New York City within two years will become the first American city to impose congestion pricing toll system on passenger and commercial vehicles that enter a geographic area.  The toll perimeter will encompass the southern half of Manhattan, from 60th street to the southern tip at the New York Harbor.

“Congestion pricing” has long been a pet project of environmental groups as a means to mitigate air pollution by taxing the use of automobiles and trucks in a geographic area in order to reduce their number and the exhaust that comes with them. In the unique case of New York City, its large mass transit system of subways, buses and commuter trains would allow at least some travelers to switch from their cars.

The first serious attempt at congestion tolls for New York City was proposed in 2007, but went nowhere. A dozen years later, the state made it a reality to begin in 2021.

New York will be one of a handful of international cities that will have a congestion tolling system, others of which include London, Singapore, Stockholm and Milan. Studies have shown that the systems in London and Singapore, for example, reduced passenger vehicles by 20 and 24 percent, respectively.

The reason for imposing this new congestion-tolling program in New York is simple:  more cash.

This new tolling system that will surround midtown and downtown Manhattan was proposed this year by New York Governor Andrew Cuomo and approved by the State Legislature earlier this month. The actual cost of the tolls was nowhere included in the plan. Rather, an existing public authority is tasked to develop the system and figure out the necessary toll amounts on the estimated net number of cars and trucks in order to generate $1 billion in annual revenue. The toll revenue generated, in turn, will be used to pay debt service for up to $15 billion in new borrowing to fund the capital costs of the mass transit system that serves the greater New York metropolitan region.

Manhattan is one of five “boroughs” that constitute New York City, only one of which –the Bronx—is on the mainland. Manhattan and Staten Island are their own islands, while Brooklyn and Queens comprise the western end of Long Island. This unique geography of New York City necessitates a vast array of bridges and tunnels, most of which currently charge expensive tolls that subsidize the cost of the City’s mass transit. In effect, New York already has congestion pricing for its tunnels and most bridges that induces greater use of commuter trains and subways.

Still, Manhattan Island is a busy, crowded place, as it is home to the famous City skyline, Wall Street, Broadway, Times Square, Central Park, world-renown museums and restaurants, and countless other businesses and tourist attractions. Manhattan is growing so much that the skyline itself has changed, and is changing, with more buildings rivaling the famous 102-story Empire State Building.

It’s all well and good if fewer vehicles eventually clog Manhattan’s increasingly crowded streets, and the air becomes somewhat cleaner as a result. But these new tolls were not done for the ostensible environmental benefits. This is a massive cash grab by the state to fund the maintenance and upkeep of the City’s extensive subway system and commuter trains to its suburbs. The subways are in dire need of improvement, from needing new cars and signals to track replacement and more.

It’s expensive to live and work in New York City and its metropolitan area. The congestion pricing toll system will make it much more so, especially for working and middle class families.  To generate an annual take of $1 billion in toll revenue, estimates have cars paying nearly $12 to enter the congestion zone perimeter in Manhattan, while commercial trucks would pay twice that amount, over $25 per entry. A passenger car entering the zone for 250 days per year would pay an aggregate of $3,000 for doing so, while a truck owner would pay more than $6,000 annually. Estimates aside, the details on the tolling scheme, including how much, at what times of day, and on which types of vehicles, will be figured out later by the bureaucrats.

Basic economics teaches that increasing the price of something will reduce its use, depending on its elasticity, that is, the degree to which purchasers of the good or service are dependent on it and thus vulnerable to price hikes. Toll expenses to commute to work by car would be inelastic items if the commuter cannot easily switch to an alternative means of travel, like mass transit.

The hope among politicians in New York is that congestion tolling will be inelastic enough such that while some travelers will forgo their autos and use mass transit to relieve congestion, the overwhelming majority will continue using their vehicles to ensure the annual billion dollars in new revenue materializes.

Time will tell about how large a cash cow the congestion pricing will be for New York City, and whether it will satisfy the voracious financial appetite of a mass transit system in disrepair. Less pollution and congestion? Sure, but those are fig leaf justifications. Imposing tolls on the masses was ultimately done for the same reason that famous criminal Willie Sutton robbed banks: “that’s where the money is.”

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