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Section 129 Loans

Guidance On Section 313(a) of the NHS ACT Toll Facilities Under Section 129(a) of Title 23

May 10, 1996

NHS Act Provision

Section 313(a) replaced paragraph (a)(5) of 23 U.S.C., Section 129, relating to the Federal share for toll projects. The previous provision established a Federal share for toll projects that varied from 50 percent to 80 percent based on the activity and facility involved. The NHS Act amendment sets the Federal share for toll projects at 80 percent.


Section 129(a) of Title 23 sets forth the statutory requirements governing use of Federal- aid highway funding for toll facilities. These provisions were significantly modified by the 1991 ISTEA and have been further amended by Section 313 of the NHS Act.

The ISTEA modifications were implemented by memoranda from FHWA Headquarters dated March 12, 1992, and May 14, 1993. In addition to the implementing guidance, FHWA Headquarters also issued a November 20, 1995, memorandum discussing the format and procedures for processing toll agreements.

The purpose of this guidance is to consolidate in one document, information on Federal- aid funding of toll facilities contained in the three previous memoranda, modified as appropriate to implement the NHS Act.

Additionally, the ISTEA also amended Section 129 by adding Section 129(a)(7) to allow Federal participation in a State loan to a toll project. The NHS Act modified the loan provisions of Section 129(a)(7) and expanded them to include non-toll highway facilities. The original implementing guidance for this section was included in the above noted March 12, 1992, and May 14, 1993, memoranda. Separate guidance will be issued on loan provisions that will consolidate into one document information on loan provisions contained in the two previous memoranda, modified as appropriate to reflect the NHS Act amendments.

The following provides implementing guidance on the Section 129(a) toll provisions.


Section 129(a)(1) establishes five broad categories of toll activities eligible for Federal-aid highway funding. These are:

  1. Federal-aid funds may be used for the initial construction of toll highways, bridges or tunnels except on Interstate System routes. Federal funds may not participate in the initial construction of toll bridges or tunnels on the Interstate System.

  2. Resurface, restoration, rehabilitation and reconstruction (4R) work on existing toll facilities [129(a)(1)(B)]. 4R work on existing toll facilities is eligible for Federal participation regardless of whether or not the toll facility had in effect a prior Section 129 toll agreement with the FHWA.

  3. Reconstruction or replacement of free bridges or tunnels and conversion to toll facilities [129(a)(1)(C)]. Examples of reconstruction would be widening existing bridges or tunnels to add lanes or providing a dual facility. On the other hand, certain types of work clearly do not meet the intent for reconstruction. For example, putting up toll booths, painting and updating bridge rail are not considered to be work that would qualify a bridge for conversion. Although these latter types of activities could be eligible for Federal participation as part of a reconstruction effort, in and of themselves, they are not viewed as reconstruction. The criteria of reconstruction could be satisfied by construction of a dual bridge or tunnel. The two bridges or tunnels do not have to be side-by-side; however, to be considered a dual facility, the new and existing bridge or tunnel must serve together as one to carry traffic on a single route.

    Reconstruction or replacement and conversion from free to toll for a bridge or tunnel previously constructed with Federal-aid funds can be accomplished with or without Federal-aid participation. In either case, a Section 129(a)(3) toll agreement will need to be executed prior to undertaking the conversion project. It is also noted that Section 129(a)(1)(C) contains no Interstate System restriction. Accordingly, existing Interstate System bridges or tunnels may be reconstructed or replaced and converted to toll facilities. This includes any Interstate tunnel or bridge, regardless of its size and significance.

  4. Reconstruction of free highways, except Interstate System, and conversion to toll facilities [129(a)(1)(D)]. Examples of reconstruction include adding new lanes to increase capacity, acquisition of access control coupled with construction of interchanges, or replacement of the full pavement structure. Reconstruction and conversion from free to toll for a highway previously constructed with Federal-aid funds can be accomplished with or without Federal- aid participation. In either case, a Section 129(a)(3) toll agreement will need to be executed prior to undertaking the conversion project.

  5. Preliminary studies to determine the feasibility of the above toll construction activities [129(a)(1)(E)].

Federal Share/Non-Federal Share

The Federal share for eligible toll facility activities under Section 129(a)(1), as outlined above, is 80 percent. Since Federal share for Federal-aid toll facility projects is controlled by Section 129 and not Section 120 of Title 23, the sliding scale provisions of Section 120 may not be applied to these projects. For privately owned toll facilities, the private entity is allowed to assume responsibility for the required non-Federal share of a toll project.

Toll Agreements - General

If Federal-aid funds are used for construction of or improvements to a toll facility or the approach to a toll facility or if a State plans to reconstruct and convert a free highway, bridge or tunnel previously constructed with Federal-aid highway funds to a toll facility, a toll agreement under Section 129(a)(3) must be executed. The toll agreement must be executed prior to either authorization of Federal funds for any work or the State undertaking a reconstruction and conversion project on its own. In addition, for 4R work on existing toll facilities, before authorization of Federal funds, a toll agreement needs to be executed or the existing toll agreement with the FHWA needs to be modified to incorporate the provision of Section 129(a)(3). A toll agreement is not needed for preliminary studies to determine the feasibility of constructing a toll facility.

The toll agreement must require that all toll revenues are first used for any of the following: debt service, reasonable return on private investment and operation and maintenance, including 4R work. An acceptable use of toll revenues can also be the establishment of reserve funds typically used by a toll authority in its financing structure. The reasonableness of the return to investors is a matter to be determined by the State.

At the option of the State, the agreement may also include a provision regarding toll revenues in excess of those needed for the required uses outlined above. This provision would entitle the State to use these excess revenues for purposes authorized under Title 23 if the State certifies annually that the facility is being adequately maintained. The issue of whether a toll facility is to become free when debt is retired or at some other future point in time or whether tolls are to be continued indefinitely is a matter to be determined by the State. The toll agreement should reflect the State's decision on this matter.

Toll Agreement Format and Provisions

The toll agreement must include a:

  • Description of the toll facility covered by the agreement;
  • Commitment on toll revenue use;
  • Provision regarding use of excess toll revenues; and
  • Stipulation regarding access to records.

A standard toll agreement format has not been developed. The attached executed agreement serves as an excellent example of a toll agreement that is simple and adequately addresses the above requirements.

Based on recent experience, there has been a trend towards including extraneous items in toll agreements. These include discussion on specific Federal-aid project funding or financing arrangements, Federal share, design standards, compliance with other Federal- aid requirements or other Federal laws, project oversight, etc. These items are not required by Section 129(a)(3) and represent project specific issues that are inappropriate for inclusion in an agreement being executed by the Federal Highway Administrator. If there is a desire for written agreement on specific project issues, it should be handled through a two-party State/toll authority agreement. Any assurances regarding project specific Federal-aid issues should be handled by the division administrator.

As future toll agreements are developed, we expect them to only address those items needed to satisfy Section 129(a)(3). Toll agreements that contain extraneous provisions will be returned for revision and simplification and must be resubmitted for execution.

Processing of Toll Agreements

If requested, Headquarters will provide review comments on a draft toll agreement before the final agreement is prepared for signature by State and/or toll authorities. For quick review and comment, it is suggested the draft toll agreement be informally submitted to HCC-32, either by E-mail or fax.

The Administrator is the FHWA executing official for toll agreements, including modifications to previously executed agreements. The agreements should be transmitted from the region office to the Office of Chief Counsel, to the attention of General Law, HCC-32. General Law coordinates FHWA Headquarters review of the agreement and recommends execution by the Administrator.

For the convenience of the parties, a minimum of two counterpart originals of the toll agreements are needed (more may be submitted if the State desires) for execution by the Administrator. After execution by the Administrator, one original will be retained in Headquarters in the Federal-Aid and Design Division. The other original (or originals) will be returned to the region for transmittal to the State. The execution date of a toll agreement will be the date the FHWA Administrator signs it, so do not include one. The other signers can, however, affix a date to their signatures if they so choose.

Modification of Section 119 or 129 Free-up Toll Agreements

Existing free-up toll agreements executed prior to December 18, 1991, under Section 119(e) or Section 129 of Title 23 (including former Section 129(d) toll agreements for approaches to Interstate highways) may be modified to allow for continuation of tolls. A provision covering the annual State maintenance certification and use of tolls, as provided for in Section 129(a)(3), may be added to these agreements. An agreement modification needs to be executed by all parties to the agreement including the FHWA Administrator.

If an existing free-up toll agreement is not modified, the State is bound by the terms of that agreement covering the use of toll revenues and free-up requirements.

Imposition of Tolls

Decisions regarding the amount of tolls charged are made by the toll entity subject to requirements under State and local laws and regulations. This decision requires no review or input from the FHWA.

For toll activities under Section 129(a)(1)(A), (C) or (D) previously discussed in the eligibility portion of this guidance, tolls may not be imposed prior to the award of the physical construction contract. Decisions regarding whether tolls are collected in only one direction of travel versus both directions are at a State's discretion.


In addition to public ownership, Section 129(a)(2) allows private ownership of a federally funded toll facility if the public authority having jurisdiction over the toll facility has entered into a contract with a private entity to design, finance, construct and operate the facility. If privately owned, the public authority having jurisdiction over the toll facility must ensure compliance with Title 23 requirements. In addition, to be eligible for Federal funding, the privately owned facility must be on a "public road" as defined in 23 U.S.C. 101(a).

Direct Payment to Other Entities

Section 129(a)(4) allows a State to request that the FHWA directly reimburse another public authority for the Federal share of a toll construction project undertaken on a facility under the jurisdiction of the other public authority. This applies to any toll facility eligible for construction or reconstruction under Section 129(a)(1).

[Questions relating to this guidance should be directed to Jim Overton, Federal-aid and Design Division, at 202-366-4653.]

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