Highway Evacuations in Selected Metropolitan Areas: Assessment of Impediments
Options for Accelerating Projects to Increase Evacuation Capacity West of the National Capital Region
This section of the report examines how construction projects that would increase evacuation capacity on NHS evacuation routes west of the NCR could be accelerated. It differs from the preceding section in that it provides a discussion of options that may be further considered by State departments of transportation in Maryland, West Virginia, and Virginia to accelerate NHS construction projects discussed in this study. This portion of the report focuses only on routes leading westward from the confines of the NCR and provides:
- A description of the major NHS evacuation routes that lead westward from the NCR;
- Identification of large (often multi-phase) ongoing projects included in Capital Construction Plans and Statewide Transportation Improvement Programs (STIPs) and Transportation Improvement Programs (TIPs) in Maryland, Virginia, and West Virginia that could increase evacuation capacity on the major NHS evacuation routes west of the NCR; and
- Identification of options for accelerating large (often multi-phase) ongoing projects that could increase evacuation capacity on NHS evacuation routes west of the NCR.
For this section of the report, FHWA asked Federal, State, and regional highway contacts in Maryland, Virginia and West Virginia about specific NHS routes under major construction and suggestions on how to accelerate work on key projects. A list of those interviewed is included in Appendix 1.
In order to understand the scope of this report, a description of both the NCR and the NHS are provided. In addition, existing (pre-study) information on the issue of evacuating west of the NCR is provided.
National Capital Region Facts
2,500 square miles
11 local jurisdictions, the State of Maryland, Commonwealth of Virginia, and the District of Columbia
3 branches of Federal Government (executive, judicial, legislative)
271 Federal departments and agencies 340,000 Federal workers
Over 5 million residents
More than 20 million visitors annually
4th largest U.S metropolitan area
Gross Regional Product (GRP) of nearly $288.3 billion (4th nationally)
Headquarters for the World Bank, the International Monetary Fund and the Organization for American States
Over 2,100 non-profit organizations
More than 40 colleges and universities - over 130,000 students annually
2nd largest rail transit system and the 5th largest bus network in the U.S.
2 major airports serving more than 40 million passengers a year
Source: DHS/FEMA Office of National Capital Region Coordination
The National Capital Region: Various definitions exist for the area referred to as the NCR. In order to analyze and describe options for accelerating construction projects to the west of the NCR, this report: (1) adopts one definition for the NCR, and (2) identifies the NHS roads that will be analyzed for this report. The FHWA selected the definition established by the DHS's NCRC for the NCR.
Congress established the geographic definition used in this report pursuant to the National Capital Planning Act of 1952, 40 USC 71. The Act defines the NCR as the District of Columbia; Montgomery and Prince George's counties in the State of Maryland; Arlington, Fairfax, Loudon, and Prince William counties in the Commonwealth of Virginia; and all cities existing in Maryland or Virginia within the geographic area bounded by the outer boundaries of the combined area of these counties. Today, the NCR includes the District of Columbia plus 11 local jurisdictions in the State of Maryland and the Commonwealth of Virginia. (See map)
The MWCOG9 defines the NCR differently. It specifically includes the city of Frederick and Frederick County, Maryland. For the purposes of this report, the congressionally mandated definition was adopted, so Frederick County is considered west of the NCR.
The National Highway System: The NHS is approximately 160,000 miles (256,000 kilometers) of roadway important to the Nation's economy, defense, and mobility. The NHS includes the following subsystems of roadways10:
- Interstate: The Eisenhower Interstate System of highways retains its separate identity within the NHS.
- Other NHS Routes: These are highways in rural and urban areas which provide access between an arterial and a major port, airport, public transportation facility, or other intermodal transportation facility.
- Strategic Highway Network (STRAHNET): This is a network of highways which are important to the United States' strategic defense policy and which provide defense access, continuity and emergency capabilities for defense purposes.
- Major STRAHNET Connectors: These are highways which provide access between major military installations and highways which are part of the STRAHNET.
- Intermodal Connectors: These highways provide access between major intermodal facilities and the other four subsystems making up the NHS.
The NHS was developed by the DOT in cooperation with the States, local officials, and MPOs. The FHWA Office of Planning offers maps of the NHS on its Web site at www.fhwa.dot.gov/planning/nhs/.
This report focuses on the portion of the NHS that extends westward from the NCR. To understand what routes evacuees would take from the NCR, an understanding of the NHS roads that cover each area is necessary.
In addition, a brief description of the Appalachian Development Highway System (ADHS) is being provided as one of its corridors, Corridor H from the Virginia State line to Elkins, West Virginia, will be included in the analysis to identify options for accelerating large (often multi-phase) ongoing construction projects that could increase evacuation capacity on NHS evacuation routes west of the NCR. The ADHS was created by the Appalachian Regional Development Act of 1965. Its purpose was to provide a system of development highways and access roads which would contribute to economic development opportunities in the Appalachian regions of 13 States—Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia. West Virginia has six corridors (D, E, G, H, L, and Q) on its portion of the ADHS. The only unfinished ADHS corridor in West Virginia is Corridor H.
Evacuating the Populations Westward from the NCR: After monitoring evacuations of New Orleans and Houston resulting from the 2005 hurricanes Katrina and Rita, West Virginia officials expressed concern regarding the potential effect of westward-moving evacuees from the NCR that would enter the State. West Virginia authorities raised their concerns about the impact of an NCR evacuation at a number of All Hazards Consortium meetings during the past several years11. In 2005, the State of West Virginia commissioned an Urban-to-Rural (U2R) Task Force12 to address the potential for receiving populations evacuating from the NCR including Northern Virginia and Maryland in response to an evacuation order. In September 2006, the West Virginia U2R Evacuation State Planners Workshop was held with key participants from surrounding States to discuss evacuation routes leading into West Virginia. During the workshop, the West Virginia EMA shared findings from a survey conducted by West Virginia University which included identification of target destinations for those selecting to self-evacuate in the event of a natural disaster in the Washington, DC, metro area. As shown in the figure, the survey found approximately 33 percent would potentially evacuate to or through West Virginia.
However, Maryland and Virginia believe that West Virginia will be minimally affected by an evacuation from the NCR. In 2005, the University of Virginia conducted a poll of 1,071 NCR households to determine if residents would practice community shielding, or staying in place while responders deliver supplies to the affected area, if attacked with a dirty bomb or a biological agent.13 Virginia, Maryland, and District officials interviewed for this study note that most events would cause NCR residents to shelter-in-place, not evacuate. For example, a detonation of a chemical, biological, radiological, nuclear explosive (CBRNE) device, such as may be used during a terrorist attack or other malevolent event, would result in a shelter-in-place order until first responders determine the hazards and if an evacuation is warranted. For those that would evacuate, the University of Virginia study found that approximately 40 percent would evacuate to Virginia, 31 percent to Maryland, and less than 3 percent to West Virginia14.
The FHWA assembled a team that included more than 15 technical experts from the FHWA Division office in the District of Columbia, Maryland, Virginia and West Virginia (See Appendix 1).
The group's charge was to:
- Identify NHS roads that would qualify for this study, e.g., corridors leading west from the NCR,
- Analyze NHS projects west of the NCR currently under construction that could increase evacuation capacity, and
- Provide options to accelerate NHS projects under construction.
Assumptions: To delineate parameters for the study, the following assumptions were used:
- Since the study specified westward movement, the following corridor routes were not considered:
- north/south routes leading through Maryland into Pennsylvania,
- north/south routes through Virginia into North Carolina, and
- eastbound routes through Maryland or Virginia into eastern Maryland or Delaware.
- The requirements of the study specified examination of projects west of the NCR. However, there are some large projects within the boundaries of the NCR (including Fairfax and Loudoun counties) that have the potential to increase evacuation capacity west of the NCR. Discussion of such projects, and options to accelerate them, are not included in this report.
- The study called for a review of "how highway system projects currently under construction west of the NCR could increase the NCR's evacuation capacity." Large construction projects, that increase system capacity, can often consist of multiple smaller projects (or phases) that are advanced based on availability of funding. In this study, projects (or phases of large multi-phase projects) were identified and options for accelerating each were provided, depending on where in project development cycle it currently stands.
- In terms of providing a "detailed plan to accelerate such projects," a list of specific options the State has considered, or plans to consider, to accelerate construction, or time to construction, for each ongoing project (or phase of a large multi-phase project) was developed.
Identification of Routes for Study: FHWA reviewed the areas considered outside and to the west of the NCR and NHS routes in the following counties:
- Virginia: Albemarle, Alleghany, Augusta, Bath, Clarke, Culpeper, Fauquier, Frederick, Greene, Highland, Madison, Nelson, Orange, Page, Rappahannock, Rockbridge, Rockingham, Shenandoah and Warren.
- Maryland: Allegany, Frederick, Garrett, and Washington.
- West Virginia: Barbour, Clarksburg, Grant, Greenbrier, Hampshire, Hardy, Jefferson, Marion, Monongalia, Pendleton, Pocahontas, Preston, Randolph, Tucker, and Upshur.
Identification of Construction Projects: After selecting the corridors that met the above criteria, Maryland, Virginia, and West Virginia STIPs and TIPs, were collected and reviewed. Based on this initial information, planning staff in all three FHWA Division Offices were asked to provide additional information (description, location, phasing, scope, etc.) for ongoing projects (or phases of large multi-phase projects) west of the NCR that could increase evacuation capacity on key NHS routes.
Identification of Options to Accelerate Construction: Through its research and interviews, FHWA obtained information offered through the plans and interviewed officials on opportunities to accelerate construction projects on the various NHS roads that form an evacuation corridor. These opportunities would accelerate construction on the corridor routes, thus potentially expanding the capacity for evacuees to flow westward if parts of the NCR were ordered to evacuate. The team interviewed officials, including engineers and planners, from the FHWA Division Offices, State DOTs, and the MPOs in Maryland, Virginia and West Virginia. Since most of the opportunities to accelerate construction depend on innovative means to carry out project financing, project development, and contract administration, the research team consulted with numerous FHWA, MDSHA, VDOT, and WVDOT specialists in order to identify viable options for the identified projects. The FHWA has been a leader in identifying and advocating the use of contract administration and project finance options to accelerate construction time on all highway projects, with particular focus on large, complex and often multi-phased projects.
This section includes the results of the study, including a map and description of the key NHS evacuation routes west of the NCR, a description of the ongoing highway projects (or phases of large multi-phase projects) on each of these routes that could increase evacuation capacity, and a listing and discussion of options that have been, or will be, considered to accelerate construction, or time to construction, on these projects.
The NHS Evacuation Routes: The FHWA's Office of Planning produced a map to aid in visualizing the routes under study for this report. This map identifies the location of four key NHS evacuation routes that lead NCR residents westward away from the region.
Northern Route: I-270 (MD) to I-70 (MD) to I-68 (MD) to I-68 (WV)
- I-270 (MD) is a four-lane freeway (two lanes in each direction) from Montgomery County line to I-70 with interchanges located at MD80, MD85, and I-70.
- I-70 (MD) is a four-lane freeway between its interchange with I-270 in Frederick County and its interchange with I-68 in Washington County.
- I-68 (MD & WV) is a four-lane limited access highway between I-79 at Morgantown, West Virginia, and I-70 at Hancock, Maryland. I-68 handles westerly traffic to/from the Baltimore-Washington area, heading to the Ohio Valley and west.
Central Route: I-66 (VA) to I-81 (VA) to the Appalachian Corridor H Alignment (VA 55 and WV 55)
- I-66 is a four-lane limited access highway.
- I-81 is a four-lane limited access highway and is used in this routing for about 4 miles between exit 300 (I-66) and exit 296 (VA 55).
- VA 55 (the eastern most portion of the Appalachian Corridor H Alignment) has limited capacity as it is a two-lane road. Traffic volumes are low at only about 5,000 vehicles per day (vpd). There are currently no planned capacity improvements along this portion of the corridor. This situation diminishes the effectiveness of this alternative as a key NHS evacuation route into western Virginia and destinations further west.
- WV 55 and the West Virginia portion of the Appalachian Corridor H Alignment. This portion of the alternative is being constructed in several separate projects (or phases). Two of the nine projects (or phases) have been completed and are open for traffic. When complete, the facility will be a four-lane limited access divided highway with roughly two breaks in access per direction per mile. Somewhat similar to the comment above regarding VA 55, this situation (seven incomplete Corridor H project [or phases]) diminishes the effectiveness of this path as a key NHS evacuation route into West Virginia and destinations further west.
Southern Route A: I-66 (VA) to I-81 (VA) to I-64 (VA) to I-64 (WV)
- I-66 is a four-lane limited access highway.
- I-81 is a four-lane limited access highway between I-66 (exit 300) and I-64 west at Lexington (exit 191). It is a significant freight corridor, with trucks accounting for 30 percent of total traffic on I-81 between Lexington and Staunton (I-64 overlap section).
- I-64 from Charlottesville to the West Virginia State line is a four-lane limited access highway.
- I-64 between the Virginia State line and its intersection with I-77 near Beckley, WV, is a 66-mile, four-lane rural Interstate. Approximately 50 percent of the corridor was constructed in the early 1970s with the remainder completed and opened to traffic in 1988. Traffic counts range from 13,000 vpd to 23,000 vpd. Traffic volumes are higher nearer to Beckley (MP 118 to MP 125) and in the vicinity of Lewisburg and White Sulphur Springs (MP 156 to MP 170). Generally, bridge clearances all meet or exceed standards. There are 12 interchanges along this section, all servicing small towns and smaller rural roads.
Southern Route B: US 29 (VA) to I-64 (VA) to I-64 (WV)
- US 29 is a divided highway (between four and eight lanes) between Gainesville and I-64 in Charlottesville. Sections of US 29 around Culpeper and Charlottesville are limited access facilities. There are sections of US 29 in the Charlottesville area carrying more than 50,000 vpd. Similar traffic volumes exist on US 29 near Gainesville. Currently, there are no planned capacity improvements on US 29.
- I-64 from Charlottesville to the West Virginia State line is a four-lane limited access highway. It runs jointly with I-81 from Staunton to Lexington.
- I-64 between the Virginia State line and its intersection with I-77 near Beckley, WV is a 66-mile, four-lane rural Interstate. Approximately 50 percent of the corridor was constructed in the early 1970s with the remainder completed and opened to traffic in 1988. Traffic counts range from 13,000 vpd to 23,000 vpd. Traffic volumes are higher nearer to Beckley (MP 118 to MP 125) and in the vicinity of Lewisburg and White Sulphur Springs (MP 156 to MP 170). Generally, bridge clearances all meet or exceed standards. There are 12 interchanges along this section, all servicing small towns and smaller rural roads.
The FHWA gathered and analyzed information on ongoing highway projects (or phases of large multi-phase projects) west of the NCR that had the potential to increase evacuation capacity. This analysis revealed no ongoing projects (or phases of large multi-phase projects) that have the potential to increase evacuation capacity on either of the two southern routes (US 29 to I-64 and I-66 to I-81 to I-64). Therefore, FHWA dropped both of these two routes from further analysis, leaving only the Northern Route and the Central Route for consideration.
The Construction Projects: State and local agency highway contacts identified two large multi-phase ongoing projects on the Northern Route and the Central Route that could increase capacity for NCR evacuees to travel westward.
Northern Route: I-270 (MD) to I-70 (MD) to I-68 (MD) to I-68 (WV)
- Project #1 - I-70 Phase 4 Project in Frederick County: I-70 is planned to be widened in the westbound and eastbound direction to construct a third travel lane in each direction from MD 85 to MD 144 to meet current highway standards. The project is located in Frederick County, Maryland, and extends from I-270 to Mt. Phillip Road. This project is currently on hold due to lack of funding. The project is currently in the STIP, and the environmental document for Phase 4 is complete. However, due to traffic growth and land use changes, a possible reevaluation of the environmental document and the proposed design may be needed. An inside widening of I-70 is being considered. Estimated project cost is $90 million, and construction timeframe is 2018 to 2020.
Central Route: I-66 (VA) to I-81 (VA) to the Appalachian Corridor H Alignment (VA 55 and WV 55)
- Project #2 - Corridor H (Bismarck to Forman Phase): This section is partially under construction. The WV Department of Highways (DOH) approved an amended Record of Decision (ROD) in May 2001. Final design is underway for the 14.5-mile Bismarck to Forman section in Grant County. Portions of this section have some ongoing construction activity, and the remaining sections are included in the approved STIP. The WVDOH anticipates that the Bismarck to Foreman section of Corridor H will be completed in late 2013. Estimated cost for this phase is $260 million (2007 dollars).15
- Project #3 - Corridor H (Davis to Bismarck Phase): The environmental and design components of this portion of Corridor H have been completed. The remaining pre-construction issue to resolve is the purchase of right-of-way from corporate land holders. The project is currently in the STIP, and the amended ROD was completed in April 2001. Final design is underway for the 16.2-mile Davis to Bismarck section in Tucker and Grant Counties. A contract, including a bridge, west of Bismarck is anticipated to be advertised in early 2010. Estimated cost for this phase is $215 million (2007 dollars), and construction timeframe is 2012 to 2015.
- Project #4 - Corridor H (Kerens to Parsons Phase): The Kerens to Parsons section of Corridor H is located almost entirely within the Monongahela National Forest. The FHWA and the WVDOH are working with the United States Forest Service, to finalize the alignment. Final design for the 15.5-mile section through Randolph and Tucker Counties is anticipated to begin in 2014. This project is currently in the long-range plan, and the WVDOH anticipates that the Kerens-to-Parsons section will begin construction in 2018. Estimated cost for this phase is $350 million (2007 dollars).
- Project #5 - Corridor H (Parsons to Davis Phase): The environmental work for this 10-mile section is not complete. As part of a court-approved Corridor H Settlement Agreement that allowed other phases of the corridor to advance, a Supplemental Environmental Impact Statement was performed on this section. The FHWA is working with WVDOH to complete the environmental process, allowing for the execution of an amended ROD. Estimated cost of this phase is $150 million (2007 dollars), and design component is expected to be completed between 2025 and 2031.
- Project #6 - Corridor H (Wardensville to VA State Line Phase): The FHWA approved the amended ROD on the 6.8-mile section of Corridor H connecting Wardensville to the Virginia State line on May 16, 2003. Final design of the section through Hardy County is anticipated to begin in 2020. Construction tentatively is scheduled to begin in 2027. However, the Corridor H Settlement Agreement places certain restrictions on WVDOH's ability to advance this phase of the project. As a part of the settlement agreement, construction of this section would be postponed for 20 years until certain traffic conditions are met. If traffic increases on WV 55 meet the agreed to threshold and evacuation strategies suggest an increased need, this section could potentially be accelerated in the funding plan for Corridor H. However, as mentioned earlier in this report, without a plan to construct the VA 55 portion of Corridor H, the effectiveness of evacuating along the Central NHS route would be diminished as a viable option to increase evacuation capacity into West Virginia. Estimated cost of this phase is $63 million (2007 dollars) and is not expected to begin construction until beyond the 2027 to 2031 timeframe.
Options to Accelerate Construction: During the interviews and research, FHWA found that both the MDSHA and the WVDOH are both planning to consider and use some of the innovative project finance and contract administration options available to all States to accelerate construction on all six of the projects (or phases of large multi-phase projects) identified above. The following includes: (1) the myriad of tools available to them to accelerate construction, and (2) suggested tools that are appropriate to the six projects (or phases of large multi-phase projects) described above.
- General Project Finance and Contract Administration Options: There are numerous Project Finance and Contract Administration tools available to States. These options are listed below.
- Project Finance Options: With the demand for highway improvements exceeding funding resources nationwide, State governments have adopted techniques that move the financing process from a single strategy of Federal funding on a grant reimbursement basis to a diversified approach that reduces the time to get projects underway and extends, or leverages, the value of existing resources. This approach includes Federal-aid grant management techniques that can be used separately or in conjunction with project finance tools that raise upfront dollars through the incurrence of debt.
Decisions about project finance are sometimes combined with decisions about project procurement, such as the contract administration options shown below. In most procurement processes, the public sector retains control of — and most of the risk associated with — the project. Public-Private Partnerships (P3) offer an alternative procurement method that shifts more control and risk, together with more potential reward, to the private sector. As such, the public sponsor must assess multiple objectives when considering whether a project is suitable for a P3 approach.
Project finance is typically used for large capital projects in cases where using "pay-as-you-go" does not make good planning and programming sense; that is, because the project's capital needs would consume most if not all available funding — and still often fall short of being fully funded. Further, given long-term benefits of transportation infrastructure, it can be economically sound to spread the project costs over the asset's life-cycle.
However, project finance comes at a cost, because interest is paid over the long-term for the money that is borrowed today. To borrow money, of course, the creditor must identify a repayment source. This can require the development and imposition of a new revenue source to pay back bonds or loans issued to support investment.
Potential Sources of Revenue to Support Project Financing: Non-Federal revenue sources can be categorized into several broad areas, within which can be found many options.
- User Fees: This fundamental tool raises revenues directly from the transportation system user. A commonly utilized user fee is a toll, collected from drivers for use of a specific facility such as a limited access highway, bridge, or tunnel. Tolls can be fixed or variable.
- State/Local Taxes: These are often dedicated taxes, subject to voter approval, to support specific transportation investment. Local-option sales, vehicle or property taxes are often used to fund transportation.
- Value Capture: This approach attempts to capture some of the increase in value due to the infrastructure improvement. Revenues can be in the form of one-time charges, or impact fees, on the new development that requires the infrastructure improvement. Tax increments capture the increase in property value resulting from the development facilitated by the infrastructure. Specific development contributions (or exactions) for land, in-kind donations, or services can be negotiated as part of the development permitting process.
Federal-aid Grants Management Techniques: Existing law affords States much flexibility in managing Federal-aid highway funds. Although State and local governments typically must provide 20 percent of the funding for projects benefiting from Federal-aid, flexibility exists to ease restrictions on the timing of obligations and reimbursements and to create a range of options for meeting matching requirements. In addition to the challenge of obtaining fund sources, States and other project sponsors have to align the flow of projects with the availability of local funding. Grant management mechanisms provide cash flow tools that help to leverage Federal funding and expedite projects.
- Advance Construction (AC) and Partial Conversion of Advance Construction (PCAC): AC construction and PCAC are cash flow management tools that allow States to begin projects with their own funds and only later convert these projects to Federal assistance. Advance construction allows a State to request and receive approval to construct Federal-aid projects in advance of the apportionment of authorized Federal-aid funds. Under AC, States typically "convert" projects to Federal-aid once sufficient Federal-aid funds and obligation authority are available, and do so all at once. Under PCAC, a State may obligate funds in phases, including the annual repayment of debt service in conjunction with the issuance of Grant Anticipation Revenue Vehicle (GARVEE) debt (see below).
- Flexible Match: A wide variety of public and private contributions can be counted toward the 20 percent State/local match for Federal-aid projects. In practice, this flexibility has been achieved primarily through use other Federal funds or third party donations as sources of the matching funds.
- Tapered Match: A project's Federal share can vary from year to year as long as the final amount of the Federal contribution does not exceed the project's maximum authorized share. The tapered match technique allows States to vary the required matching ratio over the life of a project. For example, the Federal share could start out at 100 percent and taper off to zero as the project nears completion.
- Toll Credits (Soft Match): States can substitute certain previous toll-financed investments for State matching funds on current Federal-aid projects, providing the non-Federal share of a project's cost through a "soft match" of toll credits. By allowing States to use toll revenues when other State highway funds are not available to meet non-Federal, share-matching requirements, toll credits help States use existing resources more effectively. In most cases, the Federal share of a project can be increased effectively to 100 percent.
- Transfers between States: This option allows a State to transfer, without repayment, funds appropriated or allocated under Title 23 to another State to finance a project eligible for assistance with those funds under provisions in Title 23 Section 104(k)(3). The States would be required to document their concurrence in a transfer agreement.
- Advances between States: This option would allow one State to advance funding to another and have the funds returned in the future, similar to the process used by the Forest Highway Program (an allocated program). However, this option would require congressional action for use on ADHS-funded projects.
- Transfers between Projects: This option allows a State to advance a project from a program, under which the project would be eligible, and later restore these funds under provisions in SAFETEA-LU, P.L. 109-59, Section 1936. Since ADHS funds aren't included under Section 1936, this option would require congressional action for use on ADHS funded projects.
Federal Credit Programs: The FHWA can also provide direct credit assistance to project sponsors or allow State DOTs to loan Federal-aid funds for projects. These credit programs can provide critical sources of financing for projects assembling a variety of funding sources.
- Transportation Infrastructure Finance and Innovation Act (TIFIA): The TIFIA Credit Program provides Federal assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance surface transportation projects of national and regional significance. Eligible project costs, of which TIFIA can provide up to 33 percent of funding, must equal at least $50 million. A TIFIA borrower must pledge repayment with dedicated revenue sources such as tolls, user fees, special assessments (taxes), or other non-Federal sources.
- State Infrastructure Banks (SIBs): SIBs are State-run revolving funds that provide loans, credit enhancements, and other forms of non-grant assistance to surface transportation projects. The SIB Program allows States to capitalize loan funds with regularly apportioned Federal-aid highway funds.
- Section 129 Loans: Section 129 (a)(7) of Title 23 allows States to lend apportioned Federal-aid highway funds to toll and non-toll projects generating dedicated revenue streams. Revenue sources can include tolls, excise taxes, sales taxes, real property taxes, incremental property taxes, and motor vehicle taxes.
Bonds/Debt Financing: Federal programs also support borrowing from the capital markets, either by allowing borrowers to pledge anticipated Federal-aid funding to secure public debt GARVEEs or by providing special tax status that lowers financing costs. If permitted by State law, project sponsors can use Federal-aid funds to repay debt via contracts that may involve private entities, such as contractors.
- Grant Anticipation Revenue Vehicles (GARVEEs): A GARVEE is a debt instrument—such as a bond, note, certificate, mortgage, or lease—whereby a State DOT pledges its future Federal-aid funds as a source of repayment. When implementing a GARVEE, the State uses these Federal-aid dollars to pay debt service, rather than construction costs funded with the debt proceeds. The State uses partial conversion of AC (see above) in order to obligate funds as debt service becomes due. A GARVEE is an obligation of the State, not the Federal Government.
- Performance-based Payments: In keeping with its transfer of risk to the private sector, a P3 transaction can feature a schedule of payments to a concessionaire that combine aspects of debt service with requirements for performance. Federal-aid funds may be used to pay the capital, or principal, portion of payment installments for:
- Availability Payments: Regularly scheduled payments to a concessionaire, or private contractor, based on meeting project milestones or performance standards.
- Shadow Tolls: Also known as "pass-through" tolls, these regularly scheduled payments are based on actual usage of the facility built and/or managed by the concessionaire.
- Private Activity Bonds (PABs): PABs are debt instruments issued by State or local governments where the proceeds are used to finance a public use project either developed by a private entity, or featuring significant private involvement. Providing private developers and operators with access to tax-exempt interest rates considerably lowers their cost of capital. The SAFETEA-LU amended the Internal Revenue Code to add highway and freight transfer facilities among eligible projects, and provided the Secretary of Transportation the authority to allocate up to $15 billion in PAB authority for such projects. Using a conduit public issuer, the private entity finances the project and is responsible for debt service on the PABs.
- 63-20 Issuance: State and local governments can issue tax-exempt debt through nonprofit corporations created pursuant to Internal Revenue Service (IRS) Revenue Ruling 63-20. Bond proceeds issued by the nonprofit corporation can be used by private developers to finance and build transportation facilities. The 63-20 conduit issuance can be used to finance a transportation project when there is both a reasonable expectation of future user fee/toll revenues to repay the bonds and no alternative public issuer. A 63-20 credit does not count toward State or local government statutory debt limitations, providing access to debt for a project that has a dedicated revenue source, such as user fees.
- Build America Bonds (BABs): The February 2009 American Recovery and Reinvestment Act (ARRA) authorized these taxable bonds, which are eligible for an interest payment subsidy paid directly from the U.S. Treasury. States and local governments can issue BABs through December 2010, and proposals to extend this date appear to have legislative support. Surface transportation projects are among other public infrastructure projects (public buildings, courthouses, schools, water and sewer projects, etc.) eligible for BAB financing, which because of its direct Federal subsidy may result in net lower interest costs than a comparable tax-exempt bond.
- Contract Administration Options: States have at their disposal a number of contract administration tools that may be used to plan and accelerate construction on NHS routes. These include the following:
- Construction-Manager-at-Risk: The vertical building industry has been using a contracting technique called construction-manager-at-risk for many years. Under this procedure, an owner selects a design and construction management consultant on the basis of qualifications, experience, fees for management services and prices for the target cost of construction as well as an estimated ceiling price. The consultant then proceeds with the preliminary design. At some point in the design process (typically at the 60 to 90 percent design completion), the owner and the consultant will agree on a guaranteed maximum price for the construction of the project. Many owners favor this contracting technique as it gives them greater control of the design process, yet it still provides for innovation and constructability recommendations in the design phase.
- Cost-Plus-Time Bidding: Cost-plus-time bidding, more commonly referred to as the A+B method, involves time, with an associated cost, in the low bid determination. Under the A+B method, each bid submitted consists of two components:
- The "A" component is the traditional bid for the contract items and is the dollar amount for all work to be performed under the contract.
- The "B" component is a "bid" of the total number of calendar days required to complete the project by the bidder. (Calendar days are used to avoid any potential for controversy which may arise if work days were used.)
The bid for award consideration is based on a combination of the bid for the contract items and the associated cost of the time, according to the formula: (A) + (B x Road User Cost/Day). This formula is used only to determine the lowest bid for award and is not used to determine payment to the contractor. The contractor's estimate for the completion of critical work becomes the contract time, and an Incentive/Disincentive provision is usually used to keep the bidding-playing field level.
- Design-Build: The design-build concept allows the contractor maximum flexibility for innovation in the selection of design, materials and construction methods. With design-build procurement, the contracting agency identifies the end result parameters and establishes the design criteria. The prospective bidders then develop design proposals that optimize their construction abilities. The submitted proposals may be rated by the contracting agency on factors such as design quality, timeliness, management capability, and cost. These factors may be used to adjust the bids for the purpose of awarding the contract.
- Design-Build-Maintain (Operate): Several States have initiated design-build-operate-maintain projects. Adding operational maintenance to the Design-Build process, this method is often incorporated into toll roads/toll agreements.
- Incentive/Disincentive (I/D) Provisions for Early Contract Completion: The I/D provisions for early completion are intended to motivate the contractor to complete the work on or ahead of schedule. It allows a contracting agency to compensate a contractor a certain amount of money for each day identified that critical work is completed ahead of schedule and assess a deduction for each day the contractor overruns the I/D time.
The contracting agency specifies the time required for critical work and uses this provision for those critical projects where traffic inconvenience and delays are to be held to a minimum. The I/D amounts are based upon estimates of such items as traffic safety, traffic maintenance and road user delay costs. Some States have used a variation of the incentive/disincentive provision that provides a variable I/D amount relative to the time of early or late completion. For example, a larger incentive is provided for a 10-day early completion than for a one-day early completion.
- Interim Completion Dates: Interim completion dates are a means of encouraging the early completion of a specific phase of a contract such as a ramp, an interchange or another component of a larger construction contract. The particular phase or component should be selected with great caution as this will impact the scheduling of the overall project.
- Multi-Parameter Bidding including Quality (A+B+Q Bidding): Similar to cost-plus-time bidding, this concept envisions a contracting system where a bidder would bid the cost for completing the work -A, the time for completing critical work -B (optional), and the level of quality or performance that would be achieved over a specified period of time — Q. A warranty bond or a method of making payment in future years would be necessary to implement this system.
- No Excuse Incentives: "No Excuse Incentive" (NEI) clause, also known as No Excuses Bonus16 contracts give the contractor an incentive to complete the contract work on time. The contractor is given a "drop-dead date" for completion of a phase of work or the entire project. If the work is completed in advance of this date, the contractor will receive a bonus. There are no excuses, such as weather delays, for not making the completion date. On the other hand, there are no disincentives (other than normal liquidated damages) for not meeting the completion date.
- Stipulated Sum: Stipulated, or lump, sum payment is commonly used for design-build contracts, but has been increasingly applied to traditional low-bid highway contracts for various bid items and more recently for contracts involving categories of work that lend themselves more to lump sum pricing. In contrast to a traditional unit-priced bid item, the DOT will not provide quantity estimates for lump sum items in the bid package. The plan sheets for a lump sum project typically will not include detailed quantity tables. The contractor is responsible for developing quantity take-offs from the plans for estimating a lump sum item or items for a project.
- Lane Rental: Lane rental is a contract provision that incentivizes contractors to schedule and work during non-peak periods by charging rental fees for lane and shoulder use, with higher fees during peak periods. This technique is similar to the A+B (cost-plus-time) technique in that contractors bidding on a lane rental project determine the number of days lanes will be closed during work and use this determination in their bid process. The owner will add the total lane rental bid to the standard bid to decide the award. Awarded contractors using more lane rental days than bid will be charged lane rental fees.
- Partnering: The owner should include a formal partnering item in the contract documents to ensure that all parties understand the requirements of the project and to foster relationships that facilitate resolving issues that arise during the project. Discussions should include contingency plans to address potential problems such as insufficient equipment, equipment breakdowns, inclement weather, and inexperienced personnel, as well as logistical issues related to timing of materials, equipment, public notices, and multiple moves within the same window.
- Specific Project Options to Accelerate Construction West of the NCR: During the interviews and research, FHWA found that the MDSHA and the WVDOH both plan to consider and use some of the innovative project finance and contract administration options available to accelerate construction on all six of the projects identified above.
Maryland Projects: The MDSHA typically considers a wide range of options to accelerate large projects. Examples of specific accelerated construction techniques anticipated for the I-270/US-15 and I-70 projects at this time include:
- Advance Construction: I-70 Phase 4
- Partial Conversion of Advance Construction: I-70 Phase 4
- Toll Credits: I-70 Phase 4
- Cost-Plus-Time: I-70 Phase 4
- Design-Build: I-70 Phase 4
- I/D Provisions for Early Contract Completion: I-70 Phase 4
- Stipulated Sum: I-70 Phase 4
- Project Phasing: I-70 Phase 4
- Partnering: I-70 Phase 4
The MDSHA is using TIFIA financing for its Intercounty Connector (ICC) Major Project. However, those interviewed indicated that the State of Maryland would probably be reluctant to aggressively pursue additional innovative financing options, such as GARVEE Bonding, TIFIA, tolling, express toll lanes, etc., to accelerate construction on the two projects at this time due to State budget constraints, but such options would likely be considered as part of the normal project development and programming process for each project.
West Virginia Projects: Like MDSHA, WVDOH typically considers a wide range of options to accelerate construction of large projects. The WVDOH authorities and their partners participating in this study discussed other options they have considered, or will consider, to accelerate work on this portion of the NHS. Many of the suggestions reflect innovative project financing options. However, West Virginia traffic volumes, and lack of an independent revenue source, do not support strategies such as tolling, TIFIA, SIBs, and PABs. Examples of specific accelerated construction financing and contract administration techniques anticipated for Corridor H projects at this time include:
- Advanced Construction
- Partial Conversion of Advance Construction
- Transfers between States
- Advances between States
- Transfers between Projects
- Availability Payments
- I/D provisions for early Contract Completion
- Interim Completion Dates
- Project Phasing
The table in the following section summarizes which specific project finance and contract administration options examined in this study have been, or will be, considered by the MDSHA and the WVDOH to accelerate construction, or time to construction, for the seven projects identified that would increase evacuation capacity on key NHS evacuation routes west of the NCR. Depending on where each project currently is in the project development process, will determine when such options will be considered. For example, for those projects that construction is ongoing or planned for the near term, it would be appropriate for the State DOTs to be considering many of the identified project finance and contract administration options at this time. For future projects that will not be in actual construction for many years, it would be appropriate for the State DOTs to be considering many of the identified project finance options at this time.