(Bloomberg) -- New York City’s transit system had planned to start charging motorists a fee to drive into crowded midtown Manhattan starting on June 30. But just a few weeks before implementation, Governor Kathy Hochul said that New York state would “indefinitely pause” the start of the program, citing the effects of inflation on the finances of New Yorkers.
“My focus must be on putting more money back into people’s pockets,” Hochul said. Her critics called the move an election-year political tactic.
The aim of the congestion pricing plan, which would be the first in the US, is to reduce traffic and pollution while raising money for the city’s subways, buses and commuter rails. Officials of the Metropolitan Transportation Authority had said that the program would cut the number of daily vehicles entering the district by as much as 20%.
1. What’s the idea behind congestion pricing?
Economists call it a demand-side solution: Jack up the price of something and demand will fall — producing, in this case, clearer streets and cleaner air. Doing that while also trying to maximize revenue makes things a little tricky. Charge drivers too little, and you’ll make money but still have jams. Charge too much, and you risk turning off too many drivers. That’s great if you’re going for a bike- and pedestrian-friendly city, but not so hot if you really need the cash, too.
2. Where is congestion pricing already in place?
Singapore has charged since 1975, Stockholm made a trial run permanent in 2007, and Milan’s Area C began in 2012. Fees have been in effect in central London since 2003.
3. How would New York’s system work?
The fee would apply once a day to cars and trucks driving into Manhattan’s central business district, which starts at 60th Street and includes midtown office buildings, Times Square, the Theater District and the World Trade Center. Passengers in taxis and other for-hire vehicles would pay a lower fee for each ride. The MTA, which runs New York City’s transit network, the biggest in the US, would implement the toll program.
4. How much would it cost?
The new toll to enter central Manhattan would be $15 for passenger cars during peak hours, with higher rates for vehicles without an E-ZPass transponder. For context, a rush-hour commuter from Princeton, New Jersey, to central Manhattan already pays roughly $30 to $35 in tolls, round-trip, to use the New Jersey Turnpike and a Hudson River bridge or tunnel.
However, the plan would give credits to drivers paying tolls on certain tunnels to offset the new fee. Some motorists would get discounts. For the first five years of the program, E-ZPass drivers earning less than $50,000 a year would get a 25% discount starting on their 11th trip within a calendar month. Car-owning residents of the central business district earning less than $60,000 would get a credit on their state taxes.
Taxi passengers would pay $1.25 per trip, while customers of for-hire vehicle services such as Uber and Lyft would pay $2.50.
5. How much money would this bring in?
Officials estimate the new toll would raise $1 billion a year. The plan was for the MTA to borrow against that amount to generate $15 billion through bond sales. That money would then pay for transit infrastructure, including extending the Second Avenue subway line to Harlem, modernizing signals and making subway stations accessible by adding and updating escalators and elevators. New York’s comptroller said in early May that the MTA faced a potential $25 billion shortfall for future infrastructure upgrades to the subway system.
Congestion pricing was also expected to turn some drivers into users of MTA’s system of subways, buses and commuter rails. That would provide a welcome boost to usage. The Covid pandemic decimated MTA’s ridership, and it’s struggled to match 2019 levels as remote work remains attractive for many employees. In 2026, system-wide ridership may still be only 80% of pre-pandemic levels, the MTA estimates.
Hochul, the New York governor, said after the pause announcement that the state was exploring alternative funding sources for the MTA.
6. Who’s a fan of the plan? Who’s not?
Environmentalists, urban planners and transit advocates love congestion pricing. But some politicians have pushed back against New York City’s plan. US Representatives Nicole Malliotakis, a Republican from the city’s borough of Staten Island, and Josh Gottheimer, a Democrat of New Jersey, say congestion pricing may increase pollution and traffic in their districts while adding another toll for their constituents.
New Jersey Governor Phil Murphy has filed a legal challenge seeking a longer environmental analysis of the program. But the MTA said in April that its latest submission to the federal government included money for New Jersey to help offset any pollution problems related to the new toll. Those funds may help to resolve the legal fight. Staten Island Borough President Vito Fossella, the United Federation of Teachers and a group of residents have also filed suit to delay or halt the new tolls.
Murphy promptly thanked Hochul for pausing the implementation of the program. “Although we have had a difference of opinion with our colleagues in New York on congestion pricing implementation,” Murphy said in a written statement, “we have always had a shared vision for growing our regional economy, investing in infrastructure, protecting our environment, and creating good-paying jobs on both sides of the Hudson River. We fully embrace the notion that the success of Manhattan is inextricably linked to the prosperity of the entire Tri-State Area.”
--With assistance from Skylar Woodhouse.
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