🌆 NYC Congestion Pricing: Current Proposals & Our Recommendations
How is NYC's for-hire transportation (aka TLC) market impacted by congestion pricing plans? We analyze current proposals and share our thoughts
AutoMarketplace.com NYC covers the NYC for-hire transportation industry and general automotive-mobility news. Check out AutoMarketplace on YouTube ▶️
There’s been a lot of discussions about NYC’s congestion pricing plan, formally called the Central Business District Tolling Program, as more specific proposals have come out. NYC congestion pricing legislation, originally passed by New York State lawmakers in 2019, has two primary objectives.
🚇🚌 Increase public transport use by raising money to fund at least $15 billion 💰 of additional capital investments for the Metropolitan Transportation Authority (MTA). The MTA is North America's largest transportation network and comprises the nation’s largest bus fleet and more subway and commuter rail cars than all other U.S. transit systems combined. The MTA's operating agencies are MTA New York City Transit, MTA Bus, Long Island Rail Road, Metro-North Railroad, and MTA Bridges and Tunnels.
🚦 Reduce traffic congestion (& pollution) in Manhattan’s Central Business District (CBD), defined as Manhattan streets and avenues below 60th Street. Reducing vehicle congestion will enable more “car free” 🚶♂️ streetscapes and promote the use of other transport options, such as bikes 🚴♀️.
Charging drivers a toll to enter a busy area of a city has never been done in America, although other global cities such as London, Singapore and Stockholm have implemented such programs. In this piece, we’ll occasionally reference London’s congestion pricing system, introduced in 2003, which is a good analog for NYC.
As expected, a lot of people and organizations have a lot of things to say ahead of public hearings beginning this Thursday, August 25th and running to August 31st. (To sign up and/or submit comments for those hearings click 👉 here).
While there are a lot of different congestion pricing discussion points from thoughts on charging lower income New Yorkers, impacts on eCommerce deliveries, complaints from New Jersey commuters to fears of increased traffic on roads outside of the congestion zone, we want to specifically focus on congestion pricing’s potential impact on the NYC for-hire transportation industry (aka TLC industry).
Before we get into the specific congestion tolling scenarios being proposed, we wanted to briefly overview how the MTA is structured and who the key congestion pricing decision makers are.
🔑 Decision Makers
The MTA is governed by a 23 member Board. Board members are nominated by New York’s governor, with four recommended by NYC’s mayor and one each by the county executives of Nassau, Suffolk, Westchester, Dutchess*, Orange*, Rockland*, and Putnam* counties (*Note: the members representing the latter four cast one collective vote). The Board also has six rotating non-voting seats held by representatives of organized labor and the Permanent Citizens Advisory Committee (PCAC).
The MTA is currently led by John (“Janno”) Lieber, who was appointed by New York Governor Kathy Hochul in January. Mr. Lieber previously served as President of MTA Construction & Development, which is responsible for planning, developing, and delivering capital projects across the MTA.
In late July, the MTA appointed five of six members of the Traffic Mobility Review Board (TMRB), a key step before officially implementing congestion tolling. NYC Mayor Eric Adams also nominated John Samuelsen to the TMRB. Mr. Samuelson serves as international president of the Transport Workers Union (TWU) of America, AFL-CIO and is a non-voting member on the MTA Board.
If the Federal Highway Administration (FHWA) approves NYC’s congestion tolling, the TMRB would develop recommendations for toll rates, as well as any credits, discounts, or exemptions and then present the recommendations to the MTA Board for consideration before the program is implemented. Therefore, the two key decision making bodies for NYC congestion pricing are:
The 23 member MTA Board
The 6 member Traffic Mobility Review Board (TMRB), which includes current and former MTA Board members
“The TMRB will take into consideration traffic patterns, traffic mitigation measures, operating costs, vehicle types, public impact, public safety, peak and off-peak rates and environmental impacts. Accompanying their recommendations, the TMRB will provide a report…Ultimately, the MTA Board will determine the final toll structure after the TMRB’s recommendations. The recommendations must ensure collection of annual net revenues and fees necessary to fund at least $15 billion for the MTA’s 2020 to 2024 capital program”
- MTA
One additional note for the NYC TLC industry is the following.
Midori Valdivia, who was appointed to the MTA Board in June by Mayor Adams, was previously a Deputy Commissioner at the Taxi & Limousine Commission (TLC)
So, now that we know the decision makers and process, let’s get into the specific MTA and Department of Transportation (New York State & NYC) proposals outlined in a recently released Environmental Assessment (EA).
7 Congestion Scenarios: NYC Taxis & FHVs
The seven congestion pricing tolling scenarios (A to G) can be confusing to make sense of, so we’ve made a simplified TLC industry-focused infographic below.
Peak Toll: refers to tolls applied from 6am to 8pm on weekdays & 10am to 10pm on weekends. Although in Scenario F, 10am to 4pm would be “Off Peak” on weekdays.
Off Peak Toll: refers to tolls applied from 8pm to 10pm on weekdays, with Scenario F difference noted above.
Night (or Overnight) Toll: refers to tolls applied from 10pm to 6am on weekdays & 10pm to 10am on weekends (Scenario F would start at 8pm on weekdays).
Crossing Credit: refers to potential credit towards congestion fees for tolls already paid at certain bridges and tunnels coming into Manhattan.
The quick summary, as it relates to NYC TLC vehicles, is as follows:
Two proposals (C, E) would EXEMPT 🚕 yellow cabs (& green taxis?) from congestion pricing and charge other for-hire vehicles (FHVs) a congestion toll a maximum of THREE TIMES PER DAY
Two proposals (B, F) would CAP TOLLS AT ONCE PER DAY for BOTH 🚕 yellow cabs and other FHVs
Three proposals (A, D, G) would place NO LIMIT 📈 on the number of times a yellow cab or other FHV would be charged during the course of a day
Peak congestion tolls range from $9 to $23 and would likely ultimately be paid for by passengers
TO BE CLEAR, in ALL proposed scenarios non-yellow cab (& green taxis?) FHVs are NOT exempt from congestion tolling, while in two scenarios yellow cabs (& green taxis?) 🚕 would be exempt. Given, the recent taxi medallion debt restructuring and City guarantee on medallion debt, it is almost certainly the case that historically central Manhattan (aka CBD) focused yellow cabs will get the same or preferential treatment vs. “Ubers”, “Lyfts” and other TLC-regulated FHVs.
In NO proposed scenario will FHVs have preferential treatment vs. yellow taxis. As we wrote previously, taxi medallion politics will likely show up again, as an exemption can give yellow cabs a structural pricing advantage when competing with Uber , Lyft and other NYC FHV bases.
Furthermore, non-taxi FHVs are also subject to:
8.875% New York sales tax
3% Black Car Fund fee
$2.75 congestion fee, which is $0.25 higher vs. taxis
It should be noted though that NYC taxis are subject to an $0.80 flat tax, but not New York sales tax
As a result, more often than not, non-yellow cab FHV trips are subjected to MORE government & city related taxes & fees 💸 than yellow taxi trips, as the example trips below illustrate. It should be noted though that the majority of the $0.80 in fixed fees yellow taxis collect per trip, on top of the $2.50 congestion fee, goes directly to the MTA vs. Uber & Lyft’s sales tax being a general use tax.
For example, if the NYC Uber trip above was exactly the same $12.50 as the yellow cab trip, the Uber (or Lyft) trip would be subjected to:
$2.75 congestion fee (vs. a $2.50 taxi congestion surcharge)
$1.11 sales tax (vs. a $0.80 fixed tax and surcharge for a taxi)
$0.38 Black Car Fund fee
Most NYC trips will be more expensive than $12.50 as well, so % based taxes that an Uber (or Lyft) trip is subject to, such as sales tax and the Black Car Fund surcharge, would variably increase as the trip prices go higher.
🙋♂️ Our Thoughts & Opinions
Below, we share our thoughts and opinions on the proposed congestion pricing scenarios and their impact on the TLC industry.
Point #1: Congestion Taxes, Minimum Pay Standards & FHV Supply Protection Mechanisms ALREADY Exist
Why are NYC TLC vehicles, which are high utilization and transport multiple passengers, facing ADDITIONAL ➕ congestion-related fees? 🤷♀️ NYC yellow cabs and FHVs are already paying congestion fees on *every* trip - $2.75 for FHVs and $2.50 for taxis. This is ON TOP OF being subjected to “vehicle supply cap” mechanisms. In addition, minimum pay standards provide an additional layer of protection related to FHV idling in Manhattan’s CBD.
Aggressive CBD congestion tolling on taxis and FHVs runs the risk of taxing NYC TLC vehicles TOO MUCH, which could severely impact trip demand 📉 as passengers are ultimately paying the tolls. If you destroy trip demand in a way that is greater than the projected MTA revenue you would have otherwise generated with the status quo (or less harsh) congestion tolling regime, one may actually be creating flawed policy.
Yellow cab supply is already capped via the medallion system, with the City just completing a major debt restructuring. Other FHV vehicle supply has been capped (‘TLC Plate Cap’) for the last four years (since August 2018). TLC minimum pay standards tied to utilization rates, coupled with the TLC Plate Cap, provides an additional layer of protection related to idling Ubers & Lyfts (HVFHVs) in Manhattan’s CBD.
This was already seen pre-pandemic when Uber & Lyft stopped onboarding new NYC drivers and implemented a “planner” that ensured vehicle utilization rules related to driver minimum pay standards were followed. To be frank, how much more regulation / taxes is needed? Proposed CBD tolling scenarios A, D and G, where no cap exists are unacceptable. We recommend the entire TLC community reject these proposed scenarios.
Point #2: Congestion Pricing Should Target Private Vehicles
Private vehicle ownership continues to increase in NYC’s five boroughs for a host of reasons, one being safety concerns on MTA run transportation networks. It’s likely fair to assume privately owned vehicles:
Have much lower utilization rates than taxis & FHVs
Account for large majority of occupied street parking space in Manhattan’s CBD (i.e., the % of NYC TLC drivers living in CBD is likely insignificant)
By increasing the costs of for-hire transportation alternatives, the MTA may counterintuitively promote MORE private vehicle 🚙 ownership within CBD.
Point #3: Exempting Yellow Cabs Is Fair Given Medallion Costs & Financial Stabilization Goals. Other FHVs Should Only Be Subjected To One Congestion Toll Per Day On Top of Status Quo Per Trip Congestion Fees
We think, as the NYC TLC ALREADY determined after intensive study, that exempting yellow cabs from congestion tolling is reasonable given:
The cost of a taxi medallion and the implied rights attached to that cost
The City’s effective obligation (i.e., City guarantee on taxi medallion debt) to stabilize the taxi medallion market
HOWEVER, as the TLC’s Black Car & Livery Task Force ALREADY determined after intensive study, yellow (& green) cabs cannot be overly advantaged via congestion toll exemptions vs. the FHV sector, which is a market competitor. In addition, a strong argument can be made that FHVs are a more effective customer service offering for those wanting a for-hire vehicle to commute from Manhattan CBD to non-CBD Manhattan or to outer boroughs and vice versa.
For example, a passenger from the Bronx, Queens, Brooklyn and Staten Island would unreasonably be subjected to longer wait times in flagging down (or e-hailing) a yellow (or green) taxi to make a journey into Manhattan CBD if they preferred to commute by for-hire vehicle (i.e., late night outing or prefer for-hire trip convenience).
London Black Cab exemption analog is also interesting to note…
In London, although Black Cabs (analog to NYC yellow cabs) are exempt from congestion tolling, while Minicabs (analog to NYC FHVs) are not, A MAJOR DIFFERENCE is no vehicle supply cap mechanism seems to exist related to adding private for-hire vehicles in London as it does in NYC via the biannual FHV License Determination (aka TLC Plate Cap) mentioned above.
Furthermore, London requires Black Cab driver’s pass The Knowledge, a very difficult test which takes years to study for and creates a vehicle supply cap mechanism and taxi medallion-like financial investment, justifying London Black Cabs being exempt from congestion tolling.
“There are thousands of streets and landmarks within a six mile radius of Charing Cross. Anyone who wants to drive an iconic London cab must memorize them all: the Knowledge of London.
The Knowledge was introduced as a requirement for taxi drivers in 1865.
Mastering the Knowledge typically takes students three to four years; it's a challenge, but plenty of help and support is available if you are determined.”
- Transport for London
Finally, ALL 👀 London Black Cabs appear to be wheelchair accessible (WAV) from our research, which creates an additional justification for a congestion fee exemption. As a side note, it is our assumption that NYC FHVs that qualify for WAV trips would be exempt from congestion tolling.
Point #4: MTA Competes With Taxis & FHVs
To be fair to the MTA, it appears the taxi and FHV competition point isn’t lost on them.
While most understand NYC should have a world class public transport system from the subway to buses to trains, etc - taxi and other TLC licensed for-hire vehicles (FHVs) are, to an extent, a rival transportation alternative. The MTA cannot be allowed to tax a rival alternative in a manner that is anti-competitive. MTA ridership is down due to a host of reasons from perceptions of safety to the rise of work from home (WFH), which has nothing to do with taxis or other FHVs. Making reference to pre-pandemic MTA statistics, is also not reasonable in making capital investment plans, so those probably need to be adjusted accordingly which in turn would impact congestion toll pricing.
Attempting to increase public transport demand by making alternatives price uncompetitive is not a strategy that should be promoted and has obvious conflicts of interest. In addition, MTA’s financial history of running deficits and budget mismanagement, may lead to a situation where it drags down NYC’s FHV and taxi industry that employs, directly and indirectly, 100,000s of New Yorkers. It was already well understood that the TLC industry was playing its role in helping fund the MTA.
Furthermore, suggesting commercially licensed TLC drivers who face losing their livelihood, become bus drivers due to congestion pricing, is well…😤.
Uber, who is / was a huge financial supporter of promoting Manhattan congestion pricing, even seems to be surprised by the politics that has thus far played out! They recently sent the below message to NYC drivers.
Conclusion
Net-net we think congestion pricing conceptually is a good idea and should be implemented in Manhattan’s CBD. There is too much traffic caused by multiple vehicle (i.e., double parked delivery trucks) and non-vehicle (i.e., construction) factors in Manhattan’s core. In fact, one could argue that making it unattractive to drive or own a private vehicle in NYC would benefit the NYC for-hire transportation market.
In the future, similar to London, we also expect EV exemptions for congestion tolling to come into play. However, we would be cautious before promoting such an exemption, before more charging infrastructure is built, as you run the risk of prematurely incentivizing TLC drivers investing in expensive EVs. Given the lack of affordable EV options and third party service network, we also think any future EV exemptions must be studied carefully based on ground realities vs. utopian ideals of what can exist, but is billions of dollars of investment and years away from actually existing. The concept of technological obsolescence, where EVs today depreciate rapidly in price and utility vs. EVs three or five years from now, is an important concept to think through. The 300 mile range EV with current battery technology, might be worthless when a 600 mile range EV with quick charge battery tech is more broadly available and affordable.
Given MTA’s London analog, Transport for London (TfL), is still experiencing extreme financial difficulties, in part due to changed public transport dynamics post pandemic - MTA capital investment plans created for a 2019 reality should likely be adjusted accordingly, which in turn should be reflected in the price of congestion tolling.
Our final point will be a technical one. It is our understanding the existing EZPass system will be used to collect congestion tolls. If EZPass begins charging usurious fees and violations, as it does for other MTA Bridge & Tunnel tolls, then that is going to be the subject of intense investigation and auditing.
Let’s see how it all plays out! Remember, to sign up and/or submit comments for the upcoming congestion pricing hearings beginning on Thursday, August 25th, click 👉 here.
As always, let us know your thoughts in the comments section below or by emailing us at info@automarketplace.com.
AutoMarketplace NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace on YouTube ▶️
80,000 TC plates causing all the traffic congestion and causing Pollution in our city
Apps never paid for the right to cruise as taxis did when they bought the medallion. Taxis have been disadvantaged by apps being able to manipulate their price to undercut taxis , whereas taxis rates are fixed, charging app cars and not taxis levels the playing field a bit