- New York Governor Kathy Hawkle’s announcement last week that she would indefinitely postpone New York City’s congestion pricing plan reveals conflicting views about the city’s economic future.
- In eliminating the $15 toll for daytime car commuters who enter New York City below 60th Street in Manhattan, Hawkle and other officials cited concerns about the post-COVID economic recovery.
- Critics say a short-term focus on shoring up the city’s finances after the pandemic is a mistake that will ultimately cost the city billions of dollars.
Alexander Spatali | Moment | Getty Images
As U.S. cities continue to recover from the pandemic and inflation, New York City was expected to be a key national test of the economic value of congestion pricing. A cost-of-living crisis, climate change preparedness and aging infrastructure, including public transportation, make congestion pricing plans make sense for many.
The basis of the Met’s plan was simple: impose a $15 toll on daytime car commuters entering New York City below 60th Avenue in Manhattan — the first of its kind in the United States — and use the money to fund $1 billion a year in transit improvements. The MTA estimated that the toll would reduce car traffic by about 10 percent in the nation’s most car-dense areas. 100,000 per day, or 17%.
New York state’s current governor, Kathy Hokul, rejected an idea she had championed as a model for cities to improve public transportation, quality of life and environmental sustainability by scrapping the latest version of the plan on Wednesday, which was set to take effect within weeks.
Haukle said the city’s overall economic recovery after the pandemic was a major driver of the decision, citing concerns that the plan would discourage commuters from working or visiting the area known as the “central business district.” At the time the state legislature approved it in 2019, workers were in the office five days a week and tourism was at an all-time high. Still, the plan was set to be approved by the federal government in June 2023 and take effect on June 30, but… Manhattan Office Vacancy Rate It can reach 15%.
Has remote working made congestion pricing obsolete?
Hawkle cited the pandemic’s recent decision to limit many office workers to working in person three days a week as a sign that people might take this sacrifice and return to fully remote work. Remote work availableIndustries such as finance and technology are operating in a hybrid model, with 27% working fully remotely.
It’s true that leaders at the city’s biggest companies want to bring employees back to the office more often — JPMorgan Chase & Co. CEO Jamie Dimon has been one of the most vocal advocates of the importance of working in the office — and Mr. Haukl said the plan will force commuters to “say to their employers that we need to go fully remote again.”
But that may not be what it seems: Fully remote job openings are declining, and executives are setting stricter in-office mandates for 2024. A return to five-day in-person work weeks, congestion pricing or not, may never come.
Even before congestion pricing, bridge and parking tolls into New York City reached as much as $75 a day — a price that many white-collar workers were already willing to pay, or that their employers had been paying for them. It’s hard to say whether a $10 to $15 toll, especially when subsidized by employers, including discounts for commuters who pay other tolls, would be a breaking point, or even a deal-breaker.
Hawkle supported delaying the plan to avoid hitting low-income families too hard, which he said would “potentially devastate hard-working middle-class budgets” and “squeeze the very people who make our city go,” referring to small business owners, nurses and other working- and middle-class New Yorkers.
However, the NYC Transit Department concluded that congestion damage primarily affects commuters who earn 31% more than the median Manhattan worker. In 2023, subway ridership was 3.2 million and MTA bus ridership was 1.4 million. Many New York City residents, especially low-income residents, rely on MTA services as their primary mode of transportation.
In response to the decision, Katherine S. Wilde, president and CEO of the Partnership for New York City, a nonprofit that represents New York City’s business leaders, noted on CNBC’s Squawk Box that about 3% of commuters into the city drive, and many of them are “highly paid employees or government employees.” In fact, congestion pricing would reduce “discretionary” driving, Wilde said.
Community Service Association Survey Similarly, 4% of suburban workers drive to Manhattan, and 56% of suburban residents commute to Manhattan by public transportation, according to the study. Of those who drive to Manhattan, 55% are high-income earners.
“Most people rely on public transportation, whether that’s the train, subway or express bus into the city,” Wilde said.
Wilde said many members of the business leadership community have expressed concerns about the policy, but that she has strongly supported it as a member of the MTA Transportation and Mobility Committee. Her group has also supported congestion pricing for 20 years. She estimates that a repeal of the plan would result in more than $20 billion in lost productivity, overtime pay, fuel costs, and negative environmental and health effects.
Business leaders also supported the plan for another reason. Governor Hockle proposed taxing the city’s largest companies to make up for a $1 billion annual revenue loss through an increased payroll shift tax on employers in the five New York City boroughs with a payroll of more than $1.75 million. The initial reaction from state lawmakers was: Not positiveWilde noted that while taxes help solve the problem of raising new revenue, they do nothing to solve traffic congestion.
A big win for the suburbs
The biggest winners are the suburbs. “This is a big win for families in New Jersey and New York,” Rep. Josh Gottheimer (D-NJ) said on CNBC’s “Squawk Box.”
Gottheimer cited growing economic pressures on commuters in Sussex County, New Jersey, who have little access to public transportation and must drive to essential jobs. New Jersey commuters make up 9.6 percent of New York City’s workforce, according to the Regional Plan Association. The MTA does not fund Jersey Transit, but it oversees public transportation in Connecticut, Long Island, southeastern New York state and New York City.
But drivers coming to New York City are missing out on real-world road experience: The MTA found that average vehicle speeds have fallen 23% since 2010, to 7.1 miles per hour. Narrowing roads to accommodate expanded bike and bus lanes and more outdoor dining spaces after the pandemic have contributed to workers spending more time stuck in traffic.
Congestion pricing has a long and often defeated history
The fight over congestion pricing in New York City has a longer history than you might think. For more than 70 years, locals who love to complain about traffic jams and debate the best ways to avoid them have been tossing around ideas to make life in the city a little less congested. Nobel Prize-winning economist William Vickrey first proposed the concept of congestion pricing in 1952. Ironically, he was targeting subway riders at the time, but later proposed a similar idea for roads. Last week’s surprising development among elected officials fits with the recent history of losing the fight.
In 2007, then-New York City Mayor Michael Bloomberg pushed for congestion pricing, but it didn’t gain enough support in the state capital. Former Gov. Andrew Cuomo first proposed an updated plan in 2017, but political tensions and pandemic-induced budget woes delayed its implementation. And while he voiced his support up until the start date, Hoekl said he never publicly voiced his concerns. The New York Times reports on sunday.
Governor Cuomo has spoken out in recent months against his own congestion pricing plan, listing reasons for at least pausing the implementation of what he calls the “right policy,” ranging from the immigration crisis to crime, homelessness, quality of life and taxes, but primarily, he wrote: New York Post Op-EdDue to the recent increase in crime on public transport and the need to restore passenger confidence in using public transport.
Cuomo also addressed fare evasion on public transportation, which has skyrocketed since the law was passed in 2019. “It’s a top priority,” Wilde said on Squawk Box, noting that his group helped staff an MTA task force to find solutions to fare evasion. “We have to stop the money that’s being drained from fare evasion, but then we have to… [MTA] She described the “capital program” as being $50 billion over five years, with $15 billion of that coming from congestion pricing under a law passed more than four years ago. Estimated $700 million 2023.
Thoughts about where that money will come from in the future have been circulating across the state, including in the governor’s hometown of Buffalo, where Rep. Gottheimer said in an interview on “Squawk Box” that “there’s $600 million that the Buffalo Bills are going to receive to build a new stadium, but the owners there … we shouldn’t be giving them that money to build a new stadium.”
Many critics see Hokell’s sudden announcement months before the election that he was postponing the policy as a political move to secure reelection and the support of local politicians in swing states. This is nothing new, Wilde noted, noting that the commuter tax was repealed decades ago, but at the time Democratic state legislative seats were “fighting.” “This is a similar situation,” Wilde said. “It’s suburban resentment and concern for candidates, especially Democratic candidates. This political problem is chronic, and there’s not much that can be done from the business side.”
Wilde is hopeful the delay is temporary and the MTA can move forward with plans to put the increased funding to use. He says congestion pricing has worked everywhere it’s been implemented around the world, from London to Stockholm to Singapore. “There was some initial resistance, but when you see the results, people are ecstatic, because it significantly reduces the cost of doing business. The quality of life is so much better after congestion pricing is in place.”
Dr. Steven Cohen, a senior associate dean at Columbia University and a former colleague of Vickrey, the congestion pricing pioneer at Columbia University, I wrote in a recent post While any new initiative will inevitably have unintended consequences and the need for policy rethinking, cities and their commuters could look to big companies for evidence that their concepts work.
“There [undoubtedly] New policies will have unanticipated adverse effects. Every new policy or product has drawbacks that can’t be predicted without experience. … The key is that policies and products can be adjusted to address adverse effects. But the basic policy design of congestion pricing is sound. Congestion pricing generates revenue for public transportation and reduces congestion. Surge pricing works. It works for Uber and it works for JetBlue.”
Gottheimer said he hopes this marks the end of congestion pricing, but “I don’t think so” when asked if the fees will be reinstated after the next election is decided. “We’ve done it. … Indefinite suspension, indefinite is the key word here,” he said. “I’m not saying any of this is easy. Things need to be fixed, but I think our focus today is that the solution is not just to tax people more.” He believes the issue is more fundamental to the MTA’s operations.
Meanwhile, traffic isn’t getting any better. “The city is congested,” Wilde said. “The governor says his concern is that we do the right thing and that we don’t hurt Manhattan’s economy. If we could get that congestion under control, things would be a lot better.”
—Kaya Ginsky, CNBC News Intern
