The Low-Cost Solution to Traffic Congestion

More sensible pricing of roads can help reduce congestion while it saves taxpayers money.

It's Friday afternoon in Orange County, California, and everyone wants to get home to spend a nice weekend with their families. This means that most of the freeways are backed for miles with bumper-to-bumper traffic.

But some people can ignore the traffic and zip right home, saving up to 45 minutes. They are driving on a new, privately owned and 100 percent privately funded highway known as State Route 91 (SR 91). The highway owners charge a fee of $2.50 during rush hour, but charges are as low as 25cents during less crowded periods. Such a variable pricing system is known as congestion pricing.

Congestion Pricing?

Congestion pricing is the market-based pricing of highway capacity. Highway capacity at any given moment is fixed, but the demand for that capacity varies widely by time of day, direction of travel, and location. When demand is high, the cost of servicing that demand is also high.

Currently, we all pay those costs in the form of time losses. This is inefficient and results in higher levels of motor fuel consumption and air pollution. Congestion pricing converts time losses to money by charging motorists a fee, known as a road user charge, that varies by how much demand there is for highway space. The fees can also vary by day of the week, type of facility, and type of vehicle.

The fees are collected using transponders--electronic devices placed on each vehicle and read by roadside monitors located at each on-ramp and off-ramp of congested highways. This is the fairest way to collect user fees from motorists, because those who drive the most at times when highway capacity is scarce, end up paying the most. In exchange, they get to drive at much faster speeds, because the peak-hour toll causes some motorists to change the time of their trip, switch to transit, or to carpool.

Congestion pricing has proven highly successful in Orange County. The owners of the road have sold 80,000 transponders to motorists, far more than they originally projected, since the road opened early in 1996. The road's users are guaranteed at least a twenty-minute savings in their commute. But other drivers benefit as well since the traffic on the adjacent state highway is smoother and the duration of peak period congestion is an hour shorter.

Congestion Pricing is not:

* An arbitrary pricing policy. Congestion pricing should substitute for a fuel tax on whatever road it is used (in Oregon the state gas tax is $.24 per gallon). It should be based on the incremental cost of adding another lane of capacity for each road which is the traditional way we would address congestion if we didn't use road pricing. As long as a peak-hour toll is less than the cost of building a new lane, motorists will be better off through congestion pricing. If the toll rises above the cost of building new capacity, without solving the congestion problem, then that is a sign that policy makers should seriously consider adding another lane because the users of that facility have indicated that they want the capacity and they are willing to pay for it.

* A system of "penalties" to price drivers out of their automobiles. Congestion pricing is not punitive. It simply converts existing costs--time loss--to money, which allows everyone to self-select which trips are worth the most to them. Economists estimate that the time value of a single motorist is approximately $11 per hour, while the time value of the owner of an 18-wheel truck is $75 per hour.

* A tax device or a source of general fund revenues. The money from congestion pricing should be used exclusively for the benefit of those motorists who paid the fee. That means that funds should be spent only on the road where specific fees were collected, or for services (e.g., transit improvements) that benefit those road users.

No Toll Booths

Due to technological advances, peak-hour tolls can now be collected from motorists traveling at any speed: Transponders are used on race cars at Portland International Raceway. This technology is currently being used on SR 91 in California, the Dallas North Tollway, and on the entire Oklahoma Turnpike.

Tolls can be collected by sending motorists a bill each month, drawing down a pre-paid account, or billing the tolls to a motorist's credit card account. Concerns about privacy can be met by using an anonymous debiting system, similar to the magnetic cards used in the Washington, D.C. subway system (reading someone's subway card does not indicate where they have been; the card only lists a series of debits). However, actual use in this country has demonstrated that privacy concerns are a small consideration for most motorists; operators of the newly-opened SR 91 sold 80,000 transponders in the first six months of tollway operation, and only one motorist requested a privacy account.

Low Costs

Because congestion pricing should be used to replace fuel taxes, those motorists who minimize their use of crowded highways at the peak period (when the user fee would be the highest) might save money due to the drop in the state gas tax. Also, since congestion pricing tells policy makers exactly when a new road should be built, it minimizes costly highway expansion that would otherwise be paid for from higher gas taxes.

Since congestion pricing is paid only by those using crowded facilities, non-motorists pay nothing. This is in sharp contrast to such tactics as building light rail lines, which don't solve congestion problems and require massive subsidies by all taxpayers.

Metro could buy transponders for every driver in the Portland area for less money than the cost of building one mile of the proposed south-north light-rail line. The total cost of installing congestion pricing in the entire Portland area would be far less than the $485 million Metro wants Portlanders to pay as their share of the south-north light rail. Yet congestion pricing would do far more to reduce congestion throughout the Portland area.


Although privately built roads like the on in Orange County are an option, congestion pricing doesn't require them. It could be used on any road, anywhere. Highway officials could charge at single spots or in entire corridors; and they could charge for all lanes or, like the Orange County example, just for some lanes.

"Spot" pricing would charge people who cross a single point, usually a bottle neck such as a bridge or tunnel. "Corridor" pricing would charge both for a major highway as well as for parallel roads along that highway.

"Whole facility" pricing charges for all lanes on a highway. "Partial facility" pricing charges just for express lanes on the highway.

A final alternative would be "area" pricing, charging to use all streets and roads in a particularly congested area such as downtown. Users could get a special permit to use that area or pay electronic tolls. This method is now in use in downtown Singapore.

Benefits for Transit

Congestion pricing will improve transit services, because buses, vans and jitneys previously stuck in traffic will now go much faster, yet the congestion toll will cost individual passengers almost nothing (depending on how many passengers are on the vehicle). The prospect of using fast, rubber-tired transit vehicles will also encourage private companies to enter the market and provide vastly superior service than is available today through Tri-Met, if citizens can persuade the legislature to repeal the current ban on private transit service.

What You Can Do

Metro is currently doing a federally funded "traffic relief options study" that is evaluating congestion pricing and other ways to reduce Portland congestion. Planners will study several alternatives in 1997 and will select one or two to use in Portland in 1998. You can keep informed about this study by getting on the mailing list for the Traffic Relief Options Study News by calling Metro at 503-797-1900.

This fact sheet was prepared by the Cascade Policy Institute for ORTEM, a citizens' group opposed to the Metro 2040 plan. Fact sheets are available on a variety of other topics, including:

1. Metro's 2040 plan;

2. Congestion and growth;

3. Light rail; and

4. Open space.

If you have questions or would like hard copies of this and other fact sheets, email

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