New tolls temporarily block congestion charge

Deals

The following story is from the February 13-February 26 print edition of the Budapest Business Journal.

The Hungarian government’s new highway tolls put it on a collision course with a plan to push drivers out of Budapest’s city center via a congestion charge and, for now at least, it is the congestion charge that has had to get out of the way.

But the congestion charge was a requirement in exchange for EU funding, which makes it unlikely that it will be shelved forever. And Budapest’s Mayor István Tarlós, who favors the charge, says he is not running for re-election in 2018, which means he is not as worried as he might be about political pressure from above.

With the new toll system introduced by the government effective from January 1, drivers seeking to avoid tolls on the M0 orbital highway that circumvents the capital take detours on minor roads around Budapest, driving through nearby settlements in the agglomeration area. Or else, they choose to drive right through Budapest, perhaps even through the center, using the main thoroughfares of the city.

The planned congestion charge would have meant drivers going through the heart of Budapest would have to pay a fee, but apparently the government, already facing criticism for its new tolls and the way they were introduced, was not willing to leave drivers with no free options. That’s why Mayor Tarlós was recently forced to announce that the congestion charge would be delayed until late 2016.

 

Competing concepts

Under the government’s new toll plan, those who choose to use the M0 around Budapest will have to pay about HUF 5,000 a month or more. (Confusingly, the charge does not – yet – apply to all of the M0. Sections built with EU money are not allowed to have a toll applied, at least until that moratorium ends in about three years’ time.) The congestion charge would have pushed Budapest traffic toward outer areas, and encouraged drivers who wish to drive through the capital city to drive around it instead – ideally using the M0 road. These are mutually exclusive concepts and, given the current set up, the government’s new toll system is likely to push through traffic into Budapest, as drivers look for alternative routes that don’t cost anything. A congestion charge would have taken away cheaper routes through the heart of town, and probably have turned Hungária körút into a parking lot. Already stinging from criticism about the new tolls, the ruling Fidesz party apparently pushed the mayor to forgo his congestion charge.

The competition between the two concepts did not end well for the inhabitants of Budapest. The traffic that used to pass around Budapest via the M0 ring is now passing through Budapest itself, dramatically increasing pollution of the city’s environment. Moreover, Budapest does not even profit from the transit traffic; the capital city is the clearly the absolute loser in this situation.

 

Political risk?

Ipsos opinion polls show that governing party Fidesz has seen its popularity decrease by 3% following the introduction of the new measure, but things could have been worse: At HUF 5,000 a month, the highway toll would cost HUF 60,000 per year, whereas the congestion charge would be much more – HUF 500 per day, or more than HUF 180,000 per year.

“If it depended on the political elites, the levying of the congestion charge would be delayed forever,” András Boros, senior analyst of research institute Political Solutions explained to Budapest Business Journal. But the city was committed to the congestion charge back in 2008, in exchange for HUF 180 billion in EU support for the construction of the city’s newest metro line. “If the city fails to do what it promised in the contract then the whole sum will have to be repaid. So the capital city does not have a choice,” Boros added.

Of course the city of Budapest still has room to play some tricks. The EU has not defined exactly the details of the congestion charge. Therefore either the amount of the charge could be lowered to a reasonably small amount, or the geographical area within which the charge would be introduced could be reduced and limited. Mayor Tarlós, however, has called for an expensive congestion charge, comparable to western cities like London or Stockholm. In addition, the area affected under Tarlós's plan would radically exceed the central business district, which was originally designated as the area meant to be protected by the congestion charge: On the Pest side, the affected area reaches way into the outer industrial zone, and in Buda, it covers eight square kilometers.

“Mayor Tarlós plays like a real gambler: he wants double or nothing,” Boros commented. Part of the incentive for expanding the affected area is to improve the city’s bargaining position before discussions begin with the suburbs and the Hungarian government. The suburbs have reason to object, because the congestion charge would go to the capital city, while they would have to deal with increased parking and traffic problems. 

According to Boros, the development of a congestion charge system will cost approximately HUF 15 bln. “It takes HUF 3 bln to develop the access points; HUF 2 – to 3 bln to carry out the traffic investments; in addition, real estate development (such as the construction of parking houses) can cost up to HUF 7 bln,” Boros told the BBJ. The capital would self-finance the project, but, as Tarlós mentioned, Budapest can in fact also take out a loan for that purpose. “The congestion charge is not a bad source of funding in itself, either: the investments would yield a return within a year, and the yearly income would amount to ten times the operational costs,” the analyst said. Detailed documentation from the Budapest Transport Center (BKK) received by this newspaper suggests that an HUF 500 daily entry fee would produce HUF 30 bln annually; and even HUF 400 would generate HUF 25 bln per year.

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