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Getting Started with Congestion Pricing: A Web-Based Workshop for Local Partners

Part 1

Slide 1

Getting Started with Congestion Pricing
A Web-Based Workshop for Local Partners
Part 1

Federal Highway Administration
Office of Operations

Photos. Collection of photos having to do with HOT lanes. For visual interest.

Slide 2

Workshop Objectives

  • Develop an understanding of congestion pricing alternatives
  • Communicate why congestion pricing can be beneficial
  • Gain an understanding of federal programs related to pricing
  • Learn which pertinent challenges come with implementing pricing programs and how to overcome them

Slide 3

Agenda

  • Part 1 – Overview and Introduction to Six Challenges
    • What is Congestion Pricing?
    • The Case for Congestion Pricing
    • Six Implementation Challenges
    • 1 – Political Support and Public Acceptance
    • 2 – Funding and Financing
  • Part 2 – Continuation of Six Challenges
    • 3 – Equity
    • 4 – Technology
    • 5 – Enforcement
    • 6 – Long-Range Planning Integration
    • Wrap-up and Summary

Slide 4

What is Congestion Pricing?

Slide 5

What is Congestion Pricing?

  • Many terms used:
    • “road pricing”
    • “tolling”
    • “value pricing”
    • “congestion pricing”
  • Tolling typically refers to a direct fee for using a highway facility
  • Pricing has goals besides generating revenue

Slide 6

Congestion Pricing Defined…

… a way of harnessing the power of the market to reduce the waste associated with traffic congestion.

Congestion pricing is the use of increased prices during peak usage to shift rush hour highway travel to more efficient modes or to off-peak periods.

Slide 7

Four types of pricing strategies…

  • Priced lanes
  • Priced roadways
  • Priced zones
  • Priced networks

Slide 8

Priced Lanes

  • HOT Lanes
    • HOT-2+ or HOT-3+
    • HOVs, buses, emergency vehicles free or reduced rate
    • Lower occupant vehicles charged toll
  • Express lanes - various possibilities:
    • All vehicles charged
    • HOVs receive discount
  • Truck-only toll lanes

Slide 9

Priced Lane Projects

Map of the United States showing locations of priced lane projects. States shaded in blue (Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York,North Carolina, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, and Washington) represent states with HOV lanes. Yellow dots indicate the location of HOT lanes.

Slide 10

Priced Lane Concept

  • Improve efficiency by balancing supply and demand
    • Supply: Improve efficiency by maintaining optimal flow
    • Demand: Dynamically adjust the price in relation to the current conditions

Slide 11

Supply: What is the Capacity for a Priced or Managed Lane?

  • The inherent nature of managed lanes is to provide a level of flow that is reliable and consistently free flowing
  • Thus, these lanes are managed to a level of free flow capacity, not the same as the HCM maximum capacity
  • Free flow capacity of a single lane managed lane is typically in the 1500 – 1700 VPH range.

Slide 12

Managing the Demand Side with Pricing

  • HOT Lanes are designed to serve their primary customer first – the baseline of transit and carpool vehicles
  • Then dynamic or variable pricing is used to “meter” the number of toll payers, consistent with the capacity that is available

Slide 13

Priced Roadways

  • Flat toll rates changed to variable
    • tolls higher during peak travel periods
    • tolls lower during off-peak travel periods
  • Toll-free facilities changed to variably priced
    • tolls charged on congested highway segments
    • tolls vary by time of day

Slide 14

Priced Zones

  • Fee charged to enter a congested zone
  • Usually a city center, but could be a defined geographic area
  • Fees may vary by time of day
A photo of a London 'Congestion Charging Central Zone' sign. Map showing an urban area using area pricing (with an inner cordon and outer cordon).
Photo of roadways with toll gantries, representing entrance/exit points in an area with cordon-pricing. Photo of roadways with toll gantries, representing entrance/exit points in an area with cordon-pricing. Photo of roadways with toll gantries, representing entrance/exit points in an area with cordon-pricing.

Slide 15

Priced Networks

  • Priced limited access network
  • Distance-based pricing (VMT fees)
  • Mileage-based user fees or time-distance-place pricing (TDP)
Map of the Puget Sound region showing the fully-tolled freeways in the area.

Slide 16

The Case for Congestion Pricing

Slide 17

Federal Setting

  • SAFETEA-LU provided more authority to toll and price motor vehicles:
    • To finance construction/reconstruction
    • To promote efficient use of highways
    • To reduce traffic congestion
    • To improve air quality
  • Six programs are now available

Slide 18

Six Federal Programs

Slide 19

Multiple Beneficiaries of Pricing

  • Drivers and Businesses
  • Transit & Carpoolers
  • Proponents for Innovative Financing

Slide 20

Benefits to Drivers and Businesses

  • SOV Drivers
    • Congestion-free SOV travel option
    • Improve reliability
    • Reduced fuel use
  • Businesses
    • Increase predictability of trip times for deliveries
    • Reduce costs, such as fuel use
  • Benefits to Society
    • Reduce fuel use and emissions

Slide 21

Benefits to Transit Riders and Carpoolers

  • Transit Riders
    • Preserves or improves vehicle speeds and trip reliability
    • Funds for transit improvements
  • Carpoolers
    • Preserve or provide incentives for ridesharing through time savings and trip reliability

Slide 22

Benefits for Agency Revenues

Concepts generating higher revenues:

  • Traditional tolling with variable toll rate
  • Cordon pricing

Concepts generating less revenues:

  • HOT lanes
  • Express toll lanes

Cross-subsidizing multimodal investments

  • Pool funding sources
  • Helps with public acceptance and equity concerns

Slide 23

Use of Revenues

  • Operate toll collection and traffic management systems
  • Expansion of roadway facilities
  • Support public transit
  • Toll discounts to low income individuals
  • Reduction of other taxes

Slide 24

Six Implementation Challenges

Slide 25

Overcoming Challenges of…

  • Political support and public acceptance
  • Funding and financing
  • Equity
  • Technology
  • Enforcement
  • Long-range planning integration

Slide 26

Political Support and Public Acceptance

Arguments against congestion pricing:

  • It is double taxation
  • It is not fair – “Lexus Lane” concern
  • It costs too much; raise taxes instead, they are cheaper to collect than tolls
  • It won’t work
  • It represents social engineering by elites
  • The government can’t be trusted to use the revenue properly
  • The value of time savings won’t be worth the price
  • Alternative modes will become crowded
  • Alternative modes will be underutilized

Slide 27

Loss Aversion

  • In behavioral economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains.
  • Behavioral studies suggest that losses are twice as powerful, psychologically, as gains.
X,Y-axis graph charting the tendency of people to value the avoidance of loss ('loss aversion') twice as powerful, psychologically, as they value gains. The 'X' axis demarks gains (positive side of axis) and losses (negative side), and the 'Y' axis demarks positive and negative value.

Source: Amos Tversky & Daniel Kahneman. “The Framing of Decisions and the Psychology of Choice” Science, New Series, Vol. 211, No. 4481. (Jan. 30, 1981), pp. 453-458.

Slide 28

Funding and Financing

Challenges:

  • Current and future funding situation is dire
    • Not enough funding to address all the needs
    • Motor fuel taxes unable to fully fund the system
    • Fuel taxes unsustainable in the long run
  • There is a need to manage congestion and stretch the dollars
  • Pricing represents a fundamental shift in funding approach
  • Innovative funding and financing methods require legislative authority

Slide 29

Equity

Types of equity concerns:

  • Income-based – “This will be a regressive tax on those who can least afford it.”
  • Modal – “Congestion relief will encourage choice transit riders to abandon transit and go back to their cars.”
  • Geographic – “Why do I have to pay for my road, when my tax dollars went to pay for the other guy’s road?
  • Fairness (paying twice) – “Why impose tolls on existing free roads already paid for with taxes?”

Slide 30

Technology

Challenges:

  • Start-up costs
  • Interoperability with neighboring systems
  • Balance of operating costs versus customer service level
  • Obsolescence – evolution of technology

Slide 31

Enforcement

Challenges:

  • Related to technology challenges
    • Start-up costs, both technology and adjudication process
    • Interoperability/reciprocity with adjoining states
    • Balance in cost to pursue violators, revenue lost, and public perception of system integrity
    • Obsolescence – evolving technology
  • Carpool discounts
    • Enforcement becomes more challenging and more resource-intensive
    • HOV legacy systems play a significant role in policy discussions

Slide 32

Long-Range Planning Integration

  • How can pricing be implemented in a coherent, system approach?
  • How can a region promote consistency in the application of pricing and in the allocation of revenues?
  • How can design elements and technology applications across projects be consistent and coordinated?
  • How can analytical tools be adapted to support public policy decisions?

Slide 33

Six Implementation Challenges

Part 1

  • Political support and public acceptance
  • Funding and financing

Part 2

  • Equity
  • Technology
  • Enforcement
  • Long-range planning integration

Slide 34

Political Support and Public Acceptance

Slide 35

Political Support and Public Acceptance

Start with a comprehensive public education program

  • Most people will be unfamiliar with concept
    • Gather perception data through market research methods
    • Need clear message and communication
  • Provide examples of successful projects
    • How they operate
    • Helps with public support
  • Cultivate project champions

https://www.fhwa.dot.gov/ipd/revenue/road_pricing/resources/webinars/

Photo of individuals sitting around U-shaped table watching a presentation by an individual standing at the front of the room with an easel display.

Slide 36

Public Support for Congestion Pricing

Graphic charting the level of public support for pricing projects over a period of time. The time period is divided into three portions: Outreach and Education Period - a black dot on the chart near the end of this period indicates the low level of public acceptance that existed at the time the referendums on congestion pricing were held in Edinburgh and Manchester, U.K.; Demonstration Period - public acceptance is lowest at the beginning of the demonstration period but steadily rises over time.; Post-Demonstration - a black dot on the chart indicates that at the time of the Stockholm referendum, which occurred after the end of their demonstration period, public acceptance of congestion pricing was much higher.

Source: CURACAO State of the Art Interim Report, April 26, 2008. p. 94, http://www.curacaoproject.eu/state-of-the-art-report.php

Slide 37

Public Response to HOT Lanes

  • Negative Reactions
    • Lexus lanes
    • Double taxation
    • Won’t impact traffic congestion
    • “Band-Aid” solution
  • Positive Reactions
    • Choice
    • Encourages ride-sharing and/or transit use
    • Provides funding
Photo of vehicle on freeway, passing under a sign indicating a $1.00 rate for use of the HOT lane.

Slide 38

Citizens Jury – Minneapolis (1995)

  • The University of Minnesota Humphrey Institute conducted a week-long Citizens Jury with 24-randomly selected citizens from the Twin Cities area.
  • Although the Citizens Jury voted 17-7 against congestion pricing as a way to manage congestion and fund transportation, the exit survey was quite enlightening.
  • While 16 opposed congestion pricing, 18 of the 24 were open to considering congestion pricing as an effective solution in the future. Their primary concerns were
    1. Congestion not bad enough yet,
    2. Congestion pricing not fair – Lexus Lane concern,
    3. Congestion pricing costs too much – raise gas tax instead; and
    4. Congestion pricing won’t work.

Slide 39

Should Minnesota consider congestion pricing in the future?

Citizens Jury Results

  • 25% were solidly against congestion pricing
  • 33% were in favor of congestion pricing
  • 42% were opposed to congestion pricing but open to consideration if their concerns were addressed
Pie chart showing the results of the Twin Cities Congestion Pricing Citizens Jury, May 1995. The chart shows that eight respondents, or 33 percent of the jury, were in favor of congestion pricing. Ten respondents, or 42 percent, were 'maybes' - opposed to congestion pricing but open to consideration if their concerns were addressed. The remaining six respondents, 25 percent of the jury, opposed congestion pricing.

Source: Twin Cities Congestion Pricing Citizens Jury, May 1995

Slide 40

Case Study: MnPASS I-394
Minneapolis, MN - HOV to HOT Conversion Project

Pricing Parameters

  • Prices set dynamically based on HOT Lane congestion level
  • Toll free for HOV 2+/transit/motorcycles
  • Toll rate for SOVs - $0.25 to $8.00
  • Peak hour tolls average toll between $1.00 and $4.00
  • Must have MnPASS transponder if solo driver ($1.50/month leasing fee)
Image of Highway with High-Occupancy Vehicle (HOV) lane, showing sign for HOV lane indicating current tolls to go to two locations, and 'exit only' sign for general-purpose lanes.

Slide 41

MnPASS I-394
Minneapolis, MN - HOV to HOT Conversion Project

Project Features

  • Implemented as a public-private partnership
  • First tolling of lanes without a physical separation
  • Lanes with multiple access and egress points
  • Dynamic pricing applications on two zones
  • Technology applications to assist enforcement

www.mnpass.org

Photo showing the technology associated with the MnPASS I-394 HOT lanes. The in-vehicle display indicating the tag status of any vehicle passing the patrol vehicle. Photo showing the technology associated with the MnPASS I-394 HOT lanes. The device attached to the vehicle's roof-mounted light bar.

Slide 42

HOT Lanes – Public Reaction

Public acceptance has been high on early projects

I-394 MnPass

  • 95% satisfaction with all electronic tolling
  • 85% satisfaction with traffic speed in lane
  • 76% satisfaction with dynamic pricing

Source: www.mnpass.org

Pie chart showing the public approval rating of San Diego I-15 FasTrak facility. The chart shows that 88 percent of FasTrak customers approved of the facility, 11 percent disapproved, and one percent was undecided.

Source: fastrak.sandag.org

Slide 43

Themes in Public Opinion Results

  • The public wants to see the value
  • The public wants to react to tangible and specific examples
  • The public cares about the use of the revenues
  • The public learns from experience
  • The public uses knowledge and information available
  • The public believes in equity but wants fairness
  • The public wants simplicity
  • The public favors tolls over taxes

Slide 44

Funding and Financing

Slide 45

Funding and Financing

  • Available funding only covers a fraction of needed transportation projects
  • Congestion pricing may offer innovative financing techniques
  • Key to successful project is matching desires and needs of community with specific project goals
Generic photo of $100 bills.

Slide 46

Terminology

Funding

  • Money available to implement a project in development
  • Needed by all projects
    • grants
    • taxes
    • special assessments
    • toll revenues

Financing

  • Method used to secure funding
  • Project can be developed to match financing type
  • Innovative methods
    • offer more flexibility
    • can spur infusion of non-traditional funding
    • can accelerate projects

Slide 47

How Much Revenue?

  • Tolling and pricing concepts vary in revenue generation
    • Concepts generating higher revenues
      • Traditional tolling with variable rate
      • Traditional tolling with flat rate
      • Cordon pricing
    • Concepts generating less revenues
      • Express lanes
      • HOT lanes
  • Cross-subsidizing multimodal investments
    • Helps with public acceptance and equity issue

Slide 48

Pyramid graph showing three different projects and how they differ in funding and financing strategies. The bottom third of the pyramid is representative of the traditional, non-revenue projects, which use State infrastructure banks and a variety of bonds for funding. Cash management techniques include advance construction and partial conversion, and matching strategies such as the flexible match, tapered match, and toll credits. The middle section is occupied by revenue projects that require credit assistance such as Section 129 or TIFIA loans, or assistance from State infrastructure banks. The top third of the pyramid is home to the marketable revenue projects. A blue area that encompasses the whole middle section and a small portion of the upper and lower sections indicates the realm of the managed-lanes facility. Examples from the middle section are the I-10 Katy Managed Lanes and the Beltway HOT Lanes. The SR 520 Bridge Replacement is a managed lane project that falls within the top section of the pyramid.

From TxDOT Managed Lanes Handbook, 2005

Slide 49

Gap Funding Options

  • Toll Revenue Bonds
  • TIFIA Loan
  • GARVEE Bonds
  • State Infrastructure Bank
  • Private Activity Bonds (PABs)
  • Build America Bonds
  • Special Tax Districts
  • Alternative Dedicated Revenue Streams
  • Public-Private Partnership
    • Private partner providing equity upfront
    • Risk transfer
    • Tradeoffs (pros and cons)

Slide 50

Case Study: I-10 Katy
Houston, TX – Managed Lane

Project Features

  • Opened April 2009; replaced single reversible HOV lane
  • 2 lanes each direction
  • Flexible plastic pole separation
  • Multiple access with direct connects at transit centers
Photo of the I-10 Katy Freeway showing the general-purpose lanes, barrier, and managed lanes in one direction.

Slide 51

I-10 Katy
Houston, TX – Managed Lane

Pricing Parameters

  • Express Toll Lane base operation – all vehicles pay
  • Variably-priced based on time of day, multiple zones
  • Toll free for HOV 2+/transit/motorcycles during peak periods
Photo of the Katy Tollway usage and hours of operation sign, with the Katy TollwayEZTag Only sign showing the current prices to travel to three locations along the tollway.

Slide 52

I-10 Katy
Houston, TX – Managed Lane

Project Funding

  • Public-public partnership:
    • TxDOT
    • Harris County Toll Road Authority (HCTRA)
      (in coordination with FHWA and METRO, the regional transit authority)
Graphic of the Katy Freeway Managed Lanes shield logo.

Slide 53

Case Study: Capital Beltway HOT Lanes
I-495, Virginia

Project Description

  • 14 miles
  • 2 new lanes each direction
  • Flexible plastic pole separation
  • Direct access at major interchanges with no at-grade access
Map of the Capital Beltway HOT Lanes, showing connectors.

Slide 54

Capital Beltway HOT Lanes
I-495, Virginia

Pricing Parameters

  • Dynamically priced - based on demand
  • Toll free for HOV 3+/transit/motorcycles
  • Toll rate – undecided
  • Must have E-ZPass transponder
Schematic of the I-495 Capital Beltway showing four general-purpose lanes in each direction, with two dynamically-priced HOT lanes in each direction. The HOT lanes occupy the inside lanes of the interstate.

Slide 55

Capital Beltway HOT Lanes
I-495, Virginia

Project Funding

  • Public-private partnership (PPP or P3)
    • Virginia Department of Transportation (VDOT)
    • Fluor-Transurban
  • Funding
    • Commonwealth of Virginia ~ $409 million
    • Private equity ~ $349 million
    • Private activity bonds - $589 million
    • FHWA TIFIA loan - $589 million
Photo of congested traffic on I-495.

Slide 56

Case Study: SR 520 Bridge
Seattle, WA – Bridge Replacement

Project Description

  • Project under development
  • Pre-construction tolling applied to existing bridge lanes
  • Generate funding to support bridge replacement
  • Variable tolling by time of day
  • Multiple methods for paying tolls
    • Transponders options
    • Pre-pay and late-pay video tolling
Photo of existing SR 520 bridge, with congestion.

Slide 57

SR 520 Bridge
Seattle, WA – Bridge Replacement

Project Features

  • New buses and park and ride facilities
  • Active traffic management systems
  • Expansion of existing TDM programs
Another photo of existing SR 520 bridge, showing toll gantries.

Slide 58

Four Managed Lane Projects Have Reached Financial Close since 2008

One in a series of pie charts showing the financial 'mosaics' used to meet the project funding needs of four managed lane facilities that have reached financial close since 2008. The pie charts show information for the LBJ (IH-635), North Tarrant Express, Capital Beltway, and I-595 managed lanes. The charts show the dollar amounts in millions provided from public funds, toll revenue bonds, equity, interest income, bank debt and TIFIA loans. One in a series of pie charts showing the financial 'mosaics' used to meet the project funding needs of four managed lane facilities that have reached financial close since 2008. The pie charts show information for the LBJ (IH-635), North Tarrant Express, Capital Beltway, and I-595 managed lanes. The charts show the dollar amounts in millions provided from public funds, toll revenue bonds, equity, interest income, bank debt and TIFIA loans.
One in a series of pie charts showing the financial 'mosaics' used to meet the project funding needs of four managed lane facilities that have reached financial close since 2008. The pie charts show information for the LBJ (IH-635), North Tarrant Express, Capital Beltway, and I-595 managed lanes. The charts show the dollar amounts in millions provided from public funds, toll revenue bonds, equity, interest income, bank debt and TIFIA loans. One in a series of pie charts showing the financial 'mosaics' used to meet the project funding needs of four managed lane facilities that have reached financial close since 2008. The pie charts show information for the LBJ (IH-635), North Tarrant Express, Capital Beltway, and I-595 managed lanes. The charts show the dollar amounts in millions provided from public funds, toll revenue bonds, equity, interest income, bank debt and TIFIA loans.

Source: I-405/SR 167 Corridor Tolling Study: Expert Review Panel Final Report, December 2010 http://www.wsdot.wa.gov/Tolling/EastsideCorridor/Report.htm

Slide 59

Financing Summary

  • Traditional non-revenue financing is typical for most projects
  • Few are marketable revenue projects
    • Sell sufficient debt to fully finance a project
    • High-volume corridors
    • User fees support maintenance and operations and debt service
  • Managed lanes projects fall in the middle
    • Require leveraging monies from all available sources
    • Project costs and congestion level play critical roles
    • Agency cooperation critical
  • Trend toward funding “mosaics” using non-traditional gap funding options

Slide 60

Recap of Today’s Workshop

  • Congestion pricing comes in various forms, with lane pricing the most common application in the U.S.
  • Congestion pricing can provide benefits to a variety of users and stakeholders
  • Federal programs are available to support pricing projects
  • There are a number of unique implementation challenges associated with lane pricing; today we covered
    • Public and political acceptance
    • Funding and financing

Slide 61

Next Web-Based Workshop

  • (date and other pertinent information)
  • Part 1 – Overview and Introduction to Six Challenges
    • What is Congestion Pricing?
    • The Case for Congestion Pricing
    • Six Implementation Challenges
    • 1 – Political Support and Public Acceptance
    • 2 – Funding and Financing
  • Part 2 – Continuation of Six Challenges
    • 3 – Equity
    • 4 – Technology
    • 5 – Enforcement
    • 6 – Long-Range Planning Integration
    • Wrap-up and Summary

Slide 62

Questions and Discussion