The Federal Highway Administration (FHWA) is currently offering grants to state and local governments to study “value pricing.” Value pricing, also known as congestion pricing and peak-period pricing, embodies a number of marketing strategies that can be used to reduce congestion. One strategy involves the use of fees or tolls that change based on the amount of traffic and congestion.
Higher fees are assessed for travel on specific roads during the peak-usage periods, similar to practices commonly used by airlines and hotels. Just as travelers will often change their plans to take advantage of lower off-peak pricing, the FHWA hopes this price variation would encourage shifting of travel to off-peak periods, less congested routes, alternative methods or trip combining. The program generally works with electronically collected fees rather than manually collected tolls since it is designed to eliminate delays.
Several projects have been started during the past three years using the value pricing concept. The first project was a private sector program in the express toll lanes in the median of State Route 91 in Orange County, Calif. Tolls on this road vary by time of day and level of congestion.
Another program, the Congestion Pricing Pilot Program established by the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), launched projects in San Diego, Houston and Lee County, Fla.
In both the San Diego, and Houston projects, drivers, who may otherwise be ineligible to use HOV (High Occupancy Vehicle) lanes, can pay a special toll during rush hour or other times to use these restricted lanes.
The Lee County, Fla. program uses peak and off-peak tolls to encourage travel to shift out of the highly congested time periods. Tolls in the San Diego project can vary from a low of $.50 in the late morning commute to a high of $4 at the prime hour between 7 and 8 a.m.
The New Jersey Turnpike and the Port Authority of New York recently instituted differential peak and off-peak toll rates primarily to raise revenues for infrastructure improvements. As a result, both entities have seen decreases in travel during peak times.
Other types of pricing projects that can be funded through this grant program include:
- Pay as you drive automobile insurance – Used by insurance companies to bill customers based on crash risk (using high risk areas and time of travel) and driving reduction.
- Mileage-based automotive leasing and vehicle taxation – Converting some generally fixed leasing expenses to a pay-per-mile or pay-as-you-drive basis rewarding consumers for reducing their driving and vehicle emissions.
- Car sharing – Neighborhood car rentals that substitute for ownership. This is working well in Europe and is growing. There are active car-sharing programs in Seattle, Boston, San Francisco and Portland, Ore. New programs are currently being launched in Chicago and Washington, D.C.
- Parking cash out – Employers offer employees the dollar value in cash in lieu of a parking space subsidy.
The FHWA has funds available for local governments to support pilot tests of innovative road and parking pricing projects. County governments or agencies interested in implementing and evaluating certain pricing programs are eligible to apply for grants funded through the Transportation Equity Act for the 21st Century (TEA-21).
The program is funded at $11 million for FY02–FY03, to support 15 new state and local government value pricing programs. The federal funds can be used for pre-implementation costs and up to three years of planning and project implementation costs. The federal share for such costs is 80 percent.
All state and local governments or public authorities must coordinate their proposals with their regional planning organizations and state departments of transportation.
All applicants should contact their state FHWA Division Office and the FHWA value pricing team in the Office of Transportation Policy Studies to express their interest in a pilot program and the nature of the planned program. Following these contacts, the FHWA will provide materials and technical support with the development of the application. A sketch plan for the proposed project will be required before the development of a full proposal. Additional information can be found at the Federal Register notice of Oct. 5, 1998 (Vol. 63, No. 192), pages 53487–53491.
Grants are awarded to proposals that present the greatest potential to reduce congestion and otherwise meet the goals of the program. The FHWA is also interested in expanding the value pricing strategies implemented, therefore priority will also be 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.
