The toll on business

Lawrence Solomon
National Post
March 6, 2003

Toronto Mayor Mel Lastman spoke for many when he voiced his fear of tolling city roads, as London, England, so daringly did to eliminate traffic congestion three weeks ago. “Please tell me how much business we’re going to lose in the evenings particularly with people not coming to Toronto to restaurants,” he asked. “If you pay to come into Toronto, and a toll to get out of here, you might as well go to a restaurant in your own neighbourhood.”

To Mr. Lastman, tolling Toronto roads would chart a path to ruin. Without customers, local businesses would leave the city. Toronto “might as well roll up the sidewalks.”

Mr. Lastman is wrong for two fundamental reasons and two narrow ones. The fundamental reasons: He doesn’t understand what makes people come and what makes businesses go. The narrow ones: He doesn’t understand how London’s tolling system works, or that London’s experience indicates that less congested cities would even more easily be able to eliminate congestion.

London’s mayor eliminated traffic jams in its heavily congested core by charging drivers £5 a day (about $12) to enter or leave it weekdays between 7:00 a.m. and 6:30 p.m. Although, this unprecedented feat has earned him near universal praise – from big business to automobile associations to environmentalists – the £5 charge, in fact, worked too well. Instead of an expected 10% to 15% decline in traffic – all that would have been needed to make London traffic flow freely – the £5 charge convinced 20% of drivers to leave their vehicles behind.

The streets of London, it is now clear, could have been decongested with a lower toll, perhaps £4 or £3. In less heavily congested Toronto, which needs to deter far fewer vehicles from its roads to eliminate congestion, the charge would be smaller still, perhaps $3 or $2, or about the same as a bus ticket. Looked at another way, very few people would be deterred by such a small levy from driving into Toronto, and that is a good thing: Very few people need to be deterred in order to eliminate congestion. Once the few are deterred, the great majority would obtain carefree driving conditions for the price of car fare.

Some people, to avoid the toll, will refuse to come into Toronto, costing the city “customers,” as Mr. Lastman puts it. But they will be very few. Most who decide to avoid the toll would do so by coming into Toronto by taxi, by public transit, by walking, by bicycle, by scooter, by sharing a ride, or by changing their schedules to travel in off-peak hours – this is how people are avoiding the tolls in London. Meanwhile, other people who had been deterred from entering the city at all – not by price but by congested roads – would now be new customers. On balance, Toronto would have more customers, not fewer, once the city’s transportation systems become efficient.

Mr. Lastman fears that tolls will discourage people from travelling, and encourage them to do more of their business in their own neighbourhood. In this, he is right. He is wrong in not realizing the larger, more profound effect of Toronto tolls: They will encourage more people to choose Toronto neighbourhoods as their own. After all, apart from changing their travel hours, or coming in by public transit, commuters have another way to avoid tolls to enter Toronto: They can simply move into the city.

In Canada and around the world, people have been flocking to major cities because of the quality of life that only large population centres can offer – restaurants, parks, theatre districts, shopping, museums and art galleries. In Toronto as in many other large centres, about half the commuting now goes in the reverse direction – from city to the suburb – because many people insist on living in cities, even when the jobs are elsewhere. The jobs are elsewhere chiefly for one reason: Big-city mayors have taxed them away.

In Toronto, because municipal taxes have often accounted for more than half the rent paid by local businesses, many businesses pulled up stakes and moved outside the city’s boundaries. Their employees sometimes followed them. From outside the city limits, the businesses then tried to service their city clientele, losing less in extra transportation costs than they gained in taxes. New businesses, likewise, set up outside the city to avoid ruinous municipal taxes.

With tolls negating the tax advantages that businesses obtain from moving away, many businesses would now profit from a city location, close to their customers, and move back. Tolls could convince businesses to move to the city another way, too: By using toll revenue to reduce unfair business taxes, cities could bring back more businesses still. With more businesses, and more residents, contributing to the city’s tax base, average taxes would decline for all. Then we’d see a new kind of traffic jam, as businesses, their employees, and their customers, rushed to relocate in cities.

Lawrence Solomon is executive director of Urban Renaissance Institute and a director of PEMA, a non-profit with a patent pending on toll road technology. E-mail: LawrenceSolomon@nextcity.com.
Background sources

Related articles:
Toll roads v. the Canadian Accident Association
London’s green streets
Toll skeptics be damned: London’s rolling
The take from tolls
Don’t tax, toll: Presentation to the Canadian Home Builders’ Association
London unjammed
Don’t tax, toll
Toll today’s roads, don’t build more
How the free road lobby led us astray
Toll road commentary
Road safety
How to cut highways’ human toll

Advertisements
This entry was posted in Cities, Regulation, Toll roads, Transportation. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s