Wednesday, March 23, 2011

Seattle Transportation Costs and Policy Options

(this is an updated version of a policy brief written for my Economics and Planning class in the autumn of 2010)

Seattle is a growing city that like many cities is running up against the environmental, economic, and social consequences of both automobile travel. There are numerous policy levers available for automobile travel but Seattle has only utilized a few of these so far. I will show how in the existing policy environment people are incentivized to drive automobiles rather than take mass transit, even before issues such as travel time, convenience, etc. are factored in.
In 2009 fuel costs amounted to $.0821 per mile to drive a small sedan. Tire replacement and maintenance cost an additional .0487 cents per mile. [i]  However, the consumer rarely pays for tires and maintenance at the time of consumption and most people don’t factor these into their monthly budgets the way they do gas costs. At $.0821 per mile a Seattle commuter with a compact car can drive 43 miles a day before their monthly marginal cost meets that of a $108 3 zone transit pass.[ii] If we assume our consumer is rational and factors in maintenance and tire costs then they can travel 27 miles a day before the monthly marginal cost of driving equals that of a transit pass. For someone who already owns a car in Seattle, it makes economic sense to drive it.
In the below chart I have used actual data from the Seattle area concerning the cost of a car and the cost of various transit passes. Note the 1 zone pass is only useful for short distances.

We also see here that when average cost is factored in that people who drive very little (less than 6 miles a day) are likely to save money by not purchasing a car at all and doing transit passes instead. It’s also the case that people who travel long distances are likely to save money. Sound Transit is a regional transit agency so this is indeed possible.  The shape of the average cost curve gives us some idea of how people may end up giving up cars completely. Increased marginal cost might not effect someone’s decision to drive in the short term, but it may influence their decision to buy a car in the long term via the mechanism of average cost. Alternately living closer to work or working closer to home may cause someone to economize by opting not to replace a car.
One way that institutions seek to change this is by pushing the marginal cost of transit down. In the Seattle area for example two major institutions: Microsoft and the University of Washington both provide free transit passes to employees and in the case of the University to its students. For recipients of the free pass the monthly cost drops to zero.  Meanwhile, the University increases the cost of parking on campus in order to pay for this, which further shifts incentives.
Another way that institutions can change driving habits is by levying a gas tax. In the US the gas tax varies by state, ranging from Just the Federal  $.184 cents per gallon (Alaska)  to $.645 cents per gallon (California). In Washington State it’s $.375 per gallon. This is in contrast with many Western European and Scandinavian countries that charge considerably more
A third way is to institute congestion pricing. Congestion pricing has the advantage of being more discriminatory than a fuel tax in that it allows the tolling agency to raise prices for particular stretches of roadway for particular times of the day when they are most in demand, while relaxing the toll at other times when demand is lower. Congestion pricing is a Pigovian tax like a gas tax but it specifically target road use that generates congestion externalities. Notable examples of real and proposed congestion pricing schemes include London where it was recently enacted and affirmed by a referendum, and New York City in the US where a congestion pricing scheme was approved by the City Council and then died in the State legislature. The State of Washington is currently only considering tolls in order to pay for two big transportation projects: the SR 520 floating bridge replacement and the SR99 Viaduct replacement. Using tolls to reduce demand for road space is not currently being considered.
                A fourth way to reduce driving is to institute dense mixed use land use patterns. This addresses driving from the demand side rather than the cost side. In Washington State there is a “Growth Management act that attempts to minimize sprawl. Additionally Washington State law requires a certain minimum density of zoning around the new light rail system being built in the Seattle area. The city of Seattle recently approved an upzone that will add residential density immediately adjacent to the jobs concentrated in the downtown area.
Planners in Seattle and elsewhere must consider all of these scenarios as we look for ways to make transportation more efficient in the 21st century.


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