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Priced Managed Lane GuideCHAPTER 3. Organizational / Institutional FrameworksIn order to launch a priced managed lane project, there are several organizational issues that need to be resolved. These involve identifying a logical project sponsor, arranging funding, working out operational protocols, and determining what legal ramifications may be involved. Answers to these issues may not always be obvious. This chapter identifies the wide array of organizational and institutional issues that transportation professionals must address as they consider the implementation of priced managed lane projects. 3.1 Priced Managed Lanes Roles and ResponsibilitiesThere is no set formula or norm for the institutional arrangements supporting priced managed lane projects, nor the assignment of roles and responsibilities to particular entities. Table 3-1 identifies a comprehensive list of activities undertaken for a typical priced managed lane project, divides them between project implementation and operations, and indicates the potential entities with responsibility. Not all activities will apply to every priced managed lane project. Institutional structures will depend on a variety of factors and are likely to vary from project to project. In some cases, a single agency, such as a state DOT, may be responsible for many of the activities noted in the table. In others, individual functions may be performed by individual agencies, private companies, or partnerships among them. 3.2 Project SponsorsIdentifying a project sponsor is one of the first and most important issues to resolve in implementing a priced managed lane project. The project sponsor plays the most significant role in project implementation. As shown in Table 3-1, a project sponsor can be responsible for nearly all activities during a priced managed lane project’s development and operations. The project sponsor often will execute planning studies, submit applications and environmental documentation, and oversee the construction and possibly the ultimate operation of the facility. The implementing agency will need to be vested with, or obtain the legal authority to collect tolls, and it will need to function as a champion for the project to garner the critical public and political support needed to bring the project to fruition. Experience has shown that a variety of project sponsors and operators may be involved. Most frequently, a state DOT acts as the project sponsor, but turnpike and toll road authorities, local transportation agencies and authorities, and public transit agencies can also sponsor or cosponsor a priced managed lane project. Often a long legacy of institutional relationships has already been established among project participants. Therefore, it is important to understand these relationships and determine if any pre-existing political or institutional issues should be addressed. 3.2.1 State Departments of TransportationAs the primary providers of highway service and owner/operators of a majority of the nation’s managed lane projects, DOTs are logical sponsors of new priced managed lane facilities. They have extensive experience in planning, designing, constructing, operating, and maintaining limited-access highways. They have the financial depth to contemplate building new highway capacity and to obtain the expensive toll collection and traffic monitoring systems that priced managed lane facilities require. DOTs also have the power of eminent domain and many DOTs are already operating HOV networks with extensive electronic traffic monitoring capabilities. While state DOTs have a wealth of highway experience, they may not necessarily have the legal authority to levy tolls (see Section 3.4.1). They also may not be familiar with the operation of tolled facilities and the sophisticated electronic toll collection traffic monitoring systems that priced managed lane projects require, and in certain cases they may have limited legal authority to privatize these operations. Toll road operation also involves back-office activities including auditing, credit card billing, and customer service, all of which may be new activities for many DOTs. 3.2.2 Turnpike and Toll Road AuthoritiesAs a precursor to the interstate highway program, many states developed turnpike and toll authorities with specific legislative charters to finance, build, and operate limited-access, high-speed highways. While the advent of the interstate program provided a dedicated federal motor fuel tax to provide funding for non-tolled highways, most legacy toll authorities continue to serve their original roles. Fiscal constraints beginning in the 1980s have led to renewed significance and presence of toll authorities, especially in fast growing areas such as California, Texas, Colorado, Florida, and North Carolina. Some of these authorities are state or county agencies, while others are joint entities formed by multiple jurisdictions. In certain cases, the involvement of turnpike and toll authorities may facilitate the implementation of a priced managed lane project. In addition to engineering and construction experience, they are already vested with the legal authority to operate tolled highway facilities, thereby obviating the need to seek special authorizing legislation. Turnpike and toll authorities have the staff and systems in place to conduct all back-office revenue handling and accounting activities. In addition, many operate the advanced electronic toll collection and traffic monitoring systems that priced managed lane networks require. While turnpike and toll road authorities offer natural advantages, they are not common in all areas across the country. In addition, if priced managed lanes were introduced along un-tolled highway segments, they would not involve roads already under the control of such authorities. Nonetheless, given that motorists are accustomed to paying tolls to turnpike and toll road authorities, their involvement in the operation of priced managed lane projects could help in gaining the public’s understanding and acceptance of these potential projects. 3.2.3 Local Transportation Agencies and AuthoritiesIn order to receive federal funding for transportation projects, all urbanized areas in the United States are required to establish an MPO. MPO status is designated by the United States Department of Transportation (USDOT) and is usually given to regional Councils of Government or other joint powers’ authorities. These groups are generally governed by a board of elected officials representing municipal governments within their jurisdictions, as well as county officials, and public agencies that operate transportation systems. State DOTs sit on all MPO boards ex officio. The organizational structure of MPOs varies around the country, and in certain cases, MPO status is given to county or municipal governments. In some areas, local authorities have been created to assist MPOs in securing funding and implementing projects identified through the MPO. These transportation or funding authorities, created at the county or regional level under varying conditions, can help to study the merits of priced managed lanes and secure funding for their implementation. Once a project is operational, they may be responsible for disbursement of net revenues collected. County-level transportation agencies have been especially instrumental in California, where they serve in varying capacities, as state mandated Congestion Management Agencies that plan and fund projects at the county level, as administrators of county-level local option sales taxes devoted to transportation, as transit operators, and as combinations thereof. Given their regional mandate and their planning function, MPOs and local transportation authorities may be logical sponsors of priced managed lane initiatives. They have commissioned several of the priced managed lane studies that have been carried out in California, the Phoenix region, the Washington, D.C., metropolitan region, and elsewhere. Their active and consistent support is also essential if a new priced managed lane facility is to be built, and local transportation authorities often play a primary role in the initial planning studies investigating the feasibility of such projects. Although most MPOs are likely to lack operating experience or tradition, some might play a further role in overseeing the implementation and operation of a priced managed lanes facility, such as with the I-15 Express Lanes in San Diego, where SANDAG has cosponsored the project in conjunction with the state DOT. County-level transportation agencies in California are also prominent sponsors of priced managed lane projects in the San Francisco Bay Area and Southern California. 3.2.4 Public Transit AgenciesPublic transit agencies present interesting opportunities for participating in priced managed lane projects. Several transit agencies operate bus rapid transit or HOV facilities that have excess capacity that could be sold to carpoolers, vanpoolers, or single occupant vehicles and operate as a HOT facility. Utilizing additional roadway capacity for other vehicles can help win political and public support and may limit the need to add additional roadway capacity. In the same vein, the participation of transit agencies in priced managed lane projects sponsored by other agencies highlights the potential for priced managed lane projects to provide opportunities for promoting reliable mass transit improvements. Finally, transit agency involvement in the development of priced managed lanes may also help to introduce new sources of capital funds and in return, as with the I-15 in San Diego, I-25 in Denver, and 95 Express in Miami, priced managed lane revenues can provide important new revenues to support improved transit service. It is important to note, however, that transit agencies would need to obtain the backing of the Federal Transit Administration (FTA) before being able to launch a priced managed lane project on their own. Approximately 80 of the 130 freeway HOV facilities in the U.S. are considered “fixed guideway miles” for the purposes of FTA’s formula grant programs (Section 5307 and 5309). Generally in effect since Fiscal Year 2003 and clarified in the Federal Register in January 2007 (responding to Section 1121 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users [SAFETEA-LU]), FTA also classifies HOV lanes as fixed guideway miles for the purposes of funding formulas, thereby ensuring that federal transit funding is not decreased when existing HOV facilities are converted to priced operation. The converted facility must maintain certain operational performance standards, which may be higher than generally required for priced managed lanes if the HOV facility was originally constructed using FTA capital grant funding. Facilities that were not eligible HOV lanes prior to being converted, non-HOV facilities converted to priced operation, and newly constructed priced managed lanes remain ineligible for inclusion as fixed guideway miles in FTA’s funding formulas. 3.3 Other EntitiesIn addition to project sponsors, other important roles and responsibilities rest with the private sector, including consultants and contractors and with law enforcement and emergency response personnel. 3.3.1 The Private SectorThe fact that priced managed lane projects generate toll revenues also introduces the possibility that under the right conditions they could be financially independent or even profitable ventures of potential interest to private investors. Recent design-build-finance-operate-maintain P3 transactions involving priced managed lane projects have demonstrated private sector interest in large ($2 billion or more) reconstruction projects that incorporate the conversion and/or addition of priced managed lanes.Further information on project procurement and P3s can be found in Section 5.4. Private sector involvement can be an attractive option for transportation agencies, as it provides access to additional sources of capital. This allows DOTs to reserve their own funds for other needs and often accelerate the implementation of partnership projects. Private operators are motivated to maximize efficiency in order to maximize profits and their services—both capital construction and roadway operation—can bring good value for money. On the down side, financing terms for private investors may not always be as attractive as those available to the public sector, and have the potential to offset other construction and long-term operational efficiencies. A decision must be made to forgo using some or all revenue beyond paying for operations and maintenance for other purposes, such as supporting transit or other publicly provided transportation enhancements, and to offer it instead to a the private concessionaire. Agreements between a project’s public sector sponsor and private partner dictate the terms of revenue distribution and use. In at least one current instance, regional policy in the Dallas-Fort Worth area dictates the terms of priced managed lane revenue beyond the level of profit assigned to the private concessionaire, annual debt service, and annual reserve funds set aside for operations and preventative maintenance. Excess revenue must remain in the counties in which the facility is located and returned to the local government and agency project funding partners in proportion to their original contributions for reinvestment in future transportation improvements. Private consultants and contractors may play significant roles in both the project development and operational phases of a project, regardless of whether the project is procured as a P3. As with many large transportation improvement projects, technical studies, environmental review, and design may be performed by consultants. Construction services may be handled by private contractors. Specialized firms offer services in priced managed lane operations, maintenance, incident management, and back-office activities such as toll collection and billing, customer service, and marketing. Some or all of these activities may be contracted out to one or more private entities. 3.3.2 Law Enforcement and Emergency Response EntitiesEnforcement is a critical activity in the operation of a priced managed lane facility both in terms of toll collection and occupancy requirements (see Section 7.3). These activities may be handled by the appropriate law enforcement agency, which could include the police force of a toll or turnpike authority, state highway patrol, or a local law enforcement agency. The decision on who will be the responsible enforcement entity likely will rest largely on established institutional protocols and precedents and may be prescribed by state law. Incident management along a priced managed lane facility is also of critical importance to maintain the reliable trip users expect from the facility (see Section 7.4). A variety of entities may be involved in this function including the state DOT, state highway patrol, local emergency response units and/or private towing and recovery contractors. Individual responsibilities must be established in well developed protocols. 3.4 Federal Programs and Requirements3.4.1 Tolling ProgramsTwo federal tolling programs and several pilot programs offer states opportunities to implement priced managed lanes on federal-aid highways. Current guidance on these programs is available on the FHWA Moving Ahead for Progress in the 21st Century (MAP-21) website, which is likely to be expanded as further guidance documents become available: https://www.fhwa.dot.gov/map21/guidance/guidetoll.cfm. The FHWA Office of Innovative Program Delivery Road Pricing Revenue website (https://www.fhwa.dot.gov/ipd/revenue/road_pricing/tolling_pricing/) and the Office of Operations website (https://ops.fhwa.dot.gov/tolling_pricing/index.htm) also provide information and guidance on federal tolling programs. Section 129 General Tolling Program. The passage of MAP-21 made significant changes to the federal Section 129 Tolling Program including tolling eligibilities and agreement requirements. These changes have relaxed the prior, general prohibition on the imposition of tolls on federal-aid highways and formalized provisions previously available through pilot programs. Public agencies may impose new tolls on federal-aid highways in the following cases:
Prior to MAP-21’s provisions taking effect on October 1, 2012, public authorities were required to execute a tolling agreement with FHWA to impose tolls on a federal-aid highway, but this requirement is no longer required. For toll facilities that have executed Section 129 tolling agreements prior to October 1, 2012, the terms of those agreements will continue in force. Section 166 HOV/HOT Lanes. Under Section 166 of Title 23, existing HOV lanes may be converted to tolled operation provided that the local MPO endorses the use and amount of tolls on the converted lanes. All tolls on new lanes must be variably priced and collected electronically in order to manage travel demand. To implement tolls on an existing HOV lane, project sponsors must demonstrate that the conditions on the facility are not already degraded and that the presence of paying vehicles will not cause conditions on facility to become degraded. Ongoing annual reporting documenting conditions on the converted lanes is also required, and if the HOV facility becomes degraded the sponsor must bring the facility into compliance either by increasing HOV occupancy requirements, increasing tolls, increasing capacity, or eliminating access to paying motorists. The prior requirement to execute a tolling agreement with FHWA for HOV lane conversion is no longer in place under MAP-21, same as with the Section 129 General Tolling Program. Toll Pilot Programs. In addition to the two mainstream toll programs above, four toll pilot programs enacted prior to MAP-21 are managed by FHWA.
3.4.2 Major Project RequirementsTitle 23 defines Major Projects as highway improvement requiring federal assistance that are over $500 million in cost. FHWA also has the discretion to designate a project with a total cost of less than $500 million as a Major Project in certain cases. At this scale, the processes and federal requirements involved in project delivery become more complex, rendering it more challenging, but ever more important, for the process to be well-managed. Several priced managed lane projects implemented to date as part of larger major reconstruction projects have qualified as Major Projects. For federal funding to be authorized for the financing of a Major Project, the project owner must demonstrate to FHWA that the project has been carefully planned out, i.e. costs have been estimated as accurately and meticulously as possible; risks have been carefully considered and mitigated; financing requirements and strategies have been clearly defined; and the implementation of the project delivery has been carefully planned. Through the different phases of project delivery, project owners are required to submit financial and management plans and are subject to undergo various FHWA review processes before federal funding can be released for the project. Additional information on Major Project requirements is available at https://www.fhwa.dot.gov/ipd/project_delivery/resources/index.htm. 3.4.3 Concepts of OperationsAlthough not required by FHWA as a part of a project’s approvals process or tolling programs, Concepts of Operations (as introduced in Chapter 2; see Section 2.3.1) are highly recommended, especially for projects of greater operational complexity. In fact, some FHWA Division Offices, including California, require Concepts of Operations as part of its state-level project approvals process. 3.5 State Processes and Requirements for Tolling3.5.1 State ModelsPriced managed lane projects must comply with state and local laws on toll collection. The authority to collect tolls on state highways and other roads typically rests with designated turnpike or toll road authorities in states that have such agencies. However, toll collection may be limited to roadways already operated by these agencies. Obtaining authority for toll collection on newly developed roadways or previously un-tolled roadways may require approvals beyond the agency including a state legislative body. For example, the North Carolina General Assembly in 2002 created the North Carolina Turnpike Authority (NCTA) in statute. Originally it authorized the NCTA to study, develop, construct, and operate up to three toll projects, and has since expanded authorization to nine. The NCTA’s Board has adopted a process for studying, funding, and constructing a toll road project whereby “a recognized municipal, regional or local planning authority, or group of local elected officials or members of the General Assembly may submit a request to the NCTA Board of Directors to study building a project in their jurisdiction as a toll project.” [6] However, any proposed toll road not included among the nine already authorized must be approved by the General Assembly. In states without existing toll authorities, legislative authorization is necessary on a facility-specific or potentially broader programmatic or regionwide basis. The State of Washington provides an example of legislatively authorized toll collection on a facility-specific basis. The SR 167 HOT Lanes required administrative approval by the Washington Transportation Commission and legal approval by the State Legislature, which was passed during the 2005 legislative session. The four-year pilot project opened in May 2008 and was extended in March 2011 by the State Legislature until June 2013. More recently, the State Legislature approved the tolling of existing SR 520 Floating Bridge to help pay for its replacement. The replacement bridge will include two tolled general-purpose lanes and one non-tolled HOV lane in each direction. 3.5.2 Variable Pricing AuthorityTrust agreements governing the operation of most toll roads only allow flat point-to-point toll rates (i.e., a consistently applied toll rate from point A to point B). If a priced managed lane project involves variably priced tolls, legislation may need to be drafted that establishes how and when toll rates can be changed and establishes the minimum acceptable traffic service levels in the priced managed lane. These issues should be addressed in the enabling legislation that will establish the legal and regulatory framework for the priced managed lane facility. Because priced managed lane operations require a high degree of interagency cooperation and shared responsibility, enabling legislation should designate the operating agency or agencies and outline their specific responsibilities in such areas as construction, maintenance, toll collection accounting, and enforcement. If the priced managed lane facility were to be operated by a bi-state organization, approvals would be required from the United States Congress, as well as both state legislatures. 3.5.3 Public-Private Partnership AuthorityUse of private financing mechanisms for transportation facilities can occur only when the necessary legal authority exists and governing legal principles and restrictions are observed. Local governments not only must have the legal power through constitutional or statutory provisions to finance transportation facilities, but they must also use this power within the legal restraints established by legislatures and courts. The methods of granting power and limitations on that power vary. As of May 2012, 32 states and Puerto Rico have enacted P3 legislation designed to authorize state DOTs and other subdivisions of the state to enter into new forms of legal agreements with private entities in support of revenue-generating projects which are consistent with each state’s overall transportation objectives. Recent research conducted for the Second Strategic Highway Research Program (SHRP 2) has determined that there is great variance among P3 authority granted through state legislation, constitutions, city charters, and other sources. This type of authorization must be in place before a priced managed lane concession can be awarded to a private investor. Further information on certain key legal concepts will be available upon publication of SHRP 2’s The Effect of Public-Private Partnerships and Non-Traditional Procurement Processes on Highway Planning, Environmental Review, and Collaborative Decision Making. 3.6 Operational ArrangementsOnce the priced managed lane facility is operational, a number of ongoing operational functions will be required. These involve facility operations and routine roadway maintenance, as well as toll collection and enforcement. These functions can pose differences from normal highway operation and are discussed in further detail below. Operational functions may be performed directly by the public sponsor or private partner of a priced managed lane facility, or contracted out to an outside vendor specializing in automated toll collection or facility management. 3.6.1 Toll CollectionAll forms of priced managed lanes require the collection of tolls from some, if not all motorists using the facility. Moreover, in order to maintain time savings and ease of use and to comply with federal law, toll collection for priced managed lanes must be fully automated. As discussed in further detail in Chapter 6, the operation of automated tolling systems requires sophisticated equipment and expertise. Although some toll collection agencies maintain this expertise in-house, the majority rely on the services of outside contractors to maintain their automated toll collection systems. If a priced managed lane project is sponsored by a state DOT, it is also conceivable that the DOT could vest responsibility for toll collection with a local turnpike or toll road authority with the appropriate expertise. Recently, this operational decision has also been required of priced managed lane projects being implemented as public-private partnerships on a concession basis. In this case, the private partner may have prior toll collection experience and assume the role itself, it may rely on an existing regional toll authority as stipulated in its concession agreement or required by policy, or it may retain the service of an outside contractor in the way a public agency would. As one example, in the Dallas-Fort Worth region, several priced managed lane projects are sponsored by TxDOT and are being implemented by private partners through Comprehensive Development Agreements (CDA). In addition, the region has an existing network of toll roads operated by the North Texas Tollway Authority (NTTA). NTTA also maintains the right of first refusal to develop proposed tolled projects in the region when being pursued as a CDA. To clarify and simplify toll operations in the region, TxDOT and NTTA have in place the TxDOT/NTTA Regional Protocol, which states that NTTA will be the provider for toll collection service for at least the first five years of a Comprehensive Development Agreement, after which negotiations between NTTA and the private partner can take place with the option of choosing another alternative if they are not successful.
3.6.2 InteroperabilityInteroperability is a critical toll collection issue. Interoperable systems allow a single electronic toll account to be accepted at each interoperable facility. For toll roads, it is normally advantageous for automated toll collection systems to be interoperable from region to region. Existing interoperable networks in the U.S. include E-ZPass accepted in 14 states across the Northeast and Midwest, SunPass in Florida, TxTag in Texas, and FasTrak in California. Interoperability is essential for regions that envision deploying an integrated network of priced managed lane facilities, such as South Florida and the San Francisco Bay Area. Since late 2009, FHWA has required that any tolled facility operating under authority from the Value Pricing Program or the Express Lanes Demonstration Program maximize their system’s interoperability and upgrade their ETC systems to the national standards whenever adopted. MAP-21 now mandates that all toll facilities on federal-aid highways shall implement technologies or business practices that provide for the interoperability of electronic toll collection programs by mid 2016. This would indicate that a federal standard for toll collection system interoperability will be established soon. 3.6.3 EnforcementIncreasingly, toll violation enforcement is being performed electronically using cameras that capture license plate images of vehicles that do not display a recognizable transponder. However, police presence is used to enforce occupancy requirements, as technology to automate vehicle occupancy verification is still experimental. Planning for priced managed lanes should include early involvement of the appropriate police agencies. If the priced managed lane facility will pass through several jurisdictions where each may take an active investigative and enforcement role, then planning should include early agreements to establish response and enforcement protocols. If the priced managed lanes will be added to an existing facility, then the police agencies will have considerable experience on that roadway. If the system will have a limited number of access and egress points, then agreements may be needed to consolidate enforcement responsibilities under a small number or one police agency. If only one police agency is involved, the transportation agency should request that a liaison be assigned to ensure continuity of input during the planning process. This early involvement can be invaluable for resolving design issues for enforcement locations, investigation sites, and enforceable signing. The police liaison can also be a significant help if law or procedure changes are needed before enforcement can be undertaken. As discussed in Section 7.3.1, procedures, processes, locations, and frequency of designated enforcement should be decided based on discussions with local enforcement personnel who are most familiar with the unique characteristics and needs of each corridor. Additional information on enforcement issues is provided in Chapters 6 and 7. See Sections 6.6 and 7.3. 3.6.4 MaintenanceResponsibility for the physical maintenance of a priced managed lane is most likely to rest with the agency that maintains the corridor in which the facility is located. In most cases this is the state DOT, but other agencies could also be involved. Especially in the case of the sophisticated tolling systems and infrastructure, on which the ability to collect tolls and maintain managed lane availability relies, specialized contractors may be employed. This is the case, for example, with the I-680 and the SR 237 / I-880 express lanes where Caltrans maintains the roadway but a private sector toll system integrator maintains the toll collection equipment and variable message signs. In order to operate priced managed lanes with a high degree of reliability, strict preventive maintenance protocols are necessary. Managed lane operators may also rely on ITS equipment maintained by other entities, in which case contractual performance guidance should be established between the operator and the appropriate entities. Overall, if multiple agencies are responsible for different operating aspects, maintenance agreements will need to be put into place identifying roles and responsibilities as well as reimbursement. 3.6.5 Concepts of OperationsSection 2.3.1 introduces and explains Concepts of Operations. They describe a facility’s characteristics from the user’s perspective and include details of the ongoing operational functions of the priced managed lane facility. They identify responsible entities and the relationships among them. Operating a priced managed lane adds new roles and complexities to standard highway operations, and a Concept of Operations can help clarify and integrate them into a single framework so that all responsible parties can understand their role, especially with back-office technical and administrative aspects. Footnotes [5] “Guidance on Section 129 General Tolling Program” Memorandum, FHWA, September 24, 2012. Back to reference 5. [6] “NCTA Project Approval Process,” http://www.ncdot.gov/turnpike/download/turnpike_projects_Project_Approval_Process.pdf Back to reference 6. | ||||||
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United States Department of Transportation - Federal Highway Administration |
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