1. Evaluation of a New Approach to Address Metropolitan Congestion
TRB Transportation Planning Applications Conference
Raleigh, NC, May 16, 2017
Patrick DeCorla-Souza,
FHWA Center for Innovative Finance Support
and USDOT Build America Bureau
This presentation explores the potential impact of a new P3 approach to address current transportation challenges – specifically, funding for freeway reconstruction and metropolitan mobility – and evaluates it using FHWA’s P3-VALUE 2.0 analytical tool.

2. Challenges and Opportunities
Addressing highway funding and efficiency goals
Solution:
Congestion-priced tolls in peak hours ONLY on a single managed lane
Challenges:
High costs for reconstruction
Need for capacity expansion
Opportunities:
Transformative technologies
Public acceptance of tolling
The Interstate Highway System is 50 years old. Strained to capacity, especially in metropolitan areas, it needs to be rebuilt and congestion issues need to be resolved despite dwindling fuel tax-funded revenues. The fundamental challenge is creating the revenue stream to fund the needed improvements.
This presentation discusses and evaluates a potential solution: Congestion-priced tolls in peak hours ONLY on a single managed lane created by re-striping freeways, using P3 concessions to accelerate delivery, spur innovation, and bring in the expertise needed to manage the new technologies and enhance them.

3. Part-Time Shoulder Travel Lane
This picture shows what is known in the U.S. as a “Part-Time (or Dynamic) Shoulder Travel Lane.” These lanes are new travel lanes created for use during peak periods only, by converting the right or left shoulder of a freeway into a travel lane without increasing the width of the freeway footprint. The existing pavement of the freeway is restriped to create narrower regular lanes and make additional pavement width available for the shoulder lane.
Note that the concept involves operating shoulder lanes only during times of congestion. When the traffic volumes drop below congested conditions, the mobility benefits of using a shoulder for a travel lane drop considerably, while at the same time safety analysis points to returning the lane to a safety shoulder during these off-peak periods.
Also, note that the dynamic shoulder lane (or any of the other lanes) can be shut down using overhead lane controls, as shown in the picture, if there is an incident that warrants closing the lane(s).
February 26, 2009

4. Highway Reconfiguration
Existing
New
The proposed concept would:
•Impose congestion-priced tolls (similar to those on “managed” or “HOT” lanes) during rush hours only.
•Only the left-most lane would be priced, and the right shoulder would be converted to a “dynamic” travel lane that operates only during rush hours, leaving the same number of toll-free lanes as before the conversion.
•The free-flowing priced lane would be made available free of charge to transit vehicles and all HOVs with 3 or more occupants to incentivize shared commuting and reduce congestion on the highway.
Free for registered rideshare vehicles & transit
February 26, 2009

5. P3 Concession Payment Mechanism
Availability payment
A new P3 payment model could could be used to incentivize the concessionaire to encourage and promote shared commuting. The concessionaire would continue to set toll rates to ensure efficient operations (as in a toll concession), but all toll revenue would go to the public agency, as in an availability payment concession.
The concessionaire would be compensated with a two part payment. The first part would be an availability payment sufficient to pay for debt service and O&M costs. The second part, covering the return on equity, would be dependent on person throughput on the entire facility (i.e., all lanes). There would be a “per person mile of travel (PMT)” fee paid to the concessionaire by the agency. Such usage-based payments are often called “shadow tolls.”

6. Shadow Tolls
Payments to concessionaire from public agency, based on “person miles” of travel on managed lanes
Transit passengers
HOV-3 rideshare vehicle passengers
SOVs
All real toll revenues go to public agency
HOVs on managed lanes would be identified by their use of switchable transponders. All other passenger cars would be assumed to have a single occupant. Transit passengers would be counted based on fare collections. The concessionaire would be incentivized to develop innovations and perform outreach activities to encourage ridesharing vehicles and transit.
Shadow tolls would only be paid for PMT served during the rush hours, when pro-active management of traffic flow is needed, up to a specified maximum payment cap, which would be based on a reasonable rate of return on equity. The shadow toll regime would be set in the Request for Proposals (RFP) and bidders would be asked to bid on the lowest availability payment amount they are willing to accept.
Shadow tolls would be paid for PMT on managed lanes only if vehicles are served at speeds required by performance standards laid down in the P3 agreement. Real toll rates on managed lanes would rise as high as they need to be in order to manage demand effectively and maintain required speeds.
The payment mechanism would incentivize the concessionaire to manage traffic on the entire facility to prevent the loss of throughput that accompanies traffic flow breakdowns on regular lanes.

7. Shadow Tolls Provides incentive to encourage managed lane use by HOVs
Minimum required speed to be met on managed lanes
Real toll rates set by concessionaire
Real toll rates on managed lanes would rise as high as they need to be in order to manage demand effectively and maintain required speeds.
The payment mechanism would incentivize the concessionaire to manage traffic on the entire facility to prevent the loss of throughput that accompanies traffic flow breakdowns on regular lanes.

8. Evaluation Questions
How are agency budget and public welfare affected by:
Project itself
Delay of 5 years in conventional delivery
P3 delivery
The rest of this presentation discusses results of financial and economic analyses, using P3-VALUE 2.0, to answer the following key questions:
Could the concept provide net societal benefits and what might be the magnitude of the additional net benefits?
Could the concept be affordable within the agency’s budget? If not, what would be the magnitude of the contribution from the agency’s budget required to make the concept financially viable?
The evaluation is undertaken for a prototypical illustrative freeway segment – a 20-mile long, 6-lane facility. Only Year 1 impacts are assessed for this illustration, and to be conservative, we assume that transit and ridesharing usage stays at the same levels throughout the P3 concession -- i.e., ridesharing and transit use will not increase over the concession period of 30 years.

9. Prototypical Project
Existing 20-mile, 6-lane freeway

10. P3-VALUE Evaluation Process
No Build
Accelerated Conventional Delivery
Delayed Conventional Delivery
P3 Delivery
Impacts of Project Scope
Impacts of Delay in Public Financing
Impacts of P3 Delivery Method
We use FHWA’s P3-VALUE 2.0 model for the analysis. The process used by the P3-VALUE 2.0 tool to perform calculations is beyond the scope of this presentation. The tool and guide are available on FHWA’s P3 Toolkit website. (Just Google “FHWA P3 Toolkit”).
P3-VALUE uses a 3-step process:
First, the benefits of the project concept are estimated, assuming conventional delivery that is not constrained by financial realities.
Second, the tool assesses impacts of delaying the project due to the public agency’s financial constraints.
Finally, the impacts of delivering the project as a P3 are estimated, comparing P3 delivery to conventional delivery.

11. Step 1: Project Evaluation ($M present value)
This slide shows that the concept provides the agency with a significant budgetary surplus, while also providing significant benefits to facility users – both SOVs and transit and carpool passengers. Conventional delivery is assumed, albeit without public agency financial constraints, so it is termed “Accelerated Conventional Delivery.”
Agency revenues from tolls exceed agency costs, including payments to the P3 concessionaire, by over $430 million.
SOV drivers receive net benefits of over $250 million after accounting for their costs in tolls.
Transit and carpool passengers receive net benefits in excess of $110 million after accounting for fares paid.

12. Step 2: Delay Evaluation ($M in present value)
This slide shows that delaying implementation of the concept by 5 years, due to financial constraints, reduces the agency’s budgetary surplus, while also reducing benefits to facility users – both SOVs and transit and carpool passengers. The comparison is between Accelerated Conventional Delivery and Delayed Conventional Delivery.
Agency surplus is reduced by $88 million (from over $430 million), i.e., by about 20%
SOV net benefits are reduced by $141 million (from over $250 million), i.e., by more than 50%.
Transit and carpool passenger net benefits are reduced by $22 million (from over $110 million), i.e., by 20%.

13. Step 3: P3 Delivery Evaluation ($M in present value)
This slide shows that accelerating implementation of the concept, and using a P3, increases the agency’s budgetary surplus, and also increases benefits to facility users – both SOVs and transit and carpool passengers. The comparison is between P3 Delivery and Delayed Conventional Delivery.
Agency surplus increases by $74 million (most of the $88 million reduction due to delayed delivery is regained).
SOV net benefits increase by $177 million due mainly to even faster delivery than under accelerated conventional delivery (i.e., it is higher than the $141 million lost by delayed conventional delivery).
Transit and carpool passenger net benefits increase by $51 million. (This is more than the $22 million lost by delayed conventional delivery).

14. Summary Illustrative project evaluation suggests:
Improved agency financial position
Significant increase in public welfare
P3 option provides significant increase in benefits
We have presented a potential scenario for funding freeway reconstruction that involves creating a new managed lane within the existing highway footprint. We have then attempted to assess potential impacts of using a P3 delivery mechanism to deliver the concept.
The potential financial and economic impacts of the concept are assessed using an illustrative hypothetical project. The results of the analysis suggest that the approach could provide significant benefits to the agency – through an excess of revenues over costs -- as well as net economic benefits to the travelling public, even if the project were to be delayed due to the agency’s financial constraints. Accelerating project delivery and using P3 delivery would further increase benefits significantly. These results are illustrative and are solely based on assumptions made in this specific hypothetical case. They should not be generalized to conclude that the proposed approach will always deliver agency budgetary surplus or net public welfare benefits.

15. Contact Information
Patrick DeCorla-Souza
P3 Program Manager
USDOT Build America Bureau
& FHWA Center for Innovative Finance Support
(202)