Mixed Messages on London's Congestion Tax

Expect Mayor Bloomberg to talk up the supposed benefits, while downplaying the significant problems with the congestion pricing tax imposed by London, the leading large city to attempt to curtail traffic in the central business district.

Anecdotally, most Londoners say they have noticed little difference.

Some have said they believe the decision to increase the daily fee from 5 pounds (about $10) to 8 pounds ($16) last year was either because the decrease in traffic hadn't been enough or because the income the city had seen hadn't been as high as hoped.

Transport of London said it took in 210 million pounds last year ($420 million) in fees and fines levied to those who didn't pay, with a profit of 122 million pounds ($244 million).

Most of that money has been pumped into transit improvements - mainly the addition of more buses in an effort to further reduce the number of cars coming into the city.

Officials reported an additional 72,000 bus riders in 2005 and a steady increase in users of the London Underground subways since the scheme began. The use of bicycles, too, has gone up precipitously. Other benefits have been a 13 to 15 percent dip in harmful vehicle emissions, 8 percent of which is directly attributable to the congestion scheme, officials said.

That element has been so successful that Livingstone has commissioned a study on creating a sliding scale by which cars that emit the least carbon will have the fee waived, whereas those that emit the most could be hit with a fee of up to 25 pounds ($50) a day.

Additionally, officials report an average decline of 70 serious traffic accidents per year.

While Transport of London says businesses within the zone have done better in recent years than those in the rest of the city, the London Chamber of Commerce says 84 percent of the businesses it surveyed after the scheme went into effect reported revenue declines.

One possible reason for a decline in traffic could be attributed to the revenue decline by those businesses surveyed. If they've cut back on business or are receiving less traffic as a result of the tax, that means that they're paying less corporate taxes and receiving less in other taxes (VAT) from their business operations. Those declines in revenues have to be made up elsewhere, meaning that the congestion pricing tax has to be increased to cover the declines elsewhere.

Instead of the supposed goal of supporting transit improvements, the congestion pricing tax will have to be raised to cover declines in taxes elsewhere - a tax burden shift.

Another thing to keep in mind is that once a tax is imposed, it is near well impossible to see it eliminated. Jurisdictions don't like seeing revenue streams eliminated, so stand to continue them.

As I've previously noted, NJ Transit operates at near capacity on its routes into Manhattan, so there's no way to actually increase capacity for those seeking alternative access to Manhattan to escape the congestion pricing tax.

What NJ Transit must consider is expanding the hours of operation on many of its lines. Once you get to 11:30PM, trains and buses run only occasionally - once an hour at best. Some train lines stop operation for several hours until the start of the morning runs at 4-5am. That's unacceptable if you're hoping to wean even more people from cars and use mass transit. Expand the schedule to include even more off peak and weekend hours so that people feel that they have a choice to take mass transit instead of driving into the City.