Pricing Methods
Techniques for Collecting Road, Parking and Vehicle Fees
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Victoria Transport Policy Institute
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Updated 4 November 2008
This chapter describes and compares methods of collecting road tolls, parking fees and mileage charges. Newer electronic pricing methods tend to be more convenient and cost effective to implement, and can incorporate more variables, such as time, location and vehicle type. This can help overcome many objections to direct user charges and provide more marginal pricing.
Several TDM strategies involve pricing.
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Comprehensive Market Reforms
A variety of methods can be used to collect transportation pricing fees. They differ significantly in terms of their costs (fee collection typically absorbs 10-30% 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, accepts 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. For example:
· Road pricing systems require vehicles to stop at a tollbooth.
· Many systems require specific denominations (coins or bills), and so are frustrating and slow to use.
· Many parking systems require motorists to predict how long they will be parked and pay based on the longest period of time they may be parked. In practice, this is often difficult, forcing motorists to pay for time they don’t use. For example, a one-hour meeting often requires parking for 70 or 80 minutes to accommodate time to arrive and leave. Some systems only sell one or two-hour blocks, so motorists must pay for two hours for a one-hour meeting, or face the risk of a fine. Yet, the meeting may be canceled or end early, so the motorist pays far more than they really needed.
· Many payment systems cannot easily handle multiple price structures or discounts.
· Enforcement often seems arbitrary and excessive (particularly for parking pricing). Motorists who pay for parking may feel taken advantage of if others park for free either due to special privileges or knowledge of free parking options.
Efficient and fair pricing requires that user fees reflect the marginal costs imposed by each individual trip as closely as possible (Market Principles). No pricing method is perfect. In general, pricing that is more adjustable and more convenient tends to have higher implementation costs. This requires trade-offs between transaction costs and pricing accuracy. Newer electronic systems can be highly accurate, very convenient, and are increasingly cost effective. A smart card is an electronic payment system that allows fast and seamless payments for transit use, roads, parking, bicycle rentals and other conveniences not yet explored. Some smart cards employ contactless technology which automatically deducts the correct payment value when a motorist or transit patron passes by a sensor, even if the card is in a purse or pocket. Some systems also allow payment by mobile telephone.
Road Pricing means that vehicle users are charged a direct fee (toll) for driving on a particular road or bridge, or in a particular area (a “cordon”). For more information see the “Value Pricing and Congestion Pricing Website” (www.valuepricing.org), the “ETTM Electronic Toll Collection and Traffic Management Website” (www.ettm.com) and the “European Transport Pricing Initiative” (www.Transport-Pricing.Net). Pickford and Blythe (2006) provide detailed technical analysis of electronic pricing options.
Motorist must purchase a pass to enter a particular area (a cordon), such as a city or a central business district. Passes may be specific to a particular type of vehicle or a particular time. Some systems only require passes during congested periods, such as weekday mornings. Free or discounted passes may be provided to area residents. Passes may be sold directly by government agencies or by retail stores. They tend to be inexpensive to implement and easy to use, but prices cannot reflect how much driving a vehicle does within an area, or other factors, and so are not marginal.
|
Advantages |
Disadvantages |
Applications |
|
Cheap and quick to implement. Convenient to use. |
Limited price adjustability. Not marginal. |
Cordon pricing. Unlimited use road or bridge fees. |
Conventional tollbooths located on a roadway require motorists to stop to pay with money or tokens. Most have attendants, although some have automatic coin collection systems. These tend to have high operating costs, are inconvenient to motorists, and increase traffic congestion and local air pollution. Prices can vary by time and vehicle type, but tollbooths are generally spaced several miles apart so they cannot reflect fine mileage gradations. They are generally only applicable on bridges, grade separated highways or cordon entrances.
|
Advantages |
Disadvantages |
Applications |
|
Many are in place. Moderate price adjustability. |
High cost. Requires vehicles to stop. |
Major bridges, highways and cordons. |
Electronic toll collection refers to automated systems that measure and bill motorists. A small transponder is placed inside the vehicle, which is counted each time the vehicle passes a roadside sensor. The tolling agency maintains an account for each vehicle, which is debited with each use of the roadway. Another system uses a “smart card” charged with a certain dollar value that is placed inside the transponder. Each time the vehicle passes a roadside beacon the appropriate fee is subtracted. This system protects motorists’ privacy, since there is no record of when or where the vehicle is driven.
These systems tend to have high implementation costs, and moderate to high operating costs. They have economies of scale, so unit costs decline significantly as the system expands. They can be used on any roadway, not just grade separated highways. It is possible to have many roadside sensors, allowing fine gradations of both mileage and time rates.
|
Advantages |
Disadvantages |
Applications |
|
High price adjustability. User convenience. |
High implementation costs. Some privacy concerns. |
Any road system. |
This system tracks vehicles as they pass a point in the roadway by automatically scanning the license plate. This information is used to generate a bill that is either subtracted from the vehicle’s account, or mailed as an invoice.
These systems tend to have high implementation costs, and moderate to high operating costs. They tend to have economies of scale, so unit costs decline significantly as the system expands. They can be used on any roadway, not just grade separated highways. It is possible to have several cameras, allowing moderate gradations of mileage, and fine gradations of time.
|
Advantages |
Disadvantages |
Applications |
|
High price adjustability. User convenience. |
High implementation costs. Some privacy concerns. |
Major bridges, highways and cordons. |
The GPS (Global Positioning System) based pricing uses a small electronic transponder to track an object’s geographic location (Forkenbrock, 2000; CFIT, 2002). Transponders must be securely installed and wired into vehicles. Transponder installation currently costs $300-500 per vehicle, about half for equipment and half for labor. Equipment prices are declining, and within a few years many new cars will have factory-installed GPS systems. GPS-based services are marketed to motorists for communication, navigation and emergency response. For example, GM’s OnStar service (www.onstar.com) provides hands-free cellular telephone and Internet access, directional assistance, remote power door unlock, theft recovery, emergency roadside assistance and a panic button. RoadRemote.com (www.roadremote.com) offers similar services.
In 2001, the Oregon Road User Fee Task Force (www.odot.state.or.us/ruftf), and research supported by several state transportation agencies (Forkenbrock and Kuhl, 2002), began investigating possible ways to replace the state fuel tax as a road user fees, in anticipation of more fuel efficient and alternative fuel vehicles. The Task Force is considering a system in which new vehicles will be equipped with devices that automatically report the amount of miles driven within the state each time it is refueled, with the results used to calculate a mileage fee (Kim, Porter and Wurl, 2002).
GPS-Based pricing can incorporate virtually any pricing factor, including factors related to driver, vehicle, time and location of vehicle travel. As a result, it can be most accurate pricing system. GPS-Based Pricing raises privacy concerns, since they record vehicle’s travel time and location, although these can be addressed in system design, for example, by purging this data from computers once fees are calculated, and passing privacy laws that limit access to the data.
|
Advantages |
Disadvantages |
Applications |
|
Highest price adjustability. User convenience. |
High implementation costs. Privacy concerns. |
Any road system with comprehensive pricing. |
The table below compares road pricing methods.
Table
1 Summary of Road Pricing
Options
|
Type |
Description |
Equipment
Costs |
Operating
Costs |
User
Inconvenience |
Price
Adjustability |
|
Pass |
Motorists must purchase a pass to enter a cordoned area. |
Low |
Low |
Medium |
Poor to medium. |
|
Toll Booths |
Motorists stop and pay at a booth. |
High |
High |
High |
Medium to high. |
|
Electronic Tolling |
An electronic system bills users as they pass a point in the road system. |
High |
Medium |
Low |
High |
|
Optical Vehicle Recognition |
An optical system bills users as they pass a point in the road system. |
High |
Medium |
Low |
High |
|
GPS |
GPS is used to track vehicle location. Data are automatically transmitted to a central computer that bills users. |
High |
Medium |
Low |
High |
This section describes common methods of collecting Parking Pricing fees. For more information see FHWA (2007), the “Electronic Parking Buyers Guide” published by the International Parking Institute, available at www.parking.org, and the Parking Industry Guide at www.expo1000.com/parking.
Parker purchases a pass (card, sticker or decal) that is displayed on the vehicle. Passes can be coded for different times or areas (e.g., parking lot A, weekday only, etc.). They have low implementation and operating costs. Expenses include printing and selling passes, signs and enforcement, which typically total about $50 annually per space. They are most suitable for long-term users (monthly or annual passes) for employees and residents, although they are sometimes used to collect daily parking fees. Rates can be adjusted when passes are purchased, but it is difficult to modify rates frequently, or to have many different rate categories.
|
Advantages |
Disadvantages |
Applications |
|
Cheap and quick to implement. Convenient to use. |
Limited price adjustability. |
Long-term (monthly or annual) parking fees. |
Parker prepays meters. Mechanical meters only accept specific coins. Electronic meters are now available that accept credit/debit cards, can have different rates for different times, and have occupancy sensors that automatically reset when a vehicle leaves the stall. They also tend to be significantly more reliable than mechanical meters. Costs include meters ($500-1,000 each), maintenance and repairs, revenue collection, and enforcement. These meters use more sidewalk space than other parking systems, and are considered unattractive. In typical applications they require that coins be collected two to three times a week. They are most suitable for short-term parking in busy areas.
|
Advantages |
Disadvantages |
Applications |
|
Well established. |
High costs Limited payment options. Users must predict how long they will park. |
Short-term parking. |
Parker prepays by inserting the appropriate payment into the appropriate slot in a secure box. Is inconvenient to users, who must predict how long they will park, use the correct combination of bills and coins, and receive no receipt. Costs include pay boxes ($500-1,500 each, which can serve 10-100 stalls), maintenance and repairs, revenue collection, and enforcement. This system is most suitable for off-street parking lots with low turnover. It is being replaced by other pricing methods that are more convenient to users.
|
Advantages |
Disadvantages |
Applications |
|
Low capital costs. |
Limited payment options. Users must predict how long they will park. |
Long-term (2 hr +), low-use parking facilities. |
Parker prepays a printer, which produces a time-stamped ticket that is displayed in the vehicle window. One printer can serve up to 75 off-street stalls, or about a dozen on-street spaces. Printers need to be close to parking stalls (within about 100 feet), and sufficient in number to handle peak demand. More printers are needed for parking lots with many vehicles arriving at the same time. Coin-only printers are relatively inexpensive ($1,000-2,000 per unit), but are inconvenient to users, since they require specific coins. Printers that also accept bills and credit cards (some even give change) are more expensive ($5,000-10,000 per unit) but more convenient to users. Costs include printers, maintenance and repairs, revenue collection, and enforcement. Electronic versions can be programmed for variable rates (such as lower rates in the evening and weekends). They are suitable for on- and off-street parking with 20+ stalls in one area. This appears to be the most common pricing system used by commercial parking companies due to its relatively low costs and moderate user convenience.
|
Advantages |
Disadvantages |
Applications |
|
Good price adjustability. |
High cost. Users must predict how long they will park. |
Most on- and off-street parking |
Parker prepays an electronic meter for a particular parking space (each stall is numbered). Enforcement officer downloads reports indicating which stalls are paid. One meter can serve up to 75 off-street stalls, or about a dozen on-street spaces. Meters need to be close to parking stalls (within about 100 feet), and sufficient in number to handle peak demand. Transaction can take up to a minute (particularly for users unfamiliar with the system), so line-ups can develop if several motorists arrive at the same time. More sophisticated meters can be networked so users can pay for additional time using a credit or debit card account at a meter several blocks away from where they parked, or using the Internet or telephone messaging, allowing motorists to pay from an in-vehicle telematic system or a cellular telephone. Meters can accept coins, bills, credit cards or special prepaid value cards. Costs include meters ($10,000 to $25,000 each), maintenance and repairs, revenue collection, and enforcement. Variable rates are easy to program. They are suitable for on- and off-street parking with 20+ stalls in one area.
|
Advantages |
Disadvantages |
Applications |
|
Very good price adjustability. |
High cost. |
Most on- and off-street parking |
Parker prepays for a certain value of parking credits (such as $10). Motorists insert the card in a meter when they park and remove it when they leave, with the time value automatically deducted.
|
Advantages |
Disadvantages |
Applications |
|
Allows motorists to pay for just the amount of time they will be parked. Avoids money. |
Requires new meters. |
Most on- and off-street parking. |
Parker prepays for a certain number of minutes worth of parking in a small meter (such as $10 for 600 minutes). The meter is turned on and hung from the rear-view mirror when the vehicle is parked in a designated stall (such as on-street parking spaces, or municipal off-street parking). Motorists only pay for the minutes they park. Can be used in conjunction with other parking pricing strategies.
|
Advantages |
Disadvantages |
Applications |
|
Allows motorists to pay for just the amount of time they will be parked. |
Limited price adjustability. |
As a consumer option for on-street parking. |
Parkers wave their mobile telephone in front of a contactless reader on parking meters. Can support various payment options, such as prepayment for a certain time period, or payment for the amount of time the vehicle is parked, until the telephone is again waved near the reader or a text message is sent by the motorist to a special telephone number.
|
Advantages |
Disadvantages |
Applications |
|
Convenient to user. Transactions are recorded. |
Requires new equipment. |
For new and upgraded systems. |
Parkers pay an attendant at the parking facility. At facilities with access control, parkers collect a time-stamped ticket when entering, and pay at a tollbooth when existing, based on how long they parked. At facilities without access control, attendant tracks each vehicle as it enters, and either collects a prepayment, or charges on exit. Typical costs range from $200 to $400 annually per space. Due to high labor costs, this is only suitable for large (200+) off-street parking facilities during peak hours. During off-peak periods such facilities may use other payment systems, such as Pay Box or Pay-and-Display.
|
Advantages |
Disadvantages |
Applications |
|
Good price adjustability. Provides security. |
High cost. |
Large off-street parking facilities during peak hours. |
Parker takes a ticket with the time recorded on a magnetic stripe to raise the gate, before entering the parking lot (motorists who have a long-term lease use a card to raise the gate, and so do not need to collect a ticket). When ready to leave, the parker inserts the ticket into an automated Pay-on-Foot station (similar to a bank machine), and pays with cash or credit card. This validates the ticket. They then have fifteen minutes to retrieve their vehicle and drive through an automated exit gate, which rises after the validated ticket is inserted. A pullout space is provided adjacent to the exit station for customers who forget to validate their ticket before driving to the gate. Typical costs range from $200 to $400 annually per space. This system is suitable for large off-street parking facilities.
|
Advantages |
Disadvantages |
Applications |
|
Good price adjustability. Convenient to use. |
High costs. |
Large off-street parking facilities. |
An attendant (valet) parks vehicles at an off-street lot, and returns them on demand. Motorist pays on pickup. Because attendants can move vehicles around and park in aisles, a larger number of vehicles to be stored in a given area than if drivers self-park. Typical costs range from $300 to $600 annually per space. Due to high labor costs, this is only suitable for relatively large off-street parking facilities during peak hours. During off-peak periods such facilities may use other payment systems, such as Pay Box or Pay-and-Display.
|
Advantages |
Disadvantages |
Applications |
|
Good price adjustability. Provides security. Convenient to use. |
High cost. |
Large parking lots during peak periods. |
Parkers preregister, and either prepay or authorize automatic credit/debit card payments. Electronic “Smart” cards or optical License Plate Recognition system tracks vehicles entering and leaving off-street parking facilities. Automatically charges users account for the amount of time vehicles are parked, and identifies vehicles that are not registered. Typical costs range from $200 to $400 annually per space. May be used in conjunction with other payment systems. This system is suitable for large off-street parking facilities with many regular customers.
|
Advantages |
Disadvantages |
Applications |
|
Good price adjustability. Convenient to use. |
High costs. |
Large off-street parking facilities. |
The table below compares parking pricing methods.
Table 2 Summary of Parking Pricing Options
|
Type |
Description |
Equipment
Costs |
Operating
Costs |
User
Inconvenience |
Price
Adjustability |
|
Pass |
Parkers purchase and display a pass. Common for leased parking. |
Very low |
Medium |
Medium |
Poor to medium. |