Discouraging Driving

U.S. cities have traditionally been supportive of driving as a primary means

of mobility for the population, and charges associated with driving developed
primarily to recoup construction and maintenance costs. More recently,
several cities have focused on the costs of driving in terms of both
environmental degradation and reduced quality of life in the city. Any city
hoping to become more sustainable will need to manage automobile use. To
do this, cities must adopt both carrots and sticks: improving mobility via
other modes, such as mass transit, biking, and walking, while discouraging
automobile use through pricing and regulation. Such a shift in modes must
be part of broader changes in land-use planning to encourage transit-
oriented development that promotes walkable access to local services and
public transit.

This memo focuses on the challenge of discouraging driving, while other

sections of the report look at improving non-automobile mobility and land-
use changes. Typically efforts to discourage driving involve increasing the
cost or reducing the availability of driving inputs such as road space, parking,
or fuel. Although there are a wide range of programs, this document focuses
on several prominent types:

1. Tolls or congestion fees to increase the cost of using a particular road

or set of roads including high-occupancy toll (HOT) lanes
2. Gasoline taxes
3. Parking taxes & subsidies

The Costs of Driving

Americans’ heavy reliance on the automobile undermines efforts by U.S.
cities to become more sustainable. Driving imposes severe environmental
costs that are not reflected in markets, including greenhouse-gas emissions,
local and regional air pollution, runoff from roads, noise pollution, and a
range of other costs associated with the construction of cars and roads.
Taken together, transportation sources accounted for 29 percent of U.S.
greenhouse gas emissions in 2006; what’s more, transportation is the sector
with the fastest-growing emissions, accounting for 47 percent of the increase
since 1990 (EPA). In addition cities that develop to support extensive
automobile use are spread out because they devote additional land to roads
and parking. This spreading has created a vicious circle in which residents
have become even more dependent on cars to travel between their homes
and other destinations within the city. Low-density development, especially
when associated with extensive paving, also reduces the land available for
wildlife habitat and ecosystem functions. And it increases the amount of
energy required for heating and cooling.

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Driving imposes a number of other social and personal costs that reduce
quality of life and can threaten sustainability. Driving poses a significant
safety hazard: U.S. motor vehicle accidents account for roughly 40,000
deaths each year (NHTSA 2009). In addition, driving has a negative impact
on personal health and fitness when compared to other forms of transit that
involve some walking. Road construction and maintenance consume
significant public resources, and while these are partially repaid through tolls
and gasoline taxes, the value of the land used for roads often is not
accounted for. Finally, importing oil has serious geopolitical costs.

Automobile use can be particularly problematic in urban areas, where

density leads to congested streets and reduces quality of life. Traffic
congestion wastes time, both for drivers and also for users of other modes
such as buses that share the roads. These delays reduce the attractiveness
of buses, create logistical issues, and increase operating costs. Furthermore,
each trip on a congested road consumes more fuel and creates more
pollution. Congestion also increases the cost of doing business in the area,
in turn reducing employment and increasing the cost of goods and services.
More subjectively, congestion reduces the quality of life in the congested
area by making walking more difficult and filling streets up with car noises
and fumes.

Mechanisms for Reducing Driving

In short, driving creates a host of negative social and environmental impacts
that are not paid for by the individual driver. The most effective solution to
this problem is to try to reduce the amount of driving, either through
increasing the price or instituting regulatory measures, or both.1

Tolls
Tolls traditionally have been viewed primarily as a revenue source,
particularly to recoup capital investment on roads; only more recently have
they been employed to improve environmental outcomes. Even now, few
cities overtly discourage driving. That said, tolls have been used in some
places to discourage (or at least charge for) driving on a particular stretch of
road, typically due to congestion and traffic bottlenecks. Tolls are efficient
1
Almost all of the issues associated with driving are negative externalities. The cost of
driving to the individual is well below the cost to society. Transit subsidies fall under what
economists refer to as the theory of the second best (Lipsey and Lancaster 1956). If one
good is mispriced in a market, it may be beneficial to also misprice other goods. In this
case, driving is underpriced, so the common approach is to also subsidize transit. The
problem with this approach is that it leads to a general overconsumption of the more general
good, mobility. A city that both underprices driving and subsidizes transit will likely end up
being overly spread out as residents opt for longer commutes than would be efficient.
People will also be less likely to telecommute. From an economists’ point of view, the “first-
best” solution to this problem is to try to reduce the amount of driving towards a more
efficient level, either through price increases or regulatory measures.

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because they discourage bad behavior, whereas other taxes may reduce
efficiency.2
Tolls tend to have a relatively small impact on the overall amount of driving
in a city: they reduce driving in a particular place but spread it to other
areas. The direct environmental benefit of tolls comes through reducing
congestion in the tolled location, since congestion increases the
environmental footprint of a given trip. The environmental implications of
the toll are likely to be a smaller order of magnitude than the time savings to
drivers (Evans 1992; Komanoff 2010). Still, tolls can generate revenue that
can be devoted to improving other modes, so a comprehensive congestion-
pricing program can contribute a great deal to a city’s efforts to become
more sustainable (City of New York 2007).

One relatively recent development is the High Occupancy Toll (HOT) lane, an
evolution of the High Occupancy Vehicle (HOV) lane. An HOV lane is typically
a limited-access lane on a highway that only allows multiple-occupant
vehicles to use the lane at certain peak times. These lanes provide an
incentive for carpooling and allow greater speeds for buses using the
highway. The HOT lane allows single-occupant vehicles to use the lane as
well, but to do so they pay a toll. Typically this program coincides with
adding more lanes to the limited-access program. The idea is that single
drivers in a hurry can opt into the toll, an approach that may be more
politically acceptable than congestion pricing. The environmental benefits of
HOV or HOT lanes come through increasing the speed of buses, reducing
congestion, and encouraging carpooling. From this perspective, a HOT lane
is most likely inferior to an HOV lane, but if the HOT concept is able to
convert more highway lanes, it may be beneficial overall. There are also
technical challenges associated with enforcement, as monitoring the number
of people in a vehicle and tolling can be difficult, especially if the toll is taken
at highway speeds.

Although many cities have tolls on at least some of their major highways,
bridges, and tunnels, few of these are explicitly geared toward reducing
congestion. Further, tolls and HOV/HOT lanes are typically controlled by the
state government or a state-level transportation agency, so a city that
wishes to use them to improve sustainability may be forced to lobby state
government for the change.

2
There is a substantial academic literature advocating the use of tolls or congestion fees to
reduce congestion in crowded areas. Tolls can be seen as Pigouvian taxes. A Pigouvian tax
internalizes an externality, or in other words, charges the user for the difference between
the personal and social costs for an activity (Pigou 1932). Since the charge is tied to a
particular place (and sometimes a particular time), tolls directly address congestion
externalities. They allocate road space more efficiently among drivers. Still, as a result of
the charge, drivers would generally be worse off as a result of the toll (Evans 1992; Glazer
2000).

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That said, a few cities have developed inventive tolls programs to address
congestion:

 Denver uses high-speed tolling systems on several state roads. The

tolls are charged via transponder or a photo of the license plate and
billed via U.S. mail. State highway E-470 has five high-speed toll
plazas, and charges roughly $0.31 per mile (E-470 Public Highway
Authority). I-25 features a HOT (High-Occupancy/ Toll) lane. The HOT
lane is free for cars with multiple occupants or single drivers can pay to
use the lane. The charge varies by time of day, ranging from $0.50 to
$3.50 (Colorado DOT). Both tolling programs are run by state agencies
and revenue is used for operation and maintenance of the roads and
tolling program (Colorado DOT).

 Route 73 outside of Los Angeles has rates that vary based on time of
day. The current rates are $5.50 peak, $4.75 off-peak, and $4.50
weekend to use the entire 73-mile length of the road. The Orange
County Transportation Authority owns and operates express lanes on I-
91 which charge as much as $9.90, or approximately $1 per mile, to
use the lanes. The charge is waived for vehicles with three or more
occupants, except those traveling eastbound from 4-6 p.m. on
weekdays, when the charge is cut in half. The tolling is done on open
road via transponder (Orange County Transportation Authority 2010;
Orange County Transportation Authority).

 New York City has the highest- revenue tolling system in the United
States (Samuel 1999), and the majority of the revenues are redirected
to fund mass transit. The western crossings into Manhattan are all
tolled at $8, or $6 for off-peak EZ-pass users. The Verrazano-Narrows
Bridge has an $11 toll in one direction. Eastern and Northern access
into Manhattan is less consistently tolled due to the political difficulty
of tolling access to Manhattan from the outer Boroughs. Major eastern
crossings including the RFK (Triboro), Whitestone, and Throgs-Neck
bridges and the Brooklyn-Battery and Queens-Midtown tunnels each
have a toll of $5.50 (Metropolitan Transportation Authority 2009).
Michael Bloomberg, the mayor of New York City, also presented plans
to implement a cordon toll in Manhattan in 2007. The toll would have
charged $8 for driving into the central business district between 6 a.m.
and 6 p.m. on a weekday. The proposal failed to make it through the
state assembly in 2008, but it is still an active idea (Lisberg 2009).

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Table 1: Metropolitan Area Tolls:

(Illinois Tollway), (Texas Department of Transportation)

Gasoline Taxes
Like tolls, gasoline taxes have traditionally been used as a revenue
instrument. The national gasoline tax of 18.4 cents per gallon is primarily
devoted to the Highway Trust Fund, which maintains the Interstate Highway
System. All 50 states have a state-level gasoline tax as well, ranging from 8
cents per gallon in Alaska to 32 cents in New York (American Petroleum
Institute 2005). Some states also have local gasoline taxes. For instance
New York and Florida have county-level taxes in addition to state and federal
taxes and Chicago has a surcharge or 12.75 cents per gallon for purchase in
the city.

The effectiveness of a gasoline tax as an instrument to discourage driving

depends the sensitivity of consumer demand for gasoline. If demand is not
sensitive to price, then a tax is relatively effective as a revenue instrument
but relatively ineffective as a means to discourage driving. Conversely, if
demand is sensitive to price, then a gas tax would have a large effect on

5
driving. This sensitivity in turn depends on a several factors. First, the size
of the jurisdiction is very important (Chouinard and Perloff 2004): in a
smaller jurisdiction, it is easier for consumers to move their purchases
outside of the area to avoid the tax. Second, the impact of a gas-tax
increase depends on the time frame (Dahl and Sterner 1991; Hughes, Knittel,
and Sperling 2006). In the short run, consumer response to a price increase
is limited to behavioral changes such as taking transit to work, driving more
conservatively, or reducing the number of discretionary car trips. In the long
run, however, consumers can adjust by buying new cars and relocating to
areas with less automobile dependence. In the very long run, land-use
patterns can change to reflect the increased costs. Econometric analysis of
U.S. gasoline demand has traditionally concluded that a one-percent increase
in gasoline prices would be associated with roughly a 0.24 to 0.31 percent
decrease in consumption (Dahl and Sterner 1991).3 More recent research
finds that driver responsiveness to fuel prices has declined in recent years,
with a one percent increase in prices only causing a decrease of 0.034
percent to 0.077 percent in consumption (Hughes, Knittel, and Sperling
2006). The long-run relationship between price and consumption is more
difficult to estimate because of lack of data and business-cycle effects.4 Dahl
(1991) surveys a number of studies and finds that a one percent increase in
gasoline prices is associated with a decrease in consumption of 0.58 percent
to 1.02 percent.

In sum, cities may have some success using the gas tax to discourage
driving, but the effect will manifest itself over a long time period. Drivers
may undermine the program by buying gas in another jurisdiction; for
example, commuters from the suburbs could opt to buy gas at home instead
of in the city center. Therefore, to be effective, gasoline taxes generally
need to cover larger areas, such as states or metropolitan areas, to have a
discernible impact on driving. Ideally, multiple jurisdictions would work
together to impose higher gas taxes or lobby the state for a statewide
increase. In the very long run, however, the gasoline tax could be a strong
partner to transit- and pedestrian-friendly land-use planning.

Parking
Parking policy is one of the most effective tools a city has to reduce driving
by its residents or to its destinations, although it may not have much effect
3
These are estimates of the demand-price elasticity.

4
Business-cycle movements can obscure the relationship between gasoline consumption
and price. An elasticity estimate tries to estimate the shape of the demand curve by
assuming price changes are due to changes in supply while demand stays fixed, so a time
series of market conditions are observations of different points along a single demand curve.
If the demand curve shifts (e.g. due to changes in the business cycle) during the sample
period, the observations will be biased and won’t accurately represent a single demand
curve.

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on through traffic. Government involvement in parking policy tends to take
three general forms: direct provision of parking on city streets or municipal
lots, land-use or zoning regulations detailing the provision of parking by
businesses or residents, and taxes on private parking. Traditionally parking
policy has sought to provide parking to attract residents and enable
business, and policy designed to discourage driving has been limited to
dense cities where land and road space is limited. As with any policy to
discourage driving, the success of parking restrictions depends on the size of
the charge and the availability of alternative modes of transportation. In
addition to discouraging driving and directly encouraging cities to be more
sustainable, these policies generate revenue that can be used for anything
from street improvements to transit funding.

Municipal Parking – Most cities provide on-street parking and/or municipal

lots at below-market rates. This approach has several drawbacks. First, it
subsidizes driving by under-pricing parking. Second, it spreads out
downtown development, making walking more difficult. Third, it encourages
drivers to searching for free parking, which increases traffic congestion and
emissions. Ideally cities would set higher street parking rates that vary
throughout the day and ensure occupancy rates around 85 percent
(Weinberger, Kaehny, and Rufo 2010). Underpriced street parking is a
pervasive problem in cities, as it leads to congestion and pressure to
maintain parking requirements in zoning laws (Shoup 1997).
San Francisco’s recently adopted SFpark Program sets variable parking rates
based on demand for 6,000 metered spots. The rates will be set using
wireless sensors to maintain availability of on-street parking. Hourly rates
will range from $0.50 to $6.00. The City is slated to launch a two-year pilot
program during the summer of 2010 (San Francisco MTA 2010).

Zoning – Traditionally zoning has been a major enabler of driving because

municipalities have zoned to ensure that free parking is always available for
most uses (Shoup 1997). Most cities adopt minimum parking requirements
so that businesses or venues have enough parking to meet their peak
requirements.5 Such policies are designed to reduce the burden on street
parking that is provided cheaply by the city. Since municipal parking is
purposefully underpriced, however, it is overused. If businesses are not
required to maintain sufficient parking for their own customers, the overflow
will lead to shortages of municipal parking and wasted time and resources as
drivers circle to look for spots. Parking lots impose general costs, however,
since they increase construction costs and force businesses to spread out,
thereby further encouraging driving. Shoup (1997) therefore advocates
increasing the cost of municipal parking rather than mandating overprovision
of parking by businesses.
5
Minimum parking requirements tend to be less common in dense central cities, especially
those that pre-date the automobile, because the city structure is unsuitable to parking
requirements.

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In an effort to curb driving, cities have begun adopting smart-growth or
transit-oriented development policies that reduce requirements or incentives
to provide parking. Such policies include: reducing parking requirements for
developers; optional fees for developers in lieu of providing parking, parking
districts that use the in-lieu fees to fund parking or transit improvements;
allowing shared parking facilities between developments; increasing allowed
building height/density, requirements for developers to provide transit
incentives/amenities, such as bike racks, free transit passes, or rideshare
programs; and specific city plans to coordinate reduced driving (Wilbur Smith
Associates 2007).

Employer Incentives – An effective approach some cities have implemented

is requiring employers to provide employees with the option to accept a cash
payment in lieu of a parking spot at work. The basic logic is that employers
feel the need to provide free parking to employees, but this policy subsidizes
driving with respect to mass transit. By providing the optional cash
payment, employers remove the subsidy for driving and many employees
will shift to carpooling or mass transit. The impact of these policies is greatly
dependent on local factors, but studies show that they can reduce the
number of employees driving to work by anywhere from 19 to 81 percent
(Willson and Shoup 1990). Ninety percent of employees who drive to work
receive employer-paid parking, so this is a major area to explore for cities.

Taxes – [to do: info on the impact of parking taxes, use of revenues]
For example, Manhattan charges a tax of 18.375 percent for rental parking,
though residents can be exempt from 8 percent for their own cars in a long-
term rented space.

Table 3: City Parking Policies:

8
 Parking Regulations Other related regulations

Reduce Min Parking Parking Regulate Max Transit Increased

City Tax Rate Requirements In-Lieu Fees District Parking Programs Density
Austin 8.25% only downtown n n n n Some TOD
Boston none y n n cap in 3 areas n y
Chicago 33% y n n y
Denver none n n n n
Detroit none n n n
Houston 8.25% n n n n y*
Los Angeles 10.60% n n n n
Milwaukee none y n n n
New York 10.375-18.375% y n n y y y
Philadelphia 20% y n n n y*
Portland none only some areas n n y (per sq foot)
San Francisco 25% y n n y y y
Seattle 10% y? y (per sq foot)

Notes:
Austin and Houston parking tax rate is sales tax, 6.25% state and 2% local
Chicago parking tax is a flat fee for certain ranges. 25% City and 8.3% County Tax.
Houston 1.33 parking spaces per bedroom, 5000 sq foot minimum lot until 1999 when the rule was loosened
New York parking tax rate of 10.375%, 8% higher in Manhattan, but residential long-term rentals are exempt from the 8%
Philadelphia appears to have bicycle parking minimums for dwellings.
Portland exempts units from minimum parking requirements if they are within 500 feet of a transit station with 20 min peak service

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[seattle hot lane http://www.wsdot.wa.gov/projects/SR167/HOTLanes/]

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