[Federal Register Volume 63, Number 192 (Monday, October 5, 1998)]
[Pages 53487-53491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26531]



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.


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.


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 
    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: 


    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 

[[Page 53488]]

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, 
    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.


    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.


    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

[[Page 53489]]

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 
    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 
    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 
    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 
    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 
    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]