Maryland adopts revenue maximizing toll rates for ICC from WSA T&R study

Maryland's proposed high toll rates for the new Inter County Connector are in line with those suggested by Wilbur Smith Associates to maximize revenues. Yesterday Maryland Transportation (Toll) Authority (MdTA) announced high toll rates in the range 25 to 35c/mile in the peak hours and 20c to 30c/mile offpeak for cars with a minimum 3-mile toll, and a $3/toll video surcharge. It is an all-electronic tollroad, the western third of which is due to open a year from now and the full 18.8 miles (30km) by the end of 2011.

Today MdTA released the traffic and revenue (T&R) study from Wilbur Smith Associates (WSA) on which the toll rates are based. It was an update to a T&R study done in 2006 but not released. Toll sensitivity curves - economists call them price elasticity of demand - were calculated showing maximum revenue for 2012 at 30c/mile in peakhours and 25c/mile off-peak. At higher rates than these revenue declines.

Video toll users paying a $3 premium are on the righthand downward sloping portion of the revenue curve while the bulk of motorists with transponders are just to the left of the peak at the 30c/25c peak/offpeak rates.

A combination of 25c/mile in peak and 20c/mile off-peak produced slightly more traffic but lower revenue.

The revenue maximizing approach with 30c/mile peak and 25c off-peak adjusted for inflation generates a forecast by WSA of 66k trips/day in 2013 the first full year with the full ICC open to traffic and just over $50m in tolls and fees.

By 2015 with 'ramp-up' nearly complete daily traffic is up around 90k and revenue $71m.

In  the late 20-teens daily traffic goes over 100k/day and in the early 2020s revenue breaks $100m.

Revenue bonds need aggressive pricing

MdTA have been building the ICC so far with federal grant anticipation 'Garvee' bonds and state money but the finanial plan calls for $1.23b of toll revenues bonds. To get those well rated and to find investors MdTA need to show they won't play political games, that they are serious about generating toll revenues needed to service the debt.

That, we're told, is why they are prepared to take some political heat about "high tolls." (ADDITION 2009-09-25 17:10)

No congestion to price for some years

MdTA is probably wise to defer dynamic pricing since at 6-lanes it is difficult to see there will be much congestion for some years. 15k veh/day/lane is comfortable, that's 90k/day on the road. 20k veh/lane/day or 120k on the ICC gets tighter, but that's projected to be well into the 2020s.

See the table above for key projections in the WSA study.

The projections assume that tolls are adjusted biannually with inflation but that a $3 premium for video tolls stays constant.

They assume a 20% "leakage" or non-collection for video tolls and 2% leakage for transponder tolls.

A survey by WSA showed value of time in the corridor - an above average income part of the Washington DC metro area to be $12 to $14/hourly range. It is a largely developed area with population growth expected at around 0.6%/year.

Providing east-west connectivity over the northern part of the Washington DC metro area the ICC is located 7 to 11 miles (11 to 18km) north of the Capital Beltway and twice that south of I-70, the nearest parallel expressways. Other alternatives are meandering mostly 2-lane surface arterials, little more than alphalted country lanes where traffic moseys along at 25mph between signal queues.

Expensive to build

The ICC toll rates are higher than most US tollroads, but then it's been way more expensive to build at $2.56b, $136m/mile, $85m/km. And it goes through a more affluent area than most other tollroads so estimates are the motorists will pay more. As an alternative to the 'roller coaster segment of the Beltway and the surface alternative it will provide a huge level of service improvement for the toll.

MD/ICC proposed toll rates close to Toronto 407ETR

407ETR the all-electronic tollroad in Toronto has highly comparable car toll rates to those proposed on MD/ICC.

407ETR is presently C19.85c/km for cars in peak periods which is C31.95c/mile, @ C$=US92c is US29.4c/mile.

407ETR has more off-peak rates but their weekend/holiday offpeak is C18c/km or C29c/mile @ C$=US92c is US26.7c/mile.

The video surcharge on 407ETR is C$3.25 @C$=US92c is $2.99.

see http://www.407etr.com/About/tolls.htm

Also comparable with Dulles Greenway

The proposed ICC tolls are also similar to Dulles Greenway tolls in northern Virginia in comparable high-income Loudoun County. Based on a 14 mile, 22.5km trip the length of the Greenway peakhour tolls at the mainline plaza near the airport are $4.00 (after discounting 50c remitted to Dulles Toll Road) or 28.6c/mile.

Offpeak Greenway tolls are $3.40 or 24.3c/mile for the whole 14 miles.

Trips that exit earlier pay higher per mile toll rates than this.

http://dullesgreenway.com/toll-rates.html

Most US toll rates are in the teens or high single digit cents per mile.

COMMENT: as a Marylander your editor has to say the ICC will be a pike to be proud of, superior to most, and so it's only right that the toll rates are high. We think they should stick for now with their proposed rates, based as they are on an apparently sound study of what the traffic will bear. Toll rates should be reviewed a year or so after the pike opens and the study projections can be compared against hard T&R results on the road.

NOTE: we've got a number of emails asking where the T&R study is on the MdTA website. They are working on getting it up there we're told. We tried to post our copy here but the file (18 megs) is too large for our server. 09-25 1700

TOLLROADSnews 2009-09-24