Monday Links

Public Infrastructure Consumption Pricing, A Failing Strategy

Over the weekend a report came out that detailed how much traffic over Bay Area bridges has fallen in the last 6 months as a result of unemployment and an increase in people using public transportation. On the latter, this spike was driven by the sky high gasoline prices of last summer and even as gas prices fell riders stayed with public transit for convenience benefits. As a result of declining bridge toll revenue, bridge operating authorities are convinced that yet another toll increase, and adding a toll for carpool lanes, is necessary to make up for declining revenues.

And the situation has not improved – making the need for toll hikes for autos, trucks and other multiple-axle vehicles, and carpools even more urgent; and a toll for carpools all but inevitable, said Randy Rentschler, spokesman for the Metropolitan Transportation Commission.

[From Tolls on Bay Area bridges likely to increase]

All of this is made even more ironic by the fact that a portion of bridge tolls are used to support mass transit, which means that as more people use mass transit and decreased car traffic on bridges reduces revenue further, the need to raise bridget tolls to compensate for the lost revenue, coupled with the inability of mass transit to support itself, is made more pressing.

A few weeks ago East Bay Municipal Utility District (EBMUD), the water authority for the counties on the other side of the bay, revealed that they were proposing an 8.7% increase in household water rates as a result of water conservation efforts and the slowdown in construction which deprives the authority of connection fees and increased consumption. So essentially the argument is that you did the right thing and used less water so now your rates have to increase.

My local garbage rates are going up as a consequence of people recycling more, which necessitates the renovation of a large garbage transit station and building of a new recycling center… which of course means that as people generate less garbage they have to pay more for it to be hauled away.

These three examples neatly sum up why consumption pricing for public utility services is a failing strategy. Variable costs for infrastructure services are not large enough to drive down overall costs when consumption of said services decreases, meaning it’s inevitable that fixed costs, the bulk of operational costs for bridges and water supplies, will have to be covered by sharply higher rates for consumers.

The issue of bridge tolls also reveals how conflating two unrelated issues, in this case mass transit and bridge operational spending, under the generic umbrella of transportation results in a distortion of costs to the actual consumer. As more people use mass transit the result is that the decreasing number of people who use the bridges end up paying more. This is the equivalent of a tax that singles out a specific subset of the population and it is unfair and ultimately self-defeating, as we see with water conservation efforts and homeowners water bills.

Proponents will say that these added costs serve as incentives which drive a greater proportion of the population to desired outcomes, but I counter that this is a red herring because the increased costs are carried disproportionately by those unable to serve the social agenda and that is simply punitive. Carrots work better than sticks.