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As US cities continue to recover from the pandemic and inflation, New York City is expected to provide an important national test of the economic value of congestion pricing. The cost of living crisis, preparedness for climate challenges, and aging infrastructure, including public transportation, all make congestion pricing plans sensible for many.
The basis of the Metropolitan Transportation Authority’s plan is easy to understand: a $15 fee for daytime car commuters entering New York City at or below Manhattan’s 60th Street — which would be a first in the United States — is designed to fund the transit system. improvements with approximately $1 billion in annual funding. The MTA estimates the toll will reduce car traffic in the nation’s most car-congested area by about 100,000 cars per day, or 17%.
While killing the latest version of the plan on Wednesday, which will be implemented in just a few weeks, the current Governor of New York, Kathy Hochul rejected the idea that has been supported as a model for cities to improve mass transit, quality of life, and the environment. sustainable.
Hochul cited the citywide post-pandemic economic recovery as a key driver for the decision, and concerns about distracting commuters from working or visiting the area, dubbed the “Central Business District.” At the time of the pre-Covid state legislative approval in 2019, workers were in the office five days a week and tourism was at a record high. Still, the plan was federally approved in June 2023, and is scheduled to take effect on June 30, despite the office vacancy rate in Manhattan reaching 15%.
Does remote work kill congestion pricing?
Hochul cited the three-day work week for many office workers as a symptom of the pandemic, and expressed concern that people would return to remote work in such numbers. A 2024 Gallup poll found that 54% of jobs with remote capabilities, such as those in finance and technology, work in a hybrid model, and 27% are remote-only.
Indeed, the bosses of some of the city’s biggest businesses want workers to come back more often. JPMorgan Chase CEO Jamie Dimon has been one of the most vocal about the importance of working in the office. The plan, Hochul said, would result in commuters being told “employers have to work remotely again.”
But it may not be possible. The list of far-fetched jobs is falling, and executives are setting stricter mandates to come to the office by 2024. Returning to work in people five days a week may not come – with or without the price of congestion.
Even before the congestion pricing, the bridge crossing into New York City and parking could be as high as $75 a day, a price that many white-collar workers are willing to pay, or have been paid by their employers. It’s hard to say whether the $10-$15 fee, including a break for other toll-paying commuters — especially in cases subsidized by employers — will be the breaking point, or rather, nowhere near the deal breaker level.
Hochul agreed to delay the plan to avoid hurting low-income households, which he said “could destroy the budgets of the hard-working middle class,” and “disrespect the people who make our city go,” referring to small businesses. owners, nurses and working and other middle class New Yorkers.
But the New York Department of Transportation found that congestion tolls would particularly affect commuters with incomes 31% higher than the average Manhattan worker. By 2023, the trains will have a daily ridership of 3.2 million people and MTA buses will have a ridership of 1.4 million. Many New York City residents, especially low-income residents, use MTA service as their primary mode of transportation.
Kathryn S. Wylde, president and CEO of the Partnership for New York City, a non-profit organization that represents the city’s business leaders, noted on CNBC’s Squawk Box after the decision that approximately 3% of commuters to the city drive cars, and they tend to be “people who get paid higher or government employees.” Consequently, he said, the amount of congestion will reduce “discretionary” driving.
A study by the Community Service Society found that 4% of out-of-borough workers drive into Manhattan for work, while 56% of out-of-borough residents use mass transit to get to work in Manhattan. Among workers who drive to Manhattan, 55% are high earners.
“Most people ride public transportation,” Wylde says, whether it’s rail, trains or express buses into the city.
Wylde said many members of the business leadership community have expressed concerns about the policy, but he strongly supports it as a member of the MTA’s Traffic Mobility Council. His group has also supported congestion pricing plans for two decades. The result of the loss will be what he estimates at $20 billion-plus in lost productivity, overtime and fuel costs, as well as environmental and health tolls.
There are other reasons business leaders can support the plan. Governor Hochul has proposed a tax on the largest businesses in the city to create $ 1 billion per year in lost revenue, Increase in payroll mobility tax that will target employers in the five boroughs of New York City with payrolls of $ 1.75 million or more. . The initial response from state legislators was not positive. Wylde noted that the tax may help solve the problem of raising new revenue, but does nothing about traffic.
A big win for the burbs
The biggest winners are the suburbs. “It’s a big win for New Jersey and New York families,” Rep. Josh Gottheimer (D-NJ) said on CNBC’s “Squawk Box.”
Gottheimer was referring to the growing financial pressure on commuters in New Jersey’s Sussex County, who lack access to mass transit and must bring their cars to essential jobs. New Jersey commuters make up 9.6% of New York City’s workforce, according to the Regional Planning Association. The MTA does not fund Jersey Transit, but oversees mass transit in Connecticut, Long Island, Southeastern New York and New York City.
Every driver to New York City lost, in real experience on the road. The MTA has found that since 2010, the average speed of car travel has decreased by 23%, to 7.1 miles per hour. Smaller streets – a function of increased bike lanes, bus lanes and increased space for outdoor dining after the pandemic – are factors that make workers spend more time in traffic.
A long history of congestion pricing, and often lost
The fight against congestion pricing in New York City has a longer history than you might think. For more than 70 years, local residents who like to complain about traffic and argue about the best way to avoid it have discussed the idea of ​​making life in the city a little less crowded. Nobel Prize-winning economist William Vickrey first proposed the concept of congestion pricing in 1952 – at the time, ironically, for train riders, although he later proposed the same idea for roads. Among elected officials, last week’s surprise turn matched a history of losing battles.
In 2007, New York City Mayor Michael Bloomberg made the case for congestion pricing, but was unable to gain enough support in the nation’s capital. Former Governor Andrew Cuomo first proposed the latest plan in 2017, but political tensions and the financial challenges of the pandemic delayed its adoption. And while expressing support for the start date, Hochul has never been transparent with the public about his concerns, according to a New York Times report on Sunday.
Cuomo has come out against his own congestion pricing plan in recent months, citing the kitchen’s reasons for at least pausing the implementation of what he says remains “the right policy”, from the migrant crisis to crime, homelessness, quality of life and taxes – but above all, he wrote in a New York Post op-ed, because of the recent crime wave in the public transit system and the need to restore passenger confidence in using mass transit.
Cuomo also mentioned fare evasion in the public transit system, which has spiked since the law was passed in 2019. “A top priority,” Wylde said on “Squawk Box,” noting his group has helped the MTA task force to figure it out. solution for tariff evasion. “We need to stop the bleeding of funds from fare evasion, but this will not pay for the capital program (MTA),” he said, which is $50 billion over five years, $15 billion of which comes from congestion pricing. in the legal discourse over the past four years. Fares and toll evasion are estimated to reach $700 million by 2023.
Ideas for where the money could come from in the future ranged across the country, including to the governor’s hometown of Buffalo. Rep. Gottheimer said in the “Squawk Box” interview, “There is $ 600 million that the Buffalo Bills will ask for a new stadium, the owners there … Don’t give it to them to build a new stadium.”
Many opponents see Hochul’s sudden announcement to suspend the policy a month before the election as a political move to ensure reelection and the favor of local politicians in swing districts. It’s nothing new, Wylde said, referencing the commuter tax that was eliminated decades ago when Democratic seats were “up for grabs” in the state legislature. “It’s the same situation,” he said. “This is a suburban reaction and concern about the candidates, and especially, the Democratic candidates. The politics are chronic and there is not much that can be done from the business side.”
Wylde hopes the delay is temporary, and the MTA can move forward with plans to increase funding. Everywhere congestion pricing has been introduced globally, they say, it has worked, from London to Stockholm to Singapore. “There’s opposition coming in, and when people see the results, they’re very happy. Because your cost of doing business goes down so much … Quality of life is better after congestion pricing.”
A former colleague of Vickrey’s congestion pricing pioneer at Columbia University, Dr. Steven Cohen, Senior Vice Dean at Columbia, wrote in a recent post that the unintended consequences and the need to revise the policy have nothing to do with the new venture, but that the city and its commuters can look to big business for proof that the concept is effective.
“There will (of course) be negative impacts that are not anticipated from new policies. Every new policy and product has disadvantages that cannot be predicted without experience. … The point is that we can adjust policies and products to overcome negative impacts. But the price of congestion is the price of congestion will generate revenue for mass transportation and reduce traffic congestion.
Rep. Gottheimer hopes this is the end of the road to the noise, and as far as coming back after the next election has decided, “I don’t think so,” he said. “We’re done. … infinite pause, infinite word is the key here,” he said. “I’m not saying these things are easy. It needs to be fixed, but today we have to focus on the fact that the answer is not just taxing other people.” He thinks the problem is more fundamentally about the management of the MTA.
In the meantime, the congestion is not improving. “We’re in gridlock in the city,” Wylde said. “The governor said he’s concerned about making sure we get it right and don’t do anything to hurt Manhattan’s economy. … We’re going to be better off if we reduce gridlock.”
—By Kaya Ginsky, CNBC News Intern
