Financial and Technical Feasibility of Dynamic Congestion Pricing as a Revenue Generation Source in Indiana – Exploiting the Availability of Real-Time Information and Dynamic Pricing Technologies

Highway stakeholders continue to support research studies that address critical issues of the current era, including congestion mitigation and revenue generation. A mechanism that addresses both concerns is congestion pricing which establishes a direct out-of-pocket charge to road users thus potentially generating revenue and also reducing demand during peak hours. Congestion pricing (CP) is based on the classical economic laws of supply of demand: the different prices imposed by CP for highway use at non-peak and peak periods can help regulate demand and manage congestion even with relatively little or no increases in supply. At times of peak demand, road users impose costs on each other. By making these users pay for the costs associated with the additional congestion they create, CP can encourage the redistribution of travel demand in space or in time, or both. Thus, CP harnesses the power of the market to reduce the waste associated with traffic congestion and ultimately helps to achieve more efficient use of transport infrastructure. Introducing CP on highway facilities discourages overuse during rush hours by motivating trip-makers to travel at other times of the day or to shift to other modes. By removing even a fraction of vehicles from a congested roadway, CP enables the system to flow much more efficiently, allowing more cars to move through the same physical space. A review of the literature on CP theory and practice indicates that congestion pricing can and does result in substantial benefits including congestion mitigation, modal shifts, revenue generation, and decrease in energy consumption and air pollution. Worldwide, roadway CP has been applied at London, Milan, Singapore, and Stockholm. The report traces the evolution of the concept of CP over the past millennium; explains why CP implementation continues to be limited at the current time; establishes user cost functions and traffic equilibrium conditions associated with the static and dynamic models, for a number of implementation scenarios including 1-free-route only, 1-free-and-1-tolled route, and 2-tolled-routes; applies these models in a case study that uses data from a congested 6-mile section of Interstate 69 in Indianapolis; uses the case study to evaluate the benefits of CP at the selected corridor; and assesses the CP economic efficiency on the basis of capital costs, operating and maintenance costs, and toll revenue.