It is very
important to understand the link between financial and economic viability
in toll roads because a distinctive feature of toll roads is that the
realization of the economic benefits expected from the investment depends
heavily on the financing option chosen. In other words, there are trade-offs
between the economic and financial viability of a toll road, which often
tend to be overlooked.
Given project costs,
expected traffic and financing structure (interest payments, debt/equity
ratio), the level of toll rates that meet debt service and financial
returns may cause traffic diversion to an alternative route, which may
be a highly inefficient outcome in terms of traffic allocation in the
corridor. The free-access public road, which is likely to be of less
capacity, lower level of service and less well maintained, gets more
traffic than is economically efficient while the newly built toll road
is under-used and wasted.
This can be illustrated
by the chart below:
Colombia - Toll Road Construction Project, 1998
New
highway - Variation of ERR and Financial Revenue depending on the toll
rate
Source: A. Menendez
Why
worry about "willingness-to-pay" ?
In the case of
a toll road project, an accurate estimate of the amount that the potential
users are ready to pay - the willingness to pay
- is in theory a prerequisite of toll level setting. In practice, this
parameter is very difficult to assess, in particular in countries where
the experience of toll networks is limited or simply does not exist.
In transition or developing countries, the quick changes occurring in
income distribution and overall wealth make willingness to pay even
more difficult to estimate over the periods usually considered for economic
appraisal. Users' willingness to pay tolls is largely a function of
their wealth, the value they assign to time savings and other toll road
benefits, and the cost and quality of competitive alternatives. Assessing
willingness to pay is in fact trying to figure out the elasticity of
transport demand.
Nevertheless many
countries can now count on useful results on the value of time and the
willingness to pay for various types of transport service users. These
are relevant indications when pricing new services to be provided by
private operators. It makes sense to compare the tolls or tariffs calculated
from the cost side with these rough estimates of the willingness to
pay for some services or with the value of time revealed by the post-mortem
analysis of comparable projects increasingly found in literature (see
Quinet on Marseille (1998), Small and Winston (1999) on the Dutch data
base).
Shadow
tolls may also have the benefit of mitigating market risk to
be assumed by the private sector when the motorists' willingness to
pay is unknown.
To know more about
time valuation and relation to willingness to pay, see Allocation
and valuation of travel time savings, Jara-Diaz,. Universidad de Chile,
(2000), On the social valuation of travel time savings, Galvez and Jara-Diaz,
International Journal of Transport Economics, Vol. XXV, No. 2, (June
1998).
What
is the relation between "stated preference surveys" and "willingness-to-pay"
?
The main objective
of a stated preference survey is to estimate the probability of drivers
switching from a toll road to a free route under different rates of
toll. One of the outputs of the survey is the estimate of the average
toll which drivers would be prepared to pay. Another objective is to
obtain some indications of perceived values of time.
Drivers are interviewed
using questionnaires specifically designed to avoid the usual difficulties
met when trying to get sound estimates of time values and willingness
to pay. The first part of the survey often consists of general questions
about the journey being made. These are intended to collect some information
on which to base the stated preference situations and to provide a basis
for data segmentation. The questions include:
|
The
type of vehicle being driven, |
|
The
reason for being at the journey destination, |
|
The
number of passengers, |
|
The
frequency of making the same trip, |
|
The
country of vehicle registration, |
|
The
driver's approximation of the total distance of the journey, |
|
The
journey origin, |
|
The
distance to be traveled on the toll road, |
|
The
reason for being at the journey origin, |
|
The
driver's anticipated journey time on the toll road, |
|
The
journey destination, |
|
The
driver's age, sex, economic status (employment category) and level
of education. |
The stated preference survey itself consists of a fixed pairs exercise
in which drivers are asked to state whether they would use '"definitely"
or "probably" the toll road or the free road. The usual variables are
toll level, total journey time, freeway standard.
Then questionnaires
are processed using dedicated analysis software (ALOGIT, ALASTAIR).
How is it possible to assess how toll charging will affect traffic assignment
?
Two methods are
commonly used:
the
time saving principle: the amount of the toll is divided
by the time saving value to vehicles. The resulting "time value" puts
a cash value on the amount of time saved for each vehicle type.
the
diversion ratio curve: this is derived from the relation
between the toll amount charged, divided by the time saving resulting
from using a toll road instead of an existing toll-free road and the
percentage of vehicles that will divert from the free road to the toll
road. These diversion ratio curves are calculated for each type of vehicle.
The time value for each type of vehicle can be obtained by calculation
but should eventually be based on experience. Time values and diversion
ratio curves will have to be revised repeatedly in accordance with the
actual traffic volume on toll roads as the years pass.
