New York City is set to embark on an experiment in traffic congestion management that has never been tried in the United States. The plan is likely to have spend-management implications for businesses large and small that have vehicles driving into Manhattan or that receive deliveries by truck from outside the island.
In March of this year, the New York State legislature and Governor Andrew Cuomo agreed to a fiscal year 2020 budget including the congestion-pricing plan, which will begin in 2021. The plan will cover all of midtown and lower Manhattan, from 60th Street to the Battery.
To what extent congestion-pricing costs get passed on to business customers will depend on a number of factors, including the ability of shipping and delivery companies to obtain exemptions. Fees and potential exemptions will be finalized by a newly established commission called the Traffic Mobility Review Board.
The following estimates were quoted in the New York Times from traffic expert Samuel Schwartz, known as “Gridlock Sam”:
- Cars will likely pay $12 to $14
- Trucks may pay about $25
- Lower fees are expected for nights and weekends
Questions remain as to whether and how current tunnel and bridge tolls will be factored into the cost equation.
Congestion pricing impact on truck deliveries
Because the plan has not yet been finalized, trucking company executives are facing uncertainty as to its impact. According to a report in the Wall Street Journal, one trucking company executive said that “mom-and-pop delivery companies are going to be having to raise their prices.” Another was quoted as saying that he would probably raise the per-job price he pays his company’s contract drivers.
But trucking companies also see positives. One said:
“If the plan reduced the number of vehicles on the streets and our delivery drivers can get around faster, it would be a benefit.”
Clogged streets increase the likelihood of parking tickets and fender-benders, which has driven up insurance premiums for trucking companies operating in the city. He said:
“If I will avoid getting parking tickets then I’m willing to pay between $25 to $40 per truck.”
Other indirect congestion costs include wasted hours and fuel.
Congestion pricing impact on taxis and ride-share vehicles
Congestion pricing will also impact ground transport for business travel, including taxis and other for-hire vehicles such as black cars, Uber and Lyft.
In April 2018, the New York state legislature approved a customer surcharge that would add over $2.00 to any cab or ride-share trip that begins, ends or passes south of 96th street. The new fees were temporarily blocked by a coalition of taxi owners and drivers; however, a New York State Supreme Court judge ruled that the new ride fees could proceed. She did deny the state’s motion to dismiss the lawsuit altogether, saying that the coalition’s arguments merit further review.
E-commerce: one of the reasons for increased traffic
An article published on Bloomberg.com quoted a report published in 2018 by the Partnership for New York City which found:
“Traffic congestion in the central business area of New York is costing the city economy about $20 billion a year.”
Some of the congestion problems are coming from e-commerce growth. An article published in 2017 on the website Citylab.com quotes José Holguín-Veras, Director of the Center of Excellence for Sustainable Urban Freight Systems at Rensselaer Polytechnic Institute:
“Every 25 people produce one internet delivery. So imagine any congested city you know of. Imagine that you were to increase freight traffic by a factor of three. This is what’s happening now.”
Business impact will depend on exemptions
Proponents of congestion pricing argue that the plan can only work if there are very few exemptions. As currently outlined, the congestion pricing plan for Manhattan will apply to almost every vehicle; currently, the only two planned exemptions are for emergency vehicles and vehicles carrying people with disabilities.
The New York State legislature has created only a general framework, with details to be worked out later by the Traffic Mobility Review Board and the Metropolitan Transportation Authority. However, bus companies, trucking companies, taxi drivers and political leaders in New Jersey have already begun lobbying for special carve-outs.
The ultimate financial impact on businesses remains to be seen. Yet our spend team offices and many of our clients are located in Manhattan, so we will be watching how this plays out in terms of higher shipping, receiving and ground transportation expenses. In addition, a domino effect could result as other cities across the country look at congestion pricing for their own traffic public transportation funding problems.
We will continue to monitor this topic and report on its impact to our clients. Contact us for more information on indirect spend categories and how we can serve your needs.