Congestion Scheme Involving P3 Afh

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Adrienne Heim URBP 176/226 3 December 2008

Working with the Private Sector to implement Congestion Pricing Schemes

Thirty years ago Singapore was the first country to establish a congestion pricing

scheme for the sole purpose to manage the quantity and usage of personal vehicles1.

Unlike the city of Oslo, which intended to use the cordon revenue for road maintenance

projects; Singapore foresaw the increasing presence and intrusion of the automobile and

vowed to preserve its country’s landscape and natural environment. From this

implementation, Singapore became a pioneer and paved the way for many other

governmental bodies, most notably in London to take the lead towards implementing a

traffic management scheme that fit their congested metropolitan city. Great Britain and

Singapore have heightened awareness throughout the world that increasing use of the

automobile must be managed in order to maintain the existing network of roadways,

decrease the emission of Carbon Dioxide and all the while increasing the appeal of public

transit. This strategy can be accomplished with a specific congestion price scheme that is

appropriate for the city and most importantly with investment from the private sector who

can quickly take on an important aspect of the project in the most cost effective manner.

Politicians, urban economists and transportation planners understand that traffic

generated along a popular corridor creates negative externalities such as pollution,

degradation of roadways, excessive noise and potential automobile accidents. The Texas

Transportation Institute reported in 2003 that congestion in the top 85 US urban areas

caused 3.7 billion hours of travel delay and 2.3 billion gallons of fuel for a total cost of

1 Land Transport Authority, “Electronic Road Pricing”; available from http://www.lta.gov.sg/motoring_matters/index_motoring_erp.htm; Internet; accessed 29 October, 2008.

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$63 billion2. Overall, the average cost of traffic in developing countries is at 2-3% of

GDP3 . Therefore, it was only natural to incorporate economist Arthur Pigou’s self

named tax theory to manage traffic during peak travel period hours and along popular

corridors. Pigou determined that users of a public good will use the item to their benefit,

thereby decreasing the value of the good among additional users4. The only way for users

to not exploit the shared good would be to charge a usage fee which benefits all. The

Pigou tax was then incorporated as part of the traffic demand management strategy and

coined as a congestion toll or “value pricing” scheme. The scheme was defined by

charging a toll for driving along a highly congested corridor during peak and off peak

hours and the toll has the ability to change depending on vehicle class and the popularity

of the roadway5. Once this scheme is implemented drivers would then realize the full cost

of driving and have the option to modify their behavior by driving during off peak hours,

forming rideshares or simply switching to public transportation. This in turn enhances the

level of service for public transit and private delivery vehicles that use the once congested

routes, improves the air quality and increases capacity for more vehicles to travel at

optimum speed levels.

Tolls are not a new phenomenon in the United States or the rest of the world and

many recouped the toll revenue to be used to maintain public roads. Some historic

examples include Maysville Turnpike in Kentucky in 1830 and US 1 in South Carolina in

19216. When toll roads were created in European countries, Sweden was well engaged in

private partnerships to which they felt were the most cost beneficial. Sweden’s financing

2 US Department of Transportation, “Congestion Pricing: A Primer”; available from http://www.ops.fhwa.dot.gov/publications/congestionpricing/congestionpricing.pdf; Internet; accessed 10 October, 2008. 3 Lee Schipper, Wei-Shiven Ng, “The Role of Market Based Instruments- Road Pricing, Parking Fees and Congestion Pricing” (present., World Resources Institute, December 15, 2006), 4-5, in Online database name, http://www.edf.org/documents/5845_Schipper_CongestionPricing.pdf ; accessed December 2, 2008. 4 Andrea Schage, “Traffic Congestion & Accidents.” University of Regensburg Working Papers in Business, Economics and Management Information Systems, November 9, 2006; accessed October 15 2008. 5 Ibid, 4 6 Cesar Queiroz PHD, “Screening of PPP Projects for Financial Feasibility” (present., Ministry of Economy of Poland and World Bank, 2008), in Online database name ; http://209.85.173.132/search?q=cache:WZh_5JA2d2cJ:siteresources.worldbank.org/INTECAREGTOPTRANSPORT/Resources/Day2_Pres7_PLLessonsPPPfinancialscreeningCQueiroz.ppt+Screening+of+PPP+Projects+for+Financial+Feasibility&hl=en&ct=clnk&cd=1&gl=us; accessed 4 October 2008.

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model was mainly used for low volume roads in which the government offered incentives

for private road owners to maintain their roads. This overall left the government with a

lower operating and capital cost then if they solely took over the responsibility7.

Currently, in the United States the gas tax cannot provide added funding as long as gas

prices continue to seesaw, while technological advances in automobile manufacturing

and alternative fuel sources persist. Most roads are maintained at a level of 20-50% of

what is necessary despite most of the road networks accounting for 10-50% of Gross

National Product8 . Realistically, very little funds are available to accommodate both

accumulated road projects and public transit needs. The first priced tolls that included flat

rate and variable congestion price schemes were High Occupancy Toll (HOT) Lanes,

High Occupancy Toll (HOV), Area wide, Cordon and Corridor pricing schemes9. In the

United States there are various systems in place that operate congestion pricing schemes.

The majority consists of HOV lanes in cities such as Minneapolis, MN I-394, Houston

TX I-10, SR-91 in Orange County, CA, I-15 in San Diego, CA and I-25 in Denver,

Colorado10.

By 1998, the Federal Highway Administration (FHWA) took a number of steps to

promote the advancement of Public-Private Partnerships by introducing their Special

Experiment Project 15 (SEP-15) to Congress. The project allows the FHWA to identify

new PPP approaches to project delivery such as: 1) contracting, 2) compliance with

environmental requirements, 3) right of way acquisition and 4) Project finance. Once the

report was fulfilled the FHWA believed that many local DOTs should be able to acquire

the resources needed when they felt a PPP should be considered. The FHWA dedicated

an official page listing various PPP case studies and contractual agreements by Public-

7 Sven Ivarson and Christina Malmberg, Street Smart: Competition, Entrepreneurship, and the Future of

Roads, ed. Gabriel Joseph Roth (Transaction Publishers, 2006), 328-29 Retrieved November 26, 2008 8 Gunter J. Zietlow, Street Smart: Role of the Private Sector in Managing and Maintaining Roads, ed. Gabriel Joseph Roth (Transaction Publishers, 2006), 347-48 Retrieved November 26, 2008 9 Wikipedia, “Congestion Pricing or Congestion Charges”; available from http://en.wikipedia.org/wiki/Congestion_pricing; Internet; accessed 17 September 2008. 10 Virgina Department of Transportation, “About HOT lanes in the US”; available from http://www.virginiahotlanes.com/beltway-how-hot-lanes-work-about.asp; Internet; accessed 5 October 2008.

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Private Partnership involvement11. The Public-Private Partnership page displays a wealth

of information for the public transit agency and private sector to come together to work

on a relationship that best fit both of their needs. In addition, the Transportation

Infrastructure Finance and Innovation Act (TIFIA) came about which established a new

Federal program under which USDOT could provide credit assistance to major

transportation investments. The TIFIA program was designed to draw private investment

into projects by providing supplemental capital and credit rather than solely distributing

grants12.

If the idea of a congestion toll were brought about in a local newspaper or a

question about its effectiveness was sent via survey for public response, there will always

be reaction of defense, frustration and resentment. In the public’s opinion the freeway has

always been a free good to those who have the privilege to drive. To impose another tax

would be inequitable, stifling towards local businesses within the congestion zone and

potentially requiring additional funding through increased sales taxes or governmental

bonds. However, once the congestion price scheme is successfully implemented and

traffic wanes; the residents and business owners will be aware of how decreased traffic

affects their lives for the better. Public-Private Partnerships assist with the public’s

acceptance towards the congestion scheme by aiding the transportation agency by taking

on the responsibility of funding a project and supplying technological processes.

The partnership is also ideal from an economic standpoint because it forces

multiple corporations to compete for the contract and consequently spurs competition

which in turns provides quality services at a reasonable price.

Various private partnerships agreements consist of:

� Project design and implementation � Financial strategic planning � Construction

11 Federal Highway Administration, “Public-Private Partnerships”; available from http://www.fhwa.dot.gov/ppp/index.htm; Internet; accessed 5 October 2008. 12 Jim March. “Working with the private sector to meet transportation goals,” Public Roads, NOV 1, 2005. http://www.highbeam.com ; accessed November 14, 2008.

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� Maintenance � Toll Collection � Program management � Technology to efficiently carry out the program13

The following case studies agree that Public-Private Partnerships have their

advantages; it allows the private sector to invest in the potential of the road project

without the aid of government funding and taxpayer dollars.

Let us return back to Singapore where a congestion scheme was first implemented

in 1975. The country first levied a congestion toll through an Area License and Restricted

Zone scheme towards drivers entering the Central Business District. The scheme initially

required all drivers to purchase a permit allowing them to enter the congestion zone.

Unfortunately, this posed a few problems; without the assistance of technology the

scheme was quite labor intensive requiring enforcers to check each permit by vehicle

class. It also allowed permits to be transferred to different cars14. In the 1990s Singapore

continued to enact their vehicle management framework by implementing a Vehicle

Quota system to restrict the amount of personal vehicles that could be registered within

the state. Eight years later, the Electronic Road Pricing System was implemented and

required all drivers to purchase or rent an in vehicle unit equipped with a smart card

which deducted the toll when entering a sensored Gantry point15. The new technology,

which is solely operated by Singapore’s transit agency, Land Transit Authority (LTA)

and its subsidiary MSI Global allowed toll to vary by the amount of congestion, vehicle

class and by peak period hour. Not only did congestion decrease by 13%, but the revenue

generated from the toll scheme was used to improve and increase transportation systems

around the country. Through the technology offered by private corporations, Singapore’s

Electronic Road Pricing technology was developed through a consortium consisting of

Philips Singapore Pte Ltd., Mitsubishi Heavy Industries Ltd., Miyoshi Electronic

13 ITS Decision, “Congestion Pricing”; available from http://www.calccit.org/itsdecision/serv_and_tech/Congestion_pricing/congestion_pricing_report.htm; Internet; accessed 14 November, 2008. 14 Dr. Chen Kian Keong, “Road Pricing Singapore's Experience,” Imprint Europe (2002 Oct): under “Seminar: Europe Thematic Network,” http://www.imprint-eu.org/public/Papers/IMPRINT3_chin.pdf ;accessed 14 October, 2008. 15 Land Transport Authority, “Electronic Road Pricing”; available from http://www.lta.gov.sg/motoring_matters/index_motoring_erp.htm; Internet; accessed 29 October, 2008.

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Corporation and CSE Global Ltd. for a total cost of S$197 million16. Singapore also

partnered with SingTel Mobile to develop the Easi-ERP payment system which allows

SingTel account holders to pay for ERP violations via their phone bill with an additional

S$4 added for administrative costs. The partnerships allowed the highest technology to be

utilized to regulate traffic as well as provide an additional channel for customers to pay

their fee.

In the 1990’s England became a supporter of Public-Private Partnerships in order

to expand and maintain the nation’s highways, bridges and tunnels. During the economic

reforms under the government of Prime Minister Lady Margaret Thatcher, the

Conservative party created the Riley Rule, which allowed private companies to

intermingle with transportation infrastructure development. This would only occur if the

benefits outweighed the costs17. By 1992, the Thatcher government adopted a Private

Finance Initiative (PFI) as the preferred approach for developing infrastructure of all

types for the British government18. The Private Finance Initiative was to promote the

cooperation between the public and private sectors and introduce private sector skills and

disciplines into the delivery and management of projects and services which were

traditionally overseen by the public sector19.

London’s cordon congestion scheme was first implemented in 2003 which

required drivers to pay a fixed toll when driving into central London during peak period

hours. The tolls are levied in entrance points around the congested center with the support

of high resolution cameras, which record the vehicle plate number and transmit it to their

16 Eddie Lim Sing Loong, “Electronic Road Pricing The Singapore Way”, present. National University of Singapore, 2008), in Online database name http://www.comp.nus.edu.sg/~wongls/icaas-web/links/NLB/innovsymp06/eddie-erp-talk.pdf accessed 14 October 2008. 17 ITS Decision, “Congestion Pricing”; available from http://www.calccit.org/itsdecision/serv_and_tech/Congestion_pricing/congestion_pricing_report.htm; Internet; accessed 14 November, 2008. 18 Ibid

19Federal Highway Administration, “Resources/ User Guidebook and Domestic and International Case Studies for Transportation Public-Private Partnerships”; available from http://www.fhwa.dot.gov/ppp/pdf/int_ppp_case_studies_final_report_7-7-07.pdf; accessed 14 November 2008.

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central service center20. The center will send violation notices to those who have not paid

for a monthly pass21. A year prior to the roll out of the pricing scheme Transportation for

London, the operator of London’s transportation system, awarded British outsourcing

company Capita Group a five year £200 million contract to design, deliver and operate

the congestion price scheme22. Spearheaded by Derek Turner, the Director of Transport

for London Street Management, the contract made clear that certain deadlines were to be

established and attained. In addition, each body had a clear understanding of one’s

responsibilities. Capita would initially design and implement the scheme, oversee the

central service center and maintain all operation of infrastructure while the

Transportation for London would publicly advertise and enforce the policy amongst all

visitors and drivers entering the city23. The specific contract which required strict

benchmarks allowed the Transportation for London (Tfl) to get the word out with the

support of the city’s mayor Ken Livingston’s before the next administration could tear

the system down.

During the onset of the congestion scheme roll out traffic was reduced by 20%

and one local newspaper, The Guardian UK, reported that public opinion towards the

strategy appeared positive with 72% of business owners agreeing that the congestion

scheme was effectively working for the better and 58% of London residents believing

that implementing the congestion scheme was positive for London24. However, there

were a few controversies along the way with Capita Group’s involvement with the

scheme. Within the first five month’s Capita’s operating system involving their service

center’s printers malfunctioned and overcharged hundreds of motorists who entered the

congestion zone. It also appeared that motorists entering the congestion zone fell by 18%,

20 Todd Litman, “London Congestion Pricing Implications for Other Cities,” Victoria Policy Institute (Jan 2006) http://www.vtpi.org/london.pdf ; accessed October 5, 2008. 21 Ibid 22 Nick Fildes, “Capita wins deal to charge polluting vehicles”, London Independent, September 7, 2006. http://findarticles.com/p/articles/mi_qn4158/is_20060907/ai_n16709367?tag=content;col1 ;accessed December 1, 2008. 23 ITS Decision, “Congestion Pricing”; available from http://www.calccit.org/itsdecision/serv_and_tech/Congestion_pricing/congestion_pricing_report.htm; Internet; Accessed 14 November, 2008. 24 Todd Litman, “London Congestion Pricing Implications for Other Cities,” Victoria Policy Institute (Jan 2006) http://www.vtpi.org/london.pdf ; accessed October 5, 2008.

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which was 3 percentage points higher than estimated. This led the Transportation for

London to renegotiate their contract and introduce a £ 31million incentive program

(funded by taxpayer dollars) which required Capita Group to “amp” up their customer

service program by employing additional staff and reviewing processing procedures to

avoid errors25.

Although the scheme was an overall success which garnered a 2008 Sustainable

Transport award from the International Transportation and Development Policy (ITDP);

the technology implemented in the beginning could be advanced. Just as Singapore

graduated from an Area License Scheme to an ERP system, London has the possibility to

convert to an Electronic Payment system using transponders or Global Positioning

Systems. In 2007, Tfl decided to discontinue their contract with Capita Group in 2009

and in turn extended their 5 year offer to IBM who undercut Capita’s bid and best met the

operational and technical requirements. Graeme Craig, the interim director of congestion

charging at Transportation for London believed the offer was more economically

advantageous due to the fact that the revenue received goes towards the improvement of

transportation and construction projects within the city26.

One well-known US based Public-Private Partnership which is the country’s first

fully funded private road project that implemented variable pricing involves a ten mile

stretch of four express lanes (two in each direction), which runs along California State

Route 91/55 junction in Anaheim and Orange/Riverside county lines27.

The express lanes implement a variable toll pricing scheme during peak period

hours, where HOV-3 vehicles, requiring three or more passengers, receive a 50%

discount and all others using the lane are required to setup an account with FasTrak™28.

25 "Livingstone pays pounds 31m price of congestion charging success”, Birmingham Post, July 30 2003. http://www.highbeam.com (accessed November 14, 2008). 26 Capita driven out of capital, Birmingham Post, October 26, 2007. http://www.highbeam.com/doc/1G1-170265342.html (accessed November 19 , 2008) 27 91 Express Lanes, “91 Express Lanes Snapshot”; available from http://www.91expresslanes.com/learnabout/snapshot.asp; Internet; accessed 14 November, 2008. 28 Edward Sullivan, “Continuation Study to Evaluate the Impacts of the SR 91 Value-Priced Express Lanes” (diss., State of CA Department of Transportation- Traffic Operations Program HOV Systems Branch, DEC 2000), in Online database name,

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The company provides a transponder which deducts the toll via a gantry which is fitted

with antennas that communicate with the transponder and cameras which records

violators29.

The partnership between California Private Transportation Company (CPTC) and

Caltrans first came about due to the potential for cost benefits and the elimination of

requesting state funding in order to convert existing High Occupancy Vehicle (HOV)

lanes into express toll lanes30. Funding was attained by Toll Revenue bonds and

developer fees31. This particular partnership is unique in its cost savings due to the fact

that construction began five years ahead of what would be projected if it were publicly

financed and the HOV lanes that were to be converted to express lanes already received

an Environmental Assessment Report. Caltrans also discounted capital (lease of land)

costs at an incredibly low rate. Therefore, the total cost of construction was $199 million.

The revenue from the SR 91 toll roads were modeled after the Concurrent Regular

and Shadow Tolling (CRAST) concept32 (review Table 1) in which CPTC would set the

toll rates, which would be modified from year to year and depending upon analyzing

congestion levels for the express lanes. Caltrans would receive the full amount of revenue

generated by the tolls and CPTC would then receive a flat rate reimbursement for all cars

traveling along the express lanes33. This concept allowed the separation of revenue

between the public and private partners and therefore created an incentive for the private

company to comply with set standards agreed upon in the contract in order to operate and

http://ceenve3.civeng.calpoly.edu/sullivan/SR91/final_rpt/FinalRep2000.pdf ; accessed November 14, 2008. 29 FasTrak, “About FasTrak ”, available from http://www.bayareafastrak.org/static/about/index.shtml; Internet; accessed 14 November, 2008. 30 ITS Decision, “Congestion Pricing”; available from http://www.calccit.org/itsdecision/serv_and_tech/Congestion_pricing/congestion_pricing_report.htm; Internet; accessed 14 November, 2008. 31 Ibid 32 Patrick DeCorla-Souza, “Implementing Congestion Pricing on Metropolitan Highway Networks with Self- Financing Public - Private Partnerships,” Journal of the Transportation Research Forum 45, no. 1 (2006): 7-8 http://www.trforum.org/journal/2006spr/article1.php?PHPSESSID=462b888161e4c76e32efde0369266a2c ;accessed November 14, 2008. 33 Ibid, 11

maintain free flowing traffic lanes while

consultation invested34.

Source: Patrick DeCorla-Souza, “Implementing Congestion Pricing on Metropolitan Highway Networks with Self- F inancing Public - Private Partnerships

Once the scheme took effect in 1995, the Department of Transportation and

Caltrans noticed an increase in travel speed

in travel time by almost 50%

adjacent free lanes of SR 91 as it allowed traffic to move along at higher speeds

34 Ibid, 11-12 35 Edward Sullivan, “Continuation Study to Evaluate the ImpLanes” (summ., State of CA Department of TransportationBranch, DEC 2000), in Online database name, http://ceenve3.civeng.calpoly.edu/sullivan/SR91/final_rpt/FinalRep2000.pdf2008.

maintain free flowing traffic lanes while receiving a return on the infrastructure and

Souza, “Implementing Congestion Pricing on Metropolitan Highway Networks with Private Partnerships.”

Once the scheme took effect in 1995, the Department of Transportation and

crease in travel speeds of 65 mph in the express lanes and reduction

in travel time by almost 50%35. The introduction of the express lanes also benefitted the

adjacent free lanes of SR 91 as it allowed traffic to move along at higher speeds

Edward Sullivan, “Continuation Study to Evaluate the Impacts of the SR 91 Value-Priced Express Lanes” (summ., State of CA Department of Transportation- Traffic Operations Program HOV Systems Branch, DEC 2000), in Online database name, http://ceenve3.civeng.calpoly.edu/sullivan/SR91/final_rpt/FinalRep2000.pdf ; accessed November 14,

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cture and

Souza, “Implementing Congestion Pricing on Metropolitan Highway Networks with

Once the scheme took effect in 1995, the Department of Transportation and

of 65 mph in the express lanes and reduction

The introduction of the express lanes also benefitted the

adjacent free lanes of SR 91 as it allowed traffic to move along at higher speeds than it

Priced Express Traffic Operations Program HOV Systems

; accessed November 14,

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had before operation began. CPTC’s responsibility was to design and implement the

congestion scheme, operate the central service center and oversee maintenance

improvements when needed, while Caltrans and Orange County Transit Agency were

responsible for the advertisement of the scheme and enforcement through California

Highway patrol36. After four years of operation, CPTC transferred ownership of the

facility to Caltrans, whereby Caltrans signed a 35 year operations contract which leased

the improvement services back to CPTC37. Unfortunately, there were a few setbacks

which involved the newly drawn up contract. The leasing contract with CPTC was tied to

California law AB 680, which created a clause known as the Absolute Protection Zone.

The non-compete clause required that any transportation agency involved could not make

improvements to any lanes within a mile of the express toll lanes38. Originally, the non-

compete clause was applied to encourage private investment on public projects and to

retain a consistent revenue stream for CPTC39. However, once this information became

public news, Orange County Transportation and Caltrans were placed in a very

precarious position.

After several lawsuits involving the California Assembly, CPTC and Caltrans, AB

1010 was introduced which allowed Orange County Transportation Authority to null the

contract and buy out CPTC for the amount of $207 million40. Although there were

obvious setbacks and known unethical strategies made by CPTC, one of which was a

possible purchase of the existing toll facility to a non profit agency that would incur huge

profits, the revenue generated by the steady stream of toll allowed Orange County

36 91 Express Lanes, “91 Express Lanes Snapshot”, available from http://www.91expresslanes.com/learnabout/snapshot.asp; Internet; accessed 14 November, 2008. 37 ITS Decision, “Congestion Pricing”; available from http://www.calccit.org/itsdecision/serv_and_tech/Congestion_pricing/congestion_pricing_report.htm; Internet; accessed 14 November, 2008. 38 The California State assembly, “Public Private Partnerships”; available from http://209.85.173.132/search?q=cache:BDvzWk-q7jgJ:www.assembly.ca.gov/acs/committee/c24/hearings/2006/PublicPrivate.doc+ab+680+absolute+protection+zone&hl=en&ct=clnk&cd=1&gl=us; Internet; accessed 14 November, 39 Ibid 40 KCI Technologies, Inc., “Current Practices in Public-Private Partnerships for Highways” (summ., Maryland Transportation Authority, June 2005), in Online database name, http://www.mdta.state.md.us/mdta/servlet/dispatchServlet?url=/About/currentpractise.pdf ; accessed November 22, 2008.

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Transportation Authority to pay back the issue of Toll Revenue Bonds all the while

monitoring congestion along SR 91 and providing improvements to the public transit

system41.

Issues will always arise when a new concept is brought into public light. Public-

Private Partnerships involving congestion pricing is a tricky affair, where both the public

sector and community leaders are involved in some aspect of the project. Therefore,

having a strong political leader who is a champion for the project, as was the case for

Mayor Ken Livingston’s implementation in London is quite important.

One way to rectify any miscommunication and possible litigations would be for

state agencies to hire experts who can look out for the State's best interest. This entails

hiring laws firms who are knowledgeable about US tax laws and financial services who

can present financial models from international transportation agencies42. Furthermore,

the state agency (local DOT or transit agency) should envision how the project will span

out in the long run, the private agency expects to go into the agreement with a sense that

it will gain equity and draw in additional contracts if the project deems successful.

Once the Private Public Partnership is finalized, and all parties involved are aware

of their responsibilities; including the concessions (fixed fee or by incentive basis) that

are agreed upon the following benefits created through the agreement consist of one or

more of the following:

� Road projects are quickly funded

� Road projects are quickly designed and constructed

� Road projects are carried out efficiently

� Advances are seen through innovation and technology

� Beyond the box concepts are created to better serve the public

� Large up front revenues are generated for the public sector

41 Ibid 42 Jim March. “Working with the private sector to meet transportation goals,” Public Roads, NOV 1, 2005. http://www.highbeam.com ; accessed November 14, 2008.

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� Project risks are transferred to the private concessionaire43

Present road projects that are being financed under Public-Private Partnerships are

growing within the United States with currently 20 long term concession based PPP

projects underway ranging from a few million to hundreds of billions of dollars44.

Although congestion pricing and PPP concepts are just emerging in the US, there is a

growing recognition that providing both toll roads to manage traffic congestion and

having these project financed by the private sector can be a successful complement in the

new era of road/highway finance and vehicle management.

One congestion pricing project that is under construction is the United State’s first

Truck only Toll Lane (TOT) operating in the state of Georgia along I-285. The two TOT

lanes will span northwest and west of Atlanta. The TOT lanes will be designed, operated

and maintained under Goldman, Sachs & Co.; McGuire Woods, LLP; Post, Buckley,

Schuh & Jernigan, Inc. Financing for the project has yet to be determined but will most

likely involve a combination of private equity and a TIFIA loan45.

Northern Virginia’s Capital Beltway, which is currently under construction, will

soon operate a 14 mile stretch of variable toll HOV lanes (two in each direction) between

the Springfield interchange and north of Dulles Toll Road46. This will provide a seamless

connection to proposed HOV lanes along I-95 and I-66 leading towards Arlington County

in Northern Virginia and Washington, D.C. The project will be designed and operated by

43 ITS Decision, “Congestion Pricing”; available from http://www.calccit.org/itsdecision/serv_and_tech/Congestion_pricing/congestion_pricing_report.htm; Internet; accessed 14 November, 2008. 44 US Department of Transportation, “Innovation Wave: An Update on the Burgeoning Private Sector Role in U.S Highway and Transit Infrastructure” 19 July 2008; available from http://www.ncppp.org/councilinstitutes/dotpppreport_20080718.pdf ; Internet; accessed November 26, 2008. 45 Rick Fitzgerald, “I-285 Northwest TOT lanes Executive Summary” (sum.., Goldman Sachs & Co., MAY 18, 2006), in Online database name, http://www.dot.state.ga.us/informationcenter/programs/ppi/ProjectsandProposals/Documents/I-285/285ExecutiveSummary.pdf ; accessed 19 November, 2008. 46 Federal Highway Administration, “Case Studies: I-495 Capital Beltway HOT Lanes”; available from http://www.fhwa.dot.gov/ppp/case_studies_i495_capital.htm ; accessed 19 November 2008.

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Fluor-Transurban and Virginia Department of Transportation will own the facility. The

financial agreement was constructed with a combination of TIFIA loans, Private equity

and Private activity bonds47.

Ultimately, other government agencies will seek opportunities to finance road

investments with the assistance of the private sector. As existing cities expand and once

low density communities experience a surge in population growth, it makes sense to look

to others who have attempted to implement Private Partnerships and congestion pricing

schemes to manage personal vehicular trips. This is not an easy task and it takes the

strength of the political administration, government and local transit agencies to

announce and combine their objectives so the final agreement supports their constituents.

At first politicians are wary of introducing such a controversial system to drivers who

believe the government is pricing them off the roads, but these are the growing tactics

that must be used in order to maintain our infrastructure and reduce the collapse of our

interstate system.

Implementing a congestion price scheme especially HOV lanes is also favorable

to public transit agencies as it enables them to compete with the automobile due to an

increased level of service. In the example of SR 91 the local public transit agency

Metrolink’s rail service route SR 91 which paralleled the express lanes receive a modest

boom in ridership once the express lanes opened. This was also the case in London when

the congestion price scheme took effect ultimately increasing public transit ridership by

14% on both local buses and within London’s underground system48.

It also important for the government agency to focus on which finance procedures

best work for the project’s scope and long term fulfillment. In 2005, the Transportation

Research Board hosted a panel discussion centering on the increasing use of Public-

47 Ibid

48 Todd Litman, “London Congestion Pricing Implications for Other Cities,” Victoria Policy Institute (Jan 2006) http://www.vtpi.org/london.pdf (accessed October 5, 2008).

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Private Partnerships to finance road projects. Various private and public sector

representatives came together to discuss the feasibility of managing a partnership which

could boost operating and cost savings and minimize potential risks. Bob Prieto, a

representative and panelist from the private maintenance and construction company,

Fluor examined the potential financial responsibility expected of the private sector by

explaining that “The private-sector needs a strong set of financing skills and a firm

understanding of the available tools (such as GARVEE bonds and TIFIA loans) to

determine which will provide the best risk-weighted return for the private and public-

sector partner49." This is essential because many public transportation professionals are

not knowledgeable about how a project is financed. Certain skill sets and available

funding options must be analyzed in order to create transparent dialogue between both

public and private parties.

Driving is not only a privilege but a responsibility and those who take on this risk

must realize the full costs of their actions. By implementing congestion tolls and

employing the private sector on the design and construction of the road project the

revenue from such tolls can help pay back the investment by the private sector through

revenue-issued bonds, improve the efficiency and operation of a public transit system and

maintain outlining public roads; all the while sending a clear message that an array of

options other than the private automobile exists.

49 March, Jim. "Working with the private sector to meet transportation goals." Public Roads. Superintendent of Documents. 2005. HighBeam Research <http://www.highbeam.com; accessed November 26, 2008.

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Notes:

Capita driven out of capital, Birmingham Post, October 26, 2007. http://www.highbeam.com/doc/1G1-170265342.html ; accessed December 2, 2008. Fildes, Nick, Capita wins deal to charge polluting vehicles, London Independent, September 7, 2006. http://findarticles.com/p/articles/mi_qn4158/is_20060907/ai_n16709367?tag=content;col1 ; accessed December 1, 2008. Keong, Dr. Chen Kian. "Road Pricing Singapore's Experience." Imprint Europe (2002 Oct). http://www.imprint-eu.org/public/Papers/IMPRINT3_chin.pdf ; accessed December 1, 2008. Livingstone pays pounds 31m price of congestion charging success, Birmingham Post, July 30 2003. http://www.highbeam.com ; accessed November 14, 2008.