[Federal Register Volume 71, Number 246 (Friday, December 22, 2006)]
[Pages 77084-77090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21912]



Federal Highway Administration

Value Pricing Pilot Program Participation, Fiscal Years 2007-2009

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Notice; solicitation for participation.


SUMMARY: This notice invites State and local governments and other 
public authorities to apply to participate in the Value Pricing Pilot 
(VPP) program and presents guidelines for program applications. This 
notice supersedes two previous notices about the VPP program under the 
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users (SAFETEA-LU) published in the Federal Register on 
January 6, 2006 (71 FR 970), and July 17, 2006 (71 FR 40578). The 
primary purpose of superseding the previous notices with this new 
notice is to shift the focus on the types of VPP program projects being 
solicited to achieve consistency with the U.S. Department of 
Transportation's (DOT) National Strategy to Reduce Congestion on 
America's Transportation Network (DOT Congestion Initiative), announced 
on May 16, 2006.\1\ This national strategy contains a number of 
elements that involve pricing, thus warranting a reconsideration of the 
types of projects solicited for VPP program participation. This 
solicitation aligns the VPP program with the DOT Congestion Initiative 
by together seeking to support metropolitan areas in systemically 
progressing toward implementation of broad congestion pricing 
strategies in the near term. This notice also describes the statutory 
basis for the VPP program and specifies all of the steps necessary to 
apply for funding and, where applicable, tolling authority

[[Page 77085]]

under the program. A new application deadline is also provided.

    \1\ Speaking before the National Retail Federation's annual 
conference on May 16, 2006, in Washington, DC, former U.S. 
Transportation Secretary Norman Mineta unveiled a new plan to reduce 
congestion plaguing America's roads, rail, and airports. The 
National Strategy to Reduce Congestion on America's Transportation 
Network includes a number of initiatives designed to reduce 
transportation congestion. The transcript of these remarks is 
available at the follwoing URL: http://www.dot.gov./affairs/

    A January 6, 2006, notice covering non-grant tolling programs, 
which was a companion to the original January 6, 2006, VPP program 
notice, remains in effect. That notice was entitled ``Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU); Opportunities for States and Other Qualifying 
Agencies to Gain Authority to Toll Facilities Constructed Using Federal 
Funds'' (71 FR 965). Today's new notice and the previous companion 
notice are together intended to cover all of the opportunities for 
States and other qualifying transportation agencies to obtain approval 
to toll their respective facilities and to secure funding to implement 
tolling and pricing.

DATES: Applications for tolling authority only may be submitted at any 
time prior to September 30, 2009. Formal grant applications must be 
submitted no later than April 30, 2007, for FY 2007 funds.
    Application Submission: Beginning in FY 2007, all Federal agencies, 
including FHWA, are required to use http://www.grants.gov, an 
electronic format for receiving applications. Grants.gov was developed 
as part of the President's Management Agenda and related E-Government 
Strategy, which charged Federal grant-making agencies with developing a 
single electronic system to help prospective applicants find and apply 
for Federal grant opportunities. Therefore, applicants applying for 
funding under the VPP program must file their applications online at 
www.grants.gov. The full announcement for VPP program grants is 
expected to be available on www.grants.gov no later than January 15, 

FOR FURTHER INFORMATION CONTACT: For questions about this notice, 
please contact Mr. Wayne Berman, FHWA Office of Operations, (202) 366-
4069, or via e-mail at [email protected]. For technical questions 
related to project development, please contact Mr. Patrick DeCorla-
Souza, FHWA Office of Operations, at (202) 366-4076, or via e-mail at 
[email protected]. For legal questions, please contact Mr. 
Michael Harkins, FHWA Office of the Chief Counsel, (202) 366-4928, or 
via e-mail at [email protected]. Office hours for the FHWA are 
from 7:45 a.m. to 4:15 p.m., e.t., Monday through Friday, except 
Federal holidays.


Electronic Access

    An electronic copy of this document may be downloaded from the 
Federal Register's home page at: http://www.archives.gov and the 
Government Printing Office's database at: http://www.access.gpo.gov/nara.

Coordination With Other Congestion Initiative Solicitations

    This solicitation is one of three associated solicitations being 
released under the DOT's Congestion Initiative:
    1. Urban Partnership Agreement (UPA)--One of the key elements of 
the Congestion Initiative is the reduction of urban congestion. On 
December 8, 2006 (71 FR 71231), the DOT issued a notice in the Federal 
Register seeking applications for the UPA. The UPA solicitation seeks 
to identify metropolitan areas interested in partnering with the DOT to 
aggressively implement congestion-reducing strategies in the near-term. 
Based on the responses to the UPA solicitation the DOT expects to enter 
into partnership agreements with a small number of metropolitan areas. 
Identification as an ``urban partner'' will be one of the selection 
factors considered in awarding grants under the Value Pricing and 
Intelligent Transportation System programs.
    2. Value Pricing Pilot (VPP) program--This solicitation for the VPP 
program as reauthorized in SAFETEA-LU provides funding to support 
implementation of a variety of pricing-based approaches for managing 
congestion on highways. This solicitation aligns the VPP program with 
the Congestion Initiative and seeks to support metropolitan areas in 
systematically progressing toward implementation of broad congestion 
pricing strategies in the near term.
    3. Intelligent Transportation System (ITS) Operational Testing to 
Mitigate Congestion (OTMC) program--The ITS program as reauthorized in 
SAFETEA-LU supports the research, development and testing of ITS for a 
variety of purposes, including the reduction of metropolitan 
congestion. The ITS-OTMC solicitation supports the operational testing 
and evaluation of advanced technologies to reduce congestion in urban 
    Applicants should submit pricing-related proposals involving the 
use of electronic systems for collection, management and enforcement to 
both the VPP program and ITS-OTMC solicitations. Applicants should 
submit identical proposals that address all the requirements of both 
solicitations to both programs. DOT will consider these proposals for 
funding under both of these programs. Applicants should indicate, in 
their responses to this solicitation and DOT's solicitation for ITS-
OTMC, whether they have applied to become Urban Partners in response to 
DOT's UPA solicitation.


    Section 1012(b) of the Intermodal Surface Transportation Efficiency 
Act (ISTEA) (Pub. L. 102-240; 105 Stat. 1914), as amended by section 
1216(a) of the Transportation Equity Act (TEA-21) (Pub. L. 105-178; 112 
Stat. 107), and section 1604(a) of Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) 
(Pub. L. 109-59; 119 Stat. 1144), authorizes the Secretary of 
Transportation (the Secretary) to create a Value Pricing Pilot program. 
Value pricing encompasses a variety of strategies to manage congestion 
on highways, including tolling of highway facilities, as well as other 
strategies that do not involve tolls, such as mileage-based vehicle 
taxes and leasing fees, parking pricing, and car sharing. The value 
pricing concept of assessing relatively higher prices for travel during 
peak periods is the same as that used in many other sectors of the 
economy to respond to peak-use demands. For example, airlines, hotels, 
and theaters often charge more at peak than at non-peak times.
    The FHWA is seeking applications for the FY 2007 VPP program that 
are consistent with the objectives of the DOT's National Strategy to 
Reduce Congestion, announced on May 16, 2006, which seeks to dedicate 
substantial departmental resources toward addressing the growing 
problem of urban congestion. This national strategy, and its linkage to 
the VPP program applications that are being solicited by this notice, 
are discussed in greater detail later in this notice. Because of this 
new national strategy, the primary objective of the VPP program for 
fiscal years 2007, 2008, and 2009, will be to facilitate cities in 
systematically progressing toward implementation of broad congestion 
(variable) pricing over a brief period of time, preferably 3 years.
    According to the statutory requirements of the VPP program, the 
FHWA may enter into cooperative agreements with up to 15 State or local 
governments or other public authorities (henceforth referred to only as 
``States''), to establish, maintain, and monitor value pricing pilot 
programs, each including an unlimited number of projects. The FHWA 
invites interested States to apply to participate in the VPP program 
for FY 2007. As of the date of this notice, there are already 13 State-
led programs currently in the VPP program: California, Colorado, 

[[Page 77086]]

Georgia, Illinois, Maryland, Minnesota, New Jersey, North Carolina, 
Oregon, Texas, Virginia, and Washington. Therefore, at this time, only 
two additional States are eligible to participate. Any value pricing 
project included under these programs may involve the use of tolls on 
the Interstate system. This is an exception to the general provisions 
prohibiting tolls on the Interstate system as contained in 23 U.S.C. 
129 and 301.
    To comply with the statutory cap on the number of partnering States 
in a manner that maximizes program participation, the FHWA will only 
consider an active cooperative agreement sufficient to hold one of the 
15 available value pricing slots. An agreement will be considered 
active by the FHWA under the following two circumstances: (1) During 
the period encompassing the time between when a cooperative funding 
agreement for a project or projects has been signed and when the 
project or projects has or have been completed, and (2) if VPP program 
tolling authority has been granted and is still needed to toll a new or 
existing highway. Absent one or both of these conditions being met, an 
agreement will not be considered active for the purposes of the VPP 
program. A State that does not maintain an active agreement with FHWA 
risks being denied the opportunity to participate in the program in the 
future if no participation slots are left.
    A maximum of $12 million is authorized for each of the fiscal years 
2007 through 2009 to be made available to carry out the VPP program 
requirements. A set-aside of $3 million per fiscal year is authorized 
only for value pricing pilot projects that do not involve highway 
tolls. The Federal share payable under the program is 80 percent of the 
cost of the project. Funds allocated by the Secretary to a State under 
this section shall remain available for obligation by the State for a 
period of 3 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 VPP program, but not allocated, exceeds $8 
million, the excess amount will, to comply with the statutory 
requirements of the VPP program, be apportioned to all States as 
Surface Transportation Program funds.
    Funds available for the VPP program can be used to support pre-
implementation study activities as well as to pay for pricing-specific 
implementation costs of value pricing projects. Section 1012(b)(6) of 
ISTEA provides that a State may permit toll-paying 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. Section 1121 of SAFETEA -LU, ``HOV Facilities,'' among other 
things, also allows for the conversion of HOV lanes to high occupancy 
toll (HOT) lanes. Given that, as of the date of this notice, the VPP 
program has only two slots available under which new program partners 
may participate and FHWA would like to use a new slot only where 
necessary, section 1121 authority will generally be used, instead of 
VPP program authority, for HOV-to-HOT lane conversions if an 
application comes from a State that is not already in the VPP program. 
Additionally, since value pricing projects are experimental and section 
1121 is not, the FHWA may elect to also use section 1121 authority 
instead of VPP program authority for HOV-to-HOT lane conversions in 
current VPP program States depending on the type of project that is 
    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, such as 
providing new or expanded transit service as an integral part of the 
value pricing project, toll discounts or credits for low-income 
motorists who do not have viable transit options, or fare or toll 
credits earned by motorists on regular lanes which can be used to pay 
for tolls on priced lanes. Mitigation measures can be included as part 
of the value pricing project implementation costs.
    Since the Secretary is required to report to Congress every 2 years 
on the effects of all value pricing pilot programs, project partners 
will be expected to assist the FHWA by providing data on its programs 
for use in these reports.
    The VPP program is a continuation of the Congestion Pricing Pilot 
Program authorized by section 1012(b) of the ISTEA and amended by 
section 1216 (a) of TEA-21. To obtain up-to-date information on the 
status of current projects, please go to: http://www.ops.fhwa.dot.gov/tolling_pricing/index.htm.
    In addition to the VPP program, SAFETEA-LU offers States broader 
authority to use tolling to finance highway construction and 
reconstruction, promote efficiency in the use of highways, and support 
congestion reduction by providing expanded flexibility under the 
following programs: HOV facilities; Interstate System Reconstruction 
and Rehabilitation Pilot; Interstate System Construction Toll Pilot; 
Express Lanes Demonstration Program; and Section 129 toll agreements. 
For more information on these programs, please refer to the companion 
notice in the January 6, 2006, Federal Register entitled, ``Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU); Opportunities for State and Other Qualifying 
Agencies to Gain Authority to Toll Facilities Constructed Using Federal 
Funds'' (71 FR 965).

Applicable Terms

    ``Value pricing,'' ``congestion pricing,'' ``peak-period pricing,'' 
``variable pricing,'' and ``variable tolling'' are all terms used to 
refer to direct non-constant 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, to non-motorized modes, 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. They also achieve congestion reduction, improved air quality, 
energy conservation, and transit productivity goals.
    A ``value pricing project'' means any implementation of value 
pricing concepts or techniques discussed in the ``Potential Project 
Types'' section of this notice and included under a State or local 
``value pricing pilot program.'' A State is considered to have a value 
pricing pilot program if it has one or more approved value pricing 
projects. While the distinction between ``project'' and ``program'' may 
appear to be merely a technical one, it is significant in that, as 
described in the ``Background'' section of this notice, the number of 
total VPP programs is statutorily limited to 15, while there is no 
limit to the number of VPP projects allowed under each VPP program.
    ``Cooperative agreement'' means the agreement signed between the 
FHWA and a State to establish and implement value pricing pilot 
programs. ``Toll agreement'' means the agreement signed between the 
FHWA and a State to grant the authority to collect tolls.

Program Objective

    The overall objective of the VPP 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

[[Page 77087]]

pricing projects included in such programs, and to report on these 
effects. The VPP program's primary focus is on value pricing with road 
tolls, with a secondary focus on other market-based approaches for 
congestion relief that do not involve road tolls, such as mileage-based 
vehicle taxes and leasing fees, parking pricing, and car sharing.
    The FHWA is seeking applications for funding and/or tolling 
authority to use value pricing to reduce congestion, improve system 
performance, and promote mobility in a manner consistent with the DOT's 
National Strategy to Reduce Congestion on America's Transportation 
Network, issued in May 2006. This strategy consists of a six-point 
plan, designed to both reduce congestion in the short-term and to build 
the foundation for successful longer-term congestion reduction efforts. 
The six-point plan consists of the following: (1) Establish a 
``Corridors of the Future'' competition; (2) Relieve urban congestion; 
(3) Unleash private sector investment resources; (4) Promote 
operational and technological improvements; (5) Target major freight 
bottlenecks and expand freight policy outreach; and (6) Accelerate 
major aviation capacity projects and provide a future funding framework 
for the aviation system. The VPP program is part of the, ``relieve 
urban congestion'' element under which ``[t]he Department will seek to 
enter Urban Partnership Agreements with model cities, pursuant to which 
the cities and Department will commit to * * * implementing a broad 
congestion pricing or variable toll demonstration * * *'' Consistent 
with this objective, all proposals should incorporate significant 
pricing mechanisms intended to reduce the level of congestion.

Potential Project Types

    To help meet the objectives of DOT's National Strategy to Reduce 
Congestion on America's Transportation Network, the FHWA is interested 
in projects that have the greatest potential to lead to significant, 
broad, and near-term congestion relief. The FHWA will consider 
applications that show that a project seeking grant funds will achieve 
at least one of the following: (1) Build public support and a technical 
foundation for near term congestion pricing; (2) develop a pricing 
program with detailed plans and specifications leading to near-term 
implementation; and/or (3) implement broad-based pricing and evaluate 
its effectiveness. Implementation projects should bring about new 
pricing while pre-implementation projects should demonstrate that near-
term implementation is likely, most preferably by January 2009, 
especially for FY 2007 applications. For pre-implementation projects, 
applicants should demonstrate that there is already sufficient 
political support for implementation, or that the project is well 
designed to bring about such support. Additionally, projects should 
rely wholly or at least primarily on existing facilities and/or 
facilities that will be completed in a very short time frame (e.g., 
within 12 to 18 months), since near-term implementation would otherwise 
be impossible.
    Value pricing charges need to be targeted at a sizable number of 
vehicles that are causing congestion, and prices should be set at 
levels significant enough to encourage drivers to use alternative 
times, routes, modes, or trip patterns or to telecommute during 
congested periods. Value pricing concepts that have become mainstream 
and have been adopted as common practice, such as HOV-to-HOT lane 
conversions, will not be funded.
    The FHWA is seeking VPP program applications from public entities 
that are willing to engage in discussions about entering into 
comprehensive Urban Partnership Agreements that include substantial 
actions on their part to advance broad congestion pricing approaches, 
which should be specified in their VPP project applications. Unlike 
previous VPP program solicitation notices which sought a wide variety 
of project applications, the FHWA is now only seeking projects to study 
or implement pricing that is broad in nature and will no longer 
entertain applications for studying or implementing single-facility 
projects. Such applications should cover a significantly-sized 
geographical area and include multiple roadway facilities that are 
priced, an interconnected managed lane network, or cordon pricing, 
where, as in London, cars are charged a substantial fee to drive in a 
congested area on weekdays. Variable pricing of currently free and 
tolled facilities, pricing of multiple facilities or corridors, and/or 
combinations of road pricing and parking pricing will generally be 
required. Area-wide pricing applications that use technologies that 
provide travelers (including drivers and transit riders) with pre-trip 
and real-time congestion and pricing information on alternative travel 
modes and routes are especially encouraged to assist travelers in 
making efficient travel destination, mode and route choices.
    Tests of new, innovative value pricing approaches are encouraged, 
but only within the context of a broad, area-wide application. Such 
auxiliary or complementary elements to broad pricing applications might 
include pricing at key traffic bottlenecks, shifting from fixed to 
variable toll schedules on existing toll facilities (i.e., combinations 
of peak-period surcharges and off-peak discounts), and pricing of queue 
jumps, where paying motorists can bypass motorists who choose not to 
pay, typically by using special lanes with priority signals at freeway 
entrance ramps.
    Projects should be designed to reflect the needs of low-income or 
other transportation-disadvantaged groups. Mitigation strategies to 
address equity concerns may include bus rapid transit or other 
enhancements of transportation alternatives for peak-period travelers, 
``life-line'' toll rates aimed at low-income travelers, limited 
monetary credits to all or just to low-income travelers that can be 
used to pay for tolls or transit fares (thereby allowing a limited 
amount of free travel before having to pay full fees as with some 
cellular phone service plans), and credit-based tolling programs such 
as toll credits earned by motorists in regular lanes or by transit 
users in the corridor which can later be used to pay tolls on priced 
lanes or for free transit trips.
    The FHWA is also interested in grant applications for projects that 
do not involve highway tolls. As discussed earlier, SAFETEA-LU sets 
aside at least $3 million per fiscal year for such projects. The FHWA 
encourages applicants to design such projects, to the extent possible, 
to complement or offer the potential for ``broad'' pricing as called 
for in the DOT's National Strategy to Reduce Congestion on America's 
Transportation Network. The FHWA intends to be more flexible when 
evaluating projects that do not involve tolls than when evaluating 
projects that do, given that many types of facility-based toll projects 
have already been funded by the VPP program in the past, while the 
program has had less experience using non-toll pricing strategies to 
reduce congestion.
    The FHWA seeks tests of innovative parking pricing strategies, 
including time-of-day pricing and charges reflective of congested 
conditions, provided the level and coverage of proposed parking charges 
is sufficient to reduce congestion. Among the strategies that could be 
considered innovative include: surcharges for entering or exiting 
parking facilities during or near peak periods; citywide, on-street 
parking pricing that varies by demand; and a range of parking cash-out 
policies, where cash is offered to employees in

[[Page 77088]]

lieu of subsidized parking, parking operators reimburse monthly patrons 
for unused parking days, or renters or purchasers in multi-family 
housing developments are provided direct financial saving for not 
availing of car parking spaces. The FHWA also seeks tests of pay-as-
you-drive pricing, including innovative car ownership, leasing, and 
usage arrangements that reduce fixed costs and increase variable usage 
costs. An example of such pricing might be car leases with a reduced 
fixed-priced monthly charge coupled with a substantial per-mile charge.

Pre-Implementation Studies

    The VPP program funds may also be used to assist States in carrying 
out pre-implementation study activities designed to lead to 
implementation of a value pricing project in the near-term, consistent 
with the objectives of the DOT's National Strategy to Reduce Congestion 
on America's Transportation Network. The intent of the pre-
implementation study phase is to support efforts to identify and 
evaluate value pricing project alternatives, and to prepare the 
necessary groundwork for near-term implementation. So as to focus VPP 
program resources in a manner consistent with the DOT Congestion 
Initiative, FHWA will not fund purely academic studies of value pricing 
or studies that involve major expansions of existing facilities (not 
designed to lead to near-term project implementation) or area-wide 
planning studies covering many topics besides pricing and incorporating 
value pricing only as one of a number of options. Such studies may be 
funded with regular Federal-aid highway or transit planning funds. 
Applications for pre-implementation studies will be evaluated based on 
the likelihood that they will lead to near-term implementation of broad 
value pricing conforming to the objectives described in the previous 

Project Costs Eligible for Grant Funding

    The FHWA will provide up to the statutorily allowable 80 percent 
share of the estimated costs of an approved project. Funds available 
for the VPP program can be used to support pre-implementation study 
activities and also to pay for implementation costs of value pricing 
projects. Costs of planning for, setting up, managing, operating, 
monitoring, evaluating, and reporting on local value pricing pilot 
projects are eligible for reimbursement, but neither pre-implementation 
study costs nor implementation costs may be reimbursed for longer than 
three years. The 3-year funding limitation will begin on the date of 
the first disbursement of Federal funds for project activities. 
Examples of specific pre-implementation and implementation costs 
eligible for reimbursement include the following:
    1. Pre-Implementation Study Costs--Covered activities include those 
undertaken to advance two key priority focus areas: foundation building 
and program development.
    a. Foundation building activities may be reimbursed, such as public 
participation, consensus building, marketing, modeling, and technology 
assessments; and
    b. Program development activities are also eligible for 
reimbursement, including project and financial planning, project 
design, creating project specifications, and activities required to 
meet Federal or State environmental or other planning requirements.
    2. Implementation Costs--Allowable costs for reimbursement under 
this priority focus area include those for setting up, managing, 
operating, evaluating, and reporting on a value pricing project, 
    a. Necessary salaries and expenses, or other administrative and 
operational costs, such as installation of equipment for operation of a 
pilot project (e.g., Electronic Toll Collection (ETC) technology, video 
equipment for traffic monitoring, and other instrumentation), 
enforcement costs, costs of monitoring and evaluating project 
operations, and costs of continuing public relations activities during 
the period of implementation;
    b. ``mitigation measures to deal with any potential adverse 
financial effects on low-income drivers[,]'' per section 1012(b)(7) of 
ISTEA as amended, including costs of providing transportation 
alternatives, such as new or expanded transit or ridesharing services 
provided as an integral part of the value pricing project. Funds are 
not available to replace existing sources of support for these 
    Project implementation costs can be supported until such time that 
sufficient revenues are being generated by the project to fund such 
activities without Federal support, but in no case for longer than 
three years. Each implementation project included in a value pricing 
pilot program will be considered separately for this purpose.
    Funds may not be used to pay for activities conducted prior to 
approval for VPP program participation. Also, funds made available 
through the VPP program may not be used to construct new highway lanes 
or bridges, 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 lane 
construction, the implementation of traffic control systems, or transit 
projects can be funded through other highway and transit programs under 
SAFETEA-LU and from new revenues raised as a result of a pilot. VPP 
program applicants are encouraged to explore opportunities for 
combining VPP program funds with other funds. Federal funds may not, 
however, be used to match VPP program funds unless there is specific 
statutory authority to do so.

Eligible Uses of Revenues

    Section 1012(b)(2) of ISTEA provides that revenues generated by any 
value pricing pilot project must be applied first to pay for pilot 
project operating costs. Any project revenues in excess of pilot 
project operating costs may, according to section 1012(b)(3) of ISTEA, 
be used for any projects eligible under Title 23, U.S. Code. A 
project's operating costs include any costs necessary for a project's 
execution; mitigation measures to deal with adverse financial effects 
on low-income drivers; the proper maintenance of the facility; any 
construction (including reconstruction, rehabilitation, restoration, or 
resurfacing) of the facility; any debt service incurred in implementing 
the project; and a reasonable return on investment by any private 
entity financing the project. Uses of revenue are encouraged which will 
support the goals of the VPP program, particularly uses designed to 
provide benefits to those traveling in the corridor where the project 
is being implemented.
    For VPP toll projects, the FHWA and the public authority (including 
the State transportation department) having jurisdiction over a 
facility must enter into a toll agreement concerning the use of toll 
revenue to be generated under a value pricing project. The toll 
agreement will provide that the public authority use the revenues in 
accordance with the applicable statutory requirements. The execution of 
a toll agreement will facilitate oversight of a State's compliance with 
revenue use requirements of the VPP program.

Who is Eligible to Apply?

    Qualified applicants for either tolling authority or grants (or 
both) include State or local governments or public authorities, such as 
tolling agencies. Although project agreements must be with the 
aforementioned public entities, and preferably with State Departments 
of Transportation in order to preserve

[[Page 77089]]

participation slots, a VPP program partnership may also include private 
tolling authorities, for-profit companies, and non-profit 

The Value Pricing Pilot Program Applications

    Formal applications should be submitted online directly by the 
State Department of Transportation to http://www.grants.gov.
    There is no particular format that is required for tolling 
authority applications or grant applications, although specific 
information is requested. Applications should include the following 
background information:
    (a) The name, title, e-mail address, and phone number of the person 
who will act as the point of contact on behalf of the requesting 
agency, authority, or authorities;
    (b) A description of the agency, authority, or authorities 
requesting funding and/or tolling authority;
    (c) A statement as to whether only funding, both funding and 
tolling authority, or only tolling authority via the VPP program is 
being sought to support either pre-implementation or implementation 
activities as permitted;
    (d) A description of the public agency or agencies that will be 
responsible for operating, maintaining, and enforcing the tolling 
program, if applicable; and
    (e) A statement as to whether the applicant has or intends to 
become an Urban Partner and execute an Urban Partnership Agreement with 
the DOT that would commit the region to take broad and aggressive 
action to reduce congestion.
    The core of the application should include the following:
    1. A description of the congestion problem being addressed (current 
and projected);
    2. A description of the proposed pricing program and its goals;
    3. An identification of the facilities that will be covered, 
including whether any of the subject facilities is an Interstate 
facility, whether any HOV lanes currently exist on any of the 
facilities, and whether any construction related activities would be 
needed to implement the project and, if so, whether this is new 
construction, expansion, rehabilitation, reconstruction, or other;
    4. Where applicable, a plan for implementing or modifying tolls, 
and a related timetable. Where known, the range of anticipated tolls 
and the strategies to vary toll rates (i.e., the formulas for variable 
pricing), the technology to be used, enforcement programs, and 
operating details;
    5. Anticipated effects of the pricing program on reducing 
congestion, altering travel behavior, and encouraging the use of other 
transportation modes;
    6. Preliminary estimates of the social and economic effects of the 
pricing program, including potential equity impacts, and a plan or 
methodology for further refining such estimates;
    7. The role of alternative transportation modes in the project;
    8. A description of the tasks to be carried out as part of each 
phase of the project;
    9. A detailed project timeline broken down by tasks and phases;
    10. An itemized budget broken down by task and funding year (i.e., 
Year 1, Year 2, etc.), which is only required for grant applications;
    11. Plans for monitoring and evaluating implementation projects, 
including plans for collection and analysis, before and after 
assessment, and long term monitoring and documenting of project 
    12. A detailed finance and revenue plan, including (for 
implementation projects) a budget for capital and operating costs; a 
description of all funding sources, planned expenditures, and proposed 
uses of revenues; and a plan for projects to become financially self-
sustaining (without Federal support) within 3 years of implementation, 
all of which is only required for grant applications.
    13. A discussion of previous public involvement, including public 
meetings, in the development of the proposed pricing program. Any 
expressions or declarations of support from State or local government 
officials or the public. Future plans for involving key affected 
parties, coalition building, and media relations, and more broadly for 
ensuring adequate public involvement prior to implementation;
    14. Plans for meeting all Federal, State and local legal and 
administrative requirements for project implementation, including 
relevant Federal-aid planning and environmental requirements;
    15. A description of how, if at all, any private entities are 
involved in the project either in the up-front costs to enact tolling, 
or the cost sharing or debt retirement associated with revenues; and
    16. An explanation about how electronic toll collection (ETC) 
project components will be compatible with other ETC systems in the 
    If some of these items are not available or fully developed at the 
time the formal application is submitted, applications will still be 
considered for grant funding support or for tolling authority if they 
meet the interests of the FHWA, as described earlier in the section 
entitled ``Potential Project Types,'' (except for applicants for 
tolling authority only), and if there is a strong indication that these 
items will be completed within a short time.

VPP Program Process

A. Requests for Funding

    To ensure that all projects receive fair and equal consideration 
for the limited available funds, the FHWA requires formal grant 
applications to be submitted no later than April 30, 2007, for FY 2007 
funds to http://www.grants.gov.

B. Projects for Which No Funds Are Requested

    Although most projects under the VPP program involve requests for 
value pricing funds, some projects do not, and instead only seek 
tolling authority under the program. In such cases, and especially 
where a State is not already part of the VPP program, the FHWA 
recommends that the public authority investigate the other 
opportunities to gain authority to toll that are listed in the 
companion notice in the January 6, 2006, Federal Register, entitled 
``Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users (SAFETEA-LU); Opportunities for State and Other 
Qualifying Agencies to Gain Authority to Toll Facilities Constructed 
Using Federal Funds'' (71 FR 965).

Post-Selection Process

    If approved, a formal cooperative agreement will be prepared 
between the FHWA and the State. The cooperative agreement will include 
a refined scope of work developed from the original funding application 
and subsequent discussions with FHWA. Federal statutes will govern the 
cooperative agreement. Regulations cited in the agreement, and 49 CFR 
Part 18, Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments, will also apply. As a 
practical matter, each VPP program project should have a separate 
cooperative agreement. Although, in the past, the FHWA has allowed some 
States to have a master cooperative agreement that is subsequently 
amended for each approved project, in the future the FHWA will execute 
a separate agreement for each project. For value pricing projects that 
involve only toll authority and that do not involve requests for 
Federal funds, a cooperative agreement must still be executed.

[[Page 77090]]

    Subsequent to the signing of the cooperative agreement for a 
tolling project, and after all environmental requirements have been met 
and the project is ready to proceed to construction and/or 
implementation, a toll agreement will then be executed with the FHWA 
that addresses the use of revenues from the operation of the toll 
facility. As discussed previously, revenues must generally first be 
used to cover debt service, provide reasonable return on private party 
investments, and operate and maintain the facility. Any remaining 
revenues may then be used for other title 23 U.S.C. eligible purposes.

Other Requirements

    Prior to the FHWA approval of pricing project implementation, 
value-pricing programs must be shown to be consistent with Federal 
metropolitan and statewide planning requirements (23 U.S.C. 134 and 
135; and, if applicable, 49 U.S.C. 5303 and 5304).
    Implementation projects involving tolls 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 the TEA-21.
    Implementation projects involving tolls 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 metropolitan plan must be in 
conformance with the State air quality implementation plan); (b) 
included in the approved metropolitan and statewide transportation 
improvement programs (if the metropolitan area is in a nonattainment 
area for a transportation related pollutant, the metropolitan 
transportation improvement program must be in conformance with the 
State air quality implementation plan); (c) selected in accordance with 
the requirements in section 1203(h)(5) or (i)(2) of TEA-21; and (d) 
consistent with any existing congestion management system in 
Transportation Management Areas, developed pursuant to 23 U.S.C. 

(Authority: 23 U.S.C. 315; sec. 1216(a), Pub. L. 105-178, 112 Stat. 
107; Pub. L. 109-59; 117 Stat. 1144 49 CFR 1.48)

    Issued on: December 18, 2006.
J. Richard Capka,
Federal Highway Administrator.
[FR Doc. E6-21912 Filed 12-21-06; 8:45 am]