Transportation Equity Act for the 21st Century; Implementation for Participation in the Value Pricing Pilot Program

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket FHWA-98-4300]

Transportation Equity Act for the 21st Century; Implementation

for Participation in the Value Pricing Pilot Program

AGENCY: Federal Highway Administration (FHWA), Department of

Transportation (DOT).

ACTION: Notice; solicitation for participation.

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SUMMARY: This notice invites State or local governments or other public

authorities to make applications for participation in the Value Pricing

Pilot Program (Pilot Program) authorized by section 1216(a) of the

Transportation Equity Act for the 21st Century (TEA-21) (Pub. L. 105-

178, 112 Stat. 107) and presents guidelines for program applications.

This document also describes the legislative mandate for the Pilot

Program and procedures which will be used to implement the program. As

described in the background section of this notice, and in keeping with

the DOT's broad outreach on TEA-21 programs, the procedures described

in this notice reflect the valuable contributions of FHWA's State and

local partners and many others who have participated in a series of

regional workshops and an October 1997, Project Partners' Retreat. The

FHWA will accept comments on these administrative guidelines throughout

the life of the Pilot Program and, as necessary, will issue additional

guidance in response to public comments and program experience.

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-10, (202) 366-0570; or Mr. Wilbert Baccus, Office of

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

SW., Washington, D.C. 20590.

SUPPLEMENTARY INFORMATION:

Electronic Access

Internet users can access all comments received by the U.S. DOT

Dockets, Room PL-401, by using the universal resource locator (URL):

http://dms.dot.gov. It is available 24 hours each day, 365 days each

year. Please follow the instructions online for more information and

help.

An electronic copy of this document may be downloaded using a modem

and suitable communications software from the Government Printing

Office's Electronic Bulletin Board Service at (202) 512-1661. Internet

users may reach the Federal Register's home page at: http://

www.nara.gov/fedreg and the Government Printing Office's database at:

http://www.access.gpo.gov/nara.

Background

Section 1216(a) of TEA-21 authorizes the Secretary of

Transportation (the Secretary) to create a Pilot Program by entering

into cooperative agreements with up to fifteen State or local

governments or other public authorities, to establish, maintain, and

monitor local value pricing pilot programs. Section 1216(a)(4) amends

section 1012(b)(4) of the Intermodal Surface Transportation Efficiency

Act of 1991 (ISTEA), Pub.L. 102-240, 105 Stat. 1914, by providing that

any value pricing project included under these local programs may

involve the use of tolls on the Interstate system. This is an exception

to the general provisions concerning tolls on the Interstate system as

contained in 23 U.S.C. 129 and 301. A maximum of $7 million is

authorized for fiscal year 1999, and $11 million for each of the fiscal

years 2000 through 2003 to be made available to carry out Pilot Program

requirements. The Federal matching share for local programs is 80

percent. Funds allocated by the Secretary to a State under this section

shall remain available for obligation by the State for a period of

three years after the last day of the fiscal year for which funds are

authorized. If, on September 30 of any year, the amount of funds made

available for the Pilot Program, but not allocated, exceeds $8 million,

the excess amount will be apportioned to all States for purposes of the

Surface Transportation Program.

Funds available for the Pilot Program can be used to support pre-

project study activities and to pay for implementation costs of value

pricing projects.

Section 1216 (a)(5) of TEA-21 amends section 1012(b) of ISTEA by

adding

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subsection (6) which provides that a State may permit vehicles with

fewer than two occupants to operate in high occupancy vehicle (HOV)

lanes if the vehicles are part of a local value pricing pilot program

under this section. This is an exception to the general provision

contained in 23 U.S.C. 102, that no fewer than two occupants per

vehicle be allowed on HOV lanes. Potential financial effects of value

pricing projects on low-income drivers shall be considered and, where

such effects are expected to be significant, possible mitigation

measures should be identified. The costs of such mitigation measures

can be included as part of the value pricing project implementation

cost. The Secretary is to report to Congress every two years on the

effects of local value pricing pilot programs.

The Value Pricing Pilot Program is a continuation of the congestion

Pricing Pilot Program authorized by section 1012(b) of the ISTEA. Under

this program, pricing projects have reached the implementation stage in

San Diego, California; Lee County, Florida; and Houston, Texas. In

addition, pre-program planning activities have been supported in

Portland, Oregon; Los Angeles, San Francisco and Sonoma County,

California; Boulder, Colorado; Minneapolis/St. Paul, Minnesota; and

Westchester County, New York. Funds were also used to support the

California DOT's monitoring and evaluation study of the private,

variable-priced toll lanes along State Route 91 in Orange County,

California.

An important aspect of the ISTEA program was the Federal/State/

local partnership that was created as part of the program's

development. The Value Pricing Pilot Program described in this notice

builds upon that partnership and the experience of the ISTEA program.

In particular, the views and concerns of the FHWA's project partners,

and other interested parties, were solicited during a series of

regional workshops that were sponsored as part of the ISTEA program,

and in a Project Partners' Retreat that was held in October 1997. This

notice reflects these valuable contributions.

Purpose

The purpose of this notice is to provide general information about

the Pilot Program and FWHA's plans for implementing the program, and to

invite State or local governments or other public authorities to make

applications for participation in the Pilot Program.

Definitions

Value pricing, congestion pricing, peak-period pricing, variable

pricing, or variable tolling, are all terms used to refer to direct

point/time-of-travel charges for road use, possibly varying by

location, time of day, severity of congestion, vehicle occupancy, or

type of facility. By shifting some trips to off-peak periods, to mass

transit or other higher-occupancy vehicles, or to routes away from

congested facilities, or by encouraging consolidation of trips, value

pricing charges are intended to promote economic efficiency both

generally and within the commercial freight sector, and to achieve

congestion reduction, air quality, energy conservation, and transit

productivity goals.

A value pricing project means any implementation of value pricing

concepts or techniques meeting the definitions contained in this notice

and included under a local value pricing pilot program under this

section, where a local value pricing pilot program includes one or more

value pricing projects serving a single geographic area, such as a

metropolitan area, and included under a single cooperative agreement

with the FHWA. Cooperative agreement means the agreement signed between

the FHWA and a State or local government, or other public authority to

implement local value pricing pilot programs under this section.

Program Objective

The overall objective of the Pilot Program is to support efforts by

State and local governments or other public authorities to establish

local value pricing pilot programs, to provide for the monitoring and

evaluation of value pricing projects included in such programs, and to

report on their effects. While the Pilot Program's primary focus is on

value pricing on roads, attention will also be given to the use of

other market-based approaches to congestion relief, such as parking

pricing, if they incorporate significant price variations by time,

location, and/or level of congestion.

Potential Project Types

The FHWA is seeking proposals to use value pricing projects to

reduce congestion and promote mobility. Value pricing charges are

expected to accomplish this purpose by encouraging the use of

alternative times, modes, routes, or trip patterns. To this end, and to

increase the likelihood of generating information on a variety of

useful value pricing strategies, proposed projects having as many of

the following characteristics as possible will receive highest priority

for Federal support. Projects of interest include:

1. Applications of value pricing which are comprehensive, such as

areawide pricing, pricing of multiple facilities or corridors, and/or

combinations of road pricing and parking pricing.

2. Pricing of key traffic bottlenecks, single traffic corridors, or

pricing on single highway facilities, including bridges and tunnels.

Proposals to shift from a fixed to a variable toll schedule on existing

toll facilities are encouraged (i.e., combinations of peak-period

surcharges and off-peak discounts).

3. More limited applications of value pricing are also acceptable,

including pricing on lanes otherwise reserved for high occupancy

vehicles, known as high occupancy toll (HOT) lanes, or pricing on newly

constructed lanes. Highest priority will be given to lane pricing

proposals which cover multiple facilities and/or offer innovative

pricing, enforcement, or operational technologies. In order to protect

the integrity of HOV programs, the FHWA will give priority to those HOT

lane proposals where it is clear that an HOV lane is underutilized and

where local officials can demonstrate that the pilot project would not

undermine a long-term regional strategy to increase ridesharing. In

addition, areas proposing HOT lane projects are encouraged to use

revenues from the project to promote improved transit service or other

programs that will encourage transit use and ridesharing.

4. Innovative time-of-day parking pricing strategies, provided the

level and coverage of proposed parking charges is sufficient to reduce

congestion. Parking pricing strategies which are integrated with other

market-based pricing strategies (e.g., value pricing) are encouraged.

Parking pricing strategies should be designed to influence trip-making

behavior, and might include peak-period parking surcharges, or policies

such as parking cash-out, where cash is offered to employees in lieu of

subsidized parking. Pricing of a single parking facility, coverage of a

few employee spaces, or pricing of parking spaces in a small area, for

example, are unlikely to receive priority treatment, unless they

incorporate a truly unique element which might facilitate broader

applications across local areas and States.

5. Projects with anticipated value pricing charges which have the

key characteristic that they are targeted at vehicles causing

congestion, and they are set at levels significant enough to encourage

drivers to use alternative times, routes, modes, or trip patterns

during congested periods. Proposed projects which contemplate value

pricing charges which are not

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significant enough to influence demand, such as minor increases in fees

during peak-periods, or moderate toll increases instituted primarily

for financing purposes, will be given low priority.

6. Projects which are likely to add to the base of knowledge about

the various design, implementation, effectiveness, operational, and

acceptability dimensions of value pricing. The FHWA is seeking

information related to the impacts of value pricing on travel behavior

(mode use, time-of-travel, trip destinations, trip generation, etc., by

private and commercial trips); on traffic conditions (trip lengths,

speeds, level of service); on implementation issues (technology,

innovative pricing techniques, public acceptance, administration,

operation, enforcement, legality, institutional issues, etc.); on

revenues, their uses and financial plans; on different types of users

and businesses; and on measures designed to mitigate possible adverse

impacts and their effectiveness. These diverse information needs mean

that the FHWA may fund different types of value pricing applications in

different local contexts to maximize the learning potential of the

pilot program.

7. Projects which do not have adverse effects on alternative routes

or modes, or on low-income or other transportation disadvantaged

groups. If such effects are anticipated, proposed pricing programs

should incorporate measures to mitigate any major adverse impacts,

including enhancement of transportation alternatives for peak-period

travelers.

8. Projects which indicate that revenues will be used to support

the goals of the value pricing project and to mitigate any adverse

impacts of the project.

While the FHWA is seeking proposals that incorporate some, or all

of these project characteristics, these guidelines are intended only to

illustrate selection priorities, not to limit potential program

participants from proposing new and innovative pricing approaches for

incorporation in the program.

Pre-Project Studies

A small amount of Pilot Program funds will be used to assist State

and local governments in carrying out pre-project study activities

designed to lead to implementation of a value pricing project,

including activities such as pre-project planning, public

participation, consensus building, modeling, impact assessment,

financial planning studies, and work necessary to meet any Federal or

State environmental or other planning requirements. The intent of the

pre-project study phase of the Pilot Program is to support efforts to

identify and evaluate value pricing project alternatives, and to

prepare the necessary groundwork for possible future implementation.

Purely academic studies of value pricing (not designed to lead to

possible project implementation), or broad, areawide planning studies

which incorporate value pricing as an option, will not be funded under

this program. Broad planning studies can be funded with regular

Federal-aid highway or transit planning funds. Proposals for pre-

project studies will be selected based on the likelihood that they will

lead to implementation of pilot tests of value pricing meeting the

characteristics described in the previous section.

Eligible Costs

Funds available for the Pilot Program can be used to support pre-

project study activities and to pay for implementation costs of value

pricing projects. Costs eligible for reimbursement under section

1216(a) of TEA-21 include costs of planning for, setting up, managing,

operating, monitoring, evaluating, and reporting on local value pricing

pilot projects. Examples of specific costs eligible for reimbursement

include the following:

1. Pre-Project Study Costs--All costs of pre-project study

activities, including costs of pre-project planning, public

participation, consensus building, marketing research, impact

assessment, modeling, financial planning, technology assessments and

specifications, and other work necessary for defining value pricing

projects for implementation, and doing necessary design work to bring

projects to the point where they can be implemented. Costs of pre-

project study activities cannot be reimbursed for longer than three

years.

2. Implementation Costs--Implementation costs are costs necessary

for implementation of specific value pricing projects identified during

the pre-project study phase of the program, including costs for setting

up, managing, operating, evaluating, and reporting on a value pricing

project, including:

a. Costs associated with implementation of a value pricing project,

including necessary salaries and expenses or other administrative and

operational costs, such as installation of equipment necessary for

operation of a pilot project (e.g., AVI technology, video equipment for

traffic monitoring, other instrumentation), enforcement costs, costs of

monitoring and evaluating project operations, and costs of continuing

public relations activities during the period of implementation.

b. Costs of providing transportation alternatives, such as, new or

expanded transit service provided as an integral part of the value

pricing project. Funds are not available to replace existing sources of

support for transit services.

c. Depending on the availability of funds, a limited amount of

funds may be made available to serve as a revenue reserve fund to

provide assurance to toll authorities that a pilot test of value

pricing would not jeopardize their bond covenants. For example, a toll

authority might propose a revenue-neutral pricing strategy with peak-

period surcharges and off-peak discounts designed to shift demand

patterns and improve customer service, or to reduce the need for future

capacity expansion. Even though no reduction in toll revenues is

intended, FHWA recognizes that forecasting traffic and revenue changes

is inherently uncertain, and the availability of a reserve fund to

offset any unintended toll revenue losses is intended to help overcome

institutional barriers to the testing and use of value pricing by

existing toll authorities.

Project implementation costs can be supported for a period of at

least one year, and thereafter until such time that sufficient revenues

are being generated by the project to fund its implementation costs

without Federal support, except that implementation costs for a pilot

project cannot be reimbursed for longer than three years. Each

implementation project included in a local value pricing pilot program

will be considered separately for this purpose. Funds may not be used

to pay for activities conducted prior to approval of Pilot Program

participation. Funds may not be used to construct new highway through

lanes, bridges, etc., even if those facilities are to be priced, but

toll ramps or minor pavement additions needed to facilitate toll

collection or enforcement are eligible.

Complementary actions, such as, construction of HOV lanes,

implementation of traffic control systems, or transit projects can be

funded through other highway and transit programs eligible under TEA-

21. Those interested in participating in the Pilot Program are

encouraged to explore opportunities for combining funds from these

other programs with Pilot Program funds.

Eligible Uses of Revenue

Revenues generated by a pilot project must be applied first to pay

for pilot project implementation costs as defined above. Any project

revenues in excess of pilot project implementation expenses, may be

used for any programs eligible under Title 23, U.S.C. Uses of revenue

[[Page 53490]]

are encouraged which will support the goals of the value pricing

program, particularly uses designed to provide benefits to those

traveling in the corridor where the project is being implemented.

Applying for Program Participation

Qualified applicants include local, regional and State government

agencies, as well as public tolling authorities. Although project

agreements must be with public authorities, a local value pricing

program partnership may also include private tolling sponsors and

authorities. To streamline the process of applying for program

participation as much as possible, it is suggested that, prior to

submitting a formal application for program participation, potential

applicants contact their State FHWA Division Office and/or the FHWA

Pricing Team in the Office of Policy Development to discuss their

interest in the Pilot Program and the general nature of the proposed

local value pricing pilot program or pre-project study. The FHWA will

then be able to provide materials and technical support to assist in

the development of the application. Following this initial contact, a

sketch plan for the proposed pricing program should be submitted before

a full scale proposal is developed. The sketch plan should, as a

minimum, provide a brief description of the following:

1. Congestion problem to be addressed.

2. Nature of proposed or potential pricing projects to respond to

that problem, including overall project goals, potential facilities to

be included, time line for study and possible implementation of value

pricing projects.

3. Parties proposed as being signatories to the cooperative

agreement with the FHWA (as a minimum, the local Metropolitan Planning

Organization (MPO), and the owner/operator of the facility or

facilities to be priced, must endorse or express support for the

program). Indications of support from affected parties, including

representatives of business, labor, industry, transportation users,

and/or local residents, or plans for obtaining such support should be

included.

4. Extent of public participation in the development of the

proposal, or of plans for future public participation activities.

Potential equity consequences of any proposed projects should be

portrayed in general terms, and if adverse impacts are anticipated,

preliminary plans for responding to such problems should be identified.

5. Legal and administrative authority needed to carry out a value

pricing project, extent to which these have been obtained, and further

steps needed to obtain necessary authority.

6. Plans for pre-project study, or findings from pre-project

studies that have already been completed.

The sketch plan should be submitted through the MPO and/or State

Department of Transportation to the appropriate FHWA Division

Administrator, who will forward the plan to FHWA's Director, Office of

Policy Development, where the FHWA Pricing Team is located.

Based on its initial review of the initial sketch plan, the FHWA

will work with the proposing authority to develop a detailed proposal

for review by the Federal Interagency Review Group which provides

support to the FHWA in evaluating program applications (see ``Review

Process,'' below). Ideally, the detailed proposal will include:

1. Detailed description of the congestion problem being addressed

(current and projected);

2. Detailed description of the proposed pricing program and its

goals, including description of facilities included, expected pricing

schedules, technology to be used, enforcement programs, and so on;

3. Preliminary estimates of the social and economic effects of the

pricing program, including potential equity impacts, and a plan or

methodology for further refining these estimates for all pricing

project(s) included in the program;

4. The role of alternative transportation modes in the project, and

anticipated enhancements proposed to be included in the pricing

program.

5. A time line for the pre-project study and implementation phases

of the project (proposals indicating early implementation of pricing

projects that will allow evaluation during the life of TEA-21 will

receive priority);

6. A description of tasks to be carried out as part of each phase

of the project, and an estimate of costs associated with each;

7. Plans for monitoring and evaluating value pricing projects,

including plans for data collection and analysis, before and after

assessment, and plans for long term monitoring and documenting of

project effects;

8. A detailed finance and revenue plan, including a budget for

capital and operating costs; a description of all funding sources,

planned expenditures, proposed uses of revenues, and a plan for

projects to become financially self-sustaining (without Federal

support) within three years of implementation.

9. Plans for involving key affected parties, coalition building,

media relations, etc., including either demonstration of previous

public involvement in the development of the proposed pricing program,

or plans to ensure adequate public involvement prior to implementation;

10. Plans for meeting all Federal, State and local legal and

administrative requirements for project implementation, including

necessary Federal-aid planning and environmental requirements. Priority

will be given to proposals where projects are included as a part of (or

are consistent with) a broad program addressing congestion, mobility,

air quality and energy conservation, where an area has congestion

management systems (CMS) for Transportation Management Areas (urbanized

areas over 200,000 population or those designated by the Secretary) and

the congestion mitigation and air quality (CMAQ) program. If some of

these items are not available or fully developed at the time the

proposal is submitted, proposals will still be considered for support

if they meet some of the priority interests of the FHWA as described

under ``Potential Project Types,'' and include some of the proposal

characteristics described in this section, and there is a strong

indication that these items will be completed within a short time.

Review Process

Upon receipt of the detailed proposal, the FHWA's Pricing Team will

arrange for a review of the proposal by the Federal Interagency Review

Group established to assist the FHWA in assessing the likelihood that

proposed local value pricing programs will provide valid and useful

tests of value pricing concepts. The Review Group is composed of

representatives of several concerned offices in the U.S. DOT, including

offices in FHWA, Federal Transit Administration, Office of the

Secretary of Transportation, and Office of Intermodalism. The

Environmental Protection Agency is also represented on the Review

Group. To facilitate review, applicants should submit ten copies, plus

an unbound reproducible copy, of the proposal. The FHWA will review

applications received and make selections of program participants based

on the criteria contained in this notice. As with the sketch plan,

detailed proposals should be submitted through the MPO and/or State DOT

to the appropriate FHWA Division Administrator, who will forward the

plan to the FHWA's Director, Office of Policy Development.

[[Page 53491]]

Cooperative Agreement

Based on the recommendations of the Review Group, the FHWA will

identify those Pilot Program proposals which have the greatest

potential for promoting the objectives of the Pilot Program, including

demonstrating the effects of value pricing on driver behavior, traffic

volume, ridesharing, transit ridership, air quality, availability of

funds for transportation programs, and other measures of the effects of

value pricing. Those Pilot Program candidates will then be invited to

enter into negotiations with the FHWA to develop a cooperative

agreement under which the scope of work for the value pricing program

will be defined. The cooperative agreement will be governed by the

Federal statutes and regulations cited in the agreement and 49 CFR part

18, Uniform Administrative Requirements for Grants and Cooperative

Agreements to State and Local Governments, as they relate to the

acceptance and use of Federal funds for this program.

Prior to FHWA approval of pricing project implementation, value

pricing programs must be shown to be consistent with Federal

metropolitan and statewide planning requirements.

Projects outside metropolitan areas must be included in the

approved statewide transportation improvement program and be selected

in accordance with the requirements set forth in section 1204(f)(3) of

TEA-21.

Those in metropolitan areas must be: (a) Included in, or consistent

with, the approved metropolitan transportation plan (if the area is in

nonattainment for a transportation related pollutant, the metro plan

must be in conformance with the State air quality implementation plan);

(b) included in the approved metro and statewide transportation

improvement programs (if the metro area is in nonattainment for a

transportation related pollutant, the metro transportation improvement

program must be in conformance with the State air quality

implementation plan); (c) selected in accordance with the requirements

in Pub.L. No. 105-178, section 1203(h)(5) or (i)(2); and (d) consistent

with any existing congestion management system in transportation

management areas, developed pursuant to 23 U.S.C. 134(i)(3).

(Authority: 23 U.S.C. 315; sec. 1216(a), Pub. L. 105-178, 112

Stat. 107; 49 CFR 1.48).

Issued on: September 24, 1998.

Kenneth R. Wykle,

Federal Highway Administration, Administrator.

[FR Doc. 98-26531 Filed 10-2-98; 8:45 am]

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