Participation in the Congestion Pricing Pilot Program

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. 92-24]

Participation in the Congestion Pricing Pilot Program

AGENCY: Federal Highway Administration (FHWA), Department of

Transportation.

ACTION: Notice; additional solicitation for participation.

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SUMMARY: This notice further extends FHWA's open invitation to State,

local governments, or other public authorities, including toll

authorities, to apply for participation in the Congestion Pricing Pilot

Program (Pilot Program) established by Section 1012(b) of the

Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). This

notice amends the Pilot Program to support initiatives by toll

authorities which involve tolls that vary by time of day and level of

congestion.

DATES: The solicitation for participation in the Pilot Program will be

held open until further notice.

FOR FURTHER INFORMATION CONTACT: Mr. John T. Berg, Highway Revenue and

Pricing Team, HPP-13, (202) 366-0570; or Mr. Wilbert Baccus, Office of

the Chief Counsel, HCC-32, (202) 366-0780; FHWA, 400 Seventh Street

SW., Washington, DC 20590.

SUPPLEMENTARY INFORMATION: Section 1012(b) of the ISTEA (Pub. L. 102-

240, 105 Stat. 1914) authorizes the Secretary of Transportation (the

Secretary) to create a Pilot Program by entering into cooperative

agreements with up to five State or local governments or other public

authorities, to establish, maintain, and monitor congestion pricing

pilot projects. This section also provides that three of these

agreements may involve the use of tolls on the Interstate System

notwithstanding 23 U.S.C. 129, as amended, and 301. A maximum of $25

million is authorized for each of the fiscal years 1992 through 1997 to

carry out this program.

In advance of completing its plan for implementing this program,

the FHWA published a Federal Register notice on May 29, 1992 (57 FR

22857), which presented general information about the Pilot Program and

solicited public

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comment on a number of implementation issues [Docket No. 92-94]. The

comment period closed on June 29, 1992. The FHWA published the initial

solicitation for the Pilot Program in the Federal Register on November

24, 1992 (57 FR 55293). The solicitation period closed on January 25,

1993. The results of the first solicitation were summarized in the

Federal Register on June 16, 1993 (58 FR 33293). The June 16 notice

also extended the solicitation period until October 14, 1993. A Federal

Register notice dated May 25, 1994, extended the solicitation deadline

for program participation until further notice and broadened the

program to include pre-project activities and pricing of high-occupancy

vehicle lanes.

Since that notice was issued, the FHWA has funded a variety of

projects involving pre-project studies and implementation projects.

Pre-project studies are underway in six cities in California,

Minnesota, Oregon, Texas, and Colorado. An implementation project is in

the preliminary stages in San Diego, California. In addition, Pilot

Program funds are being used to support a monitoring and evaluation

study of a privately funded highway project in California that will be

the first U.S. toll road using congestion pricing techniques to manage

demand. Negotiations are currently underway for additional congestion

pricing projects in other States.

Additional Solicitation for Participation

This notice expands the offer of Federal support currently

available to toll authorities and others for initiatives that would

make use of variable tolls as part of a demand management strategy.

Through this notice, the Pilot Program is being amended to make Federal

funds available for use as a revenue reserve fund to replace revenue

losses associated with adoption of a congestion pricing toll strategy.

The preferred method of charging tolls on existing toll facilities

is to set a fixed toll per passenger vehicle and a fixed toll per axle

for commercial vehicles. Fixed tolls may be favored because they

clearly satisfy bond trust agreements and rate covenants regarding

revenue to service debt. Another reason for this method of tolling may

be an equity concern that all toll customers in the same vehicle class

be charged the same fixed fee.

However, fixed tolls do not necessarily account for the importance

of the trip to the user or the additional cost responsibility of peak-

period users. They also preclude the possibility of using tolls that

vary by time of day or level of congestion for demand management

purposes.

Although much remains to be learned about the response of travelers

to congestion pricing practices, the use of variable tolls has the

potential of both improving service on congested toll facilities and

reducing the need for capacity expansion. To help overcome barriers to

the testing and use of variable tolls and to encourage congestion

pricing initiatives by toll authorities, the FHWA is modifying the

existing offer of support from the Pilot Program. The Pilot Program can

already provide support for efforts designed to lay the groundwork for

congestion pricing applications, such as the development of public-

involvement programs, activities designed to overcome institutional

barriers to implementing congestion pricing, and funding for automated

vehicle identification or tolling equipment and operational costs for

pricing applications.

The new feature being offered through this notice is the

availability of Pilot Program funds in the amount of up to $10 million

to a participating toll authority, either directly or as an ISTEA

Section 1012 loan of Federal funds from the State to the toll

authority, to be used to establish a revenue reserve fund that would be

available to replace potential revenue loss that might be associated

with adoption of a congestion pricing toll strategy. The purpose of

this new feature is to help provide assurance to the toll authority and

others that the revenue stream associated with a toll facility would

not be jeopardized by the adoption of a congestion pricing toll

strategy. For example, a toll authority might propose a revenue-neutral

pricing strategy with peak-period surcharges and/or off-peak discounts

that would be designed to influence demand patterns to provide improved

customer service or reduce the need for future capacity expansion. A

revenue-neutral pricing strategy would also respond to the negative

perception of congestion pricing as simply a new tax designed to raise

additional revenue. An example from a toll road in France provides an

interesting illustration where certain peak period tolls are set 25 to

50 percent higher than the base rates and off-peak rates are reduced by

25 to 50 percent. The new toll structure has significantly reduced

congestion during the most congested periods and has been viewed as a

successful strategy by users of the tollway. The toll authority

designed the pricing strategy to be revenue neutral, and while modest

revenue losses were noted initially, it appears that overall revenue

impacts were low. Alternatively, a toll authority might propose to

increase tolls to raise additional revenue to support capacity

expansion or otherwise improve service, but through the adoption of a

combination of peak-period surcharges and off-peak discounts the toll

authority may be able to influence demand patterns to provide improved

customer service or may be able to reduce the level of capacity

expansion needed.

In either case, because of the innovative pricing strategy being

proposed, toll authorities need to be able to assure bondholders and

rating agencies that revenues would not decrease or be lost as a result

of the pilot test. The FHWA recognizes that forecasting traffic and

revenue changes that might result from adoption of a peak-period

pricing initiative is inherently uncertain, even if the objective of

the initiative is to maintain revenue neutrality. For this reason, FHWA

is offering toll authorities the possibility of using Pilot Program

funds to establish a revenue reserve fund that could be drawn upon if

revenues do fall below projected levels.

The exact details of the funding arrangement of the Pilot Program

would be worked out to suit the unique circumstances of individual

proposers, but, in general, the proposer must provide to FHWA an

estimate of the expected revenue stream expected to result from a

variable toll strategy (based on an estimate by an independent traffic

and revenue forecasting firm), assign a downside risk of revenue loss

that might occur (e.g., if traffic projections prove to be overstated),

and propose to establish a revenue reserve fund that would cover that

potential amount of revenue loss. The maximum amount of Federal funds

to be available to any proposer for a revenue reserve fund is $10

million. The proposer would be required to provide the non-Federal

share of not less than 20 percent as the initial deposit in the fund.

At the time the agreement is executed between FHWA and the proposer,

the Federal share of project funds will be obligated. Federal funds

will be deposited in the revenue reserve fund immediately after the

non-Federal share is deposited.

Any revenue reserve funds that are unused after completion of the

congestion pricing initiative may be used for other congestion relief

projects, including capacity additions to the facility included in the

pilot project or related facilities, transit improvements in the area

of the pricing project, other congestion pricing initiatives, or other

related uses. Proposals should identify specific plans for use of any

excess funds, or describe how such use will be determined at a later

date. The

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effectiveness of the proposed uses of these funds will be a

consideration in the evaluation of proposals.

The selection criteria contained in the FHWA's November 24, 1992,

Federal Register notice will continue to be used as general selection

criteria for implementation. However, clear priority will be given to

projects that can be implemented during fiscal year (FY) 1996 so that

the FHWA can evaluate data prior to expiration of ISTEA. Therefore,

applications for FY 1996 revenue reserve funding for toll roads should

be submitted by October 31, 1995, or as soon thereafter as possible.

Proposals should include a brief discussion of the tolling strategy,

expected timing of implementation, proposed fund management plan, and

approvals needed. Any remaining program funds would continue to be

available for pre-project and implementation efforts that would come

later than FY 1996. To obtain further information or discuss potential

revenue reserve fund projects contact Mr. John T. Berg at the address

provided under FOR FURTHER INFORMATION CONTACT.

Authority: 23 U.S.C. 315; 49 CFR 1.48; Sec. 1012(b), Pub. L.

102-240, 105 Stat. 1914, 1938.

Issued on: September 19, 1995.

Rodney E. Slater,

Federal Highway Administrator.

[FR Doc. 95-23688 Filed 9-22-95; 8:45 am]

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