Congestion charging and getting Wellington moving

Parliament is considering submissions on allowing congestion charging in Auckland. I think it's a great idea. And it could help more broadly. 

Our submission is here. We suggest that the government should just go ahead with the system recommended in the Report on it, but that we have a few potential improvements for the longer term.

First up, the only purpose of congestion charges should be alleviating congestion. Set the charges to maximise traffic throughput and nothing else. But if the money winds up in the transport budget or elsewhere, there will always be temptation to mess around with the charges to achieve other ends. 

At the same time, the system as proposed has discounts for low-income drivers on Community Services Cards. Equity issues are real but you don't muck around with prices to solve an ability-to-pay money. Instead, you should just give people money. 

Put the two together and you can solve both problems at once. Take the money collected under a congestion charge and rebate it back to drivers in a way that's invariant to whether they're driving on- or off-peak. Lots of ways of doing it. The only critical feature is that the transfers are lump-sum with respect to on-peak driving. It's likely to wind up being a progressive transfer but if doesn't wind up being progressive, provide higher payments to users who have Community Services Cards. Simple. You've solved the equity issue by giving lower-income people money while not messing up incentives provided by congestion charging. 

As tech progresses and the costs of electronic road user charging systems come down, things start getting more interesting for the longer term. First, recall that diesel vehicles don't pay excise into the Land Transport Fund - they pay road user charges based on mileage. Flip petrol vehicles onto that system too, abolishing petrol excise (which would also solve the problem of that lots of non-road petrol uses get taxed for road use - marine fuel in particular). Get everyone onto the kinds of electronic RUC systems that the trucking companies use. The better ones are GPS enabled. The costs of those will keep coming down.

Once you have that, you can start varying road user charges across different roads if some roads are more expensive to maintain - or if the charges are part of a road tolling system for roads financed that way. 

A better future system could then:

• Use congestion charging to maximise throughput on existing roads, rebating charges back to road users through the same accounts they use to pay their congestion charges anyway;
• Use the information provided by congestion charges to inform whether new transport investments make sense. If it takes a $20 charge to clear congestion on the Auckland Harbour Bridge or the Mt Vic Tunnel, that's a pretty good case for building more capacity. If it only takes a $0.20 charge, it would be stupid to build a new tunnel or a second harbour crossing.
• The data from the congestion charge combined with GPS-enabled RUC systems would then allow for simple tolling of new roads. So if road users have demonstrated a willingness to pay $20/pop to get across the bridge at peak times (say), someone putting in a new crossing could bank on there being real willingness to pay. They could then put up a bond backed by the revenues generated by crossing. Which is how the Harbour Bridge got financed in the first place - a bond paid off by tolls. I'm not proposing anything new here or anything new to NZ. It's a big part of NZ's abandoned history of How To Get Things Built. The data from congestion charging would help in demonstrating whether the investment would be worthwhile, and the electronic charging system would make it easier to collect the tolls. That's it. But it's an important 'it'. Right now, it's neverending fights between the "let's put roads everywhere" people and the "oh roads are stupid never build them it'll just cause more induced demand and their cost-benefit cases never stack up" people. Congestion charging would help demonstrate whether new investments are worthwhile, and shoot down ones that aren't. 

There are obvious implications for Let's Get Wellington Moving - which Treasury listed as a risk in the last budget. Congestion charging would ease demand back, fixing a lot of the problem. And it would provide the information necessary for better decisions about things like second Mt Vic tunnels.