2.3 - Pricing strategies

Introduction

Pricing involves various transport price adjustments to encourage more efficient travel patterns.

Commuter financial incentives

Commuter financial incentives include several types of incentives that encourage alternative commute modes.

• Parking cash out means that commuters who are offered subsidised parking are also offered the cash equivalent if they use alternative travel modes.
• Travel allowances are a financial payment provided to employees instead of parking subsidies. Commuters can use this money to pay for parking or for another travel mode.
• Public transport and rideshare benefits are free or discounted public transport fares provided to employees.
• Reduced employee parking subsidies means that commuters who drive must pay some or all of their parking costs (parking pricing).
• Company travel reimbursement policies that reimburse cycle or public transport mileage for business trips when these modes are comparable in speed to driving, rather than only reimbursing automobile mileage.

Improved transport charging mechanisms

A variety of methods can be used to collect transport charges. They differ significantly in terms of their costs (fee collection typically absorbs 10-30 percent of total revenues), convenience, and price adjustability (prices that can vary by time, location, vehicle type, or other factors).

Consumers generally prefer pricing techniques that are easy to understand, convenient and quick to use, accept a variety of denominations (coins, bills, credit cards and prepaid vouchers), and allows them to pay for just the amount of vehicle travel or parking they use. Many of the concerns and objections to pricing relate to the methods used to collect fees.

Road tolls

Tolls are a common way to fund and bring forward road infrastructure improvements. Such tolls are a fee-for-service, with revenues used to offset project costs. This is considered more equitable and economically efficient than other roadway improvement funding options, which cause non-users to help pay for improvements. Tolling is often proposed in conjunction with private sector involvement (ie road facilities built by private companies and funded by tolls). Tolls are usually set to maximize revenues with success measured in terms of project cost recovery.

In New Zealand, road tolling is allowed for new roads, part of a new road, or an existing road or part of an existing road that is physically or operationally integral to the new road, and where there is available to road users a feasible, un-tolled, alternative route. The tolling revenue can only be applied to the new road or part of it. A demand management plan may be required for any proposed road tolling scheme. See sections 46 and 48 of the Land Transport Management Act (LTMA).

Road tolling under the current New Zealand provisions is unlikely to have major overall TDM effects because it can only be applied to a project that will increase road capacity and, therefore, encourage private vehicle use, rather than discourage it. Road tolling can have equity impacts because the road facility is only made available to those road users that can afford to pay.

Other road pricing strategies

The LTMA does not provide for charging for use of existing roads, which has been used for both TDM and revenue purposes in other countries. The New Zealand government is currently investigating the feasibility and desirability of introducing some form of congestion pricing.

• Congestion pricing refers to road pricing used as a demand management strategy to reduce congestion. It is a type of responsive pricing, meaning that it is intended to change consumption patterns. Congestion pricing often involves time-variable tolls, with higher charges during congested periods and lower or no charges when roads are un-congested.
• Cordon tolls are fees paid by motorists to drive in a particular area, usually a city centre. Area tolls apply to travel within an area. Cordon or area tolls can involve congestion pricing.
• High occupancy toll (HOT) lanes are high occupancy vehicle (HOV) lanes that also allow access to low occupancy vehicles if drivers pay a toll. This is a type of managed lane. This allows more vehicles to use HOV lanes while maintaining an incentive for mode shifting, and raises revenue.