27.4.17

PRICES ALLOCATE RESOURCES.

Recently, Kentucky and Indiana rebuilt the Interstate 65 bridge at Louisville, and implemented tolls thereon.  The nearby Second Street Bridge remained without tolling.  Conventional wisdom: traffic diverts to the free bridge until the marginal disamenity of the congestion compensates for the marginal outlay on tolls.  In reality, total crossings went down.
As we reported in February, the initial month’s worth of data on bridge traffic shows that adding tolls (which run from $1 to $4 for cars) have caused traffic levels to fall by almost half, from about 122,000 vehicles per day to about 66,000.  We included photographs from area traffic-cams that show rush hour traffic on the tolled bridges almost empty, while traffic was fairly thin on the free Second Street Bridge.
More recently, Louisville closed the Second Street Bridge in connection with a riverfront event (not the Kentucky Derby, which is a week away yet.)
What these images suggest is that, even with the nearby free alternative closed, there’s way, way more capacity on I-65 than there is peak hour demand for travel. You can compare these photos to ones we captured two months ago when the Second Street Bridge was open to traffic at rush hour. While ostensibly the crossing was widened from 6 lanes to 12 to eliminate congestion, the real congestion-fighting investment was the decision to ask users to pay just a portion of the cost of widening the road. With tolls in place, drivers have voted with their feet (or perhaps, wheels) that they didn’t really need additional capacity.
Yes, and there's a lesson to traffic engineers, who take traffic flows as a given. The generalization to the Congressional Budget Office, when it comes to evaluating tax revenues, is straightforward.
It isn’t just that traffic has shifted to the “free” alternative. It's that, with tolling in place, apparently many other trips just simply evaporated. The tendency of traffic to disappear when there’s a toll is an indication that people have much more flexibility about when, where, and how much they travel than is usually contemplated in policy discussions or travel demand models. The mental model that says traffic levels are some inexorable natural force like the tides, which must be accommodated or else, is just wrong.
The fun will begin when the tolls turn out to be inadequate to finance further road construction.
The financing of the widened I-65 crossing (and another beltway freeway crossing several miles to the East) hinges on tolls generating enough revenue to repay the bonds that Kentucky issued to pay for the project. If toll revenues don’t grow fast enough in the years ahead, the state will have to find some other source of funds to make these payments, which could make this particular experiment in transportation behavior a particularly expensive one.
More expensive than issuing the bonds and hoping for enough gasoline taxes and general revenues from strip malls at the major interchanges, the more usual model of overbuilding road capacity?

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