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DOT LogoMemorandum
U.S. Department of Transportation
Federal Highway Administration

INFORMATION: Section 1216(a) of the
TEA-21, the Value Pricing Pilot Program
July 13, 1998
Director, Office of Policy Development HPP - 10
Regional Administrators
Division Administrators

Section 1216(a) of the Transportation Equity Act for the 21st Century (TEA-21) requires the Secretary to solicit the participation of State and local governments and public authorities for one or more value pricing pilot projects. This program is a continuation of the Congestion Pricing Pilot Program authorized under the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). The change in program name from congestion to value pricing is a recognition of the practice of many Federal Highway Administration’s (FHWA) State and local partners in the ISTEA program in using terminology that does a better job of focusing on the intended benefits, or value, of pricing programs in reducing congestion.

Under the new program, the Secretary is authorized to enter into cooperative agreements with up to 15 State or local government agencies, or other public authorities, to establish, maintain, and monitor local value pricing pilot programs. A cooperative agreement may encompass one or more value pricing projects serving a local area, such as a metropolitan area. Notwithstanding Sections 129 and 301 of Title 23, United States Code, any value pricing project included under these local programs may involve the use of tolls on the Interstate System. A maximum of $7 million is authorized for fiscal year (FY) 1999, and $11 million for each of FYs 2000 through 2003 to be made available to carry out the requirements of the Value Pricing Pilot Program (this is assuming enactment of technical corrections). The Federal matching share for local programs is 80 percent. Funds allocated by the Secretary to a State under this Section will remain available for obligation by the State for a period of 3 years after the last day of the fiscal year for which the funds are authorized. If, on September 30 of any year, the amount of funds made available for the Pilot Program, but not allocated, exceeds $8 million, the excess amount will be apportioned to all States for purposes of the Surface Transportation Program.

Section 1216(a)(6) specifically provides that a State may permit vehicles with fewer than two occupants to operate in high occupancy vehicle (HOV) lanes if the vehicles are part of a local value pricing pilot program under this Section. This is an exception to the general provision contained in 23 U.S.C. 102, that no fewer than two occupants per vehicle be allowed on HOV lanes. Potential financial effects of value pricing projects on low-income drivers shall be considered and, where such effects are expected to be significant, possible mitigation measures should be identified. The costs of such mitigation measures can be included as part of the value pricing project implementation cost. The Secretary is to report to Congress every 2 years on the effects of local value pricing pilot programs.

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) include costs of planning for, setting up, managing, operating, monitoring, evaluating, and reporting on local value pricing pilot projects.


The principal objective of value pricing is to reduce congestion and promote mobility through the use of peak-traffic road pricing. By shifting some trips to off-peak periods, to mass transit or other higher-occupancy vehicles, or to routes away from congested facilities, or by discouraging some trips altogether, congestion charges are intended to promote economic efficiency and meet air quality, energy conservation, improved transit productivity, and transportation revenue objectives. The potential scope of a congestion pricing application can vary widely, ranging from pricing on a new or existing single road facility to more comprehensive areawide road pricing strategies covering several facilities. An important goal of the Value Pricing Pilot Program is to gather information about the role that various types of value pricing applications can play in improving the efficiency of urban transportation systems, and in dealing with congestion, pollution, energy, and other problems related to automobile use in urban areas.

Implementation Plan

Although we will have no program funds available in FY 1998, we intend to move expeditiously to launch the new program, carrying out various outreach and informational activities, and soliciting program participation. We believe we can use the remaining months of FY 1998 productively to begin working with State and local governments to develop statements of work to be included under potential cooperative agreements. The first step in soliciting participation in the Pilot Program will be the issuance of a Federal Register Notice to invite applications for program participation and to present selection priorities, program guidelines, and procedures for entering into cooperative agreements. The Notice has been drafted and has been reviewed by a Federal Interagency Review Group established to assist FHWA in establishing selection priorities and in selecting program participants. The Review Group includes representatives of several FHWA offices, our U.S. Department of Transportation partners in this program, the Federal Transit Administration, Office of the Secretary of Transportation, and Federal Railroad Administration, as well as the Environmental Protection Agency. The Notice will not be regulatory, but will serve to provide interested parties with general information about the Pilot Program and the kinds of projects being solicited for program participation. We will continue to use the same flexibility that was used under the ISTEA Pilot Program and willissue additional program guidance if changes to administrative procedures are deemed necessary. As part of a continuing effort to communicate with the public about value pricing and the Pilot Program, FHWA will extend the regional workshop series that was initiated under the ISTEA Program in order to promote interest in the new TEA-21 Program and to solicit comments on procedures used to implement the Program. The next workshop will be held in the Washington, D.C., area on September 9, 1998. Your suggestions for future workshop sites would be welcome.

Background Information

A substantial amount of information about value pricing was gathered under the ISTEA program. A report to Congress on that experience, "Reducing Congestion: Using Market Prices to Enhance Mobility," will be published and distributed to FHWA offices, States, and metropolitan planning organizations in the near future. Summaries of our regional workshop series have also been published and distributed. In addition, a number of information sources on value pricing have been created, including a newsletter, "Congestion Pricing Notes," (soon to be renamed) and a website on congestion pricing which is being managed by the State and Local Policy Program at the University of Minnesota (www.hhh.umn.edu/Centers/SLP/Conpric/conpric.htm). The FHWA’s program of research on issues relating to the implementation of value pricing will be continued under the new program, including a National Research Council review of the experience of the past 6 years, scheduled to get underway later this year. The final report on this study will also receive wide distribution. Information on any of these items, or about the Pilot Program in general, can be obtained from a member of the Pricing Team in the Office of Policy Development (John Berg, Thomas Keane, or Theresa Smith) at (202) 366-0570.

We believe the Pilot Program presents us with a unique opportunity to expand the knowledge base about value pricing, using real-life demonstrations to gain information about the effects of value pricing. One of the strengths of the ISTEA Program was the active participation by many FHWA Division Offices, and we look forward to continuing to work with you in implementing the TEA-21 Program.

/s/ Original signed by
Madeleine S. Bloom

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