Regional HOT lane network going back to the drawing board

Interstate 680 through the Sunol Grade. Courtesy of John K.

When last updating the Bay Area’s Regional Transportation Plan (RTP) in Spring 2009, the Metropolitan Transportation Commission reserved a distinguished place in the RTP for its planned regional network of high-occupancy toll (HOT) lanes.  The plan envisions freeway motorists paying tolls via FasTrak to beat the traffic jams, by entering specific lanes otherwise designated for high-occupancy vehicles.  Tolls would be priced dynamically throughout the day– increasing as freeways become more congested at peak travel times, and adjusting in order to maintain a relatively free-flowing traffic lane.

At full build, this network would comprise some 800 lane miles of toll lanes on most major freeways throughout the region.  About 500 of those lane miles would be built by converting existing carpool lanes to toll lanes, but the plan also calls for the construction of about 300 new lane miles.  In September 2010, the first segment of the network is expected to debut — a 14-mile southbound HOT lane on Interstate 680 through the Sunol Grade, between Route 84 in Alameda County and Route 237 in Santa Clara County.  It will be followed in Fall 2011 by the second segment — a 12-mile eastbound HOT lane on Interstate 580 in the Tri-Valley, between Hacienda Road and Greenville Road.

Optimistic assumptions paint a rosy view of the HOT network as a major new source of money for transit.  Although it would cost about $7.6 billion to finance, construct, and operate the HOT network over the next 25 years, the network was projected to generate $13.7 billion in the same time period, yielding a net revenue of $6.1 billion.  In other words, a veritable bank account overflowing with gold coins that could be used to deliver an expanded transit network. Already, before lanes are even in place, MTC has planned to use theoretical HOT revenue to close anticipated funding shortfalls, and the tolls will no doubt be regarded as a possible funding source for BART to Livermore and other projects.

There is, of course, a less rosy version.  By insisting on wider freeways, rather than simply converting existing lanes in each corridor, the HOT network as adopted would increase regional freeway capacity by building 300 new lane miles, and thereby induce an increase in driving demand commensurate with that increase in capacity.  To be fair, the Bay Area spends a comparatively small share of its regional transportation funding on roadway expansion, and in this respect is the best among its peers in California.  But given the upcoming task of preparing a Sustainable Communities Strategy to meet an ambitious target for reducing regional transportation emissions, it is fair to question how appropriate it is to leverage HOT revenue as a means of explaining away a plan that seems strategically designed to complete “unfinished” roads.

It is similarly fair to question whether the resulting revenue will cover the HOT network’s capital and operating costs, let alone become a significant source of new funding for public transit.  After all, it’s not like the whole freeway would be tolled — just the one lane.  And if the profitable segments of the HOT lane network, to the extent they exist, merely serve to subsidize other segments that operate at a loss, then at what point would transit see any of that money, and how much?  Not to mention the fact that transit would already suffer from competing with widened freeways.

MTC has not changed its position as to the underlying value of the HOT lane network, freeway widening and all.  Nonetheless, it will be going back to the drawing board because of a combination of circumstances that have emerged since adopting the RTP in Spring 2009.  One issue concerns Assembly Bill 744, introduced by Assemblymember Alberto Torrico (D-Fremont), which has been working its way through the State Legislature.  The objective of AB 744 is to authorize the Bay Area Toll Authority (BATA), which currently administers bridge toll revenue, to issue revenue bonds and to manage and oversee the HOT lane network.  The bill has been at the Senate Appropriations Committee but is collapsing under its own weight, as environmental groups sought amendments removing some segments, while traffic engineers sought more control for Caltrans over project design.

Possible smaller HOT lane network, with corridors color-coded by potential. Courtesy of MTC.

Another issue relates to what we discussed above: How much revenue can we realistically expect to go into Bay Area coffers, taking into account both lane usage and project costs?  The whole HOT lane network is, after all, premised on the assumption that motorists will be willing to pay a toll if it means a faster journey and escaping significant freeway congestion.  But commuting and congestion decrease during recessions, and the HOT revenue projections did not take into account an economic downturn.  Incorporating more realistic employment and commuting assumptions will reveal less single-occupancy vehicle demand for the HOT lanes, and thus less revenue.  Moreover, incorporating realistic cost assumptions further undercut those lower projected revenues.  Extending the construction schedule, as well as adding in right-of-way and other costs not properly accounted for (or not accounted for at all) in prior estimates adds approximately $1.4 billion to the project costs.  This is hardly a surprising development, as MTC has an ostensible penchant for under-reporting project costs.

In light of the lower projected revenue, higher projected costs, and legislative issues, it’s clear the current approach is not working.  MTC is now beginning to formulate an alternative approach to authorize at least an initial core subset of its treasured HOT lane network.  First, the plan will have to be downsized.  One possibility is pictured above — a network of 460 lane miles, priced at a cost of $3 billion.  This smaller network focuses on especially important segments of I-80, U.S. 101, I-580, I-680, and I-880.  Click here to compare it to the full network previously adopted as part of the RTP.

But without AB 744, how would even a more minimal HOT lane network be authorized?  There is an alternative path that could be pursued, by making use of Assembly Bill 798.  AB 798 authorizes the California Transportation Commission to approve applications for up to two HOT facilities in Northern California, provided that those applications are filed before the end of 2011.  And as for the revenue bonds?  The bill also creates a new governmental entity, the California Transportation Financing Authority, which can grant regional agencies like MTC the authority to issue revenue bonds for certain transportation projects, like the HOT network, that are backed by toll revenue.

MTC may ultimately choose to pursue a variant of this approach.  If so, it will need to finalize an application to submit to CTC in 2011.  There is no firm plan yet, but this is something else to keep an eye on.