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CHAPTER 2. High Occupancy Toll (HOT) Policy and Planning

2.1 Baseline Performance Framework for High Occupancy Vehicle Lanes

Minimum occupancy requirements for the HOV lanes should be set to avoid both underutilization and overcrowding of the HOV lanes. The primary benefit of adding an HOV lane is that total highway capacity is increased, causing preexisting HOVs to divert onto the new HOV lane and allowing Single Occupant Vehicle (SOVs) to share highway mainlines with fewer vehicles. After this initial shift in lane utilization, the resulting travel time differential between the HOV lane and highway mainline lanes could induce secondary shifts (second order changes) from SOV to HOV up to the point where service levels in the HOV lanes are impacted.

High Occupancy Vehicle (HOV) lanes are intended to meet three basic objectives
Provide a cost-effective means of moving greater volumes of persons at higher levels of service than mainline highway lanes by reserving dedicated lanes for multi-person vehicles; Promote ridesharing by setting aside reserved HOV lanes and offering travel time savings and reliability; and, Reduce trip times of HOVs during congested times of day

Research on HOV lanes (Dahlgren 1995) suggests that approximately 20 percent of the existing vehicles on a three-lane highway must be HOVs for an HOV lane addition to be effective and still offer enough of a travel time savings incentive to induce ridesharing. If enough travelers shift from SOV to HOV, congestion on HOV lanes can erode the travel time differential, thereby dampening the incentive needed to promote further shifts to HOV in the long term. In cases where the pre-existing HOV share is high, HOV lanes can suffer from periodic traffic congestion during the busiest times of day. Ultimately, HOV priority treatment may contain a self-limiting threshold both in very high congestion and no congestion conditions beyond which there are limited incentives to rideshare.

HOV lane performance studies typically collect peak vehicle and passenger counts for HOV lanes and highway mainline lanes and obtain average travel speed and travel time data. HOV lanes can average three to 20 times the person movement of highway mainline lanes during peak hours. If HOV lanes that carry more peak passengers than comparable highway mainline lanes and maintain peak hour volumes between 800 – 1,000 vehicles per lane per hour are determined to be an effective system management strategy.

Many HOV lanes throughout the country, under existing HOV priority allowances, achieve performance consistent with those outlined in FHWA HOV Lane Performance Guidelines. The remainder of HOV lanes currently in operation suffers from mild to severe underutilization or overcrowding or both, depending of prevailing traffic conditions. It is this subset of HOV facilities that represent the pool of potentially feasible HOT conversion projects.

2.2 Understanding the Effects of Converting an HOV Lane to HOT Lane

The conversion of an HOV lane to HOT lane results in both operational and behavioral shifts. These shifts must produce a combined positive net benefit to users in order for the conversion from HOV lane to HOT lane to be deemed worthwhile. The purpose of this section is to describe the possible behavioral effects resulting from the conversion of an HOV lane to HOT lane that should be considering in evaluating and planning.

The reduction in travel delay effect for LOVs is manifested in two ways:
LOVs diverting onto the HOT lane derive a travel time savings benefit, which they gain in exchange for a toll payment. The initial diversion of LOVs onto the HOT lane causes a reduction in traffic volumes and traffic density, as LOVs on the highway mainline lanes share capacity with fewer vehicles.

As discussed above, the primary operational effect caused by the conversion to HOT lane is that Low Occupancy Vehicles (LOVs)[5] who now pay to use the HOT lane will gain travel time savings. Converting an HOV lane to HOT results in overall delay reduction for LOVs both for those remaining in the highway mainline lanes and those that buy into the HOT lane. Pricing optimization techniques enable the HOT lane operator to maximize travel time savings differential between HOT lane and highway mainline lanes through the day. The ability to achieve and sustain travel time savings is generally considered one of the most important operational differences between HOV lanes and HOT lanes.

Figure 2-1 provides a diagrammatic overview of the various effects of converting an existing HOV lane to HOT lane.

Figure 2-1: Effects From Converting to HOT lanes

2.2.1 Shifts from HOV to LOV and from LOV to HOV

After an existing HOV lane is converted to HOT lane, the LOV toll buy-in feature will induce some additional shifts from HOV to LOV. Before the HOV lane was converted to HOT lane, all motorists who could be induced to shift to HOV presumably had already done so. Converting the HOV lane to HOT lane is unlikely to increase or even maintain existing levels of rider sharing. HOVs that are made better off by disbanding the HOV in favor of paying for HOT lane service as an LOV will shift from HOV to LOV. Likewise, some travelers will disband HOVs simply because the diversion of LOVs onto the HOT lane will cause enough highway mainline delay reduction to make HOV travel no longer worthwhile.

2.2.2 Shifts from other Routes and Times

The travel time reduction on highway mainline lanes and the presence of a HOT lane will induce some secondary behavioral shifts:

• From alternative routes to the subject highway
• From off-peak to peak, which is not less congested

With reduced delay on highway mainline lanes, LOVs that had that had previously shifted to alternative routes to save time will return to the highway via mainline lane use or HOT lane. With reduced delay on the highway, both HOVs and LOVs that had previously shifted to alternative routes to save time will return to the highway. Both groups are better off.

2.2.3 Second-order Effects and Long-Run Equilibrium

The marginal shifts from other times of day and routes, coupled with additional trips stimulated by the reduction in peak highway delay, will gradually result in increases in highway volumes, thereby offsetting some of the delay reductions caused by opening HOT lane service to toll-paying LOVs. Patterns will evolve toward a long-term equilibrium in which the relative costs and benefits of HOT lanes and highway mainline lanes are no longer sufficient to motivate further shifts from HOV to LOV. Patterns will also be stabilized to the point where additional shifts to and from other times and routes are no longer induced.

2.3 Key Planning and Policy Criteria

The purpose of this section is to describe the HOT lane project screening criteria, and identify opportunities where HOT lanes may be the most effective means of addressing a critical mobility need.

Pre-Planning Issues/Challenges

How should HOV exemptions be modified to accommodate SOV toll buy-ins? What should the minimum operating standard for HOT lanes be? To what extent should access (ingress/egress) be limited to segregate traffic and preserve LOS performance goals on the HOT lane? How much are system implementation and ongoing operating costs for HOT lanes? What are the trade-offs between implementing a HOT lane and a toll lane with no HOV exemption? What legislative barriers need to be removed in order to convert an HOV lane to HOT lane? How should toll revenues be used? Who should own and operate the HOT lane?

As discussed in Chapter 1, HOV lanes can be classified in terms of their average peak hour performance. HOV lanes that experience chronic underutilization (below 700 vehicles per lane per peak hour) generally comprise the pool of potential candidates’ conversions to HOT lane. In these cases, the presence of an optimal toll set to maintain a minimum operating standard on the HOT lane will divert LOVs onto the HOT lane. Underutilized HOV lanes are considered the best candidates for conversion because: a) no additional lane capacity needs to be added to the existing operating envelope, and b) the minimum vehicle occupancy requirement does not have to be adjusted.

HOV lanes that experience chronic peak hour congestion also reflect a mismatch between existing travel demand and lane capacity, and merit some type of policy treatment to address recurring operational shortcomings. However, all congested HOV lanes are not necessarily appropriate candidates for conversion to HOT lanes. In cases where there is potential excess lane capacity and there is no operational justification for adding a second HOV lane to an existing one-lane HOV facility, conversion to a two-lane HOT facility may achieve optimal operational conditions that cannot be duplicated by a two-lane HOV lane facility.[6] (In other words, LOVs can occupy some of the otherwise under-utilized lane capacity).

Based on considerations such as those described above, the planning process should address a number of questions to determine how effectively a potential HOT conversion project addresses a current unmet transportation need. These include:

• Is there sufficient excess peak capacity to allow SOV toll buy-ins on an existing HOV lane without the need to expand lane capacity? The feasibility of a potential conversion project depends in large part to the amount of excess capacity that can be sold to SOVs. If there is abundant excess capacity on the existing HOV lane and traffic congestion on highway mainlines is moderate, it may be feasible to attract just enough SOVs onto the HOT lane through optimally priced dynamic tolling without necessitating any change in HOV toll exemption policies. In Chapter 6 Case Studies, further discussion is devoted to factors that result in a change in HOV toll exemption policies in place.

• If there isn’t enough excess peak capacity in the existing HOV lane(s) to allow for SOV tolling, is there additional capacity that can be added to the existing HOV facility as part of an HOT conversion project? Many HOV lanes are only one-lane facilities with either limited or no barrier separation from highway mainline lanes. In cases where the potential market for premium HOT-lane service is large and mainline lanes suffer from severe to extreme peak congestion, it may be necessary to: 1) change the HOV exemption from HOV 2+ to HOV3+ or higher, 2) add a second HOT lane, or 3) do both.

• If changing the HOV exemption from HOV-2+ to HOV-3+ or higher is necessary, will it result in behavioral shifts that undermine the mobility improvement objective? The existing HOV eligibility status in the HOV exemption policy should be preserved in the HOT lane context whenever possible. In many instances, however, preserving the current HOV exemption may not free up enough capacity to auction to LOVs willing to pay a toll for premium HOT lane service. If the exemption is increased from HOV-2 to HOV-3+, the magnitude of HOV-2s that disband may offset any increases in carpooling motivated by the presence of tolling. Should the ultimate effect be a net reduction in HOVs and a net increase in LOVs, this may undermine one of the key objectives underlying the HOT lane concept, which is to promote trip reduction corridor-wide.

• Are there any unique operational and physical characteristics of the existing HOV lane facility that will require major reconfiguration? Not every HOV lane, under its current operating configuration can be readily converted to HOT without some significant physical improvements to the existing facility envelope. In addition improvements to the to limiting ingress and egress into the HOT facility, it may be necessary to modify lane configurations both at the entry and exit points of the HOT facility to minimize queuing behind bottleneck locations. The facility may also have to accommodate additional equipment including location of variable toll message signs (VTMS) and electronic toll collection equipment and supporting gantries and cabinets, and maintenance areas and enforcement envelopes.

 

2.3.1 Legal and Institutional Challenges

While there is growing interest in HOT lanes among local, state and federal transportation officials, there remain significant legislative and institutional barriers to widespread HOT lane implementation. Prior to the enactment of Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), states were expressly prohibited from converting federal-aid highways and Interstates into toll facilities.

However, that policy was modified under SAFETEA-LU Pub. L. 109-59, August 10, 2005 to allow States and qualifying transportation agencies to use Federal funds for toll facility applications. Congress enabled three new exceptions, and modified one existing exception, to Title 23 of the United States Code, Section 301, which otherwise generally prohibits the imposition of tolls on facilities that use Federal funds.

Through the applicable program States and qualifying transportation agencies may, with the execution of a toll agreement under Section 129 (a)(3), use Federal-aid funds for either the construction of or improvements to a toll facility or to the approach to a toll facility; or, for the reconstruction or conversion of a free highway, bridge or tunnel previously constructed with Federal-aid funds to a toll facility thus enabling conversion of HOV lanes to HOT lanes.

Specifically related to the conversion of HOV to HOT lanes, Section 1121 of SAFETEA-LU replaces Section 102(a) of Title 23 of the United States Code (23 U.S.C.) with a new Section 166 that clarifies some aspects of the operation of HOV facilities and provides more exceptions to the vehicle occupancy requirements for HOV facilities. It also authorizes states to create HOT lanes and allows states to charge tolls to vehicles that do not meet the established occupancy requirements to use an HOV lane if the state establishes a program that addresses the selection of certified vehicles and procedures for enforcing the restrictions. Tolls under this section may be charged on both Interstate and non-Interstate facilities. There is no limit on the number of projects or the number of states that can participate.

2.3.2 Building Support for HOT Lanes

Perhaps the biggest barrier to wider HOT lane implementation is public opposition. Recent experience demonstrates that HOT conversion projects are feasible from an operational and technological standpoint. With the mainstreaming of HOT lanes on the state and federal level, the public become increasingly familiar with the HOT lane concept, and the benefits these facilities offer in terms of congestion relief. Today, they are not as controversial as they once were. However, HOT lane conversion projects – because they include a tolling component – often raise spirited opposition based on equity and fairness concerns. Yet HOT lanes still provide access for HOV users as well as providing both HOV and non-HOV users with an option, or another travel choice.

Key Stakeholder Outreach Actions

Anticipate opposition early. Arrange focus groups to determine local issues and strategic opportunities to address specific concerns. Develop program objectives that address and mitigate social equity concerns. Gain consensus from key influential civic and community gatekeepers. Enlist advocacy from a respected local official who will serve as project champion. Manage expectations by establishing reasonable and achievable project objectives. Deliver the project on-time and on-budget.

With the increased federal support for tolling initiatives, states and metropolitan regions throughout the country have looked closely at their highway assets for opportunities to improve mobility via facility-specific electronic tolling or ‘smart road’ applications. In states like California, Texas, Utah, Minnesota, Colorado and Washington, HOT lanes have been folded into statewide and regional transportation management plans that place increasing emphasis on system management objectives.

Over the past decade, public acceptance of electronic tolling applications on urban highways has increased, with the maturation of landmark projects like the 91 Express Lanes in Orange County, CA and the I-15 Express Lanes in San Diego, CA. Today, these facilities are commonly accepted by the public as critical elements of the region’s transportation system.

A common thread in every successful HOT conversion project is the execution of a coordinated effort to convey the justification for and benefits of the project and address public concerns about the implementation and ongoing operation of the project. It is important to note that the success of an HOT lane implementation should be measured by public acceptance as well as the ability to provide added capacity, and potentially additional revenues to support enhanced maintenance support and regional mobility objective. Public consensus for the planned project requires strong public involvement program throughout the life of the project, especially from the early planning stages.

Public Outreach Strategies

Project sponsors that manage inclusive, responsive and effective outreach to stakeholders establish their own legitimacy and the legitimacy of the technical analyses, decision-making, and public processes that support project implementation.[7] Establishing transportation taskforces and technical committees consisting of business, community members, and elected officials is a proven key to successful implementation for managed lane projects. For example, the QuickRide Program in Houston over individuals participated in 14 public meetings which helped bring forward issues such as access points and directional flow. In addition, having a strong public champion is a critical element in lending credibility to the outreach process and influencing key decision makers who may initially oppose HOT conversion projects without a clear understanding of potential project mitigations.

Figure 2-2: Public Outreach Model Used at MnPass

SANDAG as well as MnDOT (MnPass) began public outreach programs very early in the project planning. SANDAG conducted stakeholder interviews, established a program of continuing surveys with both stakeholder and the public and held numerous public forums through implementation. MnPass created a local taskforce, the I-394 Express Lane Community Taskforce, at the outset of the program to address issues, desires, and design options. In addition they also held continuing public forums to keep the public informed and to address relative issues.

2.3.3 Application of Project Development Approach

Figure 2-2 provides an overview of the multiple phases involved in the project development of the conversion of an HOV lane to HOT lane. Following an initial assessment of conversion feasibility and the decision to investigate the HOT lane conversion further, the conceptual framework for the HOT lane project is then developed and refined. The conceptual refinement stage evaluates various system design alternatives, and eventually recommends a preferred alternative.

Figure 2-3: Sketch Development Approach

The third phase identified in Figure 2-3 – Program & System Design – focuses on clarifying the design, operational and technological elements of the HOT lane conversion project. The fourth phase of the project involves developing the operational requirements of the system. The project sponsor, most likely the state DOT, will complete detailed engineering and design studies for the recommended alternative and develop the design specifications for the HOT lane project. The fifth phase involves the preparation of procurement documents for the construction of the HOT lane project and the selection of a contractor through a competitive solicitation process.

2.3.4 Unique Project Risks/Challenges

While there are a significant number of technical, policy and public issues that provide both risks and challenges for the successful implementation, the success of an HOT implementation is the ability to meet stated program goals. These goals must have community support early on in the planning process, and the development of the project must be consistent with the public’s expectations. In addition to public acceptance, there are a number of other critical hurdles that must be addressed in a successful implementation.

A risk mitigation plan is an important element of a successful HOT Lanes project. Risks should be outlined as a part of the alternatives analysis described above and used for evaluation of alternatives. Then, as the project moves through design and construction a risk management plan should be developed and periodically updated. The plan should identify all risks associated with the project, the degree of impact should the risk occur and the likelihood of that risk occurring. Examples of categories of these risks are schedule, technology, operating, public acceptance and environmental. Within these categories numerous sub-categories specific to the project can be identified and therefore mitigated.

All HOT implementations must address the following areas to minimize potential areas of risk:

• Strong Interagency Support – Creating a strong public campaign that explains intended benefits and outcomes is critical to advancing a HOT conversion project from the earliest planning through project construction implementation to promote understanding and support for the project. There must also be:

  • Strong support from local, regional and state transportation officials and State Legislature,
  • Strong Project Champion – Having a dynamic and respected public official publicly support and advance HOT lanes is critical to winning public support and can often accelerate the public outreach timeline.
  • Strong support from the Metropolitan Planning Organization (MPO), with HOT lanes identified in Regional Transportation Planning documents,
  • Strong local sponsor, typically a regional transportation agency with highway management and operations responsibilities.

• Defining Program Objectives – HOT conversion projects must identify program objectives clearly from the outset, because the program objectives influence both project financing and potential for public/private partnership (PPPs). The program objectives should be realistic and defensible.

• Traffic Forecasting – It is critical that traffic forecasts are rigorous and conservative in testing the program alternatives, as these projections serve as input into potential revenue bonding and other project financing mechanisms.

• Capital and Operating Cost Forecasting - It is also critical that estimates for the initial capital costs and ongoing operating costs are conservative and realistic, as these factors in combination with traffic forecasting, will determine the basic economic viability of the project.

• Project Financing – Some HOT conversion projects will be financed entirely with state and local funds, with some federal matching support. Others may be viable as investor-owned utilities underwritten by private investment. The financing arrangement may present risks to both the public and investors if project rates of return are lower than expected, and debt cannot be adequately serviced.

• Procurement – There are both financial and schedule risks associated with traditional versus more innovative procurement strategies; development of solid ETC system specifications and selection of a vendor (system integrator) is critical to the success of the project.

• Achieving Operational Goals – The HOT lanes can only be successful if they provide consistent and reliable Level-of-Service (although some degradation in LOS may occur from time to time). If the customer doesn’t get value (i.e. travel time savings) commensurate with the toll charge, then public trust in the HOT lanes will erode and the system will fail.

• Establishing the Right Operating Model – It is critical that operating framework for the HOT conversion project reflect the program objectives. As further described in our case studies, (see MnPass) the operation and pricing strategies must be feasible, reasonable, and compatible with the program objectives.

• System Design Consideration – Creating a toll facility within an existing highway requires attention to all system design considerations including facility operations. Desired operational characteristics must be considered during both the planning and design phase of implementation so that the facility design is operationally functional. Where possible design should be flexible to allow for changes in operational policies. Modes of operation such as two-way flow, reversible flow and contra-flow, incident management and allowed vehicle types allowed affect the geometric configuration. In addition to the operational considerations that impact design consideration other design considerations are listed in Section 2.4.

2.4 Project Financing

Substantial resources are required to plan, design, construct, operate and manage a HOT facility. The method of financing selected for a given HOT lane conversion project can involve both public and/or private funding sources. Based on recent experience, HOT project financing typically rely on traditional sources of public funds (e.g., fuel tax revenues), with some opportunities to leverage federal grant support. In a few unique cases, HOT lane conversion projects may be suitable for some form of revenue bonding or the sale of a private concession to construct, operate and maintain the facility. This section describes how HOT program goals influence both the method of project financing and, ultimately, the operating model chosen for the HOT lane.

Project funds for transportation capital expansion and facility upgrades are traditionally allocated by state DOTs or other local agencies according to the goals of long-range plans and the availability of programmable funds. Because HOT lanes generate revenues, however, they need not necessarily rely on allocation of total project funding through the traditional planning and programming processes. Instead, agencies can take advantage of innovative financing mechanisms such as revenue bonding and private concessions in order to accelerate HOT conversion projects.

Revenue bonding for HOT lanes is similar to revenue bonding for other tolled transportation facilities. Under revenue bonding, a government agency issues bonds backed by future facility-generated revenues. Although revenue bonds typically carry higher interest rates than municipal bonds (which are guaranteed by more stable general tax revenues), they allow agencies to generate the capital necessary to implement projects quickly. Once the project is completed, the HOT lane revenues are, at least in part, dedicated to fulfilling obligations to the bondholders.

A second potential project financing mechanism is private concessions. Under the private concession model, a transportation agency leases the HOV facility to a private operator, sometimes in exchange for an up-front fee. The private operator is then responsible for any or all of the planning, design, construction, and operation aspects of the HOT conversion project. This arrangement makes most sense when the private operator is granted a contract to operate the facility and collect revenues for some fixed time frame, such as 30 or 50 years, beyond project completion. Benefits to the transportation agency include a transfer of project responsibility and risk as well as outsourcing of project activities (e.g., design and construction) to the private concessionaire. The concessionaire, on the other hand, must produce financial resources to complete the project, but is compensated by keeping a share of the revenues generated by the HOT facility once it opens.

On the other hand, revenue bonding may be sufficient to generate the capital necessary to complete the project in a reasonable and expedient time frame, in which case a private concession may not be desirable.

Selling Concessions

The advantages of private concession arrangements and revenue bonding depend on the particular situation and the goals ultimately set by the transportation agency. Private concessionaires can access both debt and equity stakeholders to finance the conversion project, which may increase the capital available for the project, thereby accelerating its completion, lowering construction costs, and generating revenues from the facility sooner.

Regardless of the arrangement for financing the conversion project, HOT lanes will generate revenues, which accrue to either the operating agency or to the private concessionaire. In almost all cases, some proportion of the revenues generated will be dedicated to operating the HOT facility. Operations costs include lane management, toll collection and administration, enforcement, service patrols and incident management, basic infrastructure maintenance, back-office support, and perhaps facility depreciation (these activities are discussed in Chapter 4). Under a private concession or revenue bonding financial arrangement, the next obligation for generated revenues is to the debt and/or equity investors. Finally, once the obligations to all stakeholders are fulfilled, there is reasonable expectation that the operating agency or concessionaire may generate excess revenues from the HOT lane operation.

The allocation of excess revenues, should they materialize, depends on the goals and objectives determined by the operating agency prior to project initiation. Revenues can be dedicated for improvements to the HOT facility itself, applied to the entire HOT corridor, or distributed regionally to other corridors and/or other travel modes such as mass transit. In some instances, agencies may even determine appropriate uses outside of the transportation arena.

Regardless of whether excess revenues materialize, the success of HOT conversion hinges on the ability of any particular project to meet two requirements. First, revenues should support the maintenance and operation of the HOT facility. Secondly, revenues should be sufficient to meet financial obligations to project investors. Consequently, accurate project cost estimates and realistic revenue forecasts are essential to the financial success of a conversion project.

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Footnotes

[5] Low Occupancy Vehicles (LOVs) are defined here as vehicles that do not meet the HOV exemption and would be subject to the HOT lane toll. Back to reference 5.

[6] FHWA, A Guide for HOT Lane Development, page 7. Back to reference 6.

[7] Perez, B.G., and G. Sciara. “A Guide for HOT LANE DEVELOPMENT,” Federal Highway Administration Report FHWA-OP-03-009, Washington, DC, 2003. Back to reference 7.

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June 2007
Publication #FHWA-HOP-08-034