Infra Insight Blog : written by Nossaman LLP Infrastructure attorneys, covers infrastructure project delivery, including Public-Private Partnerships, Operations & Management Agreements, policy, and news.

Our October 21 blog on managed lanes projects in Southern California talked about how three county transportation agencies are expanding on the success of the SR91 Express Lanes in Orange County, Calif., by using managed lanes to further relieve congestion and improve mobility in the region.  Not to be outdone by its Southern California cousins, the Metropolitan Transportation Commission (MTC), the transportation planning and funding agency for the nine-county San Francisco Bay Area, just received the blessing of the California Transportation Commission (CTC) to develop and operate a value pricing program that will involve either the conversion of existing HOV lanes or the development of new HOT lanes.  As with the Southern California setting, several Bay Area agencies are already developing and operating HOT lanes in their jurisdictions.  MTC’s application is the last that will be processed under California’s HOT lanes demonstration program, which expires at the end of this year, and authorized four HOT lanes projects (the RCTC and LA Metro express lanes projects described in our last entry secured the two Southern California slots under this legislation).

MTC’s goal in pursuing the HOT lanes application is to fill in the “gaps” in the HOT lanes network by converting 149 miles of existing HOV lanes to HOT lanes and adding 116 miles of new HOT lanes to create a seamless experience for the motorist.  According to a detailed cost-benefit analysis, implementation of the program could produce benefits equal to over 3.3 times the costs of developing the network, achieved primarily from travel time savings and emission reductions.  MTC estimates that—depending on the availability of funding and the timing of the permitting process—delivery of the new network will occur between 2015 and 2030.  The Bay Area Toll Authority, which operates the seven state-owned toll bridges in the region, is likely going to be the toll collection entity.  MTC anticipates utilizing a variety of funding sources, including senior toll road revenue bonds, TIFIA loans, local contributions, and grant funds to pay for the $3.5 to $4.3 billion capital costs of the program.

MTC’s application acknowledges that there is still a fair amount of work ahead to implement the program, including the execution of agreements with the California Department of Transportation (the network will be built in state right of way), FHWA (several of the projects involve tolling federal interstates), and county transportation agencies (integration of the new/converted lanes into the existing projects).  And MTC will be looking at the optimal delivery approach for design, construction, operations, and financing.

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Southern California can’t say it’s “number one” when it comes to having the worst traffic congestion in the country, but it’s a huge economic and social problem for the region which three Southern California transportation agencies are addressing through the use of managed lanes.  That’s what we recently learned at the Women’s Transportation Seminar presentation on October 14, 2011.

On a panel moderated by Rick Backlund, an FHWA region official, we heard from Rose Casey, Program Manager for the Orange County Transportation Authority; Stephanie Wiggins, Executive Officer with LA Metro; and Michael Bloomquist, Toll Program Director for the Riverside County Transportation Commission.  After hearing a brief history of managed lanes from the first HOV lanes in the early 1960s to the first all-electronic toll facility which opened in the early 1990s, Casey briefed the audience on one of the largest highway projects in Southern California, the widening of I-405 (or “the 405” if you are from Southern California) between SR55 and I-605.  With a capital cost of between $1.3 and $1.7 billion the project is expected to have a large funding gap, even if the express lanes alternative is selected by the OCTA board (the express lanes is one of three alternatives the authority is studying during the environmental process).  As to the feasibility of a tolled alternative, Casey alluded to the positive experience of the SR91 Express Lanes in Orange County which extend east to the Riverside County line, the first all electronic toll facility in the United States.

Bloomquist picked up on Casey’s presentation by describing RCTC’s efforts to develop and finance the extension of the SR91 Express Lanes from the Orange County border to I-15, as well as the plan to add express lanes to the I-15 to create an express lanes network (note: San Diego County is already operating an express lanes project on I-15 south of the proposed RCTC project—maybe someday there could be a connection between the facilities in the two counties??)  RCTC’s plan would be to leverage off of a significant commitment of local sales tax dollars and a TIFIA loan to issue toll road revenue bonds to finance this billion dollar project which includes new general purpose lanes.  To piggyback on the success of the SR91 Express Lanes project in Orange County, RCTC and OCTA have nearly finalized a co-op agreement for the new project that would take advantage of a common toll collection system and operator, would combine marketing efforts, and would coordinate toll policy.

The LA Metro project presented by Wiggins is the farthest along of the three projects.  Taking advantage of a $210 million federal grant, LA Metro is converting several miles of HOV lanes along the I-110 and I-10 leading into and out of downtown Los Angeles into HOT lanes.  Net tolls would be reinvested in transit and additional HOV improvements in the Los Angeles County area.  A common complaint about managed lanes is how they may adversely affect low income drivers.  To address this concern, LA Metro conducted a toll equity study and has agreed to offer toll discounts as well as a waiver of account maintenance fees to qualified individuals.

These three regional transportation agencies are building upon the success of previous managed lanes projects to work smarter to increase capacity in one of the most congested and physically contrained highway systems in the country.

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FHWA has extended the deadline for FY2011 TIFIA Letters of Interest (LOI) to March 1, 2011. The previous Notice of Funding Availability (NOFA), issued on January 19, had allowed less than a month for interested applicants to prepare and submit LOIs. 

The January 25 revised NOFA included a new phrase addressing the role of tolling and pricing programs in enhancing environmental sustainability. Under the revised selection criteria, applicants can demonstrate that their projects help preserve and protect the environment through “the use of tolling or pricing structures to reduce or manage high levels of congestion on highway facilities and encourage the use of alternative transportation options.” 

This new tweak to the TIFIA selection criteria may indicate the Administration’s acceptance of pricing as a gateway to “greener” highways.   FHWA has found that managed lanes, which set tolls according to traffic demand, provide environmental benefits: “By reducing the number of vehicles traveling on the road and by smoothing traffic flow and maintaining freeway speeds, managed lanes help to reduce air pollution and may also contribute to a decrease in greenhouse-gas emissions.”

There is still no indication of how much funding will be available for TIFIA in FY2011, so this may not be the last revision to the NOFA. FHWA also intends revise/replace the August 2010 template, and will likely update the template language on environmental sustainability.

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On October 8, 2009, FHWA issued electronic toll collection rules in response to a 2005 SAFTEA-LU law, which in all respects reiterate the status quo for the tolling industry and provide no guidance or standards with respect to SAFTEA-LU’s goal of progressing towards a nationwide interoperable electronic toll collection system.

With regard to interoperability, Section 950.7 of the rules require the tolling agency to identify: (i) the projected users of the facility; (ii) the predominant electronic toll collection systems likely utilized by users of the facility; and (iii) the non-cash electronic technology likely to be in use for the next 5 years in that area, including a requirement that the tolling agency demonstrate that “the selected toll collection system and technology achieves the highest reasonable degree of interoperability with both technology currently in use at other existing toll facilities and with technology likely to be in use at toll facilities within the next five years in that area.” 

All of these requirements specifically focus on existing and local interoperability, but do not require a specific standard for nor set a specific path to achieving national interoperability. The comments that FHWA received in response to the Notice of Proposed Rulemaking suggested that setting a specific interoperability standard would be premature pending changes made possible with wide scale adoption of 5.9 GHz technology. Moreover, the response to comments also made clear that there was no clear consensus around what standards national interoperability should be built. Thus, FHWA adopted a rule that essentially maintained and encouraged existing trends toward achieving regional interoperability, and provided for reasonable opportunities for motorists outside of particular toll systems to pay tolls through alternative means. 

Hence, the “interoperability requirements” set forth in these rules have long been the industry standard in developing tolling collection systems. Well before these rules were promulgated, tolling agencies have spent considerable time and money researching these identical factors in developing toll collection systems. Without any federal rules requiring toll agencies to move towards a nationwide interoperable system, toll agencies will likely continue to focus its efforts on developing toll collection systems that are generally accepted and used in the local area, which is entirely acceptable under these newly promulgated federal rules.

FHWA signaled its intent to address interoperability again as new technologies come on line and if the demand to true interoperability increases.

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