Why toll interstates?

State departments of transportation are increasingly laboring under the financial burden of maintaining and expanding their sections of the Interstate Highway System. How to pay for these ever increasing needs is one of the toughest challenges facing every state today. But what level of investment will it take to preserve the Interstate Highway System for the future? And where will funding come from to meet those mounting needs?

Much of the nation’s 47,000-mile interstate system is approaching 50 years old and requires reconstruction from the ground up so that it will last for at least another 50 years — all while continuing to provide the safe and reliable standard of care the traveling public expects. According to the U.S. Department of Transportation’s 2008 Conditions and Performance Report, it is estimated to take an annual cost of $24.8 billion just to sustain the existing condition and performance of the interstate system for the next 20 years. And that does not even factor in the costs to expand the system. With every year that passes, these costs escalate as DOTs struggle to keep pace with the maintenance and capacity needs of their systems.

That is why many state DOTs are now turning toward tolling as a way to address critical transportation needs and secure a dedicated revenue source for the annual operations and maintenance costs of their infrastructure. But options for tolling existing interstates today are very limited and emerging transportation legislation may only tighten and add new restrictions to the federal-aid highway system. HNTB Corporation predicts intense competition over the few available slots in the only federal program that allows tolling of existing general-purpose interstate highways — the Federal Highway Administration’s Interstate System Reconstruction and Rehabilitation Pilot Program.

What is the Interstate System Reconstruction and Rehabilitation Pilot Program?

The Transportation Equity Act for the 21st Century (TEA-21) established a pilot program that allows up to three existing interstate facilities to be tolled. There is no funding associated with the program, but successful approval allows a state the federal authority to toll existing general-purpose interstate capacity to generate the revenue needed to pay for the highway’s rehabilitation, reconstruction and expansion needs. To be accepted for the program, the state DOT or sponsoring agency must demonstrate the existing interstate facility will receive major rehabilitation or reconstruction that could not be paid for using any funding or financing method other than tolling.

What is the current status of the program?

Since the program was initiated in 1998 no state has successfully executed a toll agreement with the FHWA to toll existing interstate general capacity. And today’s federal transportation reauthorization challenges and shifting priorities makes it even more challenging to successfully achieve an approved toll agreement.

Two out of three of the program’s slots tentatively are reserved by Missouri’s Interstate 70 and Virginia’s Interstate 81. However, to date, neither state has moved forward and implemented their interstate toll facilities. Missouri has completed the National Environmental Policy Act process for the I-70 corridor, but the state still is working to secure enabling legislation at the state level and enact tolling through public-private partnerships or another project delivery method.

Virginia hit roadblocks advancing the I-81 corridor due to trucking industry concerns and political opposition to tolling the existing interstate capacity. Due in part to these challenges, Virginia recently has been granted conditional provisional approval to transition their program slot from I-81 to Interstate 95 and is working on I-95 corridor implementation planning.

Other states have submitted applications for the pilot program, but they have been unsuccessful at achieving the necessary approvals from the FHWA because of their planned uses for toll revenues off-corridor, or due to their proposed locations for toll collection along the interstate corridor. That means that, at a minimum, the third slot is still in play today.

What are the steps for program approval and implementation?
Congress has created a number of tolling and pricing programs under which states can obtain the authority to use tolling on federal-aid routes, all housed under the FHWA’s Office of Innovative Program Delivery. To facilitate project development, FHWA has created a tolling and pricing team that helps connect proposed projects with the most appropriate federal tolling or pricing program.

The first step is to submit an expression of interest to the FHWA’s tolling and pricing team, then following FHWA review and evaluation, submit a formal application to the Interstate System Reconstruction & Rehabilitation Pilot Program. Based on the submittal, the project may be selected by the FHWA for provisional acceptance for a program slot to toll. Next, the candidate tolling project will be required to satisfy compliance with the NEPA process to gain final program acceptance.

The end goal is successful execution of a toll agreement between the transportation agency and FHWA for the proposed interstate project. A state can begin tolling their approved project within the program once the following conditions are met:

• NEPA process is complete;
• Any required state level enabling legislation to toll is in place;
• Toll agreement with FHWA has been executed; and
• The contract has been awarded for construction.

What are the key lessons learned for successful program approval?
Missouri and Virginia have gained provisional program approvals to toll existing interstate general purpose capacity and are working toward final approvals. Missouri is making significant strides toward implementing its I-70 project, including a four-state partnership with Illinois, Indiana and Ohio to improve the national I-70 corridor. Virginia is refocused on developing the vision for tolling the I-95 corridor.

So what does it take to be successful? And what can be learned from the states that already have gone through the process? To help state DOTs understand how to best take advantage of this program, HNTB offers 10 key lessons learned from the experiences of those states that have competed for program approval:

1. Pick the right project. Not every interstate is going to be right for this program. If you are interested in value pricing, HOT lanes, express lanes or only tolling new or non-interstate capacity, this program may not be the best choice. That is why the FHWA’stolling and pricing team is there to help select the best program for each project with the initial expression of interest. Understand what you are trying to get out of your tolling project before you go too far down one program path.
2. Tell your project’s story. You need to have the history and relevant data ready at your fingertips to demonstrate the need to reconstruct and expand the interstate and effectively convey why your project should be selected for the program. Data on the interstate’s age, condition, intensity of use and other performance metrics are critical to describing the overall need for the project.
3. Secure your legislation. When a state, local or private agency decides to move forward with tolling an interstate, there are several legislative issues that may need to be addressed prior to implementation. Does your state have the necessary legislative approvals to toll? To issue bonds? Does your state allow public-private partnerships to take advantage of private sector involvement? The challenge at the state level to enable tolling is one of the key factors preventing the Missouri Department of Transportation’s I-70 project from moving forward toward implementation.
4. Educate your customer. Tolling and pricing often are new concepts, and public outreach for these types of projects involves a greater focus on education than traditional roadway projects. It is critical the public understands why the project cannot be paid for through other means, such as the fuel tax. Outreach efforts need to communicate the critical function that tolls play in providing corridor benefits, such as a sustainable maintenance source, as well as information on how and by whom tolls will be collected. Virginia’s I-81 project faced challenging stakeholder issues with the traveling public and the trucking industry regarding its concept of dedicated truck lanes and the tolling concepts to pay for it.
5. Understand how revenues can be used. As part of the program, revenues collected from the tolled interstate facility have restrictions on their use and cannot be used “off-corridor.” Toll revenues must be used for debt service, reasonable return on investment — if private industry financing is involved — and any costs necessary for keeping the facility in good operating condition. Excess toll revenues cannot be used for general state funding or other transportation system needs.
   Additionally, interstate maintenance funds may not be used on a facility for which tolls are being collected under this program. However, regular federal-aid highway funds may be used to fund improvements, in addition to the toll revenues collected.
6. Factor in NEPA. Your project will need to have successfully completed the NEPA process before final Phase 2 approvals can be granted within the program. The social, economic and environmental impacts of toll financing the project also must be evaluated within NEPA. The program gives priority to those projects that can demonstrate fewer impacts to the natural and manmade environment, which also helps streamline the environmental approval process and project schedule. And — if your project has already evaluated tolling and received NEPA approvals — you have jumped over one of the toughest and most time consuming hurdles for successful program approval.
7. Develop a sound tolling plan. As part of the application process, a state must demonstrate it has a tolling plan for the corridor, including the proposed toll rates, toll collection points, plans for manual and/or electronic toll collection, and the findings of the traffic and revenue analysis performed for the corridor. Within the application, the FHWA wants to ensure the tolling plan for the corridor is fair and equitable to the traveling public, local communities along the corridor and neighboring states, and that tolling will be evaluated within the NEPA process for the project.
8. Consider private sector involvement. With today’s limited transportation funding, demonstrating you can bring private sector financing to the table to complete the project faster and cheaper is an added value. The private sector can be involved in interstate tolling projects through a wide range of public-private partnership project delivery mechanisms. You will need to evaluate the pros and cons of different project governance and delivery options to decide if public or private ownership of the proposed project is the best approach.
9. Learn by example. Missouri and Virginia have been through the process and been successful at achieving provisional program slots. Reviewing their applications, consulting with their staff and understanding the feedback they received from the FHWA can help streamline and strengthen your state’s application.
10. Be ready to compete. The program is competitive, very limited and many states are vying for a slot. Your project needs to demonstrate it best meets the eligibility requirements and that you have a sound plan in place to get the project done. And don’t delay — once the pilot program slots are filled, only a new federal transportation reauthorization can grant new slots or new options for tolling existing general-purpose interstate capacity.

Is the program right for your project?
Tolling existing interstate general-purpose capacity requires a sea change in how state DOTs do business. As traditional funding sources — such as the gas tax — decline and the need to stretch existing dollars farther grows every day, tolling may be the best option to sustain and expand the interstate system and ensure its preservation for tomorrow. Nothing guarantees success, but within the current economic and political climate, every state DOT has to be more competitive and promote the need and importance of their project. For state DOTs, the question remains: Is the program right for your project? And what can your state hope to gain from it? Successful approval in the program offers your state the ability to:

• Secure a sustainable revenue source. Tolling provides you dedicated operations and maintenance revenues to continue keeping your interstate in good operating condition with the safe and reliable standard of care the traveling public expects.
• Do more with less. Tolling your interstate frees up the state’s limited interstate maintenance funds and state program dollars so they can be leveraged on other priority projects throughout the state.
• Accelerate your project’s delivery. With today’s limited funding, it may be challenging to reconstruct and expand your aging interstate infrastructure in any other way — while getting it done faster and cheaper.

Additional resources
For more information about the federal tolling pilot program, consult the following:

Gretchen Ivy, PE, HNTB Corporation
Project Manager
(816) 527-2561; givy@hntb.com

Pete Rahn, HNTB Corporation

Leader National Transportation Practice

(816) 527-2034; prahn@hntb.com

Jim Ely, HNTB Corporation
Vice Chair Toll Services
(850) 619-0264; jlely@hntb.com

Lisa Thompson, HNTB Corporation
Director of Communications, Southeast Division
(404) 946-5746; lpthompson@hntb.com

Federal Highway Administration
Interstate System Reconstruction & Rehabilitation Pilot Program:
http://ops.fhwa.dot.gov/tolling_pricing/interstate_rr.htm

Expression of Interest:
http://ops.fhwa.dot.gov/tolling_pricing/participation.htm.

Program Requirements:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=1999_register&docid=fr10fe99-147 

Missouri Department of Transportation
Improve I-70 website
http://www.improvei70.org/ 

Virginia Department of Transportation
Interstate 81 webpage
http://www.virginiadot.org/info/Interstate50th/i81_tolling.asp

News release regarding I-95 preliminary approval:
http://www.governor.virginia.gov/news/viewRelease.cfm?id=923

For other HNTB-issued papers and viewpoints, visit HNTB.com

HNTB Corporation is an employee-owned infrastructure firm serving federal, state, municipal, military and private clients. With nearly a century of service, HNTB has the insight to understand the life cycle of infrastructure and the perspective to solve the most complex technical, financial and operational challenges. Professionals nationwide provide award-winning planning, design, program management and construction management services. For more information, visit www.hntb.com.

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Tolling U.S. interstates white paper