reflective technology. Priced at around US$40 a tag in large quantities or _US$49.50_ a tag, the two-way communication link provides for 240 bits of fixed and variable data storage space (such as time and date stamp, account balance, etc.) on the transponder. These features allow for read-write transactions that are fully capable of protecting privacy.
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time and over a relatively longer opeating distance. In addition, a semi-active tag can keep the power transmission level of microwave antenna-readers at tolerably low levels.

36. Surface acoustic wave (SAW) technology is yet another recently developed radio frequency-based AVI system (Sommenrille, 1991).17 Application of the RF technology is widely used on those toll roads in the United States which utilize AVI technology, whereas SAW technology is used on toll roads equipped with AVI in Norway. For the most part, microwave technology appears to have superseded AVI technology based on optical and infra-red means. It involves no action on the part of the motorist: he or she simply buys or leases an electronic tag and places it behind the windscreen or the rearview mirror using attachment **s** uch as velcro pads, letting the electronics automatically charge for toil crossings. Since many of the transponders operational on toll roads are of the passive and read-only type, they are (thick) credit card-sized and they are removable. Such a transponder electronically communicates its encrypted identification code with roadside readers via high frequency radio waves."' 37. How does the system work? A vehicle is driven past a pricing point nonstop at high speeds (up to a maximum speed of 300 kph [180 mph] in principle). An antenna - connected to a reader -is placed by a signpost (or mounted above on agantry) and broadcasts a radio frequency towards a transponder placed inside the speedig car. The AVI tag 'modulates' the radio frequency which it receives and reflects its encrypted identification code back to the antenna, which is then relayed back to the reader. The reader's function is to interpret the identification code from the signal, decrypt it and validate the code according to predefined criteria. If the security check verifies that a transponder is valid and a motorist's account is fine, an indicator light by the roadside would turn green. A yellow light may indicate that a

> **17** An exaUle of an AVI system with SAW tology is **Norwegian-based** Mico Dig's Queuefree-Tag. Micro Design's passivo tag (priced round _NOKIOO_ in 1990 _[USU16D_ weiEgs about 31 gm [1.1 ozl and opents at the reserved frequency of 856 MHz.

I A passive tag (lik the oneo from Amtech or Micro Desin) is beam powered and has an almost indefinite sev ife beaous it contains no movable mhaical pat. A (smi-)active tag is bttery powered and - has a service Lif of about ten yar which is liely to exceed the lif of a vabicle or be ovetake by obsolescence.
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user's account is low and a red light would indicate that a defective or fraudulen **t** ag is used, at which time the video enforcement system automatically akws a picture of the offending vehicle. (In principle, even though a traffic cop could be dispatched immediately to apprehend violators, in practice they are merely sent tickets in the mail as with speeding violators.) The - reader then transmits the data to a central computer system composed of a system of commonly used microcomputers and a minicomputer - which records infonnation such as the identification code, the location, date, time or the vehicle class code and performs off-vehicle charging either by prepayment or postpayment. A motorist can choose to pay in advance or in arrears. For prepayment, a user's account is linked to a bank account and a pre-specified sum is deducted periodically (alongside the toll rate itslk) via electronic funds transfer (giro payments) or credit card payment. As is cufrently done at toll faciities in Europe and the United Stat, prepayment could also be performed without a bank account by placing a prepaid cash deposit in advance, as with a numbered account arrangement (thus protecting the individual's privacy). For postpayment, conventional monthly or quarterly billing statements can be automatically sent out and straightforwardly processed. Even with automatic _vehicle Wentificadon,_ the optional nature and wide variety of payment options would therefore not pose a threat to citizen's civil liberties.

38. Smart card-based systems form the latest tof-the-art technology in AVI (Thompson, 1990).19 Smart card technology is based on a two-way communication link between a 'smart' on-board unit and a roadside antenna. An on-board unit is composed of a smart card, a smart card reader and a transponder.20 In addition to the standard integrated circuits found in radio 9 As a precusor of th chip card, the plastic mqpageic osipe card (as exemplified by tbe credit card and bank card) is ubiquios and vey chea to manufactr - less tha a dollar ea Th magneic strpe card suffers from: 1) the defect of being asly copied; 2) low mwwry capcity; and 3) the requiremnt for it to be used together with a mechaical, motor driven reader tha is unrelable.

I The Teepsos system _is the_ only smUt ard sydsm in opeton s May 1990 an Italy's Autostrad. in the Italin sysdm, h tbrnpde - locte in the oa-bard muit itseffeponb for onu an d reepto of roadside to vehicl i t ad operatsat S.72H. Hence it is over s times faster than an _RF_ technology which oprates at 91S NHz, alowing for added measures of encryptio and scurity. In additiao to beu a supplier to Toleps, AT&T h **_ndy_** teamed up with Vapor Cda, Inc. to itgrate its _'ec doat'_ smrt cad used in baning applicais (which has thie cqpacity to stor fur pages
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frequency tags, the smart transponder possesses a microprocessor which has both read and write capability -- functioning much like a simple miniature computer. Hence, the smart transponder is able to maintain a transactions balance independent of a central computer and can perform simple arithmetic operations when activated, acquiring the function of an electronic purse -- similar to a phone card or a stored value card available on metro systems.<sup>2</sup> ' Whenever a vehicle passes a charging point, the on-board unit can be programmed to emit a bleep or a tone to signal the completion of a valid transaction (Dutch Ministry of Transport and Public Works, 1989). The smart card can be revalued at designated machines located at certain fuel stations after the decrements reach a threshold level, whereupon a warning yellow light emitting diode (LED) on the in-vehicle unit to which the card is attached is automaticaly turned on. (This is the modern hands-off version of operating a mechanical on-vehicle meter by hand as envisioned in the Smeed Report, so I caU its electronic equivalent 'on-vehicle metering'.) Other functions include the capability of monitoring - with the use of designated machines - a previous history of the record of the transactions made (up to 200, say), possibly for the purpose of contesting any alleged discrepancies. The prme advantage of smart card-type AVI technology relative to microwave AVI alone technology is that there is no paper trail, and that anonymity/privacy is assured. A second aedF antage of smart card system is that it obviates the need to maintain a costly central charging system capable of handling aU the separate user accounts. The latter featurw is a requirement - and shortcoming - of one-way AVI systems. A third advantage is that a charge that is deducted instantaneously would presumably have a greater impact by making of information) with electronic toll collection (Skryckci, 1991). (A 'contctless' card means tbat it involves no metal-to-metal contact or movable meco nsm when it is read by an in-vehicle smat _cad_ reader.) AT&T's traponder is said to be priced arud $100 with smart card atachment (Ramirez, 1992).

The PAMELA project, developed as pert of the Cambrdge road pricing scheme, envisions at least two versions of smart card technology: one which coains al the microwave communications circuits in a single credit-card sized unit and another which splits the on-board unit into a small card reader which contais the circuits and a separate smart card which acts only as a value card (Hills and Blythe, 1991). Here we consider the latter, more basic version.

I Tn computerjargon, a phone card is a chip card without intelligenc and is of the read-only memory (ROM) type. On the other hand, a smart cad (as used on a larg scale in swvenl bankig applications in France) is a chip card with both a microproc_sr and a nwmory, of the electrically emsable, progsammable and rmd-only memory (EMPROM) type.
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the driver more keenly aware of a trip's cost (especially via an audio beeper and a LCD visual display of the account balance) - and thus modifying his travel behavior - than a billing arrangement settled by credit card at the end of the month. The disadvantages include the fact that the theft of an electronic purse becomes a potential problem precisely because of its nontraceability -- whereas if a radio frequency-based AVI tag is stolen, it becomes worthless once it has been reported lost (as with a credit card). Hence the major strength of the smart card system is also its vulr.erable point. This problem could be partially addressed if the maximum denomination of the smart card's account balance is limited and the penalty high. It has also been suggested that a smart card could be keyed in (with a PIN number) by the u%,r to operate in tandem with the owner's in-vehicle unit, but the entire unit would still be a potential target of theft. The other chief disadvantages of smart cards are that they require complex vehicle to roadside communications and that multi-lane problems still need to be overcome entirely, as compared with microwave AVI systems which are less vulnerable to those problems. Sophisticated vehicle to roadside communications could be used as an opportunity to integrate electronic route gwudance and information systems with the smart card automatic debiting system. The use of smart cards for AVI, despite their higher cost vis-a-vis microwave AVI, may be integrated with the growing use of smart cards in several banking systems in France and Japan, making them more appealing in the future.

39. As an intermediate step to a full smart card system, a simpler memory tag which has some read and write capability can be used (see footnote 16). One such system has been tested experimentally since November 1987 at a tunnel in Alesund, Norway. It operates on similar fiequency and transmission speeds as the above-mentioned smart card system and alows vehicles to travel up to 60 kph [37.5 mph] by the tollgates.Y However, it does not have as much flexibility as, or the varied uses of, a standard commercial smart card with banking applications.

- s Based on microwave technology, this intemdiat system is called the Prognramble RE MDentification (PREMID) system. Using a match-box sized, semi-active tag poweed by a long-life lithium battery, it operates at **_2.45_** GHz - still a rlatively fast transmission rate - and up to a distance of S meters [16 ftI (Philips, 1988). Ihe PREMID tag can handle up to 32 Kbytes of memory. A more advanced PREMID ransponder by Sweden's Saab Comitech Traffic Systems with read-wnte capability was tested beginng Sping 1992 at the Easen Harbour Tunnel in Hong Kong.
- 32 -

More recently, in August 1992, the Illinois State Toll Highway Authority adopted a 'smart' transponder system for its Illinois Tollway.23 This technology has features of a smart card system such as read-write capability performed at freeway speed. It is equipped with a LCD visual display for checking toll and parking account balanc as well as an audio system that is capable of warning drvers that electronic toil collection or accidents are to be expected a mile ahead. This allows ample time for the motoris **t** o avert bottlenecks.

40. The advantages of electronic toll collection vis-a-vis manual toll collection are many. Vehicles do not have to slow down, form queues and create congestion because of the transactions cost of manual toll collection. Vehicles can travel at the desired speed (well beyond the current peed limits), with instantaneous debiting of accounts being undertake at reliability and accuracy levels exceeding 99.9%.24 Nonstop traffic results in smooth traffic flow and high - throughput of 1200 to 2000 vehicles per lane-hour triple to more than quintuple the throughput of a conventional manual toll lane. Further, no stopping and paying means decreased fuel consumption, lowered risk of accidents, pollution and road deteroration (especiay the road damage caused by heavy vehicles' alternate braking, stopping and starting action). Gone are huge toll plaz with large plots of land and in their places are gantries (or nothing, if inpavement antennas are used). In some AVI systems, the motorist is instantaneously notified by a green light (indicating avalid account), a yellow light (indicating alow account), or a flashing red light (indicating a depleted account or a malfunctioning tag). Statof-the-art technology does not need major road work, as was required for the outdated Hong Kong electronic road pricing technology in 1983-85; it requires, at most, that a small it be cut on the pavement to embed a tiin electronic loop, and that this be covered over with sealant. With in-pavement

> D In fth wning bid, AT/Comm Inc.'s cigreftpack-uizd, Diria cundd is priced at _US$37 each_ - about 35% ls expeive than comp8ing smat card This rad-wrte tg (containing 16,000 bytes of data) has the twIn advatg tht it awoids the need to maintin a cosdy cenal computer system required of one-way AVI systms and is capable of filly protectng tousb' privacy while they r treli at pesswy speeds. The AT/Comm tg can stor up to 24 separat accouns, potelaiy overcoming fth problem of differen **t** oll aoitiesad juridictions saing the proceeds of ot m acomL

Fires bued on tag-bsod AVI system. as reortd in compy brochures (fom Amtech System Corporato and Micro Design; seo following Ibotno).
> - 33 -

antennas installed in such a discreet fashion, the road surface appears to have crack seals on it and is unobtrusive compared to gantry-mounted antennas. In short, great strides have been made in AVI technology, which draws us much closer to feasible electronic road pricing in a city-wide context.

# Examples of AVI systems

41. A simple turnkey AVI system began daily opeation at the Crescent City Connection Bridge, New Orleans, United States, in January 1989. Since it was a retrofitted AVI system on existing tollbooths, the system was installed for slightly less than a million US dollars. The operating cost is merely a maintenance contract with the AVI supplier - Amtech - and four sales clerks and a fraction of a technician's time, which comes to over US$100,000 a year. With about 30% AVI users for an average daily traffic count of 60,000, the cost per (AVI) transaction comes to less than _4US_ cents at 1990 prices. Due to low capital cost of US$1 million, the cost per dollar of toil financing is only around 1%.25 42. The second set of figures presented here is based on the information proposed in 1990 for the Dulles Toll Road, Virginia, which connects the Dulles Airport to Washington, D.C. Their much delayed so-called Fastoll system is a fully integrated toll and AVI system, which includes enforcement cameras, fiber optics, communications, baies, variable message signs and conventional toll equipment, etc. This accounts for the fict that the system is esdmated to average US$16.5 million in capital cost and US$5 million in opratng cost in 1990.26

- 2s Usage of the currnt Amtech technologb **y** the toll authority of the LoZusa Deputmmt of Tnpqotio and **Deveomet** indica a *99.9X% eliability' level (thus appeaing to veriy manufau ' cldm) and a very cost-efficient operaton (snc, us of AVI reduces pesonnel costs te hims). A drawback of the system in use in 1989-90 is that enforcement ws caried out (without an add.on video rord sytem) by requiring tat dl vahicles slow down (and perhaps come to a stop) at tde tollbooth until the dectouic _security_ ystem verifies the validity of the before lifbing theb ao matc barriers. This is doam despite the fact that the technology is foly capable of haling speeds wel beyond tho **speed** limiL Motorists in New Odean place a US25 deposit for the use of an Amtech ToilTe .

- 2 The Virginia Departmnt of Transportaion opted for n out-of-sight trnsoder to be externally nmnotl underneath te vehicle and scaned by in-ound antuns (weo DeozLor, 1990).
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43. With an average daily traffic count of over 70,000 and the total number of transactions of 250,000 (due to a car passing multiple toll points), the cost per transaction comes to an average of _US7.7_ cents in 1990. Because of the relatively high capital cost of the system (including conventional toll equipment), the revenue-cost ratio is only about 1.6. Even so, the advantages of having such a sophisticated system of electronic toll collection is the indirect savings of not building, equipping and staffing approximately 100 additional toll lanes. After all, highway construction cost is in the range of US$1.25 million per kilometer in 1990. (An - attended (manual) toll lane costs US$176,000 a year 11 times more costly than an AVI ('Pikepass') lane of _US$15,800_ a year, reports the Oklahoma Turnpike Authority.) Dedicated telecommunications links, although not required, were chosen to improve security. As of this writing, the system has gone through two rounds of bid proposals and should be in operation soon.

44. In the two case studies, one actual and the other proposed, the issue of privacy is not important because travelers can voluntarily participate in electronic or manual toll collecticn. The issue of road work is also not crucial because a minimum of it is needed. Besides Crescent City Connection and the Dulles Toll Road, AVI toll collection is increasingly popular in a number of places:

- i The world's first electronic toll collection took place in October 1987 in Alesund, Norway. Though the traffic was modest with only 3,000 vehicles a day, 60% of the daily users were electronic tag holders (Waersted, 1992). In October 1988, electronic toll collection also started on a freeway in the eastern part of Trondheim.

- The 27-klaometer long Dallas North Tollway in Texas has a fully implemented and retrofitted AVI system of 60 lanes for toll tag users since August 1989. This system was installed by Amtech Corporation for free, hence users are charged US$2 a month for rental of the transponder and a premium of _US5_ cents per transaction for using the nonstop technology (Roth, 1991).
- _35_ -

- An example of smart card technology applied to a 'closed' toll road network has been implemented by Autostrade S.p.A. in Italy's autostrada connecting Milan, Florence, Rome and Naples. In operation since April 1990, the technology assures the privacy of its users by debiting the smart card at the appropriate toll rate when vehicles are driven -

- past two charging points an entry and an exit point.'

- On the ACESA highway in Barcelona, Spain, electronic toll collection started in April 1990 by the Autopistas Toll Authorities. A more full-fledged system operating on three highways is expected before the end of 1992.

- The Port Authonty of New York and New Jersey switched over from a surface acoustic wave technology to microwave technology for buses as early as April 1988 using the Lincoln Tunnel. In Fall 1990, the Authority also began operation for passenger cars on the Goethals Bridge using a fully compatible system.

i The Esterel-Cote d'Azur Toll Agency, which operates the 250 kilometer long ESCOTA highway at Antibes, France also began operation with AVI in November 1990.

- The world's longest double-span bndge of 42 kldometers - New Orleans' Lake -

- Pontchartain Causeway began opeation in December, 1990, using the same (compatible) TollTag system as Crescent City Connection's.

- In January, 1991, the Oklahoma Turnpike Authority began operating the largest electronic toll collection system by installing it on 88 lanes and it expects to opwer a total of 161 lanes when new turnpikes are completed in 1992. Charges for toll tag use are registered at freeway speeds whereas non-toll tag users are required to exit the

- 27 **Ih** T **spm smt cad tchnology** is **fully** applicable to **both** 'ope' **buer-type and** 'closed' **motorway** netwo& With **the latter** system, **Xt** toU **rat i simly calrltd** by **te distance** (or **tm) bewe two pricing points.**
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freeway to pay cash manually in order to avert any congestion and traffic back-up as a result of the toll transaction mechanism itself.

* - Owned by a private company with the same name, Cofiroute a 730 kilometer [454 - miles] highway in southwestern France has AVI equipment installed at two toll plazas near Tours, France, in May 1991.

* On September 22, 1992, the Harris County Toll Road Authority in Houston, Texas, started electronic toll collection on the 21-mile HEardy Toll Road and the 28-mile Sam Houston Tollway. Motorists who prefer to drive without stopping need only to set up an escrow account with the road authority for a rentl fee of US$1 a month for the use of an EZ Tag.

* An AVI system for special and commercial vehicles spanning Mexico from Tijuana to the border of Guatemala is expected to be installed by November 1992.

> i An AVI license plate tag system is scheduled for 18 lanes of the Georgia Route 400 atendon in Atlanta, Georgia by March 1993. Four of the lanes will be AVI expresstype dedicated lanes, with a lane capacity of at least 1260 vehicles an hour (Spock, 1990). Under optimal conditions, they are capable of achieving the maximum freeway throughput of 1800 vehicles per lane-hour.

* In January 1992, varous toll authorities in New York, New Jersey and Pennsylvania (known as the Interagency Electronic Toll and Traffic Management (ErwM) Group) issued a call for proposals for a standardized electronic toll transponder and reader system for the tri-state region, to be tested in 1993 and to be fully operational by 1995 _(Inside I1,_ February 3, 1992). The prospect of driving nonstop from Philadelphia to New York City looms even larger. The consortium of toll agencies expressed a preference for read-write technology based on two-way communication even though a read-only technology based on one-way communication is considered acceptable. The
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New York Thruway is the first among the interagency group to implement an electronic toll collection system named 1-ZPass, to be operational in 1994-96 _(I&nsde IVS,_ May 26, 1992).

# 3) Combination of Manual and Elenic Toll Collecto

# i) The Oslo and Trondheim Toll Rings

45. The emerging popularity of AVI on toll roads and the success of the technology must have had an impact on proposals for electronic road use charging in Scandinavia. In pardcular, Oslo Toll Ring began using electronic toll collection with AVI technology in December 1990, following a period of manual toll collection beginning in February 1990. The toll ring surrounding the city imposes an admissions charge for motorists entering it round the clock at any time of the year. Having had the electronic technology in place, Oslo is currently debating - the merits of switching from a flat toll to a time-differentiated charging scheme. Trondheim - Norway's third largest city has begun in October 1991 electronic road use charging by daylight period to motorists who drive into the city. The opeation of both the Oslo and Trondheim Toll Rings is the same as the pracdce of AVI on toll roads described above. Postpayment via conventional monthly billing statement and prepayment via elctronic funds transfer are possible. UnliWe most AVI systems on toll roads, the capital costs of Oslo and Trondheim Toll Rings include the construton of toll plazas for the installation of manual toll booths, automatic coin machines, and elecronic toll collection. As a result of the plaza environment and a full video enforcement system for reserved lanes, the capital costs are relatively high. With an average daily traffic count of 210,000 and 50,000 during the hours of operation for Oslo and Trondheim Toll Rings respectively, the costs per transaction are _NOK1.33_ [US21.2 cents] and _NOKI.17 [US18.7_ cents] in 1990 prices resptively, which are much higher than simple AVI systems and twice as costly as manual systems.2<sup>3</sup> x This rault appau to be caistit with to findinps of _Hawhu_ (1991), who concludes tot t cost of _isaonper lawe forfuU_ etroncic toU collection in Noay is a thud to a half of the cost of a 1mn toll coLllocton system
- 38 -

46. All three Norwegian toll rings -- Bergen, Oslo and Trondheim -- are primarily implemented for road financing. In particular, the Oslo Toil Ring was formed for the purpose of financing both roads and public transport in Oslo, with four fifths eannarked for the construction of roads and a fifth for bu3ways. Similarly, the revenues of the Trondheim Toll Ring are used to finance infiastructure which promote public transport, cycling and walking Crretvik, 1992).

47. The charging period for the Trondheim Toll Ring is Monday through Friday, 6 a.m. to _5_ p.m. (except holidays), which is essentially pricing by daylight hours. The toll rate for (light) vehicles weighing under 3500 kg. [7716 lbs.] is _NOK1O [US$1.60]_ per inbound trip if it is collected manually and the rate for (heavy) vehicles weighing over 3500 kg. [7716 lbs.] is twice that of light vehicles. (Motorcycles are not charged at any time of the day and cars are not charged in the evening and at night.) Trondheim Toll Ring is unique because most (90%) of the users during the peak period (of 6 a.m. - 10 a.m.) and many _(85%)_ of the users during the secondary peak period (of 10 a.m. - 5 p.m.) are electronic tag holders - a fact that could be due **to** the free leasing of tags. Electronic transponder users opting for a prepayment (or a postpayment) option are entitled to a discount of 20% off (during the peak period) and 40% off (during the secondary peak period) of the manual toll collection rate of _NOK10_ per inbound entry during daylight hours, resulting in the toll rates of _NOK8_ and _NOK6_ respectively CTretvik, 1992). (Further discounts are given to those who set up an account - whether numbered or not - with a deposit greater than _NOK500_ or even _NOA2500_ a month.) Ten of the 12 cordon entry points are not manned and the large fraction of AVI subscribers make the cost per transaction of the Trondheim Toll Ring comparable to that of the Oslo Toll Ring. A unique feature of the system is that a call box is available on aU 12 entry points if a motorist encounters problems with the automatic coin machines, the use of magnetic strip credit cards, or the printing of delayed charges. As in the Oslo Toll Ring, enforcement is carried out by taking videographs of all vehicles passing through and issuing a penalty by mail of NOK250 [US$16.89] for the violator. It appears the marked use of differential pricing for the heavy (electronic) users would
- 39 -

have some effect of changing the driving behavior of motorists whose trips are not as valuable - - despite the fact that the charging period is nominally by daylight hours only.

48. Norway has had much experience with financing roads from tolls, as exemplified by the early implementation of the manually operated Bergen Toll Ring in January 1986. Residents in the Oslo and Trondheim vicinity were promised that the rate of constructing the planned road system could be achieved at twice the speed with toll financing. Even though the goal was not traffic restraint, the Oslo and Trondheim Toll Rings had the side effect of dampening travel demand somewhat. Despite the fact that the per trip toll rate for entering Oslo is _NOK1O [US$1.60]_ - twice the rate for entering Bergen -- the initial estimate of the decrease in traffic is only about _5%_ - less than Bergen's (Lauridsen, 1990; Larsen and Ramjerdi, 1990).

49 One natural question to raise is whether a system of 17 toll stations (which includes the entire construction cost of two toll plazas) is worthwhile or not. According to estimates made by Ramjerdi and Larsen (1991), the annualized cost for the Oslo Toll Ring is estimated to be _N0K96.6 [US$15.4]_ million." The benefits of the toll scheme were estimated by using a simultaneous logit mode choice and traffic assignment model, under the assumption that trip timing, destination choice and location were fixed. For all practical purposes, motorists heading towards the CBD do not have a feasible alternative route to by-pass the toll. (rhus the first two assumptions which pertain to Oslo's cordon system can be contrasted with the Hong Kong zonebased ERP system, which is designed to influence route choice and the (re)scheduling of trips.) - For the Oslo system, trip matrices are separated into four time periods the morning peak, the - afternoon peak, the interpeak, and the off-peak and the choice of mode is between private auto and public transport.

- 2 By aumin tat the capital cot is amordied over 15 years and that the real discout rate is 7% (beng the official Norwegian rt for public projects), the nuualized capital cost of **_NOK25S_** million (plus the adjusted dart-w cost of _NORS_ million) comes to _NOS.SS_ million per year (slishy over the reported figure of **_N0E26.6_** million in Ramjerdi and Larsen, 1991). Together with the annual opeating cost of _NOA70_ million, the total annuized cost of the Oslo Toil Ring is _N0K98.5_ million. The benefit-cost ratios reported below are based on their reported figues, in contrst to the simple assumption of a capital recovery factor of 0.125, which is used as a yardstick of comparison across countries.
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_50._ The economic benefits of the present Oslo Toll Scheme are based on: a) the savings in vehicle operating cost, and the savings in time cost to those travelers who stay and pay the cordon toll, less the dsbenefits to those whose trs are not undertaken (hence the terminology 'net benefits').30 The savings in operating cost are based on the savings in fuel consumption due to less engine idling time and stop-and-go traffic. In a situation in which private auto trips are dominant, as in Norway, the savings in travel time of the tolled less the welfare loss in consumer's surplus to those who are tolled off is shown to be less than the gross revenues of the project. The numerical esdmates of the benefits are shown in Table 3, classified by time period, in millions of Norwegian kroner in 1990 figures (Larsen and Ramjerdi, 1990; Ramjerdi and Larsen, 1991; Larsen, Mathieu and Ramjerdi, 1991; and Ramjerdi, 1992, with corrections). The results clearly indicate that a round-theclock, 365-day flat toll of _NOK1O_ [US$1.60] for lght vehicles (and _NOA20_ [US$3.20] for heavy vehicles) is non-optimal.3' During the peak period, the present 10 kroner toll does not cover the high martinal extal congestion cost of _NOI35.60_ [US$5.69] incunred during the peak when a vehicle drives inbound to the CBD. On the other hand, during the intrpeak and the off-peak peiod, the current toil exceeds the marginal external cost of _NOI3.80_ [US$0.61] and _NOK1.40_ [US$0.22] resectively. The first set of results in Table 3 indicates that by imposig a lower than optimal toll during the peak, positive benefits of _N0OB8.3 [US$6.1]_ million follow net of the welfare losses. Similarly, by imposing a hig than optimal toll durng the interpeak and off-peak periods, negative benefits result. Thus the annual benefits for all time peiods total _NOAI.9 [US$3.5]_ mllion. (Notice that the vehicle opeadng cost savings form a minor share of the benefits, in contast to the Hong Kong ERP Scheme). Since the Oslo Toil Ring is desged for a miture of manual and electronic toll collection, the lane cpacity is about 800 vehicles per hour (see Spock, 1990). The delay caused by stop-and-go manual toll payment of 600,000 vehicle trps a week (assumed to be approimaty 15 seconds per vehicle) is taWen into account. By assuming a value of time

- 3D chag in us cost **annml** empoyed by Randedi ad Lam (1991) is based an Willias (1976).

- **31 Note tha approximate usp hg to be amumd for asonal p hoklds in 1990** d **par trip chars** will **soon be** made. **Note aso tht dio uvl impact** of **tbe pumt tol** was aound **8%, 4%** and 16%S reduction **during tho peakot intupek nd** de off-pek poriod repectively, not takng ito accoumt the ffdct of **seasona pus** holde **(Lanai. M aem and Rsaerdi,** 1991).
_-_ 41 _of NOI3O [US$4.79]_ per hour and an average occupancy of 1.3, the aggregate annual delay at the toll plazas is on the order of _NOSK4. [US$0.7]_ million. The estimated additional fuel cost due to stop-and-go traffic comes to _NOMA.4 [US$O._ 11 million per year. When combined with the cost of building the toll plaza to accommodate manual tollbooths and electronically controlled toll lanes of _NOK96.6 [US$15.4]_ million, the net benefits come to _-NOK79.6_ (-US$12.7] million. (Note that the term 'net benefits' defined throughou **t** his paper refers to benefits net of the implementation cost of a charging instrument (see footnote in Table 4).) The benefit-cost ratio, taking into account manual toll payment, I 18% and therefore fails a costbenefit test. From a financial point of view, with adjusted annual toll revenues of _NOK600_ [US$95.8] million, the revenue-cost ratio is 6.2, suggesting that governments would likely find toll financing a worthy pursuit.

_51._ Given that the electronics are already in place, a question that arises naturally is whether a large fraction of the benefits from road pncing could be reaped by imposing a crude cordon toll during the peak peiod only. For several years, it has been argued in Norway that a toll of about _NOI020-25_ [US$3.2-$4J would reduce traffic volume by about 20%. It was found that an inbound toll rate to Oslo of about _NO2iO5 [US$4]_ would approimate marginal external cost (Larsen and Ramjerdi, 1990).32 Further, the cordon boundary needs to be tightened in order to allow through traffic (a significant number of vehicles) to make detours and exercse route choice. Thus, by imposing a marginal congestion toll of _NA025 [US$4]_ (or more precisely, the marginal congestion cost of _N029.5 [US$4.71D_ on average during the peak that is somewhat opdmal, the annual benefits come to _NOI95.2 [US$15.21_ million. Notice that there are no benefits outside of the peak period since the marginal congestion cost of traffic in these other periods is close to zero. The igher benefits from imposing an improved 'optimal' cordon toll duing the peak yields numeical benefits which are of the same order as the cost of opeatng the present toll scheme. However, with the inbound peak period only toll, just two short shifts of personnel are needed as opposed to personnel for 24 hours a day. Hence the reported figure i2 t iswumed that te cos of uriAmnapoluaand road da cost u covered by th hh gasoline tax, so dX margina exen cos during do off-pek pedod u nil (Lasn, 1991).
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for the cost of toil collection is a lower amount of NOK70.0 [US$11.20] million a year. The benefits, net of the cost of impi - *ntation, come to _NOK20.3_ [US$3.2] million, with the benefitcost ratio being 1.3 vis-a-vis a base case policy of doing nothing. Interestingly, the 'optimal' toll revenues are less than a third of the revenues derived from the present 'non-optimal' toll scheme in Oslo, but the revenue-cost ratio is 2.6. Notice that the cordon scheme differs from the idea of tidal flow charging, which is in accordance with the direction of peak period demand (as in Hong Kong's ERP Scheme B). This means that a round trip which incurs a marginal congestion cost of _NOK25 [US$4]_ in each direction -one way during the morning peak and the other way during the afternoon peak -- is charged once, i.e., half the externality costs, unles it is a through trip across town. The benefit-ost ratio has increased more than six times whereas the revenue-ost ratio has decreased by 60%, suggesting that a social welfare maximizing toll may not necessarily be a revenue enhancing one. While an 'optimal' toll is two and a half times more than the present 'non-optimal' toll, it yields two-thirds less revenues to the government. If the current practice of earmarldng toll revenues is continued, then it would seem 'fair' that those who cause congestion are the ones who should pay for them, while simultaneously enjoying the fruits of improved tranwsport infrastructure.

_52._ If a motorist were to be charged for the marainal exrnal cost he or she imposes on each link that is traversed in a given trip, the benefits from doing so would come close to a 'perfect' road pricing scheme. Thus the benefits of road pricing increased by six-tenths from _NO95.2 [US$15.2]_ for the 'optimal' cordon scheme to _NOK150.9 [US$24._ 1] million for a 'perfect' road pricing scheme. The fact that, with 'perfect' road pricing the welfre loss for those who have not undertaken the trip is higher and the revenues lower suggests that travel demand is relatively elastic. The large benefits come about because of the avoided trps which would have caused high marginal external costs. As a result, the net benefits of the system increased uruther fourfold to _NOK80.9 [US$12.9]_ million and the benefit-cost ratio increased to 2.2. The costs of installing the electronic toll collection system route by route will clearly not be cheap. Hence the benefit-cost ratio will be less than 2.2. From a financial viewpoint, with 'p4rfect' road pricing, the revenues dropped from _NOK180_ [US$28.8] to _NOK152.1 [US$24.3]_ million, and
- 43 -

the revenue-cost ratio decreased to 2.2. Thus, the fear of government collecting high toll revenues as one moves to a 'perfect' road pricing scheme does not seem to be borne out by these simulations. Estimated benefits are just below estimated revenues, suggesting that a benefitmaximizing pricing scheme is on average 'fairer' than it is generally perceived.

53. The Norwegian experience appears to demonstrate that toll financing and welfare maximizing objectives may not be correlated since they may go in opposite directions. That is, a Qow) flat rate, 24 hour toll may maximize revenue but not net benefit. Per contra, a differential pricing strategy would enhance social welfare but not raise as much revenue. Data from Oslo has demonstrated that a 'perfect' road pricing scheme yields significantly higher benefits vis-a-vis a crude 'optimal' cordon scheme. By merely imposing a simple peak period toll, however, a nontrivial proportion of the benefits of a 'perfect' road pricing scheme and several times the benefits of the present flat toll scheme could be reaped too. Further, the cost of toll collection of such a crude 'optimal' scheme appears to be manageable for the size of a city such as Oslo. The simulation results from Norway also show that toll financing would require a lower toll whereas a welfare enhancing pncing strategy would suggest a higher toll. Still, a benefit-maximizing pricing strategy yields a benefit-cost ratio that happens to be the same as its revenue-cost ratio. Perhaps local authorities should only approve toll financing projects which pass the benefit-cos **t** est.

54. The simulation results, which show that road pricing is 'fairer' than formerly perceived, have contributed to informed debate about the possible introduction of road pricing in Oslo. A white paper on road pricing is currently being prepared by the Ministry of Transport and the Norwegian Road Administration.33 As of Janmzy 1992, **.e** toll for **antring the** CBD incresed by one **kmne** (fom _NOKIO to NOKll)._ Furwher, Oslo is looling into the possibility of the use of a dobit card system mther than the current one-way AVI **utannder system.**
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# ji) Road Pricing on a Cordon si9 in Stockholm and aotfhenburg

_55._ The application of AVI technology for electronic road pricing on a cordon basis in order to reduce congestion and environmental degradation was proposed for the Stockholm and Gothenburg regions in 1989. Since an electronic road pricing system is a fully-fledged AVI system extended to an entire area or city, with charging done on a point pricing basis each time a vehicle passes by an electronic reader, the costs would be higher than a simple AVI system for toll roads. In particular, the capital and operating cost hinge on the number of pricing points and transponder tags and the complexity or sophistication of the system. The Swedish proposals for the Stockholm and the Gothenburg regions are based on the principle of marginal social cost pricing, including the pricing of environmental pollution, and the agreement to channel the revenue proceeds to public transport and road construction. Three major political parties reached a final agreement in September 1992 to use a combination of manual and - - electronic toll collection system as in the Oslo Toll Ring to finance transport infrastructure for the Stockholm Region, with the possibility of introducing differential pricing (see Annex 3).

# iii) The Hong Kong Electronic Road Pricing and Area LiMsing Smes

_56._ An earlier, full-fledged road pricing system on a multiple zonal basis was conducted in Hong Kong in 1983-85. Tested within a congested, multi-lane environment, the field trials based on a sample of 2500 vehicles proved that the Hong Kong Electonic Road Priing System (ERP) was a technological success. Unlike the simple cordon-based electronic road pricing schemes proposed recently in Sweden, the system opemes on five different time periods through a 12-hour day from 7 a.m. till 7 p.m.): the morning peak, the aftenoon peak, the shoulder peaks, and the interpeak. Shoulder peak charging, immediately before and after the morning and afternoon peak, was designed to deal with the boundary problems of Singapore's ALS by smoothening out the trffic. Shoulder peak charges are half the peak charges, whereas the offpeak period from dusk til dawn is not charged. Under the ERP proposal, all private cars in Hong Kong are required to be fitted with a nonremovable, videocasette-ized 'electronic number
> - 45 -

plate' (weighing less than a IkBogram) mounted undeeath the vehicle." Some road work was requied for the 18 toll sites estabLished for the pilot stage, involving reconstruction of the road surface, installation of electronic loops, and ducts for power and telecommunications cables underneath the road. (rhe direct (passive) charging technology available now is portable, pocketable and transferable, and does not necesarily require major road work.) 57. ERP has three pricing schemes. Scheme A is the simplest in design, and lowest in the level of charges, the number of zones and geogrphical coverage; Scheme B introduces tidal charging that matches the direction of peak demand; and Scheme C captures short trips as well as being the most complex in design and highest in the level of charges, the number of zones and geographical coverage. Imposing an optimal congestion toll of HK$10 [US$1.28] in 1985, achieves the theoretical maximal benefit level in the form of savings in travel time and vehicle operating costs, less reduced benefits for those travelers who are tolled off the road (see section on 'The Effects on the Tolled, the Tolled off and the Untolled' in Hau, 1992).35 This annual benefit figure amounts to HK$1,250 miUion [US$160 million] in 1985. The simulation results, with their distributional impacts by mode for the reference year of 1991, indicate that Schemes A, B and C achieve respectively six tenths, wven tenths and thr quarter of the maximal benefits associated with the theotical optimum option of HR$1,850 million [US$237 million] in 1990 equivalent (see Table 4).

_58._ Since eectrnic number pLate (ENPs) (together with an additional 10% cost for installation) were priced at _HK$460 [US$59]_ each in 1985, the cost of the 210,000 ENPs make up about half of the system capital cost of HK$240 million [US$31 million].-4 Under the oneThenow out-dated technology wv first devloped m the edo y 1970s by the U.YL Transport Researc andm Road Labory and ued _an do_ Bitih Rail High Speed Tin snliog ysm and o Glasgow Undeground tain contol sytm (Transpotec 198S, p. 3.5).

IT economic beneft fiom ERP m _ba_ oin: 1) vehicle ownets' ving in opestmg costs; 2) pasengers' sngs i tvel Utim; and 3) public tantd' savi4np (i tm); _lm_ dei wdfar lo to those who ar tolled off (ie., the dibeeflt fiom _genated_ tafc). ame Trnspotch (1985) and Kmu (1989, 1990) cal hese amal nst benefit ind. In dti papr, -net bmft refer to beefits not of system cost. Sic then, 0t pnce of a paive trnnder ha fle by about two thds and ontne to fill.
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horse shay assumption of a capital recovery factor of 0.125, the annualized capital cost is then _HK$30_ million _[US$3.85_ miUion] and the annual op tng cost is _HK$19.80_ [US$2.54 miliionJ, representing three fifths and two fifths of the total annual cost respectively. The annual benefitcost ratios are 14.7, 17.8, 17.8 and 24.1 for each of the three scenarios and the theoretical upper bound option." With traffic growth and technological improvements, the benefit-cost ratios will most likely rise. The number of trips made by private cars is forecast to be 549,450 per week day in 1991 and the annualized capital and operating costs amount to just under _HK$50_ million [US$6.38 million] in 1985.3 Using the number of operating days per year of 260, the system cost per transaction is HB34.9 cents in 1985 _[US6.6_ cents in 1990]. Even though over 10% of the capital cost and about 12-1/2% of the operating cost are required for the 'data capture' enforcement system, the cost per transaction would be even lower if account were taken of multiple transactions, that is, crossing several screenlines a day.<sup>3</sup> 9 _59._ In comparison with other mechanisms, electronic road pricing fares well. The annual - benefits of a car ownership fiscal restraint measure an indirect charging method levied on vehicle ownership via annual license fee discussed earlier - amoun **t** o HK$301 million [US$38.6 million] in 1985, about a quarter of those of the optimum option and less than half of those of ERP Scheme A (see Hau, 1989, 1990).40

- 3 The sligt differce in annualized costs for ERP Schems A, B and C, reflect the fact that the capitd cost varies somewhat in relation to the 130, 115 and 185 toil sites required espectively for each scheme.

- 3' The average number of transactions per weekday was estimated by takng the proportion of those who 'stay and pay' (45%) and the total mber of peak users (374,000) and interpeak users (847,000) remaining under Scheme A (Trnspotech, 1985, p. 2.69 - 2.70). (Relative to Scheme A, Schemes B and C have less _transactions_ due to the higher charges, so te costs per transactions would climb by 12% and 22% respectively.) The cost per trmnsaction would be lower if one computes all the result on a six-day wori week basis rater than five.

- 3' If one were to use the nunber of vehicles forecas for 1991 of 275,000 (as opposed to using the 210,000 ENP figure on which the capital costs ae based), th number of trips averged per weekday by a motorist is exactly 2.00. This fortuitous result would make the Ho ong figures comparable with mul charn and Singapore's ALS, etc., since tho cargs made elsewhere could be viewed as a round trip charge.

The fgure includes the disbufits of those resurined or would-be car owners who m 'taxed ofP fromno being able to own a private car (bocuse of _already_ existing hefky first registration taxes and annual liense fees). The disbenefits amoun **t** o a total of H$244 million [US$31 milLion] in 1985 (Harrison, 1986, Table
- 47 -

60. A Singapore-type area licensing scheme was actually tested and formally evaluated for Hong Kong in 1985.41 A typical supplementary fee of _HK$7_ each [US$0.90] for vehicles crossing a screenline (in either direction) which encircles the central business districts tallies to about _HK$20 [US$2.56]_ each day in AIS fees. The annual benefits of area licensing amount to HK$338.4 million in 1985 [US$64.2 million in 1990 figures].'<sup>2</sup> This benefit figure from supplementary licensing makes up slightly more than a quarter (27%) of the benefits of the theoretical optimum option and less than half (46%) of those of ERP Scheme A. Despite the fact that these dollar benefits are slightly more than those of the car ownership fiscal restraint measure, the latter policy is a sledgehammer approach; it achieves a city-wide reduction in congestion by drastically _lowering_ the level of car ownership (for four years) as well as eliminating economically worthwhile trips altogether. Further, the car ownership restraint measure is widely (and correctly) perceived to be inequitable by limiting household car ownership to the wealthiest, the top decile of the population (Hau, 1988).

61. The annualized cost of supplementary licensing as in Singapore is estimated to be in the range of _HK$10_ - $15 million in 1985 (or US$1.90 - $2.84 million in 1990 figures). The annual benefit-cost ratio for two separate zones (one on Hong Kong Island and the other in Kowloon) under an area licensing scheme is 22.5 to 33.8, even surpassing the benefit-cost ratio of 25 for the theoretical optimum of ERP - the upper bound reference level of the benefits achievable under direct road pricing.43 Suppose the benefits of time savings are ignored and sensitivity 3).

- 41 Note that the st of models used by Harison (1986) and Harrison, Pell, Jones and Ashto (1986) allows for changes in mode choice, tnp timing and destinaton, but not route choice. Most of the effects of the options tsd are due to mode choice (90%), some of it to trip time change (10%) and a very minor part is due to desiadon change. _HeRco_ the flexbility of the models used in the exhaustive Hong Kog study on road pricing does allow for receduling, which overcoms one of Wilson's 1990 criticisms of the Singapore ALS.

- a Taxis are chargd at **_HI4_** per trip [US$0.511 under supplemtary licensing but are exempt unkd&r ERP schemes A. B and C.

- 4 Thes numbers were adjusted fiom daily benefit figures (Hason, 1986, Table 3) to annual figurs by 188 days, possibly an underesimate. The factor of 188 was found by dividing the known aggregate aual benefit figure of BRP Scheme A of **_HK$734_** million [US$94.1 million] (Tanspotch, 1985, Table 8.5) by
- 48 -

analysis is performed, the annual benefits for the car ownership restaint measure, area licensing scheme and ERP Scheme A amount to HA$18.8 million [US$2.41 million], HK$56.3 million (US$7.22 million], and HK$281.5 million _[US$36.09_ million] respectively. Note that the monetary benefits alone make up 6%, 17% and 38%, respectively, of the total economic benefits. In other words, the monetary benefit-cost ratio for area licensing ranges from 3.8 to 5.6, and for ERP Scheme A the benefit-ost ratio is 5.7 coincidentally.

62. The cost per transaction is conservatively estmated to be Hk7.0 to 10.5 cents per transaction [USI.3 to 2.0 cents] in 1985, making area licensing the least costly scheme vis-a-vis ERP. Because of its very low cost - both capital and recurrent - the revenue-cost ratios bracket the range of 12.5 and 18.8. However, it turns out that a single cordon could not be found to neatly encompass the congested areas of Central District in Hong Kong (but could be for Tsim Sha Tsui in Kowloon). Thus, this potentially attractive area Lcensing scheme faced practical difficulties of implementation and ranked less favorably relative to ERP. Further, other factors including: the single coarse level of charge, the long durton (12 hours) of a unitary charging period, the preponderance of overnight parkers being garaged within the zone, and the small level of benefits obtainable under supplementary lienng vis-a-vis the ERP Schemes, aU contribute to ALS being rejected in Hong Kong.

63. From the municipality's point of view, the revenue-cost ratio is perhaps the more apealing figure. With the auto ownehip restaint measure, the additional cost that the government incurs when raising first regsation taxes or annual laens fees is negligible, given that the administrative suctre is already established. Thus, raising (car) taxes has an almost ifinitely high financal mte of return and rate of return alone would not be an appropriate statistic to compare road pricing measures. Note also that these indirect fiscal restraint measures are crude instruments with which D taclde congest. Area licesing schemes' rate of reurn tho daly beeft figsue of HI3.898 million _[US$0.50_ millim. In **a** discuuini Bill Harrisa, it was _uggted _that_ dte simulaioon tlt for t 1991 _refmce fgus_ wvr converted to 1985 dollar term, under the assmption thst ra me (and hnc tme ing) ceased by _33% during_ ta _tie_ perod.
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would be very high because of their low capital cost (this is confirmed by the Singapore evidence) and, provided that the geographical conditions are not insurmountable, these schemes would appeal to local transport authorities facing hard budget constraints. The pracal ERP Schemes possess revenue-cost ratios that range from 8 to 10, whereas the theoretical optimum ERP option yields the revenue-cost ratio of 19- the highest of all the measures considered.

64. With the 1989 Green Paper on Transport Policy, the Hong Kong Government again tested public opinion on electronic road priing under the guise of 'area prcing'. It turns out that the Second Comprehensive Transport Study (CTS-2), wbich forms the basis of the consultative Green Paper, shows that area pricing is in fact ERP Scheme B resurrected (Transport Department and Wilbur Smith and Associates, 1989, Figure 9.3 and Table 9.5)." A slightly lower charge (two thirds) of the original 1985 ERP Scheme B proposal was simulated. The CTS-2 concludes that area pricing is technicaUy the best means of combatting congeston in selected areas. Dogged by continuing concerns about the potential intrmuion of privacy by 'big brother' and accentuated by the issue of 1997 (when Hong Kong will be rened to China), the Hong Kong Government revealed in the ensuing White Paper of 1990 that it has decided to retain area pricing by electronic devices as a long-term option and to monitor the technological developments and their applications elsewhere. In early 1992, the Govemment bepn testing state-of-the-art automatic vehicle identificon technology using the Amtech one-way radio ftequency-based and the PREMID stored value, two-way radio commations systems for electronic toll collecdon at the Aberdeen and Cross Harbour Tunnels. Since April 1992, a pilot project has been operating at the Aberdeen Tunnel on Hong Kong Island, with futl commercial operation expected in April 1993 pending legislative changes to the tunnel ordinances and bylaws. Given Hong Kong's previous exeience, the publicly owned but privately operated tunnel companies have offered their clients full protection from invasion of privacy through the estabLishment of numbered account arangements. If either of the AVI technologie is adopted, Area pricing is a vadrt of BRP Scdm B boomu it extends the charging days to includo Saturdy (inc Hong Kong does operate an a aix-day work week). Hce all do above alyui an HRP applies mod i quite timey. Th eferec yar is chged from 1991 to 1996.
_- 50-_

- the initial flat-rate tolls may give rise to differential tolls later the key to combatting congestion.

# iv) Congestion Pricing in New Toll Roads of Orange Counq. Califoniia

65. Given the political difficulties of implementing road pricing, a concept that has gained momentum recently is the deployment of state-of-the-art technology for implementing congestion pricing on private toll roads. Motorists would not feel coerced - as with road pricing - into paying for the use of a road hithereto not regarded as free when offered the choice of using a freeway and a feeway. As part of the advent of the privatization of highways in California (provided for in California's Assembly bill 680), the Department of Transportation awarded four franchises in September 1990 to the private sector to construct and run toll roads in Orange County, California _(Inside IVHS,_ February 4, 1991). The US$88.3 million State Route 91 (the Riverside Freeway) median project will have four additona **l** anes of road capacity built, operated - by a priiate firm, and transferred to the state after 35 years known as a Build-Operate-andTansfer (BOT) scheme. With a rate of return regulation of 17% - 20% cap imposed on the company's capital costs, motorists using the heavily congested corridor are expected to pay dectonically (or manually) about US$2 during the peak and _UfS$1_ during the off-peak when traversing the ten-mile stretch of highway. Expected to be operational by 1994, average daily traffic volume is estimated to be 30,000. The SR91 project is viewed as the first test of AVI and congestion pricing concepts in the U.S. _(Public Works Flnancing,_ November 1991).

# B. On-Vehicle Metering

66. Direct charging can either take place off a vehicle or with an on-vehicle metering system. The modern equivalent of a mechanical on-vehicle meter is an on-board unit consisting of a smart transponder and a smart card reader, the technology of which was described in the previous section. There are two types of pricing schemes, point prcing and contnuous pricing by time and distance. Whenever a vehicle passes a pricing point, the vehicle is charged for crossing it, regardless of whether the motorist encounters another charging point. This type of
_- 51 -_ charging is in contrast to the continuous type, which relies on at least one other pricing point to clock in or out with - so charging is based on distance or travel time.

# i) The Comprehensive Electronic Road Pricing Scheme of the Netherlands based on Smart Card Technol°

67. In Europe, until recently, the most rapid progress in road pricing was made by the Netherlands. In 1988, the Dutch Ministry of Transport established a special task force for - - _Rekening Rijden_ which literally means travel accounting or road pricing to investigate the feasibility of introducing a comprehensive road pricing experiment scheduled to start in 1992, with complete coverage of the Randstad Area by 1995. Having evaluated various stae-of-the-art technologies for electronic toll collection, the Dutch Government decided to pursue the use of smart card technology in electronic road pricing for a zonal-based system.5 68. As with almost all other major metpolitan areas, the growth in travel demand in the Randstad exceeds the growth in road space. In 1990, car usage was forecas **t** o increase by over seven tenths between 1986 and 2010.46 The Randstad area - an urban (and interurban) agglomeration encompassing the four major cities of Amsterdam, Rotterdam, the Hague and - was Utrecht, with a total of six million people (over four tenths of the country's population) targeted to be the testing site for comprehensive road pricing. Clearly laid out in the

- " To mainain conasicy througout this pape, I define the term 'cordonbased _sysm'_ as rfeiwg to a system of cordons or rngs with concenic circles and the term 'znal4baed system' as refering to a system of zones that are not concentrc in natr, as with the Hong Kang ERP Schumo. With suh a definition, charpng is not necessaily imposed an travel witin both crdos and zonsm. By contas, the Dutch Govemnint calls thdr system a (multiple-) cordon based system as distinct from a zonal-based m becaus they would impose charges for travel _wiA_ a zonl-based systm (Stoehorst and Zadbgen, 1990). This distincdon isnot semaic in that trvd withn a zoam could cas a great del of congestion, and that the dectonics need woud be much broader in covezsge and sophisticaon, addin to enforcemnt cosb. I am indebted to Heero Pol for his comments and for providing ma with the quanttive inonion the Dutch - .

- The72% gowth in car usage is broken down as follows: population m growth (20%), grwth in car ownewship (30%) due to _ina in incom **a** nd employment, growth in femle participation the driving populadon (10%) and incas in the level of transport service (12%) (Pol, 1991).
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"Programme of Requirements for the Road Pricing Scheme", the objectives of road pricing are to: a) reduce the growth of car use generally, as measured by total vehicle-kilometers traveled, by 14 percentage points (from 72% to 58%), and that of car use during the peak by 30 percentage points (from 72% to 42%), b) reduce waiting time costs by 19%, so that the area would be almost congestion-free by 1996, and c) use part of the revenues for the financing of roads. The scheme's requirements also specify that the revenues raised must be high enough to repay several privately-financed tunnels, and that excess road pricing revenues should be transferred back to the motodri **s** t omehow, such as in the form of a reduction in annual vehicle ownership taxes. In addition, the attributes of a 'good' road pricing system (including enhanced efficiency, flexibility, simplicity, transparency, privacy, reliability, security and enforcement, Prepayment option, occasional visitor handling, minimal road work, compatibility, and passing both benefit-ost and revenue-cost tests, (as listed in Table 2) are almost all laid down in the general requirements of the Dutch scheme and are mostly met with smart card technology. Even the document for the functional design specification for an automatic charging system spells out the performance cifications in some detail (Intercai, 1989). Specification particulars include the need for the system to handle: a) normal taffc flow and speeds (from O to 160 kph for a maximum of six undivided lanes; b) normal road capacity of 2000-2400 vehicles per lane-hour; c) a tansmission error rate of less than one in a million; d) a ransmission speed for the communications link exceeding 100 Kbits per second (achievable by microwave technology in the GHz range); and e) a smart card that has sufficient memory capacity to store at least 200 transatons.

69. The charges were designed to be _Pfl3 [US$1.65]_ per passage during the peak hours of 8:30 - 9:30 am. and 4:00 - 6:30 p.m. and 1fl.30 _[US$0.16]_ during off-peak hours.4<sup>7</sup> The effects of road pricing during peak-hours for the reference year of 2010 are: a) the decrease in total kllometers traveled of 80% (due to suppressed trips, shorter trips and trips undertaken to alterative desnations); b) a rescheduling of trips to off-peak hours of 5%; and c) a change in

> **4?** For tinmwof-dy piding, odh shmes such _as_ eing somo odier penods at half the peak charges were also bed ouL
- _53_ -

mode of 15%. The rvenues are esimated to be Dp300 [US$165] million per year. From 1992 to 2010, the time savings amount to _DfllO1,000 [US$5,495]_ million for those who are tolled and the loss of surplus amounts to 1Df440 (US$242] million for those who are tolled off the road (and on to public trsport, say). Thus the benefits come to pfl9,560 _[US$5,253]_ million in present value terms in 1992. With the total system cost of D,fl2,200 [US$1,209] million for the 18-year period, the net benefits are Dif7,360 (US$4,044] million and the benefit-cost ratio is 4.3. Also estimated are external benefits such as a decrease in road maintenance costs of _1D1450_ [US$247] million and environmental benefits valued at _Dpfl400_ [US$220] million. If one were to include these other extnal costs and benefits (heretofore not included in other schemes such as Oslo Toil Ring), the social benefits come to lfl10,850 _(US$5,962]._ Extnal costs were estimated to include an increase in the public transport subsidy of _Dif700_ [US$3851 million, migraion cost of Dfl700 [US$3851 and prosperity losses of P172,000 [US$1,099] million. Thus, the social net benefits come to P174,810 [US$2,643] million and the _social_ benefit-cost ratio is 3.2.4 70. For purposes of comparison with the other charging mechanisms presented here, conversion to annualized figures is nessary. The capital cost for implemenig the smart card technology is estimated to be f17500 million in 1991, which is equivalent to an annualized capital cost of _Dfl62.5_ [US$33.3] million in 1990 figures.9<sup>4</sup> Since the annual opating costs are estimated to be _D1f55_ million in 1991, the total atnmalized osts (including enforcement costs) amount to lfl117.5 million in 1991 [US$62.68 million in 1990 figures]. With the total number of tansactions esimated to be 500 million per year in the full Randstad area, the cost per tranction comes to roughly Df1O.24 in 1991 _[US12.S_ cents in 1990 figures]. Thus the cost T e social _net_ beefit-cost **raio is** 2.2. In our contea th reeat compa_son of banefit-cost rto requie dht the syshm co of alterAive congeto dcarg mchansm be placod n e denomnator nd al otr cost be counted a nvgow bmfit i the umeao. Heo pol Dutc Miniy of Tnsport and PubLic Works, estima tht ho cost per ansaction of AVI and sat card btchnology _ae_ approximately th same The capital coob include to emated cot of 4 to _5_ million sat _card._ I am rtefiu to Heo Pol, Chairma, Toll Collon Proct, for poviding t above figr and for his insightful comnunts an the chargg mechanisms (soe P, 1992).
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per transaction is on the order of twice the cost of the scheme for Hong Kong, reflecting the higher cost of microelectronics of a two-way smart card system vis-a-vis a one-way tag-based system. The annualized benefits from time savings of those tolled, net of the disbenefits of those tolled off, are about DflS30.6 million per year [or US$283.0 million in 1990 figures], with an annual benefit-cost ratio of 4.5, which is close enough to our previous benefit-cost ratio of 4.3 calculated using total figures.

71. As opposed to road pricing, one could attempt to reduce congestion by the unpalatable alternative of constructing roads, at a cost of Dfl3O _[US$16.5]_ billion, up till the year 2010 (Ministry of Transport and Public Works, 1989). The revenue-cost ratio of electronic road pricing using smart card technology is estimated to be 2.6, and the toll revenues collected would help alleviate the pressing demands for road construction somewhat. Nevertheless, even though the Dutch Government made a policy decision in 1988 to introduce a comprehensive road pricing scheme for the Netherlands for the period 1992 to 1996, the scheme floundered on political grounds (Catling, 1990). Apparently, the dedication of toll revenues did not sufficiently assuage the car lobby's fear that this might be yet another revenue-raising device on the part of the government. Further, smart card technology requiring two-way radio communications was not considered sophisticated enough in 1990 to warrant a go-ahead for the road pricing scheme.A' Thereafter, the Dutch Government had chosen to reduce the scale of the first phase of the road pricing project by limiting it to electronic toll collection at the tunnels under the Project Toll Ring. On April 27, 1992, the Minister of Transport announced that a system of supplementary licensing will be instituted for motorists using the main road network dunng the peak penod instead. It is expwected that eight tenths of the motorists would purchase seasonal passes, but the use of seasonal passes may dampen the desired effects (as discussed before in Annex 2).

s One of the **speifications** sought for a **smart card** is **that** it **hould contan** at **lea 200 tanctons, where art cards** produced for a **large** French **bankg system** at **the timo could only** contan 175 **trnsctons, even befre conideing the ran dr** componet **required** for **idenfyi** objecsb **which r** in **motion (nteai,** 1989).
- _55_ -

# iJ)wiCogesion Metering in Cambridge, England

72. Cambridge, England is currently in the design stage of a road pricing scheme based on smart card technology. A prototype on-board unit (transponder plus smart card) - and its miniaturized version -- is currently being developed as part of the Pricing And Monitoring ELectronicaly of Automobiles (PAMELA) project, which is one of the projects under the European Community's Dedicated Road Inftastructure for VEhicle Safety (DRIVE) research 5 programme l. Full scale field trials are expected to begin in 1993-94, with public consultation to be sought in 1995-96 for a decision of whether to go ahead with road pricing or not.

73. The scheme works as follows. A cordon is placed around the City of Cambridge and beacons are strategically installed at 17 radial roads which fully control the gateway to the city. Whenever an automobile equipped with an on-board unit containig a valid smart card passes a roadside beacon when 'congestion' occurs, a 'congestion unit' of 20 pence [US36 cents], say, is debited electronically on the smart card (Oldridge, 1990). Simultaneously, trffic information by lane is also collected by a real-time data-concentrator, which aids in monitoring the congestion situation. However, the key difference between the Cambridge road pricing concept and all other road pricing systems is that the former is based on _cc post_ pricing and the latter on _er ante_ pricing. Congestion charging, in this case, is applied literally - as and when - congestion occurs, without any prior notification regardless of whether avenues of escape are available at a congested botdeneck. When an equipped automobile enters the city during the peak hours, the in-vehicle unit is tiggered on and is turned off only upon exit or whenever the engine is shut off. Thus the Cambridge system is based on continwus pricing rather than on point pricing, which was the basis of the Dutch smart card system and most other AVI systems.'<sup>2</sup> A 'congestion unit' is debited on a smart card when one of the following

> Si A microwave c caions link using a 2.45 GHz bs e 1qutly was already tosted at Nowcasde in 1990 (Hills and Blytho, 1990; Blyth and Hlls, 1991; horpe and Hills, 1991).

> 52 A similar device caled Timezone, which chages for congestion an a continuous pricing bais, is designed by GEC-Mco. TI tial for tesing dlo dec equpment a to begin in the Landon Burfough of Richmond in 1991.
# _-56_ -

provisional conditions defining 'congestion' is met: the thehold of a pro-specfed speed (e.g. 6 mph within a third of a mile or 3 minutes for every half klHometer is reached; or more than four stops are undertalen within a third of a mile)." Even though _ex ante_ pricing is on an _xpected_ congestion ter than _acnt_ congesdon basis, it is connstent with the dictum that price signals be made known to the consumer-traveler beforehand, with the objective of transmitting scarcity values to the rational consumer and the aim of impacting modal split. While the smart card component assures privacy, _ex post_ congesion-based pricing does not affect or modify travel behavior as effectively as or _ante_ pricing would.-" 74. The plan by the Cambridgeshire County Council is to distibute on-board units with the transponder free of charge to regular users, whereas occasional visitors to the city will have to pick up daily passes from automatic machines at the entrances to the city. The revenues from congestion charging are earmarked to improve public transport, for instance, by the constructio of a light rail transit system. While it is unclear at pent whether this demonstrion project will eventually be implemented, the Secretary of Tansport in the United Kingdom has decided that London's congesdon situaton has become intoleable. The U.K Deparment of Tansport has therefore commissoned MVA Consultancy to embark on a three-year study beginning November 1991 on mainly electronic approaches to tcking congeston in London. Ohr cities such as Edinburgh are also investgating the feasibility of charging for congestion by electronic or other means. Quite a few are convinced that it is only a matter of _time_ before electronic road pricing becomes a reality in Europe.

5 At tO tim of this wring, Bzisn OlMdp _inf e_ adtoor tat do City of Camdg hs abdoed the lar dau cdariatn Still, it is possible ta problamswi safety my ara if vidcla reduce dmei tandeiy to ap at pedesrian osig in rdr to attain an _aveng tsold speed._ 54 One of the inteeti ap about do oia popoa is hat whenever t stord valu of a mnat cad expires and a **vicl's** engine is und off for marn th a mint the qfgi electrnics (or **g** supply) is cut off for efocmen purposel This is doe to enso tht -e rechap thir smat card at filling statis, _f_ insan. Although t woul redude d cost of erment to society, his ttic may possbly pose u an u_neea hudle to poliical implaintation
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# i) The Sin e Road Pricing System

75. Finally, it is worth mentioning that Singapore - the pioneer in road pricing - ha tas en the bold step of upgrading its simple labor-intensive area licensing scheme into a capitalintensive electronic road pricing system, to be operational by 1995. The initial goal is to tum the 26 manually controled gantry points of the ALS into electronically controlled ones, with the intention of eventually turning the scheme into a more sophisticated BRP system. After inviting tenders for both an AVI and smart card system, authorities have now adopted smart card technology as the basis of their electronic road pricing system. In response to the government's first call for tenders, about 30 intnational companies submitted proposals, with five finalists being chosen. The installation cost, including an electrnic enforcement system, in the mid-price range, is S$80 [US$44.2] million and a five-year maintenance contract is about S$21 [US$11.6J million. Assuming that budget authorities act conservatively and aim for this median bid, the cost per transaction is S72.7 cents [US40.2 cents], under the assumption that the morning (7:30 - 10:15 a.m.) and afternoon (4:30 - 6:30 p.m.) peak trffic volumes still remain at the level of 69,000 in 1990 (Public Works Department, 1990).-M On the other hand, if the current average daily traffic count of 300,000 during the day (6 am. - 8 p.m.) is used when electronic road pricing becomes more encompassing, the cost per tranaction is S16.7 cents [US9.2 cents].J7 The capital costs include the costs of smart card units for 520,000 automobiles. Vehicla from foreign countres are not exempt from ERP and those who intend to drive into the Resticted Zone during peak hours are expected to obtain temporary tags at commisioning stations for M Ibc bids for Xi inatallcostAs rg fiom a low of S441 [US$22.7] million (by Phiips) for a simple AVI system to a high of _S$164 [US$90.61_ million (by dIjoint vulture of United Engineers and Vapor Canada, Inc.) for a sophistcated mit cad sysem, with numos add-on optio. Th bid submited by United Egineers and Vapor Canda, ic., for a mor basdc _mrt_ card sydem ws _$98 [US$54. 11_ million The five-year mantuance contac for _asc_ comes to _$13_ [US$7.2] and _S$14_ [US$7.71 respectively in 1990 figue.

I Tho number of opwating days in the you is asumed to ba 283, u with ALS. Th corresponding cost per transaction for the low and bigh bids we S39.6 cents [US2l.9 cas] and S119.3 _cents_ [U365.9 cents] respectively.

T' h coresondinS _co_ per trncio for tho low ad high bids **S** m.1 cents _[[U5.0_ culnts and S27.4 cents **_(USS3.2_** cents] epetivdy.
- - _58_

foreign vehicles. Due to the stringent performance specifications set by the Singapore Government, the wide variation in the submitted bids, and apparent failure to agree on the commercial terms of the lucrative market between the negotiating parties, new tenders were sought in March 1992 based on revised specifications for a smart card system. Work is expected to begin on BERP in Singapore by the end of this year.
> - _59_ -

# V. **SUMMARY AM** CONCLUONS

76. The gamut of indirect and direct congestion charging mechanisms has been reviewed here. Indirect charges via vehicle ownership such as a purchase tax and annual license fees suppress worthwhile trips in uncongested areas and are considered sledgehammer approaches to dealing with congestion. Charges imposed indirectly on the amount of vehicle use via the fuel tax fail to differentiate road use between congested and uncongested times and places. A parking charge, by nature, can deal only with stationary vehicles and fails to tackle through traffic. Also, it is likely that too large a discrepancy between public on-street parking charges vis-a-vis prvate off-street parking rates would exacerbate the congestion situation further, especialy when vehicles cruise around in search of cheaper parking places. However, in many downtown areas where employer-subsidized parking prevails, parking _pricing_ could serve as a vital complementary measure to road pricing. What remains are essentially four congestion pricing instruments: supplementary vehicle licensing, cordon pricing via manual tollbooths, direct charging via automatic vehicle identification (AVI) and smart card technology. Each of these instruments is dealt with by an in-depth case study analysis.

77. Although supplementary licensing is clasified as indirect charging in Table 1, it can be thought of as cordon pricing applied directly to vehicles which are in motion, with the possible option of undertaking multiple entries (see footnote 9). Even though manual and electronic toll collection mechanisms are not charging instruments per se, they do form the rudiments of cordon pricing via manual tollgates and electronic road pricing via AVI and smart card technologies, and hence are summarized alongside the four charging instruments in Table _5._ (The grouping of the criteria for choosing a technology vis-a-vis the others is based on the perspective of: the road user, the road authority and society. A charging instrument is evaluated on each of the twenty criteria on the basis of a 'high' (coded by a white box), 'medium' (black and white box) or 'low' (black box) ranking as it pertains to the specific illustrative case study. Because of the potentially divergent objectives of the different parties, an unequivocal result of one instrument dominating another is unlikely to emerge.)
-60-

78. Tollbooth s-ffer from being land intensive, labor intensive (due to the hiring of toll operators) and time intensive (due to the queuing delay to motorists), and are not ideal for congestion charging in and of themselves. The process of stopping and paying disrupts taffic flow and lengthens queues, defeating the ultimate goal of alleviating congestion. However, cordon prcing as in the Bergen Toll Ring could serve as an effective instrument of charging for congestion since half the toll lanes are reserved for the use of seasonal pass holders who travel through the pricing points at regular highway speeds. Enforcement of those driving on reserved lanes is carried out by periodic videographs of vehicle license plates, just as radar technology is a socially acceptable tool to catch speedsters. The are licensing scheme (AU) requires that vehicles entering the central business district during peak hours display a monthy or daily license prominently, with enforcement being underta at gantry points by traffic wardens who perform visual checks on the nonstop trffic. Enforcement of ALS would be prohibitively costly when carried out at motorway speeds but would likely involve relatively low cost in a standard congested urban environment with Limited entry and exit points. As a measure of the technical efficiency of a system, consider the long-run cost of opeating a congestion charging mechanism, which includes amorfized capital and operating costs. Based on a variant of cost-effectiveness analysis, the cost per transaction is then used as an index of comparison among technologies: i indicates that supplementary licensing is the lowest, even lower than that of cordon pricing as in Bergen. The Oslo Toll Ring is designed for the purpose of eJonic _and_ manual MU *-3i=ion, and the construction of large toll plazas accommodatig both involves relatively high capital cost. (Note also that a flat rate, 24-hour toll used by a (standard) manual and electronic toll collection system such as Oslo's is not welfare enhancing. The use of such a system would improve social welfare if a differential pricing stategy were adopted by simply implementing a crude peak period toll). However, merely retrofitting an isting toll plaz setting with electronic toll equipment would not involve high capital cost, as the Crescent City Connection case clearly demonstrates. By the same token, electonic road yiing .3RP) is thus electronic toll collection _wrt large_ and made obligatory on vehicle owners within a jurisdiction. Even though the cost of the electronic equipment for standard AVI basea on a one-way communication link is not considered trivial, the benefits are a multiple of the cost. As the sensitivity analysis performed on the Hong Kong ERP Scheme clearly demontates, even after excluding time
- 61 -

savings on philosophical or other grounds, the savings in opating cost stil yield benefit figures that are considerably greater than the system cost. Using yet anotber yardstick, the cost per tansaction is also found to be low." The much touted invasion-of-privacy issue that plagued the Hong Kong ERP scheme in the past can now be dealt with by providing road users access to confidential 'numbered account arangements' with prepaid cash deposit. The capital cost of electronic road pricing with smart card technology for the Comprehensive Road Pricmg Scheme of the Netherlands is higher than AVI alone technology, but the benefits outweigh the cost also. Put together, the benefit-cost ratio remains respectable. Still, the cost per tanscon of smart card technology - based on a two-way communication link - is about twice that of AVI alone technology, and, even though the cost per transaction can still be regarded as acceptable, this technology is still not widely used or. a commercial basis. Neverthel, rapid progress in microeectoics, cryptology and microwave technologes will continue to yield large-scale economies in the manufacuring of AVI equipment, read-write transponders, smart cards and the hardware and software that go with them. It may very well be the case that the cost per transaction of smart card-type AVI technology will soon approach that of AVI alone technology.

79. What emerges from a quick perusal of Table S is that elctronic approaches of direct road use charging are superior to manual approaches, on average, whether from the perspective of a road user, road authority or society. Among these broad categories, ERP using AVI alone - technology is rankld higher than ERP usig smart card given the state of current technologies in 1992 - based on an unweighted index of all the criteria (see Table 5). In general, ALS is superior to cordon pricing using manual tollbooths. Hence, if budgetary conditions allow it, the feasibility of implementing ERP ought to be invated. However, if budget is tight, then AIS (with its low cost and cresndinlWy high benefit-ost ratio) ought to be seriously considered. If one is given only a single criterion to pick (out of te 20 criteria), I argue that the most important measure (although not an all-inclusive one) is the passage of the benefit-cos **t** est.

A Note **tat this** is so despiteth ct hat h stadard capital zcovy ficta _ud_ to copwidldy differipg teholos is biased _agais_ Cald-inZMAiv AVI technogy po_eumig big fe.
- 62 -

Nevertheless, by pursuing the multicriteria analysis<sup>introduced here, the road authority or</sup> decision maker could - on the basis of other<sup>criteria listed-choose from amongst a variety of</sup> congestion charging instruments.

Recommendations of Congestion Charging Mechanisms for Developing<sup>Countries</sup> 80. While the principles of road use charging enunciated<sup>here are applicable worldwide, the</sup> following guidelines are put forth with developing<sup>countries in mind:</sup>

**0** On the basis of benefit-cost calculations, the labor-intensive technology of supplementary licensing outranks the capital-intensivt **e** chnology of electronic road pricing via AVI and is especially suitable for those developing countries<sup>that have a pool of unemployed work</sup> force and limited gateways. (A fairly reliable<sup>guide to the appropriateness of</sup> implementing ALS in a particular city is the citizenry's<sup>adherence to general traffic</sup> regulations.) This charging instrument is definitely<sup>worth revisiting, with the proviso</sup> that improved alternative **s** uch as public transport<sup>and bypass routes be offered (as in</sup> the Singapore ALS).

3 Cordon pricing via standard manual tollbooths<sup>and unattended reserved lanes (as in</sup> Bergen) - supplemented by periodic videographs<sup>-may yet prove to be a worthwhile,</sup> labor-intensive technology to consider in developing<sup>countries.</sup>

* The lesson of using electronic toll collection<sup>as in the Oslo Toll Ring amply</sup> demonstrates that it is the peak/off-peak pdcing strategy,<sup>rather than the electronics per</sup> se, that is benefit enhancing (as opposed to being<sup>merely revenue enhancing).</sup>

* Electronic road pricing via AVI alone technology<sup>is a viable alternative for the newly</sup> industrializing economy whose standard of living<sup>is rising but whose rapid urbanization</sup> and motorization growth rates are a major problem.
- 63 -

* Smart card technology is not widely available on a commercial basis in roads and hence is not yet recommended for developing countries at this time, even though Singapore has already actively sought international tenders (as a source of technology transfer) for the implementation of its Electronic Road Pricing system with smart card by 1995. Technological breakthroughs will contnue to make this electronic equipment worthwhile on both economic and financial grounds. In the interim, the use of two-way microwave read-wnte transponders that are less costly and yet fully protect privacy can be considered.

* The disposition of the revenues collected from road pricing is crucial to its success - - be the funds raised by electronic means or not and should be explicitly laid out to the public. Based on both experience and conceptual grounds, it appears that earmarlkng of the proceeds from road pricing would serve as an important prerequisite to the actual implementation of (Bank-mandated) marginal cost pricing in the road sector.

Timothy D. Hau
Table I Methods of Road Use Charging <!-- Start of picture text --> ~dat Chrgg<br>Diact Cargn<br>Vdhcl L- nemp Vi VdehileUsagva Of-VeIc Recrng On-Vebile Meten<br>AmoanatUs by AmoUn and Place bybotb as Thane by Mnua h g Combination malc a of Auctoi ScaningVa A atic Scanning<br>Automatic Scanning Automatic Vehle via<br>Ideutif ont (AVI) Smart Card-tpe AVI Tec _onolow<br>I 1. PllelU (&&First Registration Ta Annua Fees. tceme 2. Toa an 1. %rea Fud1T. Vehickl Part FITh DltlJ 2. Sqplmeuy 1. P 1.d100e1ins, Cae * -Moring SipOreea IcbaulngScbeme uklog Ch Peak Cb SVeZ=o n v h Entry via Manual Reserved CooStI f booths a a sBergnT Lan. CAMb Manu kia& ElectrudkW C CtStudier * tStudiw OsdlToliRing (Dec. o 1990-) f BnaEbc Rnicod Pricig(BRP) * * Stockholm Gothesber (1994*-) ( t ioC 2se ) (Sge-) Bs"edtP £rn * * ERP(Initial) Atotrade, Sinpo (1995-) Cordon- :M Co Chawn. * EnA$ndCa uridge. (1993-96',Onoing -bsed<br>Chamg"ng (June 1975- Ring (Jan. 1966-) * Toil Ring adhem (lb Ro It* m)<br>- M 1'969) (Ocl1991-) ( 19 -)<br>MorningPek Crescn ty<br>and Aftenoon Connection<br>Chau<br>BdrdF. Nw<br>(Jun 19-) orlem<br>* Stockho<br>(Jn 196-)<br>(am -) * Dus lDTol<br>19931-)<br>2c.d-basdh,# Zo-bued d-b_ed<br>N#4*Zc.u<br>*Haus Km Reaes,<br>Elcoaic Niharh_<br>Road Pking ERP<br>ER?) Scheme (199-9*)<br>(1963-450) SioppoeERP<br>KN<br>Poe sym we deafted Wms tes* (Mid 1990r-)<br><!-- End of picture text --> <!-- Start of picture text --> KN<br>Poe sym we deafted Wms tes*<br><!-- End of picture text -->
**- 66 -**

# **Table 2: Criteria** for a 'Good' Road Prcinog **System**

FEom WJsers' Point of View (14):

1. User-friendiness (Slmplicity)

2. Transparency (via _& Ante_ Pricing) 3. Anonymity (Protection from Invasion of Privacy) 4. Prepayment/Postpayment Option for Charging From Road Authority's Point of View (5-1 1: _5._ Enhanced Efficiency via Direct Charging 6. Flexibility (Responsiveness to Demand) 7. Reliability 8. Security and Enforcement:

- a. Protection from Theft

- b. Protection from Fraud

# _9._ Provision for Occasional Visitors

10. 'Market' Price as an Investment Signal

# 11. Passage of Revenue-Cost Test

# From Society's POint of View (12-20):

12. Passage of Benefit-Cost Test 13. Minimum of Road Work and Environml Intrusion 14. Provision for Mixed Traffic 15. Handling of Transitional Phase 16. Compatibility with Other Systems 17. Modularity to Add-on Options (e.g. automatic rout guidace) 18. Tolerance to Culture of Non-compliance

# 19. Tolerance to Varied Geography

# 20. Fairness and the Availability of Alteatives.
- 67 -

Table 3: Benefts, Costs and Revenues of Various Cordon Toll Schemes In Oslo, by Time Period, per year (in milions of 1990 Norwegan kroner)

# 1) Results of the Present (Non-optimal) Cordon Toil Scheme In Osb .e., a 24-hour Inbound **Flat** Toil of _NOJ1O [US$1.60D_ vis-a-vis the Base Case of No Toi

||Savings in<br>OperatingCost|Savings in Travel<br>Time|Welfar<br>Sur|e Loss of<br>plus|Total|Beneft|
|---|---|---|---|---|---|---|
|Peak Periods|2.4|42.1||-6.3||38.3|
|Interpeak Period|0.2<br>|_5.0_<br>||-7.0||-1.7|
|Off-peak Period|0.4|m|-0"""||||
|AllPeriods|3.0|52.4||-33.6||219|
||Annual T<br>Annual B<br>Stops at<br>Annaize<br>Benefits|oil Revenues, R<br>enefits, B<br>Manually-operated<br>To<br>d Cost of Toll Colle<br>less System Cost,_NB_|<br>ilgates<br>ction, C<br>||600.0<br>21.9<br>4.9<br>96.6<br>-79.6||
||Benefit-|Cost Ratio,_BWC_|||0.2||
||Revenu|e-Cost Ratio, R/C|||6.2||

2) Results of an Improved ('Optimal') Cordon Toi Scheme .e., an Inbound Peak Toi of _NOINS_ _[US$4])_ vis-a-vis the Base Case of No Toi

||Savings in<br>OperatingCost|Savis in Travel<br> <br>Time|Welfar<br>Sur|e Los of<br>plus|Total|Benefit|
|---|---|---|---|---|---|---|
|Peak Periods|6.0|108.5||-19.4||95.2|
|InterpeakPeriod|0|o||0||0|
|Off<br>Pod|0|o||0||0|
|All Periods|6.0|108.5||-19.4||95.2|
||Annual T<br>Anmnal B<br>Stops at<br>Anmual<br>Benefit|oll Revenues, R<br>enefits,_B_<br>Manualy-operated<br>To<br>ized<br>Cost of Toil Colle<br>s less System Cost,_NB_|llgates<br>ction, C<br>||180.0<br>_95.2_<br>4.9<br>70.0<br>20.3||
||Benefit-|Cst Rato,**W/C**|||**13**||
||Revenu|e-Cost Ratio,_RIC_|||2.6||
- 68 -

# Table 3 (contnued)

3) Ru1_1 **eof** _a fWet'_ (nh*4ased FuIy Eletronc Read Pt Scme , a Marginal Cost ToU appled IJUnk-by-Unk vlo-yl the Bm Cme of No Toi

||Sravngp In<br>P°<br>Opting<br>Cost|Savg in Travel<br>Time|Welfar Ls of<br>Surplus|Tota|Benft|
|---|---|---|---|---|---|
|Peak Periods|7.6|162.6|-19.3||150.9|
|Interpak Perl|0|0|0||0|
|Off-peakPid|0|0|0||0|
|All Perod|7.6|162.6|-19.3||150.9|
||Annual<br>Anmnsl B<br>A aliz<br>Beanits|Toll Reveues,_R_<br>efits, B<br>,<br>ed Cost of ToU Colle<br>loss System Cost,_AN_|cdon, C<br>|152.1<br>150.9<br>>70.0<br><80.9||
||Dedt-Co|st Raio, WIC<br>||<2.2||
||Re3meC|<br>bti<br>Rad,, I/C||<2.2||

%gw: Ls and Ranoodi, 1990; Ra and Larsen, 1991; Lusen. MA=eu and Ranjd 1991; RaAd, 199, with correton; and disusions with the athors.
Table 4: Bemft Cost aid een, of Car Ownerdhp rca Ridatn Miuue Area ad ic Road Ptldg Schem , by Vehile Clm pw year compared to 1991 Rde e (in m im of 195 Hong Ko doa)

|C|r<br>x<br>ReswtT<br>_Mmmr_|<br>_Am._<br> <br>_8c&_|HI<br>_Shm__<br>A|iRP<br>Scham<br>B*|HRP<br>M<br>Sd<br>C|Opdim<br> <br>O|
|---|---|---|---|---|---|---|
|Avup pink-a|-|H.O|_H$0_<br>8.4|H9.8|H9.7|ms10.5|
|AnalBflts, B|||||||
|Ptivae cm|-29<br>(4.10)|124<br>(0.37)|202<br> <br>(0.28)|<br>235<br>(0.27)|216<br>(0.24)|279<br> <br>(0.22)|
|Taxi|38<br>|30<br>|_53_<br>|61<br>|68<br>|-21<br> <br>|
||(0.13)|(0.09)|(0.07)|(0.07)|(0.07)|<br>(-0.2)|
|PubL;c<br>Iunxwt|158<br>|118<br>|299<br> <br>|<br>350<br>|389<br>|607<br> <br>|
||_(0.52)_|(0.35)|<br>(0.41)|(0.40)|(0.42)|<br>(0.49)|
|Goods vehicle.|134<br>(10.45|66<br>)<br>(0.19)|180<br>(0.25)|<br>225<br>(0.26)|246<br>(0.27)|385<br> <br>(0.31)|
|_Bmft_for All vehul|301|338|734|871|919|1250|
|_As_a Sbha ofhe_BunAdt_<br>of doThXeica Opum|(0.241|<br>(0.27]|<br>_[0.59]_|[0.70]|[0.741|<br>(1.00l|
|_'mm_Revea G rniud,_R_|1200|188|39S|<br>_465_|540|976|
|Awmnmad Capt =d<br>|||||||
|Opeaug cuba ofaOw<br>Mclzazaimw<br>_C_|0|10-1S|49.8|49.0|S1.7|>51.7|
|BunAtNmSy_em_Coea,_<br>_NoI-B-C_|301|323-328|684|821|869|1200|
|_B_uaAd_<br>stlals, WC|a<br>|2.5-338|147|17.8|17.8|<241|
|RI_w.cuR lad[%,<br>lUC||DJ.-18.|73|_9._|10.4|<W|

mw~~~~~~~~~~~~~~~~~~~~ HE7.8 - _Ut1_ ad B=10.1 _-_ * (195 a pgu ). CM (1OYCPM ) - 1.48 (Cm_voh w _vsfuS_ do Coemw Pdo ode hr a2 _km)_ Figu. 1. wod - mdh ao =M* dbm.. * a"P Ssm. a In asmiby lbs Am Psisin pu,oml (wib _u~4*_ vaziatln) simulated in 1Tampwt Dpuuma ad Wibur 3mnbh and Assodute (196). Give tmit 3RD Sibmu A, 3 aniC hmacrs h ooumixiy and ms*m. harg levolin the simuatd pftk-bw chwru wmbypdudoftbesimmaluiun. 3mb tkhauldeth mgsiWa hmvelde aopsathgcostof theWild and asdlnma* of dos tole of, bunm s IW _amO_ b. g se tued la the hflwhgS umr, wham .od 8<sup>g</sup><sup>**_go_**</sup><sup>_&u_bomb 6gpm.7he</sup> ta bm*W _fSgus_ use h. _so_ out dbs coe of tol cdWlem gur_ of depek-h dIg. - by ous leyof 31 Haue.o
-70-

Table S: A Cmparu _of_ **Road** U.. argiug Ndm&uW

|Congson Charging<br>Mechanisms||MANU<br>12|AL||ELECTROMC<br>3|4|
|---|---|---|---|---|---|---|
|Manual and Elctonic ToU<br>CoUection<br>plus<br>Congestion Carwging<br>Mechanisms|Maa<br>Toil<br>Collecwd<br>(24 hour)|Cordon<br>Picing<br>on (Combinato<br>of Manual and<br>Reseved<br>Ln)|L<br>ing (Single<br>Zon)<br>|BElocic Toi<br> <br>Collection (24<br>hour) with AVI<br>Technlology|Electronic Road<br>Pdcing (ERP)<br>with Automat<br>Vehice<br>Idficato|Elernic<br> <br>Road<br>Pcng<br>(ERP) with<br>Smat Cad<br>Tecinology|
|Iussrativw_CareSuidy:_|Common<br>tonl plaza|<br>Bergan Toll<br>Ring|Sipore<br>Am<br>Licnsing Schm<br>ALS|Odo Toil Rig|Hong Kog<br>ERP Schmoe|Nthelands<br>ERP<br>P|
||_______||()|||rpos|
|_From User'Poaiof Vkw (14)_|||||||
|1. User-fiendines<br>(Simplicity)|0|_0_|0|0|03||
|2. Trnspaecy<br>(via Er_Ante_<br>Pricing)|O||[|O|3<br>O|0|
|3. Annymity (Potecton from<br>lnvaDionofPrivacy)|03||0|0|3|03|
|4. PrepaymentPoslpaymet<br>Optko for Charging|Pay-s-<br>YOU-go|_Pay-as-you-gP_<br>+ Prepayment|_Pnpynat_only<br>|PrPyme<br>Postpaymen|Psaymnvt/<br>Postpaymnz|Prpy-<br>_mants_|
|_Fm. Road_<br>_AnJd_t'sPet of _|_View_<br>_(5-11)_|_:_<br>|||||
|'S. B2hancedEfficscyvia<br>Ditet Chaging||E31||**U**|0|O<br>0|
|_6._Flexibility (Repoanivai s<br>toDnd)||O|O|||0|
|7. Rlbility|0O|*|7|O3|0||
|||MANUA|L||EE.ECTRONIC||
|---|---|---|---|---|---|---|
|Cogeston Charging<br>Meebanisms|7||2||3|4|
|Manual and lecltronic Toll<br>Colecdon<br>plus<br>Congestion Charging<br>Mechanism|Maua<br>Toll<br>Collection<br>(24 hour)|Cordo<br>Pricing<br>(Combinato<br>of Maa<br>and<br>Reseved<br>Lane)|Licenn (Single<br>Zone)<br>|Eleronic Tol<br> <br>Collection (24<br>hour) with AVI<br>Technoloy2|actonic Road<br>Priin (ERP)<br>with Autmatc<br>Vehicle<br>Idenfication|Electronic<br>Road<br>Picing<br>(E)<br>with<br>Smat Cad<br>Technology|
|8. Secuntray<br>andEnfonmnt:<br>a. Protection from Theft|_9_<br>*(||**U**<br>*||_.s_<br>0|**U**|
|b. Protection fromFrud|O(|OI||0|0_a3_||
|9. Provision for Occasonal<br>Vwoisi|O|O|**32**<br>3|O|3|O|
|10. 'Market' Prce as an<br>Investmt Signal|O0||||0|0|
|11. Passage of Rvenue-Cost<br>Test|case-<br>Specific|14<br>0<br>6.3:1|3<br>6.9:1to11.8:1|0<br>5.9:1 to 2.2:1|0<br>7.9:1 to 10.4:1|El<br>2.6:1|
|_FromSocdy's PohAtof Vw(12_|_-20):_||||||
||||1~~~<br>**14**|3~~~~|~7|is|
|12. Passage of Benefit-Cost<br>Test|Case-<br>specific|**Ldd.**|0|**U**<br>0.2:1 to 2.5:1|14.7:1 to 17.8:1|(3<br>4.5:1|
|_Long-mm Cost per T_<br>__vadi_<br>_(US cenXt_in1990 figus)|_ox_Case-<br>spDcific|_11.00_|5.6-9.90|21.20|6.60|_12.50_|
|13. Minimum of Road Work<br>andEnviromentalntruuion|||||||
|14. Provision for Mixed Traffic|O|0||(3|||
|15.**HEadlin**of Transtional<br>Phse|_3|||0|(|(3|
-72 -

|||MANU|AL||ELECTRONC||
|---|---|---|---|---|---|---|
|Congeson Charging<br>Mechanisms||1|2||3|4|
|Manual and ElectronicToi<br>Collection<br>plus<br>Congestion Chaging<br>Mechanisms|Maa<br>Toil<br>Collecin<br>(24hor)|cordn<br>Pdcin<br>(Co4_atio<br>ofMna and<br>Reaved<br>L4e)'|ceaiin(Singb<br>Zon)<br>|ElectronicToll<br> <br>Collecdon (24<br>hour)with AVI<br>Technology'|Elec<br>Roa<br> <br>Picig (BP)<br>witbhAutmac<br>Vehicl<br>IdM_ificato|dElctrnic<br>Road<br>Picig<br>(3RP)wi<br>Smut Card<br>TeclOny|
|16. Compatibility with Other<br>Systems|O|||Ld.|Ld.|Ld.|
|17. Modularity to Add-on<br>Options (e.g. automatic<br>route guidance)|*|*|*Ld.||Ld.|i.d|
|18. Toleance to Culture of<br>Non-compliac|0||**U**|3|C|0|
|19. Tolerance to Varied<br>Geography|*|**21**<br>*|*|0|0|O|
|20.Fairessandthe<br>Availability of Altemaves <sup>2</sup>|Case-<br>scific|.<br>0|0|0|31<br>*|O|
|_Oher MajorChamctAsdes_<br>**_and_**_Probkms-_|Land-<br>_0aa_iv<br>Labor-<br>innive;<br>Trm.-<br>intenive<br>(Queuwng<br>Dday)|Lmad-<br>e;nmivo;<br>Labor-<br>intosive;<br>Tlnmieive<br>(Some<br>Queing<br>Dday)|Labor-intnsive,<br>btchnoo<br>_foremt cowt<br>may behig<br>prnti<br>ca<br>conkieato|Capi costis<br>highifthe<br>constio<br>of<br>lam toll<br>plaa for both<br>eecrncd<br>nImatoll<br>colection is<br>inlodedx Use<br>of AVI<br>tranod<br>is<br>popula on tol<br>.S|Capital oeti<br>highutte<br>bmefitaao<br>evenhigh;-<br>cowt p<br>taunsactm is<br>low. Ptivacy<br>_Dieis_argly<br>ovecoostn with<br>the o of<br>numberd<br>accouts.|CAPi_ct_<br>in highbut<br>tho benfits<br>alm<br>high;cost<br>per<br>tansacton<br>is_nothigL_<br>Smart cad<br>tecnoly<br>is not yet<br>widely<br>|
|||||||available|
|Unweighted, ndex (out of 3.0)|2.0|2.0|2.2|2.4|2.6|2.4|
|_Rankng of Congesdox_<br>_Charging_<br>_Medawdsm_||_4_|_3_||1|_2_|
- - 73

<!-- Start of picture text --> Aitndmumt to Tabh 5<br>O-High AU -Ar THuin Scbhema<br>AVI - AutomaIc Vehicle I dtication<br>BP - Blectre Road PrcWi<br>Oi -Medium i.d. - 1nmflim Dat<br>* -Low<br>Notea to Tabk 5:,<br>Ak tf figur repoted in this WU meifouy refer to th i dtra cma stui in th text<br>IT vari of cordon pacan oaosdd blo is the ow bad aon t Bes. Toll Ring, vwh has hlf<br>of au ln equppd wia inSally- opt tg and th oter hf of to lane reved for oesomal<br>p holds.<br>2 Maua toll colleto op to wallb together Wi o toll collto at the Osdo ToU Ring,<br>henoe dt prmacy ie do. n ari<br>For _saam pm 1oldsm of ot Beos Toll Ring, th inctve to oveau pee uii ohh e thy are<br>pd for. Th .m quaificatio appie to ths hoUlds of tmhy AU fee cards<br>4 Although th EI.g Koug MP Sem afias fom havmSg uh vehcle idenifiod expicy, cumut us<br>of AVI techloy have laqdy ovecom h ivacy mu.<br>s AIthgh a owt c is prurdasd, it in debitd oaly at the mamo of chgg and funcion lik an<br>electrni pue dispe_ning c i a .<br>Altho URP allows pr to be vae contuusly in repon to deanmd, 'bounded atonai'<br>-csderatdo on the pat of decio me call for h judiou sting of picing gradations.<br>At th Balm Toll Ring, o cat occ at to unumud to s rsved for moaua pmn<br>Althouh usumt car techolog was o considered safficluaty sap~bistaedaa ough for EIP in the Dutc<br>prposa of 1988 for fur niq* cities, Tdopm Im a systm for electroc to collecti bosd on mat<br>crds - operatig on a lmit bmasn th taim anautada sih 1989.<br>Om of to prinp prb1ums with anua to colleco is te problm of tho tr of cas ce.<br>Theft of caa md coupon books by tall opete have b n tporod theft of sue licm ad owal<br>ps. ao occr.<br><!-- End of picture text -->
- 74 -

- Theft of a smart card is a problem, aldthougt **h** e card could be made invalid when oprat **in** conjunction with another in-vehicle unit.

- Counterfeiting of monthly licenses (or seasonal pss) is a potental problem

- **32** Visitors from out of town will have to incur additional time in searching for outlets where are licenses or electronic tags could be leased.

Even though Beqen Toll Ring has a 16-hour charging period, a non-zero toil still serves as an investment signal reflecting the scarcity value of land use.

- _14_ Each revemn-cost ratio reported i based on the respective charging policy of the case studies examined. Since the revenue-cost ratios are high, i.e., low cost per doilar of revenue raised, the Norwegian schem - Bagen, Oslo (and Trdhaeim) Toil Rngs - are al toll-financing schemes.

- **is** Despite insufficient data, it is likely that the net benefits of cordon pricing would not be high sincoe mnual toll collection by tollbooths impedes traffic flow and causes congestion itself.

- is Hoiland and Watson (1978) report a tough estimation of the economic rate of retum for the first year of the Singapore ALS at 60% to 150%. Data fiom the Hong Kong ERP Project indicates that the benefit-cost ratios for ALS in Hong Kong, if implemented, wouldbe in the rango of 22.5:1 to 33.8:1, even higher than those of the Hong Kong ERP itself. All benefit-cost ratios are based on the specific case studies reported in th text.

- _7_ nTh lower bound estimate of the benefit-cost ratio is based on the actual Oslo Toll Ring, whers the correspon upper bound estimate is for a 'perfict' (link-based) road pricing scheme.

Is

- noe _soci_ benefit-cost ratio for the Dutch EW Proposal using smart card technology is 3.2.

- to Despite the fact that the capital cost for smart card technology is high, the multiple transactions yield a level of cost per tansaction that is in tho mid rage. The annalzed capital cost of a project is arrived at by using a capital recovery factor of 0.125, coreponding to the interest rate of 8% and a project life of 12 _yeas._

- MmTh Hong Kong ERP Scheme required some amont of road work, whes current AVI technologies we gantry-mounted antennas or in-pavement antennas requiring minimal road wodL

- Current AVI tecbnology allows a simple version of vehiclo classfication by linkig an AVI trnsponder with a vehicle's class. Classicatin equipment for heavy vehicles is available and further advances in atomatc vehicle classification (AVC) are curmnly being made.

- Implementdatin of road pricing with manually-operated toil plans is not expaen. Implementation of eleconic road pricing with existn electrmnic toll collection facilities is feasible, especilly with a modular desig.

Seasonal passe and area licenses may not be compatible with other cities nearby.

- CurCurmly, there is a move to come up with an intraionaly agreed upon standard for AVI technology, as part of tho DRIVE project in Europe and the HELP project in the United States, plus its integrtion with automaic vehicle classificaon and weigh-in motion equipment
# - 75 -

- 2s It is expected that noncompliance will take place at the unatded nonstop reserved lames becuw video enformnent is carried out only on a periodic basis to minimi cost.

- 26 Enforcement of moving vehicles under the Singapore ALS is camed out at normal traffic speeds. On the other hand, enforcemnt of vehicles at freway speeds is likely to be infeasible. A good rle of thumb to use to ascertain whether a countay is ready to implement ALS is the degree of its citizes' compliance with parking regulations.

- 27 Naturl cordon boundaries and limited access to the city are both prerequisites to cordon prcing and ALS.

- 2 lThe criterion of 'faimess and the avilaaility of altenatives' is clearly case-specific and does not apply to the charging instruments in and of itself.

- 29 The Bergen and Oslo Toil Rings both succeeded pnncipally becuse the toll rvenues were earmarked for road coumnsction (80%) and busways (20%).

- 30 Without the provision of public tranpot and bypass routes, the Siga ALS might not have succeoded.

- 31 Although Hong Kong has exceptionally good public tansport altmatives, ERP floundered becauso the _public perceived_ thst ERP was 'just another tax', despite Goverment's promise that it is rvenue-nutral, and thwir privacy might be compromised in the light of 1997.

- 32 The Netheilands' Comprehensive Road Pricing Scheme failed because the car lobby felt that it wa anotor revenue-raisingistrument and that it would place n unifair burden on those suburban residents who located where they had as a result of past govenment policy.

- 33 The iankng is based on an unweighted sum of the 20 criteria applied to the ilustrative case studies at hand. Criteria 11, 12 and 20, in particular, pertain more to the case studies than the charging instrument method per se.
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Annex 1: The Spapore Area liens Scheme, 1975 to present

# A. Background Informaton

81. The Singapore Area Licening Scheme (ALS) which began in June 1975, is the world's foremost example of road pricing. During the morning peak period of 7:30 to 9:30 a.m. (except Sundays and holidays), automobile drivers desiring to euLe the Restricted Zone - an area of over _5_ kilometers square - within the Central Busines District of Singapore were required to purchase a daily or monthly license from the kiosks or post offices just outside the Restrcted Zone.<sup>9</sup> Iniially, taxis, buses, carpools (of more than four psengers) and commercial vehicles were exempt from the entry fee. The specally-shaped and color-coded licenses were Priced by tral and error at around SS3 _[US$1.251_ each, with the day or month printed in large characters and displayed near the top left hand corner of the windshield. The visibility of the dated color stickers allowed traffic wardens to check them as velicles drove by any of the gantry posts signaling the entrance to the zone at the city speed limit of 50 kph. It is the nonstop feature of the ALS - as distinct from manualy opeated toll booths which also attempt to - implementcordon pcing that is unique and reaps ignficant savings in travel ime. The ALS is part of a comprehensive package of taffic restraint measures by the Singaport Government. Several months prior to the opening of the ALS on June 2, 1975, authorities instituted the following complementary traffic management measues in order to achieve the goal of 25% to 30% reduction in traffic volume: a) monthly parking charges in both public ani private parldng lots were about doubled (via mandated prce increases and surcharges) and un;iorm hourly rates were replaced by rates which varied by geographical location and duration of say; b) 15 parkand-ride facilities (oviding about 10,000 new parldng spae) were constucted just outside the Restricted Zone to ease the swintch from private to public tansport; c) premium franchised shutde bus services were provided to facilitate the transfer from the fringe parldng lots to the downtown area; and d) flexime was encouraged by the government as part of a wider public e Resticted Zom **has** now **beWm** i (by **lad** r tamdo1) to **725** hctu (or 7.25 **squarm** lilometer). Ieo mondl licyHw fee is et at twt tbin. d daiy Hoen fee.
- 78 -

information campaign. After 1975, there were a couple of changes in fees, boundaries and operating hours (see Ang, 1989, Table 2). PrincipaUy, the exemption of txis from _AIS_ fees were rescinded (August 1, 1975) and company cars were required to pay twice the rate of private cars (January 1, 1976).

82. Beginning June 1, 1989, there was a new and major revision of the ALS: a) the restricted times of operation were extended to cover both the morning and afternoon peak periods, with the latter occurring at 4:30-7:00 p.m. (but later changed to 4:30-6:30 p.m.); b) aU vehicles were charged, with the exception of emergency vehicles (such as ambulances, police cars and fire engines) and public buses, so that carpools were no longer exempt; c) the daily license fee for automobiles was lowered from _S$5_ per day to S$3 per peak period entry - a (more than) 40% decrease in real charges!; and d) motorcycles were to pay one Singapore dollar per day (after July 1, 1989).

# B. Anlysis of Results (1975-89)

83. Even though the ALS was touted to be a resounding success, it was not free from qualifications. First, as expected from intuition, during the morning peak period, the number of motor cars dropped by three fourths within the first month whereas all vehicles dropped by between a third and a half during that period, easily surpassing the government's objectives (Toh, 1977, Table 1; Watson and Holland, 1978, Chapter 4). Second, however, as intuition would also expect, motorists rescheduled their trips to arrive during those periods just befnre and immediately after the restricted period, prompting authorities to extend the time period the ALS was in operation by three quarters of an hour to 10:15 a.m. on June 23, 1975. Third, simultaneously there was a significant increase in the number of taxis of about a quarter within the first three weeks, prompting authorities to remove taxis fom the exempt list on August 1, 1975."° More importantly, a full year after ALS came into effect, there remained a decrease in private cars of three-fourths and a decrease in all vehicles of one-half, despite the fact that As a **compromise, auhori lowwted Xt fee for tis fiam S$4** to S$2 **on Aril** 1, 1977.
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there was an increase in the ALS fee of one Singapore dollar on January 1, 1976 (Seah, 1980, Table 1). Fourth, one month before ALS began, new non-uniform parldng charges (rising by - length-of-stay and by proximity to the CBD) designed as a complementary measure to area - licensing served to raise the out-of-pocket costs of motorists (Watson and Holland, 1978, pp. 24-27, 68-73). Monthly parking fees of government car parks were also raised (by at least 2040%) and operators of private parking lots were required to match the price increases. In addition, the government levied a surcharge equvalent to the pnce increase. By discouraging circular traffic within the zone in this way, public transport was made more attractive and substitutable. Fifth, the fringe parking lots to promote the park-and-ride mode - another - complementary measure to road pricing were deemed unsuccessful almost from inception, with only 4% of the parking spaces taken up in the first year and a half (Watson and Holland, 1978, Table 3.3). Hence the authorities promptly responded by converting the empty parldng lots into hawkers' markets and cooked food stores. Sixth, the quality shuttle bus service was also a failure, with ridership well below the capacity of the buses, and so the privately operated shuttle buses were quickly merged with the regular bus system (Watson and Holland, 1978, p. 36; Wilson, 1988). Seventh, the enforcement of offenders was carried out by assigning entry po"nt attendants (between 1 and 5) to issue traffic tickets via mail. Perhaps because of the stiff penalty of S$50 for an offender, which is just short of the cost of a monthly license fee of S$60, the rate of violation was only 1 %-2% in 1975 (Watson and Holland, 1978, Table 3.1). Eighth, motorcycle travel - presumably a crude substitute for private car use - increased so much that charges for motorcycles were introduced. Ninth, as a result of a doubling of the number of carpools within the first year and annual growth occurring thereafter durng the operating hours of the ALS (Seah, 1988, Table 1), and because nine-tenths of carpoolers did not make reurn trips in the same fashion, carpools were no longer exempt as of June 1, 1989. Tenth, the ,mirror image effect hoped for in the afternoon peak period did not materialize because of cross-town traffic in the afternoon. One third of the total trans-Restricted Zone commuting traffic chose to travel on the ring road, which serves as a bypass route; two-thirds still chose to go through the Restricted Zone after ALS was introduced. (Only one-seventh of the (two-thirds) through traffic chose to drive into the Restricted Zone during the restncted hours; the rest of the through traffic switched to a different time or made a detour by traveling on the circuitous route
- 80 -

in the morning peak or changed modes (Watson and Holland, 1978, p. 7)). In due course, the detours resulted in heavy traffic along the nag road around the Restricted Zone, tating traffic management measures such as the re-timing of traffic lights. On the other hand, on the return trips, traffic traverses directly through the relatively uncongesd downtown area in the afternoon peak. Further, only about one tenth of the carpool were esdmated to make their return trips in the same fashion (others used public transport, taxis, or were collected in private vehicles). As a result, "bumper to bumper congesdon' was observed during the aftnoon peak in 1983, with average traffic speed being 18 kph, in contrast to 30 kph during the morning peak (Behbehani, Pendakur, Armstrong-Wright, 1984, p. 36). Thus the moming ALS scheme was able to solve only part of the congestion problem.

# C. Analvsis of Results (1989-present)

84. The 'mirror image' phenomenon therefore contrbuted dirctdy to the extension of the reincted hours of the ALS on June 1, 1989 (from the moming peak into the aftenoon peak period, initially beginning from 4:30 - 7 p.m. but later curilled to 6:30 p.m. to accommodate business interests and activities).6 ' _85._ The most comprehensive survey to date regarding the impact of the AIS was carried out in Febuary, 1990 by the Public Works Department and the Nanyang Technological Institute (Menon and Seddon, 1991) and the results are briefly analyzed here. One, the traffic survey indicates that there was a marked increase in total in-bound taffic immediately before and after the afternoon peak period came into operation, similar to the historical pattern during the morning peal. Further, compansons of traffic levels traveiog in and out of the Restricted Zone were made between May 1989 (which represents the pro-June 1989 scheme) and May 1990 (which represents the post-June 1989 scheme). Two, as expected, the comparisons indicate that " m Sinsae ALS did not try out 't-id flow' erpimun chur, in which urs- impoed an homard bound trips out of the ceul bins distric **t** o tho sobulbs in n with t min uffic flow, a opposed to the cuirant pvacvic of chargmg for entry _perse_ both ino nmog and the afdl_emn. Thb 'tidal flow' idea is he basi of Long Kong's Bleoctmic Road Picing Systm Scheme B.
> - 81 -

the total vehicle flow had decreased - suggesting that cross-town through traffic had been curtailed - concomitant with an increase in traffic on the rig roads. Three, both the drastic cut in daily license fee for cars and taxis plus the introduction of charging of carpools resulted in a net increase in inbound automobile tffic during the morning peak of thre-tenths, relative to May 1989 (in which a high daily license fee of **_S$5_** previously applied). Four, a significant reduction in inbound automobile traffic of seven-tenths naturally occurs during the afternoon - peak relative to May, 1989 (when no charges were applied at all in the afternoon peak). Five, by contrast, since goods vehicles (and motorcycles) are now charged when entering the Restricted Zone, there has been a sgnificant reduction in these vehicles of six tenths, during both the moming and afternoon peak periods, as intuition would lead us to expect. Six, as a result of introducing the evening ALS, average traffic speed within the Restricted Zone increased to 30 kph in 1990, as indicated in the Report of the Select Committee on Land Transportation Policy (see Seventh Parliament of Singapore, 1990; Olszewski and Tan, 1991). Seven, despite - a growing economy, the recent lowenng of the daily license fee possibly the outcome of a - trial-and-eror pricing process suggests that the Singapore Government is currently using ALS as a traffic management tool to curtail congestion rather than as a revenue-generating device.

# D. Financial and Economic Evaluation

86. Even though the purpose of the ALS is not to raise revenue, it fulfills the government's multipronged objective of seeking a traffic restraint measure that does not involve subsidization Croh, 1977). From a purely financial point of view, this policy measure is appealing to local authorities, especially in an age of declining municipal funds.

87. The capital cost of the ALS is SS6.6 million [US$2.8 million] in 1975 and the recurrent cost for the period 1975-89 is S$l.0 million tUS$0.4 million), including about 40 entry point atendants opating 22 gantries for enforcement purposes, in 1975.62 The monthly revenue Nobt that the US dollar equivalent here is eprssed in 1975 dolla, using di exch an t of S$2.40 _-_ **_US$1._** T1euays that immed8iy follows i based an fir from Waton and Hlland's (1978) sudy for tie first year only, nd the rest is computed from the d tho author cocd firm Sao's Public
# - 82 -

from the sale of ALS licenses averages S$472,000 in 1975 for the last four months.<sup>After</sup> netting out the operating costs of ticket sales, car parks and enforcement, the monthly<sup>net</sup> revenue was about S$420,000, resulting in a net financial return to the authorities of about 76% (Watson and Holland, 1978, pp. 38-39). As a result of a one dollar increase in daily<sup>license</sup> fees on January 1, 1976, the gross revenue increased to a monthly figure of<sup>S$568,000, which,</sup> together with comparable operating costs of S$52,000, yield a net financial rate of return<sup>of</sup> 94 %. Note that the capital cost of $6.6 million is less than that of building an urban expressway two kilometers long (Watson and Holland, 1978, p. 37)!

88. Since the construction of car parks, bus shelters, provision of utilities and landscaping account for over nine tenths of the capital cost of the ALS, and since the park-and-ride<sup>facilities</sup> were considered a failure and converted to more productive uses, the capital cost of<sup>the ALS</sup> itself - which is nothing more than overhead gantry structures, electric signs,<sup>and 15 or so</sup> booths for the sales of licenses - is only S$316,000 (Watson and Holland,<sup>1978, Table 3.6).</sup> This means that the net financial rate of return is 1,590%, or an equivalent revenue-cost<sup>ratio</sup> of 16.9 (see also Wilson, 1988). These figures can be compared with<sup>the net financial rate of</sup> return figure calculated on the basis of data the author compiled for 1975-89.<sup>There the net</sup> financial rate of return, based on annualized capital and operating cost and annwal revenue-cost ratios, comes to 590% _with_ the revenues and costs of _opafting_ the car parks<sup>and 1,080%</sup> _without_ the associated revenues and costs of the car parks. The difference<sup>between the 'short-</sup> term' figures collected within the first year and a half and dhe 'long-term' figures<sup>collected over</sup> a 14-year period can perhaps be partally explained by: a) the amortzation<sup>of capital costs over</sup> a longer time period, b) the reduction in opeating cost of the ALS through learning<sup>by doing,</sup> and c) thL, 'long-term' figures include enforcement costs hitherto not taken into<sup>account. Based</sup> on an average daily car traffic volume of 45,000 in 1989 during the morning<sup>peak period and</sup> the number of operating days of the ALS of 301 (including Saturdays) in a year,<sup>the cost per</sup> transaction comes to S12.1 cents for the period 1975-89 [US9.9 cents in<sup>1990 figures]</sup><sup>_with_car</sup> parks and S6.8 cents for the period 1975-89 _[US5.6_ cents in 1990 figure]<sup>_without_car parks.</sup>

**Works Dqatment snd** Regisky of Vehicles **_for_ the** peiod 1975-89.
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Based on an average daily car traffic volume of 45,000 during the morning peak period and 24,000 during the afternoon peak and the number of operating days of 283 in a year, the cost per transaction comes to S16.5 cents for the fiscal year 1989 [US9.4 cents in 1990 figures] _wwhout_ car parks.6<sup>3</sup> By employing the index of cost per transaction alone, the Singapore Area Licensing Scheme is among the least costly of alternative methods of charging for road use.

89. In a review of the impact of the ALS after nine years of operation, a team of World Bank researchers observed that had the ALS package of traffic management measures not been implemented, there would have been bumper-to-bumpet **r** affic conditions universally in the Restricted Zone by 1982 (Behbehani, Pendakur and Armstrong-Wright, 1984, p. 50). Further, the deferred or canceled investments for roads amoun **t** o savings to society of the order of _S$1.5_ billion.

90. The paucity of benefit-cost studies on the Singapore ALS means that it is difficult to come up with strong conclusions as to its economic **viability.** Holland and Watson bnefly reported an economic evaluation in their 1978 article. A lower bound estimate of an economic rate of return of 15% is obtained for the first year. This figure seems to be on the low side for such a major undertaking. Nevertheless, it includes only time savings and not savings in operating costs and fuel which are normally calculated in transport projects. (urther, it does not employ the standard assumption of value of tme being a funcdon of the wage rate, but assumes that everyone has the same value of time.) Since at least three fourths (or nine tenths) of the capital cost of the scheme, which went into the construction of fringe car parks, could have been saved, the economic rate of return would have become 60% (or 150%) in the first year. The estimxate here does not take into account: a) the costs to commuters of rescheduling or the losw in welfare for 'hlose tolled off the desired mode, and b) the gain in welfare to the ones who valued time highly and were tolled at the (lower) average rate upon enterng the Restricted Zone.

**T0 Me** difference in the number of days a **year aises becaus the** post-June 1989 **schm operated an a** five and a half day a week bis. bat is, _(5_ + 45000169000) x **_52_** - 11 holidays = 283 days.
# - 84 -

91. In a rigorous welfare analysis, Wilson (1988) uses a joint mode choice and work start time choice model to analyze the same set of individual **s** urveyed in a pre- and post-ALS set of data by the World Bank. His results indicate that: a) some travelers are worse off as a result of being tolled off when entering the Restricted Zone during its operating hours and are diverted onto a different time period or even onto public tsanport, and having to incur the resultant rescheduling costs which exceed the payment of the ALS fee itself; b) some motorists (who used to travel, say, just outside the restricted hours) had to suffer increased congestion as a result of those motorists who were tolled off the restricted times, and those public transport commuters who had to face a more congested public tranwsport environment following AMS would also be worse off; and c) those commuters who chose to remain _as is_ and be tolled would be worse off unless their values of time savings are sufficiently high." He concludes that a constant, flatrate toll may in fact result in a decrease in social welfare as in Nash-Bentham-Sen, contrary to the -exuberantu feeling surrounding the positive results of the AIS scheme in 1975-78. Wlon simulates the effects of making various revenue-neutal assumptions by explicitly retuning the toll revenues to the individuals in the sampled popUiation and comparing the pre- and post-AMS results. However, he acknowledges that he has not taken into account incentive effects. The setting of the AMS fee in 1975-76 may have been widely observed to be on the high side and it resulted in the underutilization of the road network in the Restrcted Zone. Subsequently, the ALS fee was lowered, on June 1, 1989. However, it is unclear how the simulation results would have panned out given a real decre in daily licenses exceeding 40%.

# E. Lessons for ImDlementng Area Licensing

92. A few lesons emerge from analyzing the Singapore ALS for the purpose of chargng for congeson: a) ALS, being fairly low cost and requiring one gantry per entry point, would be suitable for cities with limited access;6 b) ALS defers hefty investment in roads and requires " Botb intuind twy sggest tht these _bt_ are to be ctd (u a 1992).

- For a tpicl United Sats inner-city si of two sque mles and _ming_ 12 major shteets to a mile, dio toa numberof prcigpointsorgies ndod woudw be96 (or48 if half ao e-way dreeb). fdeed econoica;lly efficient, a few mmo **r** oads locdad a tb ecdon bonday could be dod off (as was don
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very little land for its impLemenlation, epcept the dozen or so kiosks fo ales of lienses; c) enforcement may be difficult for high speed expressways but the level of skills required is not high, so it is suitable for a low-tech, labor-intsve society; d) ALS work best as part of a package of complementary traffic management measus such as parking pricing and the provision of viable alternatives for travelers (in the form of improved public tsport, alenative modes and routes); e) since ALS is not capital intensive, it is particularly amenable to a short-term experiment, leaving few long-term rpercussions; and f) ALS has worlkd well and should adapt itself, with any necessary modicons, to a culture that has a tradition of compliance and law enforcement.

in Sinqo) to lvy on cWpibl d opsrati coda of putis. Furthr, note dht ALS acmoda aocuazl visitr and dows noa rqi the _w&forat_ of l;m onveicls **h** ave ted the _Reuincted_ Zwo
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# Annex 2: The Manually-Operated Bergen Toll Ring, 1986 to present

## A. Background Informadion"

93. The Bergen Toll Ring began on January 2, 1986 within a couple of years after the scheme was first proposed. Following Singapore, it is the second city to charge motorists for entering the Central Business Distict (CBD). The scheme involved the construction of tollgates at six entry points to the CBD of Bergen, Norway's second largest city.6<sup>7</sup> The tollgates are aU manualy operated, with about half of the lanes for motorists paying by cash or prepaid tickets and the other half reserved for motorists with seasonal passes (i.e., seson tickets) placed behind the windscreen. These passes could be purchased on a monthly, six-monthly, and yearly basis, their purpose being to allow traffic to go through the toUlgates at expreway speed. The enforcement of offer.ders is caried out by occasional videotape recording of license plates in these unattended lanes. Since its inception, the toll rates have remained at _NOKS [US80_ cents in 1990 figures] for light vehicles such as automobiles, with buses and light motorcycles being exempt. (Heavy vehicles are charged exactly twice the rate of light vehicles and the rate for monthly seasonal pass holders are set at 20 times the daily rate (SWderstr6m, 1988).) The hours of operation for entry have been set at Monday through Friday, 6 a.m. - 10 p.m. (except public - holidays) not quite daylight pricing. Note that the purpose of settng the toll at a low level is to increase revenues earmarked for road financing. (For purposes of charging for congestton, the toll rate should be higher to have a positive impact and should apply for a more selective time period. With its net toll revenue (totalling 25% of funds for a road program), Bergen was able to obtain a matching grant (25%), and when these grants are combined with regular

- "5 This nx is based piincipally on Lasn (1987, 1988). Extensive discussions with him and insights borrowed are gratfiuly acknowledged.

- 67 Four of the toilgates hve two lanes - one for motos payg cash and pepaid (coupon book) tices and another for use of seasonal passes - and two of dte paalld tollge have four lanes - two for cash and prepaud tckets and the other two for seasonal passes. Thus, the tota mumber of les in the 6 toll **_p_**<sup>**_1_**</sup> **_as_** is 16.
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government funds (50%), Bergen was able to pursue a road construction program within half the time horizon previously envisaged for its road construction program. Citing problems of congestion, air and noise pollution and traffic safety, eight tenths of toUl revenues are earmarked for road construction and improvement and two tenths for bus lanes, etc. (to improve pubLic transport).

# B. Analysis of Results

94. Even though the principal purpose of the toll ring was not traffic restraint, traffic was projected to fall by 3%. Given that the overall traffic growth of 10% was due to ecozemic growth, it was stiU found that the isolated (i.e., _ceterisparibus)_ impact of the toll ring was that traffic declined by 6%-7% in the first year. In surveys conducted by the Institute of Transport Economics, Norwegian Centre for Transport Research (arsen, 1987, 1988), the effects of the toll ring were found to be as follows: a) change in route choice was negligible since the topography allows almost no detours; b) there was an internal adjustmr- t for households which are seasonal pass holders and have more than one car, resulting in more car trips undertaken since the additional toll is zero; c) it is unclear whether a change in mode choice from car to public transport had taken place; d) through trfic declined by 6-7%; e) car occupancy seems to have increased slightly; and f) changes in trip timing are observed at the end of the charging period but the effect is not sgniicant.

95. Even though only a quarter of all vehicle owners in Bergen are hol&drs of seasonal passes, slightly over half (55%) of the CBD-destined trips are undertaken by these holders every day.68 In particular, seven tenths of trips during the morning rush hours are undertaken by these holders. It was found that seasonal pass holders undertake about 1.7 trips per day on average, implying an effective charge of about _NOI2.90 [US46_ cents], (a 40% discount or more) as compared to the standard toll rate of _NOKS [US8O_ cents]. From a road authority's

**Leus** th **amo tenth** of Bergui's **populion** live inside do **toil ing (Sderut6m,** 1988).
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persective, the multiple use of seasonal pases may dampen the effectivenes of cordon pncing as a congestion charging instrument.

# C. ,EawHatiml

96. Tradeoffs will have to be made either to disallow seasonal users' implicit rebates and charge directly for their entry, via tollgates, potentially exacerbating congestion and increasing operator costs, or to allow the continuation of seasonal passes with their (invaluable) nonstop nature but their zero (marginal) toll effect. _Prima facie,_ it appears that the advantages of the use of seonal passes mitigates the disadvantages of charging for congestion via toligates. The videotaping of license plates was done on a periodic but random basis, with the number plates checked against the list of seasonal pass holders' license plates. A tolerable level of about 2% violators was found based on a 5% random check of aU vehicles passing through. A fairly hefty fine equivalen **t** o twice the monthly fee was imposed on offenders, apparently with the desred effect. The enforcement cost of monitoring motorists who cheat and the follow-up work of issuing traffic tibets are more or less covered by the revenues derived from such pursuits. Thus enforcement costs are all internalized with this approach to charging for congestion.

97. The capital cost of the system (including the construction of tollgates, consultant fees, equipment and the publicity campaign) is _NOK12.8_ million in 1986 [US$2.58 million in 1990], and the opering cost (including toll operators' salaries, etc.) amounts to _N0A7.2_ million a year _(US$1.45_ million in 1990]. The gross revenues total _NOKS5_ million in 1986 [US$11.10 million in 1990]. As a toll financing nehanism, the collection cost per dollar of net revenue was 19%. Since this partal dead-weight loss was lower than the high social opportumity cost of public funds esdmated to be in the 30%-40% range in Norway, toll financing is therefore regarded as a viable alternative to tax financing and enhances the Toll Ring's _rauon d'*mte._ With an average daily taffic count of 62,000 for 260 days of option in a year, the cost per transaction (including aU enforcement costs) comes to _NORO.546_ in 1986 [US1l.O cents in 1990]. When compared with the Singapore ALS, the cost per transon is only slightly higher but within the
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compared with the Singapore ALS, the cost per transaion is only slightly higher but within the same order of magnitude. This is to be expectd since half of aU lanes were reserved for seasonal pass holders and were left unmaned. If welfare maximiaton is pursued in lieu of revenue maximiaonper _se,_ then it is desirable to: a) iZuce the number of opeating hours, from 6 a.m. to 10 p.m. to perhaps daylight hours 6 a.m. to _5_ p.m. (as is curently done in Trondheim) or to the morning and afternoon peak periods only (as in the revised Singapore ALS post-1989 period) in order to impact the modal split of tmly congestion-causing traffic; and b) raise entry prices higher to effectuate a reduction in rush hour taffic. The side effects of this twin policy would most lily be an increase in revenues, both because of the relatively unronsive (i.e., inelastic) natre of peak demands as well as the savings in toll opeors' salaries. Alas, no benefit-cost studies have been performed on the Bergen Toil Ring to crosscheck my intuition.

# D. Lessons for Implemendng Cordon Pricing via Tollgtes and Reserved Lanes

98. Some lessons to be drawn from the Bergen Toll Ring of charging for congestion are as follows: a) For cities with limited entries (and detours) in developing countries such as Lagos, Bombay and Jakarta, manual charging of congestion via tollgates is potentially feasible. b) If the fraction of regular commuters is high, the use of reserved lanes for holders of seasonal passes can be justfied. The use of reserved lanes would both reduce the delays that are the major drawback of cordon prcing via tollgates, and lower the capital and operating costs of the toll facility itself. c) Toll collection is a well-established technology for the constrction of toll roads, tunnes and bridges, with almost universal acceptance in terms of administatio. d) The use of toll revenues to finance road constrction and/or public trasport seems to appeal to road users as being 'fair' and appears to be a political prerequisite to implementation.
# Annex 3: **Ihe** Electronic and hMnual Zone Fee Proposal of Stockholm, 1989 and 1992

# A. The Qllon _NW Maa_ Zone Fee Poosals of Stockholm. 1989

99. In order to combat environmental pollution and congestion, the City of Stockholm proposed that a wholly electronic fee system be imposed on automobiles entering Stockholm (City of Stockholm, 1989a). The inner city is marked by a circular cordon line around it with 32 control points. In addition, a screen line with 9 control points bisects the cordon, with vehicles crossing it in any direction being charged. (Through traffic can still pass through the city without charge via certain by-pass routes). Only one charge is made each day regardless - of origin or destination thus the concept of a day fee levied from 6 a.m. to 6 p.m., Monday through Friday. The proposed day fee of _SE125 [US$4.22]_ - which is much higher than a revenue-maximizing fee in order to combat congestion - is expected to curtail traffic by a fifth. In contrast to other systems such as the Trondheim system, in which transpondeii for local resdWents are given away free, each local motonst desiring to enter inner Stockholm is required to purchase a transponder at manufacturer's cost, estimated to be SEK100 [US$16.89] a piece. About nine tenths of motorists are estimated to be driving with purchased transponders, whereas a tenth of motonsts are enforced via the video recording system and charged by arrears if they are found to be without rental transponders. It was hoped that technological development would be able to verfy pictured license plate numbers electronically rather than manually. With avrage daily traffic of 195,000 cars and 260 opering days a year, the system cost per transaction is SEKO.69 [US12.7 cents] in 1990 figures, which is higher than that of a simple AVI system for toll roads but lower than that of a combination AVI and manual system.

100. Because the electronic tee system was estimated to take a couple of years from implementation to oration, the City of Stockholm proposed a manual zone fee system, i.e., supplementary licesing, in June 1989 to serve dunng the transitional period (City of Stockholm, 1989b). The splementary license was set at the same rate as that proposed for the electronic system, that is, _SE25_ [US$4.22] a day. In addition, a monthly car card of SE300 [US$50.68]
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is available. It was estimated that at least 50 traffic wardens were required to monitor the nonstop traffic and a degree of compliance of only 75% was expected due to enforcement problems. The cost per transaction of _SEK1_ .97 _[US36.4_ cents] in 1990 figures for the manual proposal is considerably higher than that of the electronic proposal a couple of months earlier.

101. In Autumn 1990, a bill was placed before the Swedish Parliament to introduce road pricing in Stockholm on an experimental basis from January 1991 to June 1993. As a result of higher petrol prices around the time of the Gulf war, and reservations about the manual zone fee proposal, the road pricing experiment was deferred until an acceptable electronic system that could protect privacy becomes available.

# B. The Demis Paka. 1221-92

102. In January 1991, the three political parties in the City and County of Stockholm, who form a two-thirds majority in Parliament, signed an agreement on traffc and the environment known as the Dennis agreement.70 They agreed that major investments totalling SEIQ8 billion [US$4.73 billion] will need to be spent - half of them are for public tranport and the other half are for ring roads around Stockholm. What they had left undecided was the issue of whether or not to implement road pricing in Stockholm in 1997 and, in the Gothenburg area in 1994 (Ministry of Transport and Communications, 1991). The Swedish Parliament has adopted the pnnciple of marginal social cost pricing - including congestion, environment, road maintenance and accident costs. For the Stockholm region, the marginal social costs for car taffic alone are estmated to be _SEK_ 10.0 billion [US$1.69 billion] in 1990, of which SEK2.5 billion [US$0.42 - billion] only a quarter -- is collected (regnr, 1991). Fully three quarrs of the total marginal costs are composed of congestion costs (42%) and accident costs (35%). The annual Th nualized capital and opatg coda nd revmu figur ae ten from Abbott (1990) whs the not of th data is from City of Stockholm, 1989b.

- ° ITh three myor parties ae the Socid Demoats (which Consevatives (25%) amd ie Liberals (10%).

about 40% of Padriat), tho
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net oenefits of introducing marginal social cost pricn in the Stockholm region _and_ combining the toll revenues with a package of ring road bypass extensions and public tansport service quality improvements are esfimated to be SEK8 billion _[US$1.35_ billion] (Tegndr, 1991).

103. In September 1992, the three political parties reached a final agreement regarding the adoption of road use charging as an intument to finance road investments and public tansport for the Stockholm Region, which costs a total of _SE35.9_ billion [US$6.06 billion] in 1992 figures (see The Social Democratic Party, the Moderate Party and the Liberal Party, 1992). To be introduced in 1996, the uniform toll for light vehicles (weghing less than _3.5_ metric tons) entenng the toll rng designed to surround the city of Stockholm will be _SEK15 [US$2.53]_ initially whereas the average toll will be _SEKS [US84_ cents) for both inbound and outbound trps on the West Link. For heavy vehicles, these so-called 'vehicle-use fees' will be three times higher (Malmsten, 1992). A total of about 25 toll stations will be situated on all roads leading to the city center and 2 toll stations will be located at the West Route. At the dme of this - writing, a combination of manual and electonic toll collection system as in the (24-hour) Oslo - Toll Ring is planned. The fee system must be designed to satify the stringent requirements of securty, anonymity, flexibility and the option of offering 'discounts'.
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l PftIWdn&z **Daft Marc** 23, **1992**

**FPtl Du& Dsct_b** 31, **1992**
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|---|---|---|---|---|
|WPS106|0 Economies<br>of the Former Soviet<br>Union: An Input-Output<br>Approach<br>to the 1987 National Accounts|Dmitri Steinberg|December<br>1992|E. Zamora<br>33706|
|WPS106|1 Dynamic<br>Response<br>to Foreign<br>Transfers and Terms-of-Trade<br>Shocks in Open Economies|Klaus Schmidt-Hebbel<br>Luis Serven|December<br>1992|A. Maranon<br>31450|
|WPS106|2 Economic Development,<br>Environmental<br>Regulation,<br>and the<br>International<br>Migration<br>of Toxic<br>Industrial Pollution, 1960-88|Robert E. B. Lucas<br>David Wheeler<br>Hemamala<br>Hettige|December<br>1992|WA.<br>31393|
|WPS106|3 Mongolia: Privatization<br>and System<br>Transformatio**n**<br>i An Isolated<br>Economy|Cevdet Denizer<br>Alan Gelb|December<br>1992|A. Oropesa<br>39075|
|WPS106|4 More Evidence<br>on Income<br>Distribution<br>and Growth|George R. G. Clarke|December 1992|R. Martin<br>39065|
|WPS106|5 Strengthening<br>Uganda's Policy<br>Environment<br>for Investing<br>in<br>University Development|Thomas Owen Eisemon<br>John Sheehan<br>George Eyoku<br>Franklin Van Buer<br>Delane Welsch<br>Louisa Masutti<br>Nat Colletta<br>Lee Roberts|January 1993|C. Cristobal<br>33640|
|WPS106|6 Pollution Control In a Decentralized<br>Economy:<br>Which Level of<br>Government<br>Should Subsidize What<br>in Brazil|Antonio<sup>Estache</sup><br>Kangbin<br>Zheng|January 1993|A. Estache<br>81442|
|WPS1<br>067|Returns to Investment<br>in Education<br>A Global Update|: George Psacharopoulo|s January 1993|G. Psacharopoulos<br>39243|
|WPS1<br>068|Enterprise<br>Reform in Eastern Europe|Sweder van Wijnbergen|January 1993|B. Pacheco<br>37033|
|WPS106<br>|9 Why Is There Proportionately<br>More<br>Enrollment<br>in Private Schools in Som<br>Countries?|Estelle James<br>e|January 1993|D. Evans<br>37496|
|WPS107<br>|0 Economic<br>Fundamentals<br>of Road<br>Pricing: A Diagrammatic<br>Analysis|Timothy Hau|December<br>1992|J. Francis<br>31005|
|WPS107<br>|1 Congestion<br>Charging Mechanisms:<br>An Evaluation<br>of Current Practice|Timothy Hau|December<br>1992|J. Francis<br>31005|