Why Chicago Needs a Congestion Tax for Driving

By adding a congestion fee to driving, Chicago can significantly reduce the economic and environmental costs of congestion, in addition to encouraging more sustainable methods of commuting and providing a revenue stream for enhancing alternative transportation options. 

According to the 2011 Urban Mobility Report, the lost time and extra fuel consumption caused by traffic congestion cost the American economy $101 billion in 2010. In the Chicago metropolitan area alone, this cost amounted to $8.2 billion, giving Chicago the distinction of having the highest per-commuter cost in the nation. These costs are only expected to grow in the future as the amount of cars on the road continues to increase. 

Unfortunately the historical solution of simply expanding roadways to address congestion is prohibitively expensive during this time of fiscal austerity, and, in densely built up cities like Chicago, often-times physically impossible. In order to address congestion in these situations, the demand placed on roadways needs to decrease to levels where traffic can flow efficiently again. 

Congestion pricing at its core is simply adding a fee to driving within a certain area at a certain time. By making driving more expensive, many commuters will opt for alternative means of transportation, taking their cars off the road, thereby reducing congestion. Internationally, many cities have adopted congestion pricing schemes to great positive effect. 

Singapore implemented the world’s first major congestion pricing scheme in 1975. Since then, other major cities such London and Stockholm have all implemented similar schemes, each accomplishing its stated goal of significantly reducing congestion within the pricing zone. The U.S. Department of Transportation (DoT) found that on average congestion pricing reduced traffic by 10-30 percent, “virtually eliminating” congestion in certain instances. Additionally, the levels of air pollutants such as carbon dioxide, nitrogen oxides, and particulates all declined by up to 27 percent. Each of these systems has also been a significant revenue generator for its respective city. 

Although the 2012 Budget Options Report from the Chicago Inspector General’s Office contained a detailed outline of a toll-based congestion pricing scheme for central Chicago, Mayor Rahm Emmanuel choose not to include this recommendation in his budget plan. Rather he opted to implement a “congestion fee” levied as a tax on downtown parking garage rates. The effectiveness of this plan is questionable though, as Chicago already has the fourth-highest median daily parking rate in the nation, and no other successful congestion pricing scheme has used similar measures to accomplish its goals. 

Analysis 

By using the bare costs of congestion in lost time and wasted fuel, and assuming a decline of traffic between 10 to 30 percent, mirroring the average observed internationally, the implementation of congestion pricing would lower the annual economic cost of congestion by between $600 million and $1.8 billion in Chicago. This figure is a significant underestimate, as it does not include the additional benefits realized by reducing emissions and the other negative externalities associated with driving. 

According to the congestion pricing system outlined in the Inspector General’s Report, initial capital costs would be about $300 million. Assuming a 20 percent reduction in vehicle volume, with a quarter of all vehicles exempt from the congestion fee, then annual revenue would be about $375 million. 

Next Steps 

The City of Chicago should perform studies to determine what the elasticity of driving is and what prices are necessary to achieve specific declines in driving. Concurrently, the optimal decline in vehicle volume necessary to eliminate or significantly reduce congestion should be determined. Additionally, the City of Chicago should petition the State of Illinois for permission to implement tolls on interstates and state highways within Chicago. Once the optimal congestion fee is known and permission to toll on state roads is granted, a yearlong trial congestion pricing program should be initiated (as in Stockholm) to record real-time data and gauge success.  After the trail period, the congestion pricing program should be tweaked to iron out any issues that emerged, and should then be implemented on a permanent basis.