Six months after New York Governor Kathy Hochul (D) initially paused congestion pricing in New York City, she approved a revised congestion pricing strategy that went into effect on January 5. Traffic has decreased, busses are running faster, and subway ridership is up. Although the roll out appears smooth so far, questions remain, especially among transit riders. Will the reduced toll generate the revenues needed? Will it reduce traffic as intended? And what could be the long-term consequences of the six-month delay and reduced fares?
Congestion pricing can be thought of a “sin tax” that aims to reduce motor vehicle traffic and its harmful effects (including air pollution and car crashes) while boosting revenue—in this case for the beleaguered Metropolitan Transportation Authority (MTA). In New York City, the Central Business District (CBD) Tolling Program now charges drivers a $9 base toll to enter local streets in Manhattan below 60th Street during the peak hours of 5 am to 9 pm (9 am to 9 pm weekends), down from the $15 base toll originally set to start in June. Drivers pay 75 percent less outside peak hours, while other tolls apply to oversize vehicles and motorcycles. The $9 base toll will remain in place until 2027, but can be raised to $12 from 2028 through 2030 and $15 in following years.
Will a 40 percent lower congestion price generate enough funding? Probably, but it’s less than an ideal scenario. A 2022 environmental assessment of the policy, conducted by the Federal Highway Administration, considered a $9 base toll (equivalent to $9.77 today), with higher off-peak tolls (Scenario A) and projected it could generate sufficient annual revenues to secure $15 billion in bonds. But this should be taken with some caution. The assessment assumed higher overnight and off-peak tolls than the policy in effect, and did not consider all the rebates commuters might receive. The Hochul administration maintains that the $9 base rate—40 percent of the originally planned $15 base rate—will generate sufficient annual revenues.
But because the MTA will use the revenue to secure $15 billion in bonds, annual revenues are only half the funding puzzle for congestion pricing. This is because the MTA needs funding for improvements now, and congestion pricing will generate revenue to repay its bonds over time. If lower tolls don’t boost ridership and instead only reduce congestion pricing revenues, that will extend the MTA’s repayment schedule and increase its interest payments for an even higher final cost.
How much will a $9 toll reduce traffic? Each toll scenario studied in the environmental assessment, including Scenario A, reduced vehicle miles traveled within the CBD by at least 5 percent and the number of vehicles entering the CBD by at least 10 percent, the minimums set by state law. The policy, however, has larger aims than simply fewer vehicle miles traveled: it aims to reduce the related negative social and individual health and wellbeing outcomes, such as noise pollution, air pollution, and car crashes. A lower “sin tax” provides a smaller disincentive for driving in the CBD.
How much the $9 base toll reduces driving in the CBD will depend on how responsive drivers are to the change in price. If drivers are willing to pay, congestion pricing won’t reduce traffic as much as expected. More vehicles will be taxed, and more revenue will be generated, but residents and visitors to the CBD will not receive the full individual and social health, environmental and safety benefits.
Will the delay have any long-term effects on the MTA and New York City? After the pause of congestion pricing this past June, the MTA had to deprioritize improvements and modernization projects, including making stations ADA accessible to individuals with disabilities. Instead, the MTA has been focusing only on projects necessary to maintain basic operations. Congestion pricing in New York City, even modified, should allow the MTA to secure bond funding to complete its improvements, but the delay and lowered price could come at both a financial and social cost.
After much consideration, the CBD tolling program went into effect last week. New York City has struggled with congestion for decades—Mayor Ed Koch considered a ban on private cars on some streets in 1979—and this is a major step in curbing it. Still, it’s too soon to know how much congestion will be affected longer-term, or the downstream effects on the MTA. What we do know is that the MTA desperately needs the funding.
