High-Occupancy/Toll (HOT) Lanes and Value Pricing: A Preliminary Assessment

High-Occupancy/Toll (HOT) Lanes and Value Pricing: A Preliminary Assessment THE ITE TASK FORCE EXAMINES HOT LANES AND VALUE PRICING, WHICH ARE TWO DISTINCT CONCEPTS THAT HAVE BEEN COMBINED IN SEVERAL RECENT AND PLANNED PROJECTS. BY THE ITE TASK FORCE ON HIGH-OCCUPANCY/ TOLL (HOT) LANES HOT LANES AND VALUE PRICING are two new terms in the lexicon of the transportation professional. The term HOT Lanes, which stands for High- Occupancy/Toll Lanes, refers to highoccupancy vehicle (HOV) facilities that are open to lower-occupancy (including single-occupancy) vehicles upon payment of a fee or toll. The concept was first articulated in a 1993 policy paper by Gordon J. Fielding and Daniel B. Klein. 1 HOT lanes differ from regular toll roads, which may offer discounts to high-occupancy vehicles, in that they give drivers of lower-occupancy vehicles a choice: motorists can stay in the free but congested lanes, or they can pay a fee and enjoy a faster, more reliable and less stressful trip in the HOT lane. The term value pricing is used here to describe a system of optional fees paid by drivers of lower-occupancy vehicles to gain access to dedicated road facilities providing a superior level of service (LOS) and offering time savings compared to the parallel free facilities. HOT lanes and value pricing are two distinct concepts, but they have been combined in several recent and planned projects. Like many new concepts, HOT lanes and value pricing have generated both interest and a good deal of debate. This preliminary report by a special ITE Task Force on High-Occupancy/Toll (HOT) Lanes aims to illuminate this debate by examining current experience with HOT lane facilities and value pricing, and by identifying key issues that should be considered in connection with HOT lane proposals. The task force intends to monitor future developments and publish a more detailed informational report in the fall of 1998. CLARIFYING THE CONCEPTS The terms congestion pricing and road pricing have been used to describe pricing systems that require motorists to pay for the use of congested roadways. In the rigorous context of economic theory, the concept of congestion pricing obliges every traveler to pay a fee that reflects the incremental cost his or her trip imposes (primarily in the form of increased delay) on other users of the facility. The actual fee would vary in response to changing levels of demand, rising during periods of heavy congestion and falling in off-peak times when demand is low and traffic flows freely. If every traveler responded rationally to price signals, congestion pricing would lead, in principle, to traffic patterns that maximized total system efficiency and minimized external and system costs. Value pricing, in contrast to congestion pricing, charges motorists for the use of uncongested roadways. First employed by the California Private Transportation Company (CPTC), the operator of the State Route 91 Express Lanes project in Orange County, Calif., USA, the term is used to describe a system of optional fees paid by drivers to gain access to alternative road facilities providing a superior level of service and offering time savings compared to the free facility. 2 The alternative facilities in question may be: (a) new or existing toll lanes; and (b) new or existing high-occupancy vehicle (HOV) lanes. The tendency has been to use the term highoccupancy/toll (HOT) lanes in reference to both alternatives, even though the character of each facility and the circumstances in which it was built may differ. An essential feature of HOT lanes and value pricing is choice. Value pricing enables lower-occupancy and solo drivers who are in a hurry to pay a toll and travel in peak periods in uncongested and therefore faster and more reliable dedicated lanes. These lanes should remain uncongested if the tolls are set high enough. In off-peak periods there may be less demand for these facilities and the fee may thus be lower. Indeed, when traffic is 30 ITE JOURNAL / JUNE 1998

THE ITE COUNCILS SPONSORING THIS REPORT ARE: Traffic Engineering Council; Transit Council; Transportation Demand Management Council; and Transportation Planning Council. light, most drivers will likely elect to stay in the general purpose lanes and travel free. Conventional toll roads and traditional congestion pricing do not allow motorists this kind of choice. In the case of toll roads, all drivers are required to pay a toll. In the case of congestion pricing, everyone traveling on a congested road or during peak period has to pay a congestion fee. The fees charged for the use of HOT lanes may vary by time of day and by day of the week rising during periods of heavy demand and falling during periods of low demand in order to maintain free flow at all times. Until the advent of electronic toll collection (ETC), toll facilities had to maintain a fixed toll schedule. A stepped toll schedule would be published in advance, giving motorists a high degree of predictability as to the cost they would incur by using the HOT lane. With the introduction of ETC, collection of dynamically variable tolls (i.e., tolls that fluctuate in real time reflecting changes in traffic conditions in the HOT lane as they take place) has been rendered technically feasible. CURRENT HOT LANE PROJECTS Three current projects illustrate the concepts and possibilities of HOT lanes and value pricing. The State Route 91 Express Lanes project in Orange County is a toll facility built in the median of an existing freeway, which offers a reduced rate to vehicles carrying three or more occupants. The FasTrak (formerly ExpressPass) demonstration project on the I-15 HOV lanes north of San Diego, Calif., USA, initially allowed solo drivers to use the HOV facility for a flat monthly fee, and currently charges a variable pertrip fee. Finally, the QuickRide Demonstration on the Katy Freeway (I-10 West) in Houston, Texas, USA, allows two-person carpools to use the HOV lanes for a fee during peak hours when a three-plus vehicle-occupancy requirement is in effect. In addition, permits rather than tolls are being used to allow two-person carpools access to the HOV-3 lane of the Southeast Expressway (I-93) in Boston, Mass., USA. Key characteristics of these projects are described below. There are some important distinctions between the SR 91 Express Lanes project in Orange County and the other projects. The Express Lanes were built to provide additional capacity in the corridor and to be paid for with toll revenue. Therefore, toll rates were set (and are adjusted continually) to generate optimum revenue. While some HOV traffic is given preferential treatment (HOV-3s pay a reduced toll), all vehicles using the lanes must carry electronic toll transponders. The other projects allow lower-occupancy vehicles to use an HOV lane if they pay a fee. The objective of these latter projects is to more fully use the excess capacity of the HOV lane(s) while maintaining the original intent of encouraging carpooling. Because carpools still travel free, only single-occupant vehicles (SOVs) are required to carry electronic toll tags. State Route 91 Express Lanes, Orange County The Route 91 Express Lanes, the nation s first project implementing the concept of value pricing, opened in December 1995. The project is one of four private toll road ventures authorized by the California legislature in 1989. Project development and operating procedures are spelled out in a franchise agreement signed in 1990 between the state and the facility s operator, CPTC. Two toll lanes in each direction were built in the median of the existing eightlane freeway. Toll rates vary with the time of day to ensure that the toll lanes remain uncongested at all times. Since the Express Lanes entered service, tolls have been raised three times in order to keep traffic flowing smoothly. The latest toll schedule, effective Sept. 14, 1997, provides eight different price levels between $0.60 and $2.95 for traveling the length of the 10-mile facility. To support California s ridesharing policy, the SR 91 Express Lanes initially allowed HOV-3+ vehicles to travel free. As of Jan. 1, 1998, HOV-3+ pay a half-toll. All tolls are collected electronically and only vehicles with valid transponders are THE ITE TASK FORCE ON HIGH- OCCUPANCY/TOLL (HOT) LANES Leon Goodman, Chair, Transit Council; Robert P. Jurasin, Immediate Past Chair, Transportation Planning Council; Thomas F. Larwin, Vice Chair, Coordinating Council; C. Kenneth Orski, Immediate Past Chair, TDM Council, Task Force Chair; Katherine F. Turnbull, Vice Chair, Transit Council; and Richard A. Cunard, TRB Representative. permitted to enter the Express Lanes. The facility is open to all vehicles carrying transponders issued by CPTC and other toll authorities which use the California AVI (automatic vehicle identification) standard. Approximately 105,000 transponders were issued by the end of 1997, and about an equal number have been issued by other California toll road authorities. Enforcement is done electronically, using photographic license recording methods as vehicles pass spotter booths located at the midpoint of the facility. Citations are issued by the California Highway Patrol (CHP) and by mail, and are handled similarly to parking violations. Since the Express Lanes have been opened to traffic, daily traffic volumes on the tolled facility have grown steadily. Due to a diversion of some traffic from the adjoining general purpose lanes onto the toll lanes, peak period travel conditions in the free lanes have improved substantially, falling from a 30- to 40- minute average delay to a five- to 10- minute average delay at the height of the p.m. peak period, according to Caltrans, the California Department of Transportation. 3 Since 1994, Caltrans and the Federal Highway Administration (FHWA) have been supporting an evaluation study at California Polytechnic State University, San Luis Obispo, Calif., USA. The study is monitoring traffic conditions on SR 91 and conducting before-and-after opinion surveys of SR 91 users. Survey results show that about 45 percent of Express Lanes peak period travelers use the facility once a week or less, suggesting that many travelers are highly discriminating in judging when time savings afforded by the ITE JOURNAL / JUNE 1998 31

Express Lanes justify paying the toll. Surveys also have found that the mix of vehicles in the toll lanes and the demographic profile of frequent Express Lanes customers is not significantly different from that of SR 91 commuters in general, thus allaying concerns that the facility would be used mostly by affluent motorists. 4 Public approval of the variable tolls, while initially somewhat restrained, has increased significantly after two years of operation. 5,6 I-15 HOV Lanes, San Diego The San Diego HOV facility consists of an eight-mile stretch of two reversible lanes in the median of I-15, about 10 miles north of San Diego. The HOV lanes are open to southbound traffic from 5:45 a.m. to 9:15 a.m. and to northbound traffic from 3 p.m. to 7 p.m. The HOV facility has been operating well under capacity since it was opened to traffic in October 1988. Prompted by a desire to make better use of the existing HOV lane capacity, and to generate revenue for transit service improvements in the corridor, the San Diego Association of Governments (SANDAG) proposed the high-occupancy/toll (HOT) lane demonstration project for implementation under the federal Congestion Pricing Pilot Program. The project, initially called Express- Pass and now known as FasTrak, was implemented in two phases. In the first 15-month phase, which began in December 1996, solo drivers were allowed to use the HOV lanes upon purchase of a permit. The permit provided for unlimited use of the HOV lanes for a flat monthly fee. Verification and enforcement during this phase was carried out through visual inspection of a color-coded windshield sticker. In June 1997 the decals were replaced by electronic transponders, thereby facilitating enforcement. Because the state enabling legislation required SANDAG to maintain the level of service in effect at the start of the project (LOS C ), the number of SOVs permitted to use the HOV facility was increased gradually and traffic was monitored carefully to ensure that the lanes remained uncongested. Initially, 500 monthly passes were offered for sale at $50 per pass. In February 1997, the number of monthly passes was increased to 700. In March, the price of the monthly pass was raised to $70 to test the value placed by commuters on time savings. Despite the 40 percent increase in price, only 16 percent (115) Express- Pass holders chose not to renew their permits, with nearly 400 applicants still on the waiting list. In April, the number of passes was increased to 900, with traffic in the HOV lanes still flowing at LOS C or better. All revenue collected from the sale of the permits was dedicated to transit improvements in the corridor. A new express bus service financed with these revenues was launched in November 1997. The $70 monthly fee equates to about $1.75 per trip if full roundtrip use is made of the permit. However, an early survey of users showed that only 60 percent of permit holders are regular commuters and over 80 percent of survey respondents reported making fewer than five round trips per week on the HOV lanes. This suggests that permit holders valued the time savings offered by the HOV lanes considerably higher than $1.75 per trip. SANDAG staff estimates the value of time savings to be approximately $2.33 to $3.18 per trip. In a second phase of the demonstration project, which began on March 30, 1998, the flat-rate monthly pass was replaced by a per-trip toll. Toll rates, which range from 50 cents to $4 per trip, fluctuate in real time with changing traffic volume in the HOV lanes. Ordinarily, the maximum $4 rate is charged during the peak of the rush hour and the lowest fees are in effect when the lanes first open around 6 a.m., and just prior to closing when traffic is light. However, if road sensors detect lighter-than-usual traffic, a lower than maximum toll will be charged even during the peak of the rush hour. In exceptional circumstances, when heavy congestion in the free lanes causes a sharp increase in demand in the HOT lanes, the maximum toll may increase to $8. Electronic signs located in front of the entrance to the HOT lanes give motorists advance notice of the current toll as they approach the toll lanes. Tolls are collected electronically. Motorists access the HOT lanes at normal highway speeds through a special entrance lane where overhead antennas scan the customer s windshield-mounted transponder and automatically deduct the posted toll from the motorist s prepaid account. 7 The sponsoring agencies are monitoring the demonstration with San Diego State University acting as the official evaluator. A telephone survey of 1,500 commuters, including 500 ExpressPass participants, was conducted in September/October 1997. Eightynine percent of the participants thought that the program is a success. 8 I-10 (Katy) HOV Lane, Houston The Katy HOV lane is a 13-mile, barrier-separated, reversible HOV lane located in the freeway median. The facility was opened in stages between 1984 and 1990. The vehicle-occupancy requirement for the lane has changed a number of times, stabilizing at buses, vanpools and two-plus carpools in 1986. The two-plus occupancy requirement remained in effect until the fall of 1988. In response to high volumes occurring in the morning peak hour, and the corresponding decline in travel speeds and travel time reliability, a three-plus vehicle occupancy requirement from 6:45 a.m. to 8:15 a.m. was reinstated in October 1988. The three-plus hours were revised to 6:45 a.m. to 8 a.m. in May 1990, and in the fall of 1991 the three-plus requirement was applied to the afternoon peak hour from 5 p.m. to 6 p.m. The facility is the only HOV lane in the country that uses variable hour occupancy requirements. A priority pricing study on the Katy HOV lane was conducted by the Texas Transportation Institute (TTI) for the Metropolitan Transit Authority of Harris County (METRO) and the Texas Department of Transportation (TxDOT) with funding support from FHWA in 1996 and 1997. The purpose of the study was to test the feasibility of allowing two-person carpools to use the HOV lane for a fee during the morning and afternoon peak hours when the threeplus occupancy requirement is in effect. Based on the feasibility study, a decision was made to implement a demonstra- 32 ITE JOURNAL / JUNE 1998

tion project. The project, called Quick- Ride, was launched on Jan. 26, 1998. It allows two-person carpools to pay for use of the lane during the period currently restricted to three-plus carpools. Two-person carpools are charged $2 per trip for the use of the lane. The project uses AVI tags and an ETC system. An initial group of 300 individuals has been provided with tags on a first-come, firstserved basis. It is expected that this number will be increased to between 800 and 1,000 permits to generate approximately 600 daily users. The demonstration is being monitored and evaluated by METRO, TxDOT and TTI. 9 I-93 Southeast Expressway Sticker Program, Boston Permits rather than tolls are being used as a rationing system on the HOV-3 lane of the Southeast Expressway (I-93) in Boston. The six-mile contraflow facility is created through a movable barrier system. The Massachusetts Highway Department (MassHighways) estimated that an additional 2,000 vehicles/day could use the HOV lane without degrading the level of service. MassHighways officials, concerned that opening the lane to unrestricted two-person carpools would exceed this limit, decided to issue free windshield stickers to 4,000 two-person carpools on a first-come, firstserved basis. Half of the applicants can use the HOV lane on odd-numbered days, and the other half on even-numbered days. MassHighways has conducted an extensive monitoring and evaluation program. The volume of vehicles in the HOV lanes has increased steadily since the program was implemented in September 1996 without degrading the level of service. 10 Other High-Occupancy/Toll Lane and Value Pricing Projects HOT lane/value pricing projects are being considered currently in a number of other metropolitan jurisdictions. These include: Dallas, Texas, USA, where a six-lane HOT lane facility (three lanes in each direction) has been proposed by an advisory group to TxDOT in connection with the reconstruction of the LBJ Freeway in North Dallas; Sonoma County, Calif., USA, where a study will explore the potential of adding two variable-priced HOT lanes in the median of a 20-mile segment of US 101, a major artery from the North Bay into San Francisco which carries 113,000 vehicles/day; Contra Costa County, Calif., USA, where a new HOT lane has been proposed on SR 4W; Alameda County, Calif., USA, where a new HOT lane has been proposed on I-680; Maryland, USA, where a proposal for widening a segment of the Capital Beltway (I-495) has HOT lanes as an option; Milwaukee, Wis., USA, where there is a proposal to add a HOT lane on I-94; Portland, Ore., USA, where several HOT lane additions and conversions are being studied currently; Phoenix, Ariz., USA, where AzDOT has been studying a possible conversion of HOV lanes on I-10 and I-17 into high-occupancy/toll lanes; Denver, Colo., USA, where proposals have been made to convert an existing two-lane HOV facility to a toll facility because of low carpool usage; Hampton Roads, Va., USA, where a conversion to a high-occupancy/toll facility has been proposed for an existing two-lane HOV facility on I-64; Los Angeles, Calif., USA, where a task force known as REACH (Reduce Emissions and Congestion on Highways) is considering opening up any new carpool lanes to solopaying commuters as one of several options to relieve traffic congestion on the region s freeway network; and Minneapolis, Minn., USA, where a proposed demonstration project on I-394 was canceled, but consideration is still being given to the HOT lane concept on future additions to the Twin Cities freeway system. ISSUES ASSOCIATED WITH HOT LANE AND VALUE PRICING IMPLEMENTATION Based on the examination of existing experience, the following issues appear important in the consideration of HOT lane and value pricing projects. Current and Future Utilization of the HOV Facility The best prospects for HOT lanes are likely to be new facilities associated with major corridor reconstruction, and existing HOV facilities with large excess capacity. When the conversion of an existing HOV facility is contemplated, the degree of current and anticipated future utilization of the facility should be examined carefully. Underutilization cannot be defined according to uniform national standards but, rather, should be determined locally by the responsible transportation agency in consultation with local elected officials and stakeholders. Toll Structure An issue of prime importance is to determine correctly the system of variable charges that will maintain a high level of service in the HOT lanes and not impact adversely current bus and carpool usage. A related issue concerns the choice between dynamic pricing and a fixed stepped toll schedule. The determination should take into account the degree of congestion in the adjoining general purpose lanes, the expected time savings by users of the HOT lane and the limitations of ETC technology. Use of Revenues The expected revenue generated by a HOT lane facility and the cost to operate and administer the project should be estimated carefully. The proposed uses of revenues may have considerable influence on public support, which appears to be highest if the revenue is dedicated to improving transportation service and commuting conditions within the corridor. Public Reaction Expected public reaction toward HOT lane conversion should be weighed carefully. While there has been generally good public acceptance of the HOT lane and value pricing concepts that offer a new choice to travelers, critics may object to charging for the use of facilities that already have been paid for. Concerns that HOT lanes might 38 ITE JOURNAL / JUNE 1998

create a two-tier highway system with Lexus lanes serving only affluent motorists should be addressed openly. Opinion surveys indicate that these concerns have lessened as evidence has emerged showing that the mix of vehicles using HOT lanes and the income levels of HOT lane users are substantially the same as those of nonusers. CONCLUSION This preliminary informational report is intended to provide a first overview of the concepts of HOT lanes and value pricing. Although the available data and experience are still limited, the task force felt that a publication of an interim report is warranted in view of the intense interest in the subject on the part of state and local officials and the transportation community. Careful monitoring of the current projects, as well as additional experience from new HOT lane/value pricing projects, is needed to strengthen the confidence in and to enhance future understanding of these concepts. References 1. Gordon J. Fielding and Daniel B. Klein. High Occupancy Toll Lanes: Phasing In Congestion Pricing a Lane at a Time, Policy Study No. 170. Reason Foundation, November 1993; see also, High Occupancy/Toll (HOT) Lanes vs. Traditional HOV Lanes: Where Do We Go From Here? Innovation Briefs, Vol. 7, No. 6, December 1996. 2. California Private Transportation Company. 1996 Annual Report. 3. Carl B. Williams. Are HOV Lanes Alone Effective? Engineering News Record, Sept. 23, 1996. 4. Fear of Lexus Lanes Unfounded. USA Today, March 3, 1996. 5. State Route 91 High Occupancy/Toll Lanes Opinion Surveys. Orange County Transportation Authority Staff, May 12, 1997 (unpublished). 6. Sullivan, Edward C. Impacts of Implementing the California Route 91 Variable-Toll Express Lanes. Paper prepared for presentation at ITE Annual Meeting, Boston, Aug. 4 6, 1997; The SR91 Toll Lanes Observed Impacts and Other Observations. Paper prepared for presentation at the 77th Annual Meeting of the Transportation Research Board, January 1998; K.A. Mastako, L.R. Rilet and E.C. Sullivan. Commuter Behavior on California SR91 After Introducing Variable Toll Express Lanes. Paper prepared for presentation at the 77th Annual Meeting of the Transportation Research Board, January 1998. 7. San Diego Association of Governments. I- 15 Congestion Pricing Project, March 19, 1997; February 1998 Update. 8. SANDAG Resolution 98-20. Nov. 21, 1997 and attachment, Status of Operations and Description of Proposed Full Implementation Fee Schedule for the I-15 Value Pricing Project. SANDAG, I-15 Express News; private communications with SANDAG staff. 9. Stockton, W.R., C.L. Grant, C.J. Hill, F. McFarland, N.R. Edmonson and M. Ogden. Feasibility of Priority Lane Pricing on the Katy HOV Lane: Feasibility Assessment. College Station, Texas, USA: Texas Transportation Institute Report No. 2701-1F, 1997. 10. Luisa Paiewonsky. A New Approach to HOV Entry Requirements: MassHighways s 3+/Limited 2+ Sticker Program. Paper prepared for presentation at the 77th Annual Meeting of the Transportation Research Board, January 1998. 40 ITE JOURNAL / JUNE 1998