Dmitry Travnikov / Alamy Stock Photo

Business Fears, Real and Imagined

Rebecca Baird-Remba

May 01, 2024

Will congestion pricing hobble Midtown and those who rely on its economic ecosystem to make a living?

Will congestion pricing hobble Midtown and those who rely on its economic ecosystem to make a living?

The MTA may have finally voted through a congestion pricing toll in New York City, but that hasn’t stopped small business groups, neighbors and even Broadway theater owners from lining up against the new charges because they believe they’re inimical to their interests. While the fees are expected to raise $1 billion annually for the city’s public transit system, there have not been similar projections done to examine how the economic effects will play out for the drivers, businesses and consumers who have to bear the financial burden. That question demands further consideration as the implementation date comes hurtling toward Gotham.

How will it work? Most drivers entering the zone will pay the $15 toll, with “crossing credits” for those who enter Manhattan via any of the four tunnels — Lincoln, Holland, Battery or Queens-Midtown. Drivers who earn less than $50,000 a year can apply to get a discount on the toll, which would apply after their first 10 trips per month into the congestion pricing zone. Daytime rates would apply from 5 a.m. to 9 p.m. during the week and from 9 a.m. to 9 p.m. on the weekends, with heavily discounted toll rates overnight. The MTA expects to implement the new tolls in mid-June. (For more details, see Vital City’s full explainer.)  

Meanwhile, taxi passengers will pay $1.50 per ride, and passengers in other ride-share services like Uber and Lyft will pony up $2.50 per ride. Taxi drivers, who’ve already been walloped over the last decade-plus as app-hail cars have flooded the market, naturally aren’t happy about that. New York Taxi Workers Alliance Executive Director Bhairavi Desai told NBC4 last month that the new tolls were “a reckless proposal that will devastate an entire workforce.” 

Many small business owners, particularly restaurant and bar owners who receive dozens of deliveries a week and expect that distributors will find ways to pass the costs onto them, also worry about feeling the pinch. Andrew Rigie, head of the New York City Hospitality Alliance, has spent the past two years lamenting how congestion pricing will be just another financial burden on hospitality businesses that, especially in the wake of COVID, are just barely making ends meet. 

“It is extraordinarily difficult to operate a bar or restaurant in New York City,” said Rigie. “The bars and restaurants in the congestion zone have been hit the hardest by the pandemic, don't have as many office workers coming in, and still have pandemic-era debt on the books.” On the increased costs associated with pricier deliveries and potentially reduced business from fewer people traveling in, Rigie adds: “I don't know if this will be the final nail in the coffin for some of these businesses. What I do know is that many feel squeezed and it’s another example of the government making it harder to survive. These delivery trucks have to come into the zone. It gets more expensive for the customer as well.”

Komanoff’s analysis is one of the few that tries to assign hard numbers — time saved, reduction in traffic speeds — to how congestion tolling will shape Manhattan streets.

The Broadway League, which represents Broadway theater operators and production companies, has also warned that congestion pricing will hurt theater attendance, which hit 83% of pre-pandemic totals for the 2022-2023 season, the trade group’s most recent annual report found. Roughly 35% of Broadway goers are from the tri-state area, according to the report, with 22% hailing from the city and 14% from the suburbs. Those suburban drivers are the ones that restaurateurs and Broadway theater owners worry about the most, because they can’t just take the subway into the city instead. Of course, some of those people might take commuter railroads or buses into the city as an alternative if the cost of driving got high enough — the very point of the policy. But some will likely not bother to travel in at all anymore.

Business owners also worry about how the new surcharges affect their employees, who may feel safer driving rather than taking the subway after finishing a shift in the middle of the night.

Though there are sure to be hard-luck anecdotes of working people put out by the fee, it’s crucial to put those in context. Just 4% — or 182,000 — of outer-borough residents commute by car to work in Manhattan, a 2022 analysis from Community Service Society of New York found, and just 2% of outer-borough New Yorkers living in poverty do so. Car owners in Brooklyn, Queens, the Bronx and Staten Island also tend to be well off, earning a median income of $94,000, more than twice the $42,000 median income of car-free households, according to CSSNY. 55% of New Yorkers do not own cars, according to 2022 Census data. 

That said, there are sure to be economic winners and losers, as there are with almost any tax, fee or sizable policy change. A group of small business owners, outer borough Republican City Council members and New Yorkers who live in the congestion pricing zone have even filed a federal lawsuit to try and block the new surcharges. They argue that the federal and state governments did not conduct a thorough enough environmental review of the congestion pricing scheme, which has taken five years to become a reality since former Gov. Andrew Cuomo signed it into law. They pointed to the MTA’s August 2022 environmental assessment, which found that congestion pricing could push more drivers onto the highways through surrounding neighborhoods. That would mean more air pollution in the central and south Bronx, Staten Island and other highway-filled parts of the outer boroughs. In response, the MTA has proposed installing air filtration units in schools near highways, upgrading parks and funding an electric truck voucher program in the Bronx and other affected areas. Of course, the lawsuit also argues that the new tolls will create a financial burden for the two dozen named plaintiffs, or in the case of another dozen politicians, for their constituents. 

Gov. Phil Murphy of New Jersey — home to countless people who drive into Manhattan with some regularity for business or pleasure, and a commuter rail system in NJ Transit that’s loathed for its unreliability — also filed a federal lawsuit against the MTA making the exact same argument. The suit also claims that the new surcharges could violate the commerce clause of the Constitution because New Yorkers can get credits for the tolls, while New Jerseyans can’t. (Murphy has also pushed for a $10 toll credit for New Jerseyans crossing the George Washington Bridge.)

Roderick Hills, a law professor at New York University, called the New Jersey suit “a publicity stunt.”

“It’s not utterly frivolous in that New Jersey-ites don’t get a tax rebate [for the tolls] but New Yorkers do,” he said. “It would be very unusual for New York to give rebates for New Jersey taxes. Given that New Jersey is charging New Yorkers tolls all the time, [the lawsuit] strikes me as close to frivolous as you can get.”

These are just two out of six federal lawsuits brought by congestion pricing opponents. The United Federation of Teachers and Staten Island’s Vito Fossella are responsible for one, while the mayor of Fort Lee, Mark Sokolich and Rockland County Executive Ed Day are behind two more. The MTA has even suspended signal upgrades to the A and C lines amid concerns about the potential impact of the lawsuits on congestion pricing revenue. The agency shrank its capital funding commitment for 2024 from $12 billion to $2.4 billion, Bloomberg reported in March, delaying work on modernizing signals, installing new elevators and buying new subway cars and buses. 

There are sure to be hard-luck anecdotes of working people put out by the fee. But it’s crucial to put those in context.

Businesses and commuters have both exaggerated complaints and legitimate worries. The way others see it, a significant reduction in traffic congestion will be an economic boon to tradespeople, delivery drivers, taxis and other professionals whose livelihoods depend on getting places by car as quickly as possible; indeed, it’s possible that both things turn out to be true — that the charges simultaneously have both concrete downsides and benefits for businesses.

There’s no perfect formula for assessing the tradeoffs, but Charles Komanoff, an energy policy analyst and longtime cycling and environmental activist, developed an early model for New York City congestion pricing, which he dubbed “the Balanced Transportation Analyzer.” His analysis is one of the few that tries to assign hard numbers — time saved, reduction in traffic speeds — to how congestion tolling will shape Manhattan streets.

He estimates that congestion pricing could improve traffic speeds in the Manhattan core by 11% to 12%, which means less time paying drivers and delivery crews and less money spent on gas. 

“Especially the people for whom time is money — man with a van, tradespeople, food delivery — they will all benefit substantially,” said Komanoff. “And curb space should be easier to come by.” 

A typical delivery truck carrying $5,000 worth of food would pay a $24 toll, which would be “a few tenths of 1% of the costs that delivery companies incur and then have to recoup to their restaurant customers,” he said. “It’s even less than statistical noise.” 

He added, “you’re talking about a 10% to 20% savings” in costs, once the lower costs of gas and worker wages are factored in. Cabs and other for-hire vehicles would also benefit from faster travel speeds, which would allow customers to get where they need to go faster and allow cabbies to pick up more people per shift, he argued. 

At the end of the day, Komanoff believes the state’s creation of the $1 billion annual revenue target — along with constant discussion of toll prices and exemptions — “had the effect of overemphasizing the revenue piece and underemphasizing the direct travel improvement. So perhaps it has contributed to a climate of public opinion in which it is easier for the naysayers, the worriers to discount entirely the benefits that will fall into their lap en route to and from the zone. All these people will have been worrying and agitating for no good reason.”