June 20, 2014, Toronto, Ont. – A new study from the
Residential and Civil Construction Alliance of Ontario shows that fuel taxes to
pay for transportation infrastructure is a second best option when compared to
road and parking pricing.
June 20, 2014, Toronto, Ont. – A new study from the
Residential and Civil Construction Alliance of Ontario shows that fuel taxes to
pay for transportation infrastructure is a second best option when compared to
road and parking pricing.
The breakthrough report, prepared by Professor Harry Kitchen
of the Department of Economics at Trent University in Peterborough, Ont., was
commissioned by the RCCAO to explore how much revenue might be generated from a
GTHA-wide fuel tax over the next 20 years. Kitchen concludes "that gas and
diesel fuel tax revenues are unlikely to generate enough revenue to fund future
road and transit expansions and that it is a blunt instrument to address
congestion."
Instead, he recommends that innovative parking technologies
and levies as well as road pricing will prove to be much more effective at
reducing traffic congestion while at the same time generating revenue to fund
transportation/transit projects.
Among Kitchen's findings:
-
Fuel taxes to pay
for transportation infrastructure is a "second best" option when
compared to road and parking pricing.
-
Dedicated fuel
taxes will result in additional revenue, but these monies will not shift
driving behaviour during peak travel times.
-
Fuel tax revenues
have helped municipalities fund some infrastructure needs, but these
revenues have not increased in 20-years and are likely to decline due to
an increase in more fuel efficient vehicles, an increasing
reliance on electric and hybrid vehicles and people simply driving less.
Hence, other revenue sources must be implemented to offset these losses.
-
As an alternative
to fuel taxes, provincial politicians must stand up and take a good
look at parking levies and road tolls as better ways to fund road and
transit in the future.
-
Parking is
currently inefficiently priced and tends to promote cruising for on-street
parking in high-demand areas. Consequently, drivers spend a lot of time
looking for a vacant spot which adds to traffic congestion,
pollution, and results in lost productivity.
-
Efficiently
implemented parking levies, including progressive pricing (where prices
increase for longer stays), will result in better turnover of vehicles and
will increase municipal revenue. Deployment of cell-pay parking will
result in lower policing and traffic enforcement costs.
-
Road pricing
applied at a regional scale is widely recognized as an effective travel
demand management tool to internalize congestion, pollution, and
other external costs of driving. More so than parking fees, they can
influence all dimensions of travel choice: trip frequency,
destination, travel mode, time of day or week and route.
-
Tolls can generate
significant sums of revenue. In 2011, Highway 407 International
earned gross revenues of $675 million (net income $128.3 million). The
Province of Ontario plans to implement tolls on the new 407 East which
will be built over the next few years.
-
In comparison, it
is estimated that a one-cent fuel tax increase will yield about
$90-million per year. Fuel tax revenues are not expected to increase by any
notable amount over the next two decades. It's debatable if a fuel-tax
increase will generate an adequate and sustainable source of revenue.
- Road pricing and
parking levies/taxes are a "first-best" policy. These instruments target
those who use the roads, and are effective in tackling congestion
and the problems that it creates.
Professor Kitchen's findings provide a cautionary tale.
"While this revenue stream will continue to be an important source of
revenue to fund transportation infrastructure in the coming years, it should
not be relied upon indefinitely," said Andy Manahan, Executive Director of
the RCCAO.
A full copy of the report can be viewed at: http://www.rccao.com.
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