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Value Pricing Pilot Program

Value Pricing Pilot Program

Notice of Grant Opportunities

The Federal Highway Administration (FHWA), has funds available to support the development, operation and evaluation of pilot tests of innovative road and parking pricing projects. Public agencies interested in implementing and evaluating certain innovative pricing programs are eligible to apply for grants under the Value Pricing Pilot Program authorized by Section 1216(a) of the Transportation Equity Act for the 21st Century (TEA-21). The program's intent is to demonstrate and evaluate road and parking pricing concepts that achieve significant and lasting reductions in highway congestion.

Congress has mandated this program as an experimental program to learn the potential of different value pricing approaches for reducing congestion. The grant program supports efforts by State and local governments or other public authorities to establish, monitor and evaluate value pricing projects, and to report on their effects. A pricing project under this program may include tolls on Interstate highways. Funds in the amount of $7 million in FY 1999 and $11 million per year for FY 2000 to FY 2003 are available to support costs of implementing up to 15 new State and local value pricing programs. Federal funds can be used to support pre-implementation costs, including costs of public participation and pre-project planning for up to 3 years, and to support project implementation costs for up to 3 years. The Federal share payable for such costs is 80 percent.

What Is Value Pricing?

Value pricing, also known as congestion pricing and peak-period pricing, is a way of harnessing the power of the market and reducing the waste associated with congestion. It entails fees or tolls for road use which vary with the level of congestion. Fees are typically assessed electronically to eliminate delays associated with manual toll collection facilities. This concept of 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. Airlines offer off-peak discounts and hotel rooms cost more during peak tourist seasons. Road-use charges that vary with the level of congestion provide incentives to shift some trips to off-peak times, less-congest-ed routes, or alternative modes, or to cause some lower-valued trips to be combined with other trips, or to be eliminated. A shift in a relatively small proportion of peak-period trips can lead to substantial reductions in overall congestion. And, while congestion charges create incentives for more efficient use of existing capacity, they also provide improved indicators of the potential need for future capacity expansion. They are also generating revenues that can be used to further enhance urban mobility.

Where Has It Been Implemented?

A number of value pricing projects have been launched in the United States over the past 3 years. The private sector led the way in 1995 by constructing new tolled express lanes in the median of State Route 91 in Orange County, California. Tolls vary by time of day and level of congestion to maintain an uncongested alternative along one of the most heavily-traveled commuter routes in the United States.Under the Value Pricing Pilot Program and its predecessor, the Congestion Pricing Pilot Program established by the Intermodal Surface Transportation Efficiency Act of 1991, value pricing projects have been launched in San Diego, California; Houston, Texas; and Lee County, Florida. The California and Texas projects involve tolling on High Occupancy Vehicle (HOV) lanes to make better use of available capacity.

 

Maximum Toll Schedule (as of 3/99)
I-15 Value Pricing Pilot Project
San Diego, California

Maximum
Toll
Morning Period (Southbound)
$4.00   

X

X

   
$3.00        
$2.50        
$2.00  

X

  

X

  
$1.50        
$1.00 

X

    

X

 
$ .75

X

      

X

$ .50        
  5:45-6:00 6:00-6:30 6:30-7:00 7:00-7:30 7:30-8:00 8:00-8:30 8:30-9:00 9:00-9:15
Maximum
Toll
Evening Period (Northbound)
$4.00   

X

X

   
$3.00        
$2.50        
$2.00 

X

X

  

X

  
$1.50        
$1.00      

X

 
$ .75

X

      

X

$ .50        
  3:00-3:30 3:30-4:00 4:00-4:30 4:30-5:00 5:00-5:30 5:30-6:00 6:00-6:30 6:30-7:00

"CONGESTION PRICING HAS GREAT PROMISE: IT COULD REDUCE CONGESTION SIGNIFICANTLY WHILE HELPING TO MEET AIR QUALITY AND ENERGY CONSERVATION GOALS. MORE OVER, BY RELYING ON A MARKET MECHANISM, IT WOULD ACCOMPLISH THESE ENDS WHILE PROVIDING NET BENEFITS TO SOCIETY."

Curbing Gridlock,
National Research Council,
Special Report 242, 1994.

In San Diego, California, drivers of single occupant vehicles are allowed to use the HOV lanes on Interstate 15 by paying a toll that varies directly with the level of congestion. In Houston, Texas, drivers of vehicles with two occupants can pay a fixed toll during rush hour to use an HOV lane on Interstate 10 that is otherwise restricted to vehicles with three or more occupants. The project in Lee County, Florida involves the use of peak and off-peak toll variations to provide an incentive to shift travel out of the most heavily traveled time. A number of additional cities across the United States are evaluating the feasibility of value pricing to improve traffic flows and to enhance mobility. Several of these are expected to move toward implementation in the near future. Internationally, pricing projects have been implemented recently on a new beltway in Toronto, Canada, in three cities in Norway, on intercity toll roads in France and in the central area of Singapore. Numerous cities in the European Community (the Netherlands, United Kingdom, Sweden and Greece) as well as Hong Kong are currently conducting feasibility and implementation studies and field tests of pricing concepts.

Why Is Value Pricing of Interest?

Travel time savings due to reduced congestion and anticipated environmental benefits have been major attractions of recently opened value pricing projects. Other potential benefits include:

  • Reduced frustration and delay
  • Increased travel choices
  • More efficient modal choices
  • Revenue generation
  • Increased economic productivity
  • Improved highway investment decisions

What Kind of Pricing Applications are Eligible for Support?

FHWA is seeking proposals to implement value pricing programs designed to reduce highway congestion through the use of variable tolls on roads, although related market-based approaches to congestion relief, such as parking pricing, will also be considered if they incorporate significant price variations by time, location, and/or congestion level. Projects of interest include:

AREAWIDE VALUE PRICING

  • Fees for entering an area, sometimes called cordon crossing charges, using electronic vehicle identification devices;
  • Charges for traveling on a network of metered routes within a defined area;
  • Areawide parking charges with variable fees targeted toward congestion reduction, or areawide parking cash-out programs which provide employees the option of trading in employer-provided parking spaces for cash.

VALUE PRICING ON A SINGLE HIGHWAY FACILITY, ROUTE OR CORRIDOR

  • Pricing of key traffic bottlenecks, single traffic corridors, or single highway facilities, including bridges and tunnels;
  • Conversion of fees on existing toll facilities from fixed to variable structures, such as use of peak surcharges combined with off-peak discounts.

VALUE PRICING ON SINGLE OR MULTIPLE HIGHWAY LANES

  • Charges for the use of newly constructed or existing highway lanes during peak-traffic periods, including fees that allow entry to High Occupancy Vehicle lanes by vehicles not meeting prescribed occupancy requirements.

PRE-PROJECT STUDIES AND MARKET TESTS

  • Pilot Program funds may be used to assist State and local governments in carrying out pre-project study activities designed to lead to the implementation of a value pricing project. The intent of the pre-project study phase of the Pilot Program is to support efforts to identify and evaluate value pricing project alternatives and to prepare the necessary groundwork for possible future implementation.
  • In certain situations, Pilot Program funds may also be used to implement and evaluate small scale market tests with voluntary participants designed to demonstrate a new pricing technology or to generate information about user responses to value pricing.

INNOVATIVE PILOT TESTS

  • Potential Pilot Program participants are encouraged to develop new and innovative pricing approaches for incorporation into the program, including use of innovative electronic tolling technologies, satellite-based vehicle identification technologies, incorporation of smog fees into variable road pricing strategies, or use of auction techniques for allocating entry permits, or determining price levels.

What Activities Can Be Carried Out with the FHWA Funds?

Funds available for the Pilot Program can be used to support pre-project study activities and to pay for implementation costs of value pricing projects. Costs eligible for reimbursement, under Section 1216(a) of TEA-21, include costs of planning, setting up, managing, operating, monitoring, evaluating, and reporting on local value pricing pilot projects. Examples of specific costs eligible for reimbursement include the following:

PRE-PROJECT STUDY COSTS

  • Impact assessment
  • Modeling
  • Development of monitoring/evaluation plans
  • Public participation
  • Market research
  • Financial planning

IMPLEMENTATION COSTS

  • Costs associated with the implementation of a value pricing project such as implementation of electronic tolling equipment, enforcement costs, costs of monitoring and evaluation and public participation.
  • Costs of providing new or expanded transportation alternatives.
  • Depending on the availability of funds, limited funds may be available to serve as a revenue reserve fund to provide assurance to toll authorities that a pilot test of value pricing would not jeopardize their bond covenants.

How to Apply

Any State, local government, or other public authority may apply for these FHWA grants. Coordination of the proposals with the relevant Metropolitan Planning Organization (MPO) and the State Department of Transportation (DOT) is required.

Prior to submitting a formal application for pro-gram participation, potential applicants should contact their State FHWA Division Office and/or the FHWA Value Pricing Team in the Office of Transportation Policy Studies to discuss their interest in the Pilot Program and the general nature of the proposed local value pricing pilot program or pre-project study. The FHWA will then be able to provide materials and technical support to assist in the development of the application. Following this initial contact, a sketch plan for the proposed pricing program will be requested before a full proposal is developed. Further detail on what should be included in the sketch plan is contained in the Federal Register notice of October 5, 1998.

Proposals with the greatest potential to reduce congestion and advance current knowledge of price effects, operations, enforcement, revenue generation, equity mitigation and monitoring/evaluation mechanisms will be given the highest priority. The FHWA is also interested in expanding the value pricing strategies implemented. Thus, priority will be also given to promising but untried technological, operational and institutional innovations. Projects with strong evaluation programs, significant commitment by implementing organizations and evidence of stakeholder support are encouraged.

What Technical Resources are Available?

  • Federal Register notice of October 5, 1998 [(Volume 63, Number 192), pages 53487-53491] , provides a summary of the TEA-21Value Pricing Pilot Program and establishes broad criteria for participation.
  • The activities under the ISTEA Congestion Pricing Pilot Program are summarized in the FHWA's Report to Congress on the progress and accomplishments of the congestion pricing pilot program, entitled, Reducing Traffic Congestion: Using Market Prices to Enhance Mobility, July 1998.
  • Pricing project planning guidelines are summarized in an FHWA report, Congestion Pricing: Guidelines for Project Development, Revised Interim Report, FHWA, August 1996.

Where Can Additional Information be Obtained?

Additional information can be obtained from the value pricing homepage at http://ops.fhwa.dot.gov/tolling_pricing/value_pricing/. This homepage is being operated for the Federal Highway Administration by the University of Minnesota's State and Local Policy Program.

More general information about value pricing and the Value Pricing Pilot Program can be obtained from either of the following offices:

POLICY ISSUES

Office of Transportation Policy Studies, HPTS
Federal Highway Administration
Washington, D.C. 20590
Tel: (202) 366-0570

OPERATIONAL ISSUES

Office of Travel Management, HOTM
Federal Highway Administration
Washington, D.C. 20590
Tel: (202) 366-6726

This is an electronic version of
Publication No. FHWA-PL-99-014
HPTS/3-99(5M)E


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