(This blog was posted earlier this month but somehow disappeared from my website, so I am reposting it.) New York City was to start collecting tolls on June 30 for a road pricing system that would charge cars $15 (and trucks more) to enter downtown Manhattan. It was intended to reduce congestion and collect $ 1 billion annually to support public transit. At the eleventh hour (June 5), Governor Kathy Hochul decided to indefinitely delay the plan because she feared it would harm New York City’s post-pandemic economic recovery and because it was unpopular in the suburbs, the locus of swing voters in the upcoming federal election. Why does this story matter in New York, Toronto, or other major North American cities?

Implications for the GTA

Toronto has long compared itself to NYC. In this case, both have world-class traffic congestion. The politics of the issue seem similar, with likely opposition to road pricing coming from suburban residents driving into the downtown. In fact, the Ford Government has gone on record that it will not impose road tolls on the Gardiner Expressway and Don Valley Parkway, which are now under provincial control. But, if a system of road tolls were successful in NYC, then Torontonians might change their minds, especially if the Ford Government is defeated in 2026.

My Own Interest

As an economist I’ve long been interested in the use of pricing to improve the utilization of infrastructure capacity (for example, electricity pricing that varies my time of day). I did my doctoral dissertation about airport planning. In that context time of day pricing or runway landing fees can smooth demand and improve capacity utilization. I studied Hong Kong’s experiment with road pricing in the mid-Eighties, which failed primarily because of the fear that the Chinese-controlled government that would be installed a decade later would employ road use data to enhance social control – a reasonable fear, given Hong Kong’s political history since 1997. Finally, I served on the board for the Crown corporation that developed Ontario’s electronic toll road (Highway 407) in the mid-Nineties. In this case, the technological issue was the first-ever integration of transponder and photoimaging technology to make toll booths unnecessary, and the political issue was whether the Harris Government should have privatized what had quickly become a successful toll road. Given my history of engagement with the issue, the NYC story certainly matters to me.

Why the Reversal?

New York’s congestion pricing proposal lacked a political champion. Mayor Eric Adams was lukewarm. Hakeem Jeffries, Democratic leader in the House of Representatives, was concerned that it would cost the Democrats the swing seats in the New York suburbs that enabled the Republicans to gain control of the House in 2022. Though she never said so, Governor Hochul must have come to share the concerns of her federal Democratic colleagues. To meet the revenue goal, tolls would be charged in the evening even though there is little congestion, which provoked opposition from the restaurant and entertainment industries. There are already tolls on tunnels leading into Manhattan, so road tolls were seen as double taxation. Finally, there were concerns that tolls in Manhattan would lead to increased traffic in northern New Jersey and the Bronx. Thus, both national political and local interest group concerns led to Hochul’s decision.

What Now?

Backers of road tolls such as environmental groups are likely to challenge Hochul’s decision in court. Students of road tolls suggest tweaking the proposal to gain local support, for example not charging tolls in the evening and crediting tunnel tolls against road tolls. Nicole Gelinas, a proponent of tolls, suggests that instead of a flat rate toll to enter the downtown zone, drivers should be charged for time driving within the toll zone. The latter would be implemented through the same technology used to track travel with a cellphone. It isn’t clear to me whether a technologically more sophisticated and hence more expensive system would reduce congestion more than the flat-rate fee. In addition, it would likely raise privacy concerns.

The Big Picture

The big picture concerns the political feasibility of government using economic incentives to influence behaviour. It is well accepted that reductions in taxes such as credits and deductions can be used to induce the public to act in socially desirable ways, such as making charitable donations and saving for purposes like higher education. In the private sector, dynamic pricing of airline tickets, hotels, and recreational events is well understood even if not appreciated. Yet there remains considerable opposition to public sector price incentives such as carbon taxes, even if the money is rebated. This opposition is likely greater in an inflationary period, when the incentives are also perceived as increases in the cost of living.

Road tolling exists in several places in the world, such as Stockholm, Singapore, and London. But New York would be the first major city in North America. There is a well-known adage in the public sector that it’s always risky to be the first to innovate. It’s much easier when there is a precedent. New York might have been that precedent. Municipal governments and proponents of road tolls in other major American cities such as Boston, Chicago, San Francisco, and Los Angeles were waiting to follow New York’s lead. Will they now act on their own? As for Toronto, road tolls aren’t even on the radar here.