🚖🗽 Congestion Pricing: What New MTA Tolls Could Mean For NYC Taxis, FHVs, Uber & Lyft?
After delay, central Manhattan tolling program set to debut on January 5th. What are the new surcharges for NYC taxis and for-hire vehicles, how will tolls be collected & how could it impact business?
After surprise “pause” in June, the MTA now plans to roll out Manhattan congestion pricing over three phases, beginning in January 2025 and ahead of President-elect Donald Trump taking office
Yellow cab, non-HV trips will initially have an additional $0.75 MTA surcharge added, while Uber & Lyft trips will have an additional $1.50 added, surcharges will then increase in 2028 (Phase 2) and 2031 (Phase 3)
Taxi and other FHV trips already have existing MTA congestion surcharges
Uber aggressively lobbied for congestion pricing, but a recent blog post might suggest it is having second thoughts
Opinion: NYC does need to reduce traffic congestion, does need to invest in public mass transit, but rapidly increasing MTA fees on TLC trips is not good for drivers, passengers and overall marketplace
After years of studies, public hearings, lobbying by various interest groups and tolling plan iterations, NYC was set to become the first city in America to charge tolls to drive on its busiest streets. However, just weeks before the new tolling program was set to go live in late June, with toll readers (gantries) installed and visible across Manhattan, New York State Governor Kathy Hochul temporarily paused implementing congestion pricing.
Whether the delay was politically motivated ahead of November elections, can be debated, but the tolling plan is now back! Governor Hochul and the MTA are ready to move ahead with charging drivers and passengers a toll to enter Manhattan, below 60th Street.
The focus of our coverage will be on how the proposed tolls impact the NYC for-hire transportation (TLC) industry.
Three phases result in original surcharges
While Governor Hochul, the MTA and congestion pricing advocates are pitching the newly proposed (and passed) congestion pricing tolls as cheaper than the original proposal, that is, in our opinion, a mischaracterization of what was actually approved by the MTA yesterday.
Yes, in the initial years the tolls are cheaper than the original congestion pricing plan, but there are two pre-approved built-in increases, one in 2028 (“Phase 2”) and the other in 2031 (“Phase 3”). After both of these increases, we get back to the originally proposed $15 private vehicle toll and the NYC taxi / non-HV and Uber / Lyft per-trip surcharges of $1.25 and $2.50, respectively.
It should be mentioned, Governor Hochul faces a tough re-election campaign, potentially even a primary challenge from within her own party, ahead of 2026. Hochul likely expects to receive backlash from voters not only related to the concept of Manhattan congestion tolls, but how the program is being rolled out. At the same time, there are many congestion pricing advocates who represent a meaningful voting bloc.
If the MTA’s financial position and service doesn’t significantly improve after (if) congestion tolling begins and the phased hikes are implemented, there will likely be political consequences across City and State elections, not limited to the Governor’s race. In our view this might impact the ability of the MTA to increase tolls and surcharges as quickly as it envisions in its plan.
Such aggressive toll and surcharge increases, only years after a first in the nation congestion pricing program begins, is likely not going to be popular with the public. Ultimately it will depend on ground realities at the time of the proposed increases (i.e., Phase 2 in 2028, Phase 3 in 2031). For example, if Manhattan traffic congestion significantly declines and MTA subway, bus, train services improve, the increases might prove less controversial.
How will the new MTA congestion surcharges be collected from NYC FHVs?
For passenger and commercial vehicles, E-ZPass tags and the Tolls by Mail program will be used to collect congestion tolls. For NYC for-hire vehicles (FHVs) congestion surcharges, similar to how current MTA surcharges are collected, will directly be paid by the passenger on a per-trip basis (remitted by a FHV base or taxi technology system provider (TSP)).
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Some Thoughts
We listened to the combined ~3 hour MTA public hearing and Board meeting that took place yesterday. We’ve also listened to many hours of previous public hearings related to congestion pricing that have taken place over the past months and years. We also live and work in NYC, specifically within the congestion zone below 60th Street in Manhattan. Finally, we’ll add that we remain impressed by MTA Chair & CEO Janno Lieber, other MTA leadership, board members and their genuine advocacy for congestion pricing.
While the MTA has a history of financial mismanagement, it’s obvious a lot of analysis and effort was put into creating a congestion pricing plan and how newly raised funds would be used. We found many arguments for congestion pricing compelling. We also know via living in Manhattan and travelling around and out of the five boroughs that traffic congestion is bad. In fact, NYC was recently ranked as the world’s most-congested urban area, costing the city an estimated $9.1 billion in lost time (setting aside the additional air quality impacts of this traffic congestion).
That being said, we also thought talking points strictly focused on the number of people commuting into Manhattan’s Central Business District (CBD) by public transit, fundamentally misses how many people use taxis and other for-hire vehicles (FHVs) to commute into the CBD and to generally get around NYC.
Chair Lieber and other MTA board members always seem to make the case that only a small, low single digit percent of people would actually be negatively impacted by congestion tolling because the vast majority of commuters take public transit into Manhattan. The over 750,000 daily FHV trips that occur within NYC’s five boroughs is a fact that was not even mentioned once (!) during yesterday’s Board meeting.
If the MTA plans to charge $0.75 per taxi trip and $1.50 per Uber / Lyft trip, it implies a large portion of congestion pricing revenue is being generated by NYC TLC-regulated vehicles. By the end of MTA’s Phase 3 tolling plan, these surcharges are set to become $1.25 and $2.50 per trip, respectively. This sets aside the fact that a $2.50 (taxi) and $2.75 (Uber, Lyft, other FHVs), MTA congestion fee surcharge already exists!
We just want to make this point again, taxis and other FHVs are already paying congestion-related surcharges. The MTA wants to add another one 😑?
Simply sitting in a yellow cab and moving a few blocks is going start approaching $10! The same principle applies to Uber, Lyft and other NYC trips. This a non-starter for the TLC industry, that will most likely hit trip demand and future growth prospects. NYC taxis and FHVs are highly utilized vehicles, transporting multiple passengers every day.
Furthermore, for elderly New Yorkers on fixed incomes who can’t easily access public transport the cost of travel may become more prohibitive or dependent on how successfully MTA can run the Access-a-Ride program, especially an on-demand service.
The first and primary target of congestion pricing should be private passenger vehicles that come into Manhattan.
When people say NYC TLC-licensed drivers don’t pay for congestion tolls because passengers are paying, we think that’s very disingenuous framing. If the price of for-hire trips rise because of increased taxes and surcharges, what do you think happens to trip demand? If there are less trips, what happens to driver earnings? As an additional point, when driver per mile and per minute pay rates are adjusted for inflation, it is not reflecting fare increases driven by new taxes and surcharges.
When people say yellow cabs, Uber and/or Lyft are unfairly being charged very low congestion tolls, do they not realize cabs and TLC-plated vehicles are doing 10, 15, 20+ trips per day? These FHVs are collecting well over the once a day $9 congestion toll, and eventual $15 toll, charged to a private passenger vehicle. If the current proposal is implemented, a single Uber trip will be collecting $4.25 in MTA surcharges. By 2031, this will increase to $5.25 for a single trip. This is madness.
In terms of arguments related to there being too many Uber and Lyft (TLC-plated) vehicles on City streets, this was addressed by City Council in 2018 when it wisely capped the issuance of new FHV Licenses. The TLC is to blame for failing to properly manage FHV supply, carelessly flooding the streets despite continued and multiple warnings from within the industry. This problem was already addressed six years ago. Drivers now have to pay for TLC’s failures? This is madness.
NYC does need world class public transit and does need to reduce traffic congestion
During the public hearing and meeting yesterday, we think MTA Board Member and senior partner at Boston Consulting Group (BCG), Neal Zuckerman, made the most compelling argument explaining why raising and investing additional billions for the MTA might sound excessive, when it’s actually relatively modest if you think about the value of MTA’s infrastructure assets.
In other words, if one had to value (or recreate) all the bridges, tunnels, trains and other infrastructure the MTA owns and controls, the value of such assets might be in the hundreds of billions or even $1 trillion+. Raising and spending $1 billion per year (or multiple billions over several years) is a very small percent of the underlying value of assets. We agree with Mr. Zuckerman on this point.
This leads us to David S. Mack’s testimony, the sole MTA Board Member who (once again) voted against the proposed congestion pricing proposals. Mr. Mack’s view is most similar to where we come out. MTA’s Capital Plan to invest billions to maintain, upgrade and build new infrastructure should be supported. However, there are better and less controversial ways to raise that money.
Mr. Mack is often demonized in the press as a sort of “old, rich guy”, but Mack is being pretty reasonable in our view. His point about President-elect Trump being a long-time New Yorker that understands the City’s economy and the importance of getting congestion pricing right should not be ignored.
As a final point, the MTA, as an institution, has deservedly lost a lot of public trust. Many people are not against funding mass transit, they are skeptical of MTA’s ability to efficiently use the money it already takes in, let alone additional billions it wants to raise from hundreds of thousands of working class New Yorkers. Many of those New Yorkers are NYC TLC-licensed drivers, so this topic is very relevant to us.
Uber having second thoughts?
It is well known Uber has been one of congestion pricing’s most vocal supporters, including money spent on lobbying. They do not hide this fact. The reason(s) for the support is pretty simple to understand. If driving your own personal vehicle into Manhattan becomes prohibitively expensive, the logic is many of those individuals might opt to take an Uber into and around NYC. If traffic congestion decreases, Uber can more efficiently utilize their driver base and deliver a better experience for their customers.
“Uber supports congestion pricing, including on our own trips, to fund mass transit infrastructure. We do this because we are a for-profit company and good, robust, public transportation is good for business, reducing the need for car ownership and increasing use cases for Uber. Congestion that slows travel times and frustrates riders and drivers is bad for business. In fact, our top cities are ones where robust public transportation options serve as the backbone of a daily commute.”
- Uber Blog (May 11, 2023)
To be clear, Uber has had disagreements with the MTA about the total amount and technical mechanisms around how Uber-hailed vehicles would be charged, but has generally been supportive of the per-trip passenger surcharge(s). However, as many of our readers will know, a lot has changed even since the original congestion pricing plan was approved earlier this year. Primarily, the rise of driver access restrictions (“lockouts”), related to NYC’s unique utilization-based driver pay formula.
In other words, Uber (and Lyft) are having a hard time keeping all their NYC drivers busy enough to pay them TLC minimum driver pay rates, without force logging them out. Basically, there are too many drivers (and associated FHVs), chasing too few trips. In a recent Uber blog post, that the company allowed us to share, Uber reveals trip demand is declining for the first time since the pandemic, and concludes:
“There is only one long-term solution to stop riders increasingly opting out of requesting Uber rides: it’s time for the TLC to rethink the formula used for their minimum wage requirement and for State and City officials alike to pause on any new taxes and fees.”
- Official Uber Medium post (November 11, 2024)
DOGE vs. MTA?
We’ll conclude this article with a reply we posted to an X post that we felt mischaracterized MTA Board Member David Mack’s testimony, that we’ve shared and described above. President-elect Trump has famously enlisted Elon Musk and Vivek Ramaswamy to help lead a new presidential advisory commission called the Department of Government Efficiency, or DOGE. Essentially, DOGE plans to target government bureaucracy and inefficiencies.
If MTA wold have solved the problem of fare evaders they wouldn’t need congestion plan.
The reason why new app based vehicles need to pay more Is the authorities are realizing that another fleet of vehicles , HV app based cars on are not necessary , and causing congestion , you must be very upset that they are increasing the difference between the two , HV app based cars are a reason congestion pricing is needed to begin with , yellows can do the job with less