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2012 Discretionary Grant Programs

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Value Pricing Pilot Program - Selection Criteria and Additional Information

Statutory References

ISTEA Section 1012(b)
TEA-21 Section 1216(a)
SAFETEA-LU Section 1604(a)

Program Summary

Value pricing encompasses a variety of strategies to manage congestion on highways, including tolling of highway facilities through congestion pricing, as well as other strategies that do not involve tolls, such as mileage-based car insurance and parking pricing. The congestion pricing concept of charging variable fees based upon usage and assessing relatively higher prices for travel during peak periods is the same as that used in many other sectors of the economy to respond to peak-use demands. For example, airlines, hotels, and theaters often charge more at peak periods than at non-peak periods.

The overall objective of the Value Pricing Pilot (VPP) program is to support efforts by State and local governments or other public authorities to establish local VPP programs, to provide for the execution, monitoring, and evaluation of value pricing projects included in such programs, and to report on these effects. The effects of interest include impacts on congestion, travel behavior, traffic volumes, transit ridership, air quality, and funding for transportation improvements. The Federal Highway Administration (FHWA) is seeking applications to use less-tested, innovative approaches to congestion pricing to reduce congestion, improve system performance, and advance the Department's priorities of growing the economy, enhancing livability, and promoting environmental sustainability. All proposals should incorporate significant pricing mechanisms that are designed to substantially advance these objectives.

The VPP program authorizes the Secretary of Transportation (through the FHWA) to enter into cooperative agreements with up to 15 State or local governments or other public authorities (henceforth referred to only as "States") to establish, maintain, and monitor VPP programs, each including an unlimited number of projects. To comply with the statutory cap on the number of partnering States and other public authorities in a manner that maximizes program participation, FHWA will only consider an "active" cooperative agreement sufficient to hold one of the 15 available VPP program slots. An agreement will be considered "active" by FHWA under either of the following two conditions: (1) during the period of time between when a cooperative funding agreement for a project or projects has been signed and when the project or projects has or have been completed, and (2) if VPP program tolling authority has been granted and is still needed to toll a new or existing highway. Absent one or both of these conditions being met, an agreement will not be considered active for the purposes of the VPP program. If progress in moving forward to use its VPP program funding or tolling authority is unsatisfactory, FHWA may withdraw its approval for inactive agreements in favor of other applicants seeking to obtain VPP program funding or tolling authority.

Funding

Funded by contract authority; funds are not transferable. FY 2012 funds allocated to a State through this program shall remain available for obligation by the State for a period of three years after the last day of the fiscal year for which the funds are authorized. Funds are to be allocated by the Secretary of Transportation to the States. Of the funds that Congress makes available for the VPP program, at least $3,000,000 in each fiscal year must, according to statute, be spent for projects that do not involve highway tolls.

Federal Share

The Federal share of the cost of a project under the VPP program is up to 80 percent.

Eligible Use of Funds

Funds available for the VPP program can be used to support pre-implementation study activities and also to pay for implementation costs of value pricing projects. Costs of planning for, setting up, managing, operating, monitoring, evaluating, and reporting on local congestion pricing pilot projects are eligible for reimbursement, but neither pre-implementation study costs nor implementation costs may be reimbursed for longer than three years. The three-year funding limitation will begin on the date of the first disbursement of Federal funds for project activities.

The intent of the pre-implementation study phase is to support efforts to identify and evaluate value pricing project alternatives, and to prepare the necessary groundwork for relatively near-term implementation. The FHWA will not fund purely academic studies of congestion pricing, or studies that involve major expansions of existing facilities, or area-wide or region-wide planning studies covering many topics besides pricing and incorporating congestion pricing only as one of a number of options. Such studies may be funded with regular Federal-aid highway or transit planning funds. Applications for pre-implementation studies will be evaluated based on the likelihood that they will lead to relatively near-term implementation of congestion pricing and on the considerations and project selection criteria set forth below.

Project Costs Eligible for Grant Funding

Examples of specific pre-implementation and implementation costs eligible for reimbursement include the following:

  1. Pre-Implementation Study Costs -- Covered activities include those for foundation building, such as public participation, consensus building and marketing, modeling, and technology assessments.
  2. Implementation Costs -- Allowable costs for reimbursement include those for setting up, managing, operating, evaluating, and reporting on a value pricing project, including:
    1. Salaries and expenses, or other administrative and operational costs, such as installation of equipment for operation of a pilot project, costs of monitoring and evaluating project operations, and costs of continuing public relations activities during the period of implementation;
    2. Mitigation measures to deal with any potential adverse financial effects on low-income drivers, per section 1012(b)(7) of ISTEA as amended, including costs of providing transportation alternatives, such as new or expanded transit or ridesharing services provided as an integral part of the value pricing project. Funds are not available to replace existing sources of support for these services.

Project implementation costs can be supported until such time that sufficient revenues are being generated by the project to fund such activities without Federal support, but in no case for longer than three years. Funds may not be used to pay for activities conducted prior to approval for VPP program participation. Complementary actions, such as lane construction, the implementation of traffic control systems, or transit projects can be funded through other highway and transit programs under SAFETEA LU and from new revenues raised as a result of a pilot. The VPP program applicants are encouraged to explore opportunities for combining VPP program funds with other funds. Federal funds may not, however, be used to match VPP program funds unless there is specific statutory authority to do so.

Uses of Toll Revenues and Other Requirements

For VPP toll implementation projects, FHWA and the public authority (including the State transportation department) having jurisdiction over a facility must enter into a cooperative agreement concerning the use of toll revenue to be generated under a value pricing project. The cooperative agreement will provide that the public authority use the revenues in accordance with the applicable statutory requirements. Additionally, the toll collection system must meet FHWA requirements for interoperability at 23 CFR Part 950.

Statutory Priority Considerations

Project Selection Criteria

FHWA will evaluate proposals based on the following criteria:

  1. the degree to which new, innovative value pricing approaches are included;
  2. the degree to which stakeholder groups, including (among others) business groups, environmental groups, and advocates for social equity, are involved in and supportive of the project, and the project is likely to win broad public support;
  3. the degree to which the project is likely to lead to relatively near-term implementation; and
  4. the degree to which it is demonstrated that the project is testing especially promising strategies such that their implementation will likely then be replicated broadly.

All proposals will also be evaluated based on the following outcome measures, with pre-implementation proposals evaluated based upon their projected effects on these measures if they are later to lead to implementation:

Congestion Reduction:

To what extent will forecasted reductions in traffic:

To what extent will revenue from road pricing:

Equity:

To what extent will costs and benefits be distributed so that:

To what extent will revenues be used to:

To what extent are equity impacts mitigated so that:

Livability:

To what extent will the project directly enhance livability by:

To what extent will forecasted reductions in traffic make available:

To what extent will revenue from pricing contribute to:

Sustainability:

To what extent will forecasted reductions in traffic:

To what extent will revenue from pricing contribute to:

Post-Selection Process

If a proposal is approved, a formal cooperative agreement will be prepared between the FHWA and the State. The cooperative agreement will include a refined scope of work developed from the original funding application and subsequent discussions with FHWA. Federal statutes will govern the cooperative agreement. Regulations cited in the agreement, and 49 CFR Part 18, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, will also apply.

Other Requirements

Prior to FHWA approval of pricing project implementation, congestion pricing programs must be shown to be consistent with Federal metropolitan and statewide planning requirements (23 U.S.C. 134 and 135; and, if applicable, 49 U.S.C. 5303 and 5304).

Implementation projects involving tolls outside metropolitan areas must be included in the approved statewide transportation improvement program and be selected in accordance with the requirements set forth in section 1204(f)(3) of TEA-21.

Implementation projects involving tolls in metropolitan areas must be:

  1. included in, or consistent with, the approved metropolitan transportation plan (if the area is in nonattainment for a transportation-related pollutant, the metropolitan plan must be in conformance with the State air quality implementation plan);
  2. included in the approved metropolitan and statewide transportation improvement programs (if the metropolitan area is in a nonattainment area for a transportation related pollutant, the metropolitan transportation improvement program must be in conformance with the State air quality implementation plan);
  3. selected in accordance with the requirements in section 1203(h)(5) or (i)(2) of TEA-21; and
  4. consistent with any existing congestion management system in Transportation Management Areas, developed pursuant to 23 U.S.C. 134(i)(3).

Section 1012(b)(2) of ISTEA provides that revenues generated by any congestion pricing pilot project must be applied first to pay for pilot project operating costs. Any project revenues in excess of pilot project operating costs may, according to section 1012(b)(3) of ISTEA, be used for any projects eligible under Title 23, United States Code. A project's operating costs include, but are not limited to, any costs necessary for a project's execution; mitigation measures to deal with adverse financial effects on low-income drivers; the proper maintenance of the facility; any construction (including reconstruction, rehabilitation, restoration, or resurfacing) of the facility; any debt service incurred in implementing the project; and a reasonable return on investment by any private entity financing the project. States are encouraged to consider using excess revenue for projects designed to provide benefits to those traveling in the corridor where the project is being implemented.

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

Policy Considerations

Restoring economic health and creating jobs through improvements to transportation infrastructure are among the highest priorities of the FHWA. In furtherance of these priorities, the FHWA will give priority consideration to projects and activities that create new jobs in the short-term and contribute to the economic competitiveness of the United States over the long-term. Applicants are encouraged to explain how their project will contribute to increased employment and enhance economic competitiveness.

In addition to a project's transportation and economic benefits, when allocating funds to carry out the FY 2012 discretionary programs, the FHWA will also give consideration to providing an equitable and geographic distribution of funds.

Submission Requirements

Applicants shall submit an electronic copy of the application (containing all required components) via email to both Angela.Jacobs@dot.gov and Allen.Greenberg@dot.gov and additionally to the appropriate FHWA Division Office in the State by January 6, 2012. (A list of FHWA Division Offices may be found at http://www.fhwa.dot.gov/about/field.cfm.) The applications must be submitted electronically in PDF.

Required Forms - Applicants must complete and submit the following forms. Failure to submit all required forms may result in the application being removed from consideration for award.

No particular format is required for the Project Narrative, but the Project Narrative should include the following background information:

  1. The name, title, e-mail address, and phone number of the person who will act as the point of contact on behalf of the requesting agency, authority, or authorities;
  2. A description of the agency, authority, or authorities requesting funding; and
  3. A description of the public agency or agencies that will be responsible for operating, maintaining, and enforcing the tolling program, if applicable.

The core of the Project Narrative should include the following:

  1. A description of the congestion problem being addressed (current and projected);
  2. A description of the proposed pricing program and its goals;
  3. An identification and description of the facilities, systems, or area that will be covered;
  4. Anticipated effects of the pricing program on reducing congestion, altering travel behavior, and encouraging the use of other transportation modes;
  5. An identification of how the proposal addresses goals related to livability, sustainability, equity, congestion reduction, safety, and state of good repair as outlined in the Project Selection Criteria section above;
  6. Preliminary estimates of the social and economic effects of the pricing program, including potential equity impacts, and a plan or methodology for further refining such estimates;
  7. The role of alternative transportation modes in the project;
  8. A description of the tasks to be carried out as part of each phase of the project;
  9. A detailed project timeline broken down by tasks and phases;
  10. An itemized budget broken down by task and funding year (i.e., Year 1, Year 2, etc.);
  11. Plans for monitoring and evaluating implementation projects, including plans for data collection and analysis, before and after assessment, and long-term monitoring and documenting of project effects;
  12. A detailed finance and revenue plan, including (for implementation projects) a budget for capital and operating costs; a description of all funding sources, planned expenditures, and proposed uses of revenues; and a plan for projects to become financially self-sustaining (without Federal support) within three years of implementation;
  13. A discussion of previous public involvement, including public meetings, in the development of the proposed pricing program; any expressions or declarations of support from State or local government officials or the public; future plans for involving key affected parties, coalition building, and media relations, and more broadly for ensuring adequate public involvement prior to implementation;
  14. Plans for meeting all Federal, State, and local legal and administrative requirements for project implementation, including relevant Federal-aid planning and environmental requirements;
  15. A description of how, if at all, any private entities are involved in the project, either in spending grant funds or in cost sharing or debt retirement associated with revenues; and
  16. If tolling authority is sought, an explanation about how electronic toll collection project components will, if applicable, be compatible with other electronic toll collection systems in the region and allow motorists to pay toll charges incurred on any regional facility through a single account.

If some of these items are not available or fully developed at the time a formal application for grant funding is submitted, applications will still be considered for funding support if they meet the interests of FHWA and if there is a strong indication that these items will be completed within a short time.

FHWA Points of Contact

General programmatic and solicitation questions and questions about tolling project applications:

Angela Jacobs
Office of Operations
(202) 366-0076
Angela.Jacobs@dot.gov

Non-toll project application questions:

Allen Greenberg
Office of Operations
(202) 366-2425
Allen.Greenberg@dot.gov

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