Just Who Should Pay for What? Vertical Equity, Transit Subsidy and Road Pricing: The Case of New York City

In this paper, equity and cross-subsidization issues associated with the congestion pricing scheme proposed as part of New York City’s PlaNYC are examined, as are initial usage patterns, user income distribution, and revenue distribution. We find that equity concerns surrounding the proposal are supported by economic analysis. If New York City is to revisit congestion pricing in the future and make it more politically palatable, it will need to find a way to mitigate these equity concerns. Introduction Governments at all levels across the United States are searching for new revenue sources to finance the maintenance, repair, and expansion of transportation infrastructure. Gasoline taxes have been the traditional source of funding for such work. However, as Puentes and Prince (2003) report, federal and state gas tax revenues have been decreasing when inflation is taken into consideration. With the public Journal of Public Transportation, Vol. 15, No. 2, 2012 118 generally unreceptive to increases in taxes, road pricing has become an integral part of many of the proposals to fund transportation infrastructure. One highprofile example of this is the congestion pricing scheme proposed by the mayor of New York City (NYC) in the spring of 2007. As one part of a sweeping master plan to make the city “greener” and more livable (PlaNYC 2007), Mayor Bloomberg proposed the creation of a cordon pricing system similar to the one implemented in London in 2003. While the mayor’s proposal had a “burgeoning coalition of civic and business organizations in support of congestion pricing” (Schaller 2010, p. 267), the legislation failed to garner enough support in the State Assembly to come to a vote. Lacking this authorization, the proposed congestion pricing system could not be implemented. The reasons for the failure of the plan to gain enough political support to successfully pass through the legislative process have been well documented by Schaller (2010) and Peters and Gordon (2009). One of the primary reasons cited for the failure of the plan to be implemented is related to social equity. It is very difficult to accurately measure the equity implications of a proposed road pricing scheme because of the complexities of the transportation networks involved. This is especially true in New York City, where so many people are competing for a limited supply of routes into the Central Business District in Manhattan. It is also challenging to measure equity considerations because” ... equity can be defined in many different and legitimate ways” (Ecola and Light 2009, p. 35). While other measures of equity are important—such as horizontal equity—in this paper, we focus on the vertical equity considerations of NYC’s proposed congestion pricing system. Vertical equity examines whether or not members of different income groups are treated differently. In a comprehensive review of why NYC’s congestion pricing scheme failed to gain enough support to be implemented, Schaller (2010) concludes that, The short answer is that a relatively small group of users believed that congestion pricing was against their best interests. As with many large highway construction projects in the 1970s and 1980s, the extensive approval process required for congestion pricing offered auto users an avenue to block action. The intensive interests of one group were thus able to overcome widespread public support (p. 270). These concerns led to successful political obstruction “... motivated by individuallevel impacts on auto users” (Schaller 2010, p. 270). The auto users referred to were primarily from the outer boroughs, particularly eastern Queens and southern Brooklyn (see Figure 1).