Final Policy Statement on When High-Occupancy Vehicle (HOV) Lanes Converted to High-Occupancy/Toll (HOT) Lanes Shall Be Classified as Fixed Guideway Miles for FTA's Funding Formulas and When HOT Lanes Shall Not Be Classified as Fixed Guideway Miles for FTA's Funding Formulas, 1366-1372 [E7-263]

Download as PDF 1366 Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices DEPARTMENT OF TRANSPORTATION Federal Transit Administration [Docket No: FTA–2006–25750] Final Policy Statement on When HighOccupancy Vehicle (HOV) Lanes Converted to High-Occupancy/Toll (HOT) Lanes Shall Be Classified as Fixed Guideway Miles for FTA’s Funding Formulas and When HOT Lanes Shall Not Be Classified as Fixed Guideway Miles for FTA’s Funding Formulas Federal Transit Administration (FTA), DOT. ACTION: Final policy statement. cprice-sewell on PROD1PC66 with NOTICES AGENCY: SUMMARY: This notice supersedes the notice published in the Federal Register by FTA on December 27, 2006, at 71 FR 77862. This notice corrects certain typographical errors that appeared in the prior notice, makes non-substantive revisions to the prior notice and reorders the sections of the prior notice. This final policy statement describes the terms and conditions on which the Federal Transit Administration (FTA) will classify High-Occupancy Vehicle (HOV) lanes that are converted to HighOccupancy/Toll (HOT) lanes as ‘‘fixed guideway miles’’ for purposes of the transit funding formulas administered by FTA. This final policy statement also describes when FTA will not classify HOT lanes as fixed guideway miles for purposes of the transit funding formulas administered by FTA. DATES: Effective Date: The effective date of this final policy statement is January 11, 2007. ADDRESSES: Availability of the Final Policy Statement and Comments: Copies of this final policy statement and comments and material received from the public, as well as any documents indicated in this notice as being available in the docket, are part of docket number FTA–2006–25750. For access to the DOT docket, please go to https://dms.dot.gov at any time or to the Docket Management System facility, U.S. Department of Transportation, Room PL–401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: David B. Horner, Esq., Chief Counsel, Office of Chief Counsel, Federal Transit Administration, 400 Seventh Street, SW., Washington, DC 20590–0001, (202) 366–4040, david.horner@dot.gov; or Robert J. Tuccillo, Associate Administrator, Office of Budget & VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 Policy, Federal Transit Administration, 400 Seventh Street, SW., Washington, DC 20590–0001, (202) 366–4050, robert.tuccillo@dot.gov. Office hours are from 8:30 a.m. to 5 p.m., Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: This document is organized in the following sections: I. Background II. Final Policy Statement on HOV-to-HOT Conversion III. Response to Comments Received I. Background On September 7, 2006, the Federal Transit Administration (FTA) published in the Federal Register (at 71 FR 52849), a proposed policy on (i) when HighOccupancy Vehicle (HOV) lanes converted to High-Occupancy/Toll (HOT) lanes shall be classified as ‘‘fixed guideway miles’’ for the purpose of FTA’s funding formulas and (ii) when HOT lanes shall not be classified as fixed guideway miles for the purpose of FTA’s funding formulas. The proposed policy reads as follows: FTA would classify HOT lanes as ‘‘fixed guideway miles’’ for purposes of the funding formulas administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each of the following conditions is satisfied: (i) The HOT lanes were previously HOV lanes reported in the National Transit Database as fixed guideway miles for purposes of the funding formulas administered by FTA under 49 U.S.C. 5307 and 49 U.S.C. 5309; (ii) The HOT lanes are continuously monitored and continue to meet performance standards that preserve free flow traffic conditions as specified in 23 U.S.C. 166(d); and (iii) Program income from the HOT lane facility, including all toll revenue, is used solely for ‘‘permissible uses.’’ The proposed policy also addressed whether FTA should require certain transit and tolling policies with respect to HOT lanes classified as fixed guideway miles, and whether FTA should require the return of funds made available under Full Funding Grant Agreements for the construction of HOV lanes that have later been converted to HOT lanes. II. Final Policy Statement on HOV-toHOT Conversion This final policy statement explains when FTA shall classify HOV lanes converted to HOT lanes as ‘‘fixed guideway miles’’ for the purpose of FTA’s funding formulas and when FTA shall not classify HOT lanes as fixed guideway miles for the purpose of its funding formulas. Overview Since the early 1980s, transportation officials have sought to manage traffic PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 congestion and increase vehicle occupancy by means of HighOccupancy Vehicle (HOV) lanes— highway lanes reserved for the exclusive use of car pools and transit vehicles. Today, there are over 130 freeway HOV facilities in metropolitan areas in the US,1 of which approximately ten have received funding through FTA’s Major Capital Investment program and approximately eighty are counted as fixed guideway miles for purposes of FTA’s formula grant programs.2 Since 1990, however, HOV mode share in thirty-six of the forty largest metropolitan areas has steadily declined,3 while both excess capacity on HOV lanes and congestion on general purpose lanes have increased.4 An increasing number of metropolitan areas are considering new demand management strategies as alternatives to HOV lanes. One emerging alternative is the variably-priced High-Occupancy/ Toll (HOT) lane. HOT lanes combine HOV and pricing strategies by allowing Single-Occupant Vehicles (SOVs) to access HOV lanes by paying a toll. The lanes are ‘‘managed’’ through pricing to maintain free flow conditions even during the height of rush hours. HOT lanes provide multiple benefits to metropolitan areas that are experiencing severe and worsening congestion and significant transportation funding shortages. First, variably-priced HOT lanes expand mobility options in congested urban areas by providing an opportunity for reliable travel times for users prepared to pay a premium for this service. HOT lanes also improve the efficiency of HOV facilities by allowing toll-paying 1 Office of Operations, Federal Highway Administration, U.S. Department of Transportation. 2 National Transit Database. 3 Journey to Work Trends in the United States and its Major Metropolitan Areas 1960–2000, Publication No. FHWA–EP–03–058 Prepared for: U.S. Department of Transportation, Federal Highway Administration, Office of Planning, Prepared by: Nancy McGuckin, Consultant, Nanda Srinivasan, Cambridge Systematics, Inc. 4 Office of Operations, Federal Highway Administration, U.S. Department of Transportation. Demand for highway travel by Americans continues to grow as population increases, particularly in metropolitan areas. Construction of new highway capacity to accommodate this growth in travel has not kept pace. Between 1980 and 1999, route miles of highways increased 1.5 percent while vehicle miles of travel increased seventy-six percent. The Texas Transportation Institute estimates that, in 2000, the seventy-five largest metropolitan areas experienced 3.6 billion vehicle-hours of delay, resulting in 5.7 billion gallons in wasted fuel and $67.5 billion in lost productivity. And traffic volumes are projected to continue to grow. The volume of freight movement alone is forecast to nearly double by 2020. Congestion is largely thought of as a big city problem, but delays are becoming increasingly common in small cities and some rural areas as well. E:\FR\FM\11JAN1.SGM 11JAN1 cprice-sewell on PROD1PC66 with NOTICES Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices SOVs to utilize excess lane capacity on HOVs. In addition, HOT lanes generate new revenue which can be used to pay for transportation improvements, including enhanced transit service. In August of 2005, recognizing the advantages of HOT lanes, the U.S. Congress enacted Section 112 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA–LU), codified at 23 U.S.C. 166, to authorize States to permit use of HOV lanes by SOVs, so long as the performance of the HOV lanes is continuously monitored and continues to meet specified performance standards. The U.S. Department of Transportation (Department) has strongly endorsed the conversion of HOV lanes to variably-priced HOT lanes, most recently in its Initiative to Reduce Congestion on the Nation’s Transportation Network. It is the Department’s policy to encourage jurisdictions to consider ‘‘HOV-to-HOT’’ conversion as a means of congestion relief and possible revenue enhancement. The ability of HOT lanes to introduce additional traffic to existing HOV facilities, while using pricing and other management techniques to control the number of additional motorists, maintain high service levels and provide new revenue, make HOT lanes an effective means of reducing congestion and improving mobility. For this reason, and given the new authority enacted by Congress to promote ‘‘HOVto-HOT’’ conversions, many States, transportation agencies and metropolitan areas are seriously considering applying variable pricing to both new and existing roadways. For example, the current long-range transportation plan for the Washington, DC, metropolitan area includes four new HOT lanes along fifteen miles of the Capital Beltway in Virginia, and six new variably-priced lanes along eighteen miles on the Inter-County Connector in Montgomery and Prince George’s Counties in Maryland.5 Virginia is also exploring the possibility of converting existing HOV lanes along the I–95/395 corridor into HOT lanes.6 Maryland is considering express toll lanes along I– 495, I–95 and I–270, as well as along other facilities.7 Similarly, in San Francisco, the Metropolitan Transportation Commission’s Transportation 2030 Plan advocates development of a HOT network that 5 Letter to U.S. Department of Transportation, August 28, 2006, from National Capital Region Transportation Planning Board. 6 Id. 7 Id. VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 would convert that region’s existing HOV lanes to HOT lanes; 8 Houston’s 2025 Regional Transportation Plan includes plans to implement peak period pricing within the managed HOT lanes of the major freeway corridors in the region; 9 and the Miami-Dade, Florida 2030 Transportation Plan includes conversion of existing HOV lanes to reversible HOV/HOT lanes to provide additional capacity to I–95 in Miami-Dade County.10 Other jurisdictions are exploring the potential for HOT lanes with grants provided by the Department’s Value Pricing Pilot Program.11 These include the Port Authority of New York/New Jersey; San Antonio, Texas; Seattle, Washington; Atlanta, Georgia; and Portland, Oregon.12 While an increasing number of metropolitan planning organizations and State departments of transportation are studying the HOT lane concept as a strategy to improve mobility, six HOT lane facilities currently operate in the United States: State Route 91 (SR 91) Express Lanes in Orange County, California; the I–15 FasTrak in San Diego, California; the Katy Freeway QuickRide and the Northwest Freeway (US 290) in Harris County, Texas; I–394 in Minneapolis and St. Paul, Minnesota; and I–25 in Denver, Colorado. Prior FTA Policy Since 2002, FTA’s policy has been to continue to classify the lanes of an HOV facility converted to HOT lanes as fixed guideway miles for funding formula purposes on the condition that the facility meets two requirements: (i) The HOT facility manages SOV use so that it does not impede the free-flow and high speed of transit and highoccupancy vehicles and (ii) toll revenues collected on the facility will be used for mass transit purposes.13 FTA 8 A Vision for the Future Transportation 2030, February 2005, Chapter 1, Page 6. 9 2025 Regional Transportation Plan HoustonGalveston Area, June 2005, Page 31. 10 Miami-Dade Transportation Plan (to the Year 2030) December 2004, FINAL DRAFT, Page 24. 11 Federal Highway Administration, U.S. Department of Transportation. The Department’s Value Pricing Pilot Program (VPPP), initially authorized by the Intermodal Surface Transportation Efficiency Act as the Congestion Pricing Pilot Program and continued as the VPPP under SAFETEA–LU, encourages implementation and evaluation of value pricing pilot projects, offering flexibility to encompass a variety of innovative applications including areawide pricing, pricing of multiple or single facilities or corridors, single lane pricing, and implementation of other market-based strategies. 12 Federal Highway Administration, U.S. Department of Transportation. 13 In a Letter to U.S. Representative Randall Cunningham, dated June 10, 2002, concerning the I–15 FasTrak facility in San Diego, FTA stated: PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 1367 has considered requiring as an additional condition for eligibility that the lowest toll payable by SOVs on a HOT facility be not less than the fare charged for transit services on the HOT facility. Final FTA Policy (a) Purpose of Final Policy. This final policy statement will help ensure that Federal transit funding for congested urban areas is not decreased when existing HOV facilities are converted to variably-priced HOT lanes in an effort by localities to reduce congestion, improve air quality, and maximize throughput using excess HOV lane capacity. The policy will also promote a uniform approach by the Department’s operating agencies concerning HOV-toHOT conversions. In particular, FTA’s policy will be coordinated with the statutes enacted by the U.S. Congress under Section 112 of SAFETEA–LU applicable to the Federal Highway Administration that are intended to simplify conversion of HOV lanes to HOT lanes. The policy will also support the Department’s objective of encouraging HOV-to-HOT conversions. (b) Final Policy. FTA shall classify HOT lanes as fixed guideway miles for purposes of the funding formulas administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each of the following conditions is satisfied: (i) The HOT lanes were previously 14 HOV lanes reported in the National Transit Database as fixed guideway miles for purposes of the funding formulas administered by FTA under 49 ‘‘* * * FTA will recognize, for formula allocation purposes, exclusive fixed guideway transit facilities that permit toll-paying SOVs on an incidental basis (often called high occupancy/toll (HOT) lanes) under the following conditions: the facility must be able to control SOV use so that it does not impede the free flow and high speed of transit and HOV vehicles, and the toll revenues collected must be used for mass transit purposes.’’ 14 With respect to whether HOT lanes were previously HOV lanes reported in the National Transit Database (‘‘NTD’’) as ‘‘fixed guideway miles,’’ HOV facilities classified as ‘‘fixed guideway miles’’ in the NTD on or before date of the publication of this final policy statement shall satisfy this requirement. With respect to HOV lanes that have not been classified as ‘‘fixed guideway miles’’ in the NTD on or before the date of publication of this final policy statement, such HOV lanes may not be converted to HOT lanes and maintain their classification as ‘‘fixed guideway miles’’ unless: (i) The HOV lanes have reported to the NTD as ‘‘fixed guideway miles’’ for three years prior to their conversion to HOT lanes, (ii) users of public transportation have accounted for at least 50% of the passenger miles traveled on the HOV lanes in their last twelve months of service (or once the HOV lanes are converted to HOT lanes, users of public transportation are reasonably expected to account for at least 50% of the passenger miles traveled on the HOT lanes in their first twelve months of service), or (iii) in his or her discretion, the Administrator so approves. E:\FR\FM\11JAN1.SGM 11JAN1 1368 Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices cprice-sewell on PROD1PC66 with NOTICES U.S.C. 5307(b) and 49 U.S.C. 5309(a)(E).15 Facilities that were not eligible HOV lanes prior to being converted to HOT lanes will remain ineligible for inclusion as fixed guideway miles in FTA’s funding formulas. Therefore, neither non-HOV facilities converted directly to HOT facilities nor facilities constructed as HOT lanes will be eligible for classification as fixed guideway miles.16 (ii) The HOT lanes are continuously monitored and continue to meet performance standards that preserve free flow traffic conditions as specified in 23 U.S.C. 166(d). 23 U.S.C. 166(d) provides operational performance standards for an HOV facility converted to a HOT facility. It also requires that the performance of the facility be continuously monitored and that it continue to meet specified performance standards. Due to original project commitments, HOV facilities constructed using capital funds available under 49 U.S.C. 5309(d) or (e) may be required, when converted to HOT lanes, to achieve a higher performance standard than required under 23 U.S.C. 166(d). Standards for operational performance and determining degradation of operational performance for facilities constructed with funds from FTA’s New Starts program shall be determined by FTA on a case-by-case basis. FTA will require real-time monitoring of traffic flows to ensure on-going compliance with operational performance standards. (iii) Program income from the HOT lane facility, including all toll revenue, 15 FTA apportions amounts made available for fixed guideway modernization under 49 U.S.C. 5309 pursuant to fixed guideway factors detailed at 49 U.S.C. 5337. One of these fixed guideway factors, located at 49 U.S.C. 5337(a)(5)(B), apportions a percentage of the available fixed guideway modernization funds to ‘fixed guideway systems placed in revenue service at least seven years before the fiscal year in which amounts are made available.’ For purposes of 49 U.S.C. 5337(a)(5)(B), (i) no HOV facility that has been in revenue service at least seven years shall forfeit its eligibility for fixed guideway modernization funds because it is converted to a HOT lane facility in accordance with this final policy statement; and (ii) no HOV facility that has been in revenue service for less than seven years shall forfeit the years it has accrued under 49 U.S.C. 5337(a)(5)(B) because it is converted to a HOT lane facility and for so long as the HOT lane facility maintains its ‘‘fixed guideway’’ classification in accordance with this final policy statement, it shall continue to accrue years thereunder. 16 FTA recognizes one exception to this statement—bus-only shoulders. Accordingly, FTA shall classify HOT lane facilities converted from bus-only shoulders as fixed guideway miles, so long as such HOT lanes satisfy the conditions set forth in sections II(b)(ii) and (iii) of this final policy statement and were bus-only shoulders previously reported in the National Transit Database as fixed guideway miles for purposes of the funding formulas administered by FTA under 49 U.S.C. 5307 and 5309. VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 is used solely for ‘‘permissible uses.’’ ‘‘Permissible uses’’ means any of the following uses with respect to any HOT lane facility, whether operated by a public or private entity: (a) Debt service, (b) a reasonable return on investment of any private financing, (c) the costs necessary for the proper operation and maintenance of such facility,17 and (d) if the operating entity annually certifies that the facility is being adequately operated and maintained (including that the permissible uses described in (a), (b) and (c) above, if applicable, are being duly paid), any other purpose relating to a project carried out under Title 49 U.S.C. 5301 et seq. In cases where the HOT lane facility has received (or receives) funding from FTA and another Federal agency, such that use of the facility’s program income is governed by more than one Federal program, FTA’s restrictions concerning permissible use shall not apply to more than transit’s available share 18 of the facility’s program income. FTA shall not require recipients to assign priority in payment to any permissible use. (c) Transit Fares and Tolls on HOT Lane Facilities. FTA shall not condition the classification of HOT lanes converted from HOV lanes as fixed guideway miles, or condition any approval or waiver under a Full Funding Grant Agreement, on a grantee’s adopting transit fare policies or a tolling authority’s adopting of tolling policies concerning, respectively, the price of transit services on the HOT lane facility and the tolls payable by SOVs. Instead, FTA shall permit grantees and tolling authorities to develop their own fare structures for transit services and tolls, respectively, on HOT lane facilities. Transit fares shall remain subject to 49 U.S.C. 332 (Nondiscrimination) and 49 U.S.C. 5307 (Urbanized area formula grants), however. 17 The costs necessary for the proper operation and maintenance of a HOT lane facility may include reconstruction, rehabilitation, and the costs associated with operating transit service on the facility. 18 Transit’s allocable share of the facility’s program income shall be an amount equal to the facility’s total program income, for any period, multiplied by a ratio, (a) The numerator of which shall be the cumulative amount of funds contributed to the facility through a program established by transit law, and (b) the denominator of which shall be the cumulative amount of all Federal, State and local capital funds contributed to the facility, in each case at the time transit’s allocable share is calculated. For purposes of 49 CFR part 18.25, (i) amounts other than transit’s allocable share shall not constitute program income and (ii) any expenditure of transit’s allocable share that is not deducted from outlays made under transit law shall be deemed an ‘‘alternative’’ under 49 U.S.C. 18.25(g) and deemed by FTA a term of the grant agreement. PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 (d) No Return of Funds under Full Funding Grant Agreements. In the event that an HOV facility is converted to a HOT facility and the HOV facility has received funds through FTA’s New Starts program, FTA shall not require the grantee to return such funds so long as the facility complies with the conditions set forth in this final policy statement and the original grant agreement or Full Funding Grant Agreement, as applicable. III. Response to Comments Received Thirty-four parties submitted comments in response to FTA’s proposed policy, published in the Federal Register on September 7, 2006, at 71 FR 52849 (the proposed policy). This section responds to those comments by topic in the following order: (a) Policy Statement Generally; (b) HOT Lanes Were Previously HOV Lanes Reported in the National Transit Database as ‘‘Fixed Guideway Miles’’; (c) Monitoring and Performance Standards; (d) Program Income and Toll Revenues; (e) Transit Fares and Tolls; (f) Return of Funds under Full Funding Grant Agreements; and (g) Miscellaneous Comments. (a) Policy Statement Generally. The purpose of the proposed policy was to ensure that Federal transit funding for congested urban areas would not be decreased if HOV facilities were converted to variably-priced HOT lanes. The proposed policy also sought to achieve a uniform approach among the operating agencies of the Department concerning HOV-to-HOT conversions, and supported the Department’s policy of encouraging HOV-to-HOT conversions. Eight commenters agreed generally with FTA’s proposed policy. Six parties submitted general comments. Four commenters asked FTA to defer its final policy determination until the impacts become more apparent. One commenter articulated four policy principles that discuss ways to integrate transit into toll roads and HOT lanes.19 Another commenter stated that one of FTA’s top priorities in developing the policy should be to foster an increase in alternative transportation ridership— whether that alternative is carpool, vanpool, transit, or other shared-mode— and suggested four ways the policy 19 The commenter’s suggested policy principles are as follows: (1) Metropolitan areas and states should have greater latitude to use roadway tolling; (2) Tolling should be a supplement to and not a substitution for existing transportation funding; (3) Local sponsors should have the discretion to fund public transportation with toll revenues; and (4) Tolling should be permitted as a long-term strategy. E:\FR\FM\11JAN1.SGM 11JAN1 Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices cprice-sewell on PROD1PC66 with NOTICES statement could better support this end.20 FTA Response: The commenters that asked FTA to defer its final policy determination until the impacts are more apparent seemed to misunderstand the scope of FTA’s proposed policy. FTA’s HOV-to-HOT policy will not result in all HOT lane facilities being classified as fixed guideway miles for purposes of FTA’s funding formulas. Rather, only those HOT lane facilities converted from HOV lanes that have been previously classified as fixed guideway miles shall qualify for continued classification as such, subject to the conditions set forth in the final policy statement in section II of this notice. In response to the four policy principles summarized at footnote (19), FTA reminds the commenter that, without this final policy statement, transit formula funding for congested urban areas would decrease if existing HOV facilities were converted to variably-priced HOT lanes. For this reason, FTA believes that this policy statement: (1) Gives states greater latitude to use tolling without negatively impacting available transit resources; (2) enhances existing transportation funding through the collection of toll revenues; (3) grants project sponsors discretion to use toll revenues for any ‘‘permissible use’’ (as defined in section II of this notice); and (4) encourages variably-priced HOT lanes as a long-term strategy, consistent with the policy of the Department. In response to the commenter that stated FTA should consider fostering an increase in alternative transportation ridership as one of its top priorities in developing this guidance, FTA reemphasizes its primary purpose in drafting this guidance—to ensure that Federal transit funding for congested urban areas is not decreased when exiting HOV facilities are converted to HOT lanes. FTA responds to the commenter’s four suggestions summarized at footnote (20) in turn. With respect to the first suggestion, the final policy statement supports HOV usage, but recognizes that many HOV facilities are underutilized; the ability of 20 The commenter’s four suggestions on how FTA’s policy statement could foster alternative transportation ridership are as follows: (1) The policy statement should support transportation demand management and HOV usage; (2) Greater emphasis on enforcement should be considered; (3) FTA should tie fixed guideway qualification to integrity of the lane; and (4) FTA should emphasize language at 23 U.S.C. 166(c)(3), which section requests that States, in the use of toll revenues, give priority consideration to projects for developing alternatives to single occupancy vehicle travel and projects for improving highway safety. VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 HOT lanes to introduce additional traffic to existing HOV facilities, while using pricing and other demand management techniques to control the number of additional motorists, maintain high service levels and provide new revenue, make HOT lanes an effective means of reducing congestion and improving mobility. With respect to the second and third suggestions, FTA will rely on the management, operation, monitoring and enforcement provisions of 23 U.S.C. 166(d). With respect to the fourth suggestion, the final policy statement does not modify language at 23 U.S.C. 166(c)(3). Accordingly, FTA has adopted as final the general provisions of its proposed policy. (b) HOT Lanes Were Previously HOV Lanes Reported in the National Transit Database as Fixed Guideway Miles. In its notice describing the proposed policy, FTA requested comments on its proposal to classify HOT lanes as fixed guideway miles for purposes of the funding formulas administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each of three conditions is satisfied. The first condition is that the HOT lanes were previously HOV lanes reported in the National Transit Database as fixed guideway miles for purposes of the funding formulas administered by FTA under 49 U.S.C. 5307 and 49 U.S.C. 5309. FTA received thirty-five comments on this condition, with some parties offering multiple comments. Eight commenters favored FTA’s proposed policy. Eighteen commenters asked FTA to expand its policy to classify all HOT lanes as fixed guideway miles for purposes of the funding formulas administered by FTA, regardless of whether the HOT lane facility was newly constructed or was previously an HOV facility. Seven commenters asked FTA not to fund HOT lane facilities at a level that would dilute the pool of transit funding available for existing fixed guideway facilities. Two commenters proposed that FTA require converted HOV lanes to have operated as HOV lanes for seven years prior to their conversion to HOT lanes before FTA would classify them as fixed guideway miles. FTA Response: FTA recognizes that all HOT lanes provide similar benefits to metropolitan areas that are experiencing severe and worsening congestion, regardless of whether the facility is newly constructed or converted from HOV or general purpose lanes. However, the purpose of the final policy statement is to ensure that Federal transit funding for congested urban areas is not decreased when PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 1369 existing HOV facilities are converted to variably-priced HOT lanes in an effort by localities to reduce congestion, improve air quality, or maximize throughput using excess HOV lane capacity and to promote a uniform approach by the Department’s operating agencies concerning HOV-to-HOT conversions. If FTA were to classify all HOT lanes as fixed guideway miles without a commensurate increase in overall funding levels, it could negatively impact the ability of many transit operators to finance needed capital maintenance on existing infrastructure. For this reason, FTA has limited the scope of the final policy statement to classifying as fixed guideway miles only those HOT lane facilities that are converted from HOV lanes which had previously been classified as fixed guideway miles. In this way, FTA will ensure that Federal transit funding for congested urban areas is not decreased when existing HOV facilities are converted to variablypriced HOT lanes. FTA believes it appropriate to leave for the U.S. Congress, and not to determine on an administrative basis, the question of whether and on what terms facilities newly constructed as HOT lanes or general purpose lanes converted directly to HOT lanes would be classified as fixed guideway miles given the substantial reallocation of formula funds among transit authorities that might result over time if such facilities were also classified as fixed guideway miles. FTA has included the following footnote (15) in section II (b)(i) of this notice in response to the recommendation that FTA require HOV lanes to have operated as HOV lanes for seven years before they may be converted to HOT lanes and remain classified as fixed guideway miles: FTA apportions amounts made available for fixed guideway modernization under 49 U.S.C. 5309 pursuant to fixed guideway factors detailed at 49 U.S.C. 5337. One of these fixed guideway factors, located at 49 U.S.C. 5337(a)(5)(B), apportions a percentage of the available fixed guideway modernization funds to ‘fixed guideway systems placed in revenue service at least seven years before the fiscal year in which amounts are made available.’ For purposes of 49 U.S.C. 5337(a)(5)(B), (i) no HOV facility that has been in revenue service at least seven years shall forfeit its eligibility for fixed guideway modernization funds because it is converted to a HOT lane facility in accordance with this final policy statement; and (ii) no HOV facility that has been in revenue service for less than seven years shall forfeit the years it has accrued thereunder because it is converted to a HOT lane facility, and for so long as the HOT lane facility maintains its fixed guideway classification in accordance with this policy E:\FR\FM\11JAN1.SGM 11JAN1 1370 Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices cprice-sewell on PROD1PC66 with NOTICES statement, it shall continue to accrue years thereunder. Accordingly, FTA will not require that converted HOV lanes operate as HOV lanes for seven years before they may be converted to HOT lanes and remain classified as fixed guideway miles in accordance with this final policy statement. (c) Monitoring and Performance Standards. In its notice describing the proposed policy, FTA requested comments on its proposal to classify HOT lanes as fixed guideway miles for purposes of the funding formulas administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each of three conditions is satisfied. The second condition is that the HOT lanes are continuously monitored and continue to meet performance standards that preserve free flow traffic conditions as specified in 23 U.S.C. 166(d). FTA received twenty comments on this topic. Four commenters favored FTA’s proposed position. Seven commenters proposed that FTA require a minimum level of transit service on a HOT lane facility before its lanes could be classified as fixed guideway miles for purposes of the funding formulas administered by FTA. Five commenters requested that FTA adopt more exacting performance standards. One commenter requested that FTA state explicitly that local agencies may increase HOV occupancy levels as necessary to ensure free flow conditions needed for transit bus service. Another commenter asked FTA to amend its policy to state that single occupant vehicles may be permitted on HOT lanes that are classified as fixed guideway miles, provided that the lanes satisfy the conditions set forth in FTA’s final policy statement. One commenter requested that FTA acknowledge that compliance with State law governing performance standards for HOT lanes suffices in terms of meeting the condition that the HOT lanes are continuously monitored and continue to meet performance standards that preserve free flow traffic conditions as specified in 23 U.S.C. 166(d). One commenter asked FTA to require a study on degradation of transit service before an HOV facility may convert to a HOT lane facility and be classified as fixed guideway miles for purposes of funding formulas administered by FTA. FTA Response: FTA disagrees that it should require a more exacting performance standard, including a minimum level of transit service. FTA recognizes that a more exacting standard would be necessary if all HOT lane facilities were eligible for classification VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 as fixed guideway miles, for under this scenario rural or suburban HOT lane facilities with little or no transit service could receive a significant portion of the Federal transit funds needed by the Nation’s largest transit providers to maintain their current infrastructure. For this reason, FTA has limited the benefits of the final policy to HOV lanes that have previously been classified as fixed guideway miles. Such designation as a fixed guideway mile indicates that a facility has a minimum level of transit service. FTA believes that compliance with the performance standards codified at 23 U.S.C. 166(d) is sufficient to ensure free flow traffic conditions and to avoid degradation of transit service on these facilities when converted from HOV lanes to HOT lane facilities. Moreover, HOV facilities constructed using capital funds available under 49 U.S.C. 5309(d) or (e) could be required, when an HOV facility converts to a HOT lane facility, to achieve a higher performance standard than required under 23 U.S.C. 166(d). In all circumstances, FTA shall require realtime monitoring of traffic flows to ensure on-going compliance with 23 U.S.C. 166(d). FTA does not agree that compliance with State law governing HOT lane performance standards will satisfy FTA’s requirements in all circumstances. Rather, FTA shall require all HOT lane facilities to comply with the statutory requirements of 23 U.S.C. 166 to be classified as fixed guideway miles for purposes of FTA’s funding formulas. It may be the case that the laws of certain states require a higher level of performance than the Federal standard articulated here. In these instances, the lesser Federal standard should present no obstacle to HOT conversion. With respect to the request that FTA require a study on the degradation of transit service before an HOV facility may convert to a HOT facility, FTA (i) believes that compliance with the free flow traffic requirements of 23 U.S.C. 166 is sufficient to avoid the degradation of transit service on these facilities and accordingly (ii) will not require that project sponsors incur the additional expense of a formal study on the degradation of transit service. (d) Program Income and Toll Revenues. In its notice describing the proposed policy, FTA requested comments on its proposal to classify HOT lanes as fixed guideway miles for purposes of the funding formulas administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each of three conditions is satisfied. The third condition is that program income from PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 the HOT lane facility, including all toll revenue, is used solely for ‘‘permissible uses.’’ FTA received twenty-five comments on this condition. Five commenters favored FTA’s proposed policy. Seven commenters requested that FTA expressly state in its final policy that grantees may use toll revenues for transit operating costs. Four commenters stated that FTA funds should not be used for the maintenance and/or construction of HOT lane facilities. Four commenters asked FTA to require that all Federal transit funds generated by HOT lane facilities because of their classification as fixed guideway miles be directed to the ‘‘designated recipient’’ for Federal transit funding. Three commenters stated that FTA should not permit the operators of HOT lane facilities to finance a HOT lane facility’s operating losses with Federal funds generated by the facility’s classification as fixed guideway miles. One commenter asked FTA not to limit the use of HOT lane toll revenues to transit. Another commenter asked FTA to require that priority of payment be provided for in the project implementation documents. FTA Response: Based on the recommendation of several commenters that FTA expressly state that grantees may use toll revenues for transit operating costs, and pursuant to 49 CFR part 18.25, which states that FTA ‘‘grantees may retain program income for allowable capital or operating expenses,’’ FTA has added transit operating costs to its description of ‘‘permissible uses’’ at section II(b)(iii) of this notice. FTA disagrees with the comment that its grantees should not use Federal transit funds for the maintenance and/ or construction of HOT lane facilities. The commenter did not indicate whether it referred to the use of grant funds or program income. While FTA recognizes both HOV and HOT lanes as permissible incidental uses of FTAfunded assets, FTA grant funds shall not be used to construct a HOT lane facility beyond what is allowed by 49 U.S.C. 5302(a)(4), as implemented by FTA’s regulations, as amended from time to time.21 Any facility that converts from an HOV to a HOT facility, and retains its classification as a fixed guideway by satisfying the conditions of this policy statement, may use program income in accordance with this final policy 21 49 U.S.C. 5302(a)(4) defines ‘‘fixed guideway’’ as ‘‘a public transportation facility (A) using and occupying a separate right-of-way or rail for the exclusive use of public transportation and other high occupancy vehicles; or (B) using a fixed catenary system and a right-of-way usable by other forms of transportation.’’ E:\FR\FM\11JAN1.SGM 11JAN1 cprice-sewell on PROD1PC66 with NOTICES Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices statement, the Department’s regulation at 49 CFR part 18.25, and other applicable statutes, regulations and requirements. Similarly, FTA disagrees with the comment that it should limit the use of HOT lane toll revenues to transit. In many cases, a HOT lane facility may have received (or receives) funding from FTA and another Federal agency, such that use of the facility’s program income is governed by more than one Federal program. In these instances, FTA’s restrictions concerning permissible use shall not apply to more than transit’s allocable share of the facility’s program income, as described in section II of this notice. FTA will not require recipients to assign priority in payment to any permissible use. Federal transit law requires FTA to disburse certain funds to the designated recipient. The designated recipient for FTA formula funds shall not be changed because the grantee converted an HOV facility to a HOT facility, in accordance with the final policy statement. FTA shall not prevent such designated recipients from using the funds for eligible activities in accordance with the process for programming transit funds described at 23 CFR part 450.324(l) of the joint FTA–FHWA planning regulations. (e) Transit Fares and Tolls. In its notice describing the proposed policy, FTA requested comments on transit fares and tolls on HOT lane facilities. FTA stated that it would not condition the receipt of Federal transit funds by a qualifying HOT lane facility on the tolling authority’s adoption of policies concerning the price of transit services on the HOT lane facility or the tolls payable by single occupant vehicles. FTA would allow grantees and tolling authorities to develop their own fare structures for transit services and tolls on HOT lane facilities. FTA received sixteen comments on this topic. Without further comment, five commenters agreed with FTA’s proposed policy not to regulate toll prices. Ten commenters stated that transit vehicles should be exempt from tolls charged on Federallyfunded HOT lane facilities for its lanes to be classified as fixed guideway miles for purposes of the funding formulas administered by FTA. One commenter asked FTA to require that transit fares and tolls remain competitive. FTA Response: Federal transit law prohibits FTA from regulating the ‘‘rates, fares, tolls, rentals, or other charges prescribed by any provider of public transportation.’’ 49 U.S.C. 5334(b)(1). Accordingly, FTA shall not condition the receipt of Federal transit funds by a qualifying HOT lane facility on the tolling authority’s adoption of VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 policies concerning the price of transit services on the HOT lane facility or the tolls payable by single occupant vehicles. FTA will allow grantees and tolling authorities to develop their own fare structures for transit services and tolls, respectively, on HOT lane facilities. Transit fares shall remain subject to 49 U.S.C. 5332 (Nondiscrimination) and 49 U.S.C. 5307 (Urbanized area formula grants), however. (f) Return of Funds under Full Funding Grant Agreements. In its notice describing the proposed policy, FTA requested comments on its proposal that, in the event that an HOV facility is converted to a HOT facility and the HOV facility has received funds through FTA’s New Starts program, FTA would not require the grantee to return such funds, so long as the facility complied with the conditions set forth in the proposed policy. FTA received one comment on this topic. The commenter expressed concern that, when the grantee is not also the tolling authority, the tolling authority may make business decisions contrary to the interest of the grantee/transit provider, thus forcing the grantee/transit provider to repay New Starts funding to FTA. FTA Response: It appears that the commenter misunderstood the scope of FTA’s proposed policy, which states that ‘‘in the event that an HOV facility is converted to a HOT facility and the HOV facility has received funds through FTA’s New Starts program, FTA would not require the grantee to return such funds so long as the facility complied with the conditions set forth in this guidance.’’ If a grantee wishes to convert an existing HOV facility to a HOT lane facility and maintain the classification of its facility as a fixed guideway for purposes of FTA’s funding formulas, it must comply with the conditions set forth in the final policy statement. To the extent that the facility is subject to a Full Funding Grant Agreement, the grantee is obligated to abide by the requirements thereof, just as it is bound to any other contractual or legal obligation. (g) Miscellaneous Comments. FTA received seven miscellaneous comments in response to its proposed policy. One commenter asked FTA to address a circumstance in which a previously eligible HOV lane (or a portion of an HOV lane) is temporarily or permanently taken out of service in order to be reconstructed and expanded into an improved HOT lane facility in the same corridor. A second commenter requested that FTA indicate whether it would classify as fixed guideway miles bus-only shoulders converted to HOT PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 1371 lanes when the bus-only shoulders are currently classified as fixed guideway miles. Another commenter asked FTA to clarify its policy with respect to variable-priced express lanes. Two commenters asked FTA to require coordination between privately operated HOT lane facilities and public transportation agencies. One commenter asked FTA to connect this policy with transit supportive land use. And another commenter argued that FTA’s policy should not affect New Starts project eligibility criteria. FTA Response: FTA recognizes that it may be necessary to temporarily remove an HOV lane from service in order to convert it into a HOT lane facility. Such a HOT lane facility will not lose its classification as a fixed guideway so long as it satisfies the conditions set forth in the final policy statement. FTA agrees with the proposal that it classify as fixed guideway miles busonly shoulders converted to HOT lanes as long as the bus-only shoulders are currently classified as fixed guideway miles and satisfy the conditions of this final policy statement. Accordingly, FTA has included the following language at footnote (16) in section II(b)(i) of this notice: FTA shall classify HOT lane facilities converted from bus-only shoulders as fixed guideway miles, so long as such HOT lanes satisfy conditions (ii) and (iii) of this final policy statement and were bus-only shoulders previously reported in the National Transit Database as fixed guideway miles for purposes of the funding formulas administered by FTA under 49 U.S.C. 5307 and 5309. The commenter that asked FTA to consider variably-priced express lanes did not provide enough information for FTA to determine whether such facility could satisfy the conditions set forth in the proposed policy. FTA responds by reiterating its statement at section II(b)(i) of this notice, that with the exception of bus-only shoulders, ‘‘neither non-HOV facilities nor facilities constructed as HOT lanes would be eligible for classification as fixed guideway miles.’’ The comment requesting that FTA require coordination between privately operated HOT lane facilities and public transportation is beyond the scope of this notice. FTA’s Planning and Assistance Standards are located at 49 CFR part 613. Similarly, the comments requesting that FTA connect this policy with transit supportive land use and that this policy not affect FTA’s New Starts project eligibility criteria are beyond the scope of this notice, which is limited to the classification of HOT lane facilities E:\FR\FM\11JAN1.SGM 11JAN1 1372 Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Notices as fixed guideway miles for purposes of FTA’s funding formulas. Issued on January 8, 2007. James S. Simpson, Administrator. [FR Doc. E7–263 Filed 1–10–07; 8:45 am] BILLING CODE 4910–57–P DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency [Docket No. 06–17] Office of Thrift Supervision [Docket No. 2006–55] FEDERAL RESERVE SYSTEM [Docket No. OP–1254] FEDERAL DEPOSIT INSURANCE CORPORATION SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55043; File No. S7–08–06] Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities Office of the Comptroller of the Currency, Treasury (‘‘OCC’’); Office of Thrift Supervision, Treasury (‘‘OTS’’); Board of Governors of the Federal Reserve System (‘‘Board’’); Federal Deposit Insurance Corporation (‘‘FDIC’’); and Securities and Exchange Commission (‘‘SEC’’) (collectively, the ‘‘Agencies’’). ACTION: Notice of final interagency statement. cprice-sewell on PROD1PC66 with NOTICES AGENCIES: SUMMARY: The Agencies are adopting an Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities (‘‘Final Statement’’). The Final Statement pertains to national banks, state banks, bank holding companies (other than foreign banks), federal and state savings associations, savings and loan holding companies, U.S. branches and agencies of foreign banks, and SECregistered broker-dealers and investment advisers (collectively, ‘‘financial institutions’’ or ‘‘institutions’’) engaged in complex structured finance transactions (‘‘CSFTs’’). In May 2004, the Agencies issued and requested comment on a proposed interagency statement (‘‘Initial Proposed Statement’’). After reviewing the comments received on the Initial Proposed Statement, the Agencies in May 2006 issued and requested VerDate Aug<31>2005 15:52 Jan 10, 2007 Jkt 211001 comment on a revised proposed interagency statement (‘‘Revised Proposed Statement’’). The modifications to the Revised Proposed Statement, among other things, made the statement more principles-based and focused on the identification, review and approval process for those CSFTs that may pose heightened levels of legal or reputational risk to the relevant institution (referred to as ‘‘elevated risk CSFTs’’). After carefully reviewing the comments on the Revised Proposed Statement, the Agencies have adopted the Final Statement with minor modifications designed to clarify, but not alter, the principles set forth in the Revised Proposed Statement. The Final Statement describes some of the internal controls and risk management procedures that may help financial institutions identify, manage, and address the heightened reputational and legal risks that may arise from elevated risk CSFTs. As discussed further below, the Final Statement will not affect or apply to the vast majority of financial institutions, including most small institutions, nor does it create any private rights of action. The Final Statement is effective January 11, 2007. EFFECTIVE DATE: FOR FURTHER INFORMATION CONTACT: OCC: Kathryn E. Dick, Deputy Comptroller, Credit and Market Risk, (202) 874–4660; Grace E. Dailey, Deputy Comptroller, Large Bank Supervision, (202) 874–4610; or Ellen Broadman, Director, Securities and Corporate Practices Division, (202) 874–5210, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219. OTS: Fred J. Phillips-Patrick, Director, Credit Policy, (202) 906–7295, and Deborah S. Merkle, Project Manager, Credit Policy, (202) 906–5688, Examinations and Supervision Policy; or David A. Permut, Senior Attorney, Business Transactions Division, (202) 906–7505, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552. Board: Sabeth I. Siddique, Assistant Director, (202) 452–3861, or Virginia Gibbs, Senior Supervisory Financial Analyst, (202) 452–2521, Division of Banking Supervision and Regulation; or Kieran J. Fallon, Assistant General Counsel, (202) 452–5270, or Anne B. Zorc, Senior Attorney, (202) 452–3876, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW., Washington, DC 20551. Users of Telecommunication Device for Deaf (TTD) only, call (202) 263–4869. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 FDIC: Jason C. Cave, Associate Director, (202) 898–3548; Division of Supervision and Consumer Protection; or Mark G. Flanigan, Counsel, Supervision and Legislation Branch, Legal Division, (202) 898–7426, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. SEC: Mary Ann Gadziala, Associate Director, Office of Compliance Inspections and Examinations, (202) 551–6207; Catherine McGuire, Chief Counsel, Linda Stamp Sundberg, Senior Special Counsel (Banking and Derivatives), or Randall W. Roy, Branch Chief, Division of Market Regulation, (202) 551–5550, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: I. Background Financial markets have grown rapidly over the past decade, and innovations in financial instruments have facilitated the structuring of cash flows and allocation of risk among creditors, borrowers, and investors in more efficient ways. Financial derivatives for market and credit risk, asset-backed securities with customized cash flow features, specialized financial conduits that manage pools of assets, and other types of structured finance transactions serve important purposes, such as diversifying risk, allocating cash flows and reducing cost of capital. As a result, structured finance transactions, including the more complex variations of these transactions, now are an essential part of U.S. and international capital markets. When a financial institution participates in a CSFT, it bears the usual market, credit, and operational risks associated with the transaction. In some circumstances, a financial institution also may face heightened legal or reputational risks due to its involvement in a CSFT. For example, a financial institution involved in a CSFT may face heightened legal or reputational risk if the customer’s regulatory, tax or accounting treatment for the CSFT, or disclosures concerning the CSFT in its public filings or financial statements, do not comply with applicable laws, regulations or accounting principles.1 In some cases, certain CSFTs appear to have been used in illegal schemes 1 For a memorandum on the potential liability of a financial institution for securities laws violations arising from participation in a CSFT, see Letter from Annette L. Nazareth, Director, Division of Market Regulation, Securities and Exchange Commission, to Richard Spillenkothen and Douglas W. Roeder, dated December 4, 2003 (available at https:// www.federalreserve.gov/boarddocs/srletters/2004/ and https://www.occ.treas.gov). E:\FR\FM\11JAN1.SGM 11JAN1

Agencies

[Federal Register Volume 72, Number 7 (Thursday, January 11, 2007)]
[Notices]
[Pages 1366-1372]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-263]



[[Page 1366]]

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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket No: FTA-2006-25750]


Final Policy Statement on When High-Occupancy Vehicle (HOV) Lanes 
Converted to High-Occupancy/Toll (HOT) Lanes Shall Be Classified as 
Fixed Guideway Miles for FTA's Funding Formulas and When HOT Lanes 
Shall Not Be Classified as Fixed Guideway Miles for FTA's Funding 
Formulas

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Final policy statement.

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SUMMARY: This notice supersedes the notice published in the Federal 
Register by FTA on December 27, 2006, at 71 FR 77862. This notice 
corrects certain typographical errors that appeared in the prior 
notice, makes non-substantive revisions to the prior notice and re-
orders the sections of the prior notice.
    This final policy statement describes the terms and conditions on 
which the Federal Transit Administration (FTA) will classify High-
Occupancy Vehicle (HOV) lanes that are converted to High-Occupancy/Toll 
(HOT) lanes as ``fixed guideway miles'' for purposes of the transit 
funding formulas administered by FTA. This final policy statement also 
describes when FTA will not classify HOT lanes as fixed guideway miles 
for purposes of the transit funding formulas administered by FTA.

DATES: Effective Date: The effective date of this final policy 
statement is January 11, 2007.

ADDRESSES: Availability of the Final Policy Statement and Comments: 
Copies of this final policy statement and comments and material 
received from the public, as well as any documents indicated in this 
notice as being available in the docket, are part of docket number FTA-
2006-25750. For access to the DOT docket, please go to https://
dms.dot.gov at any time or to the Docket Management System facility, 
U.S. Department of Transportation, Room PL-401 on the plaza level of 
the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: David B. Horner, Esq., Chief Counsel, 
Office of Chief Counsel, Federal Transit Administration, 400 Seventh 
Street, SW., Washington, DC 20590-0001, (202) 366-4040, 
david.horner@dot.gov; or Robert J. Tuccillo, Associate Administrator, 
Office of Budget & Policy, Federal Transit Administration, 400 Seventh 
Street, SW., Washington, DC 20590-0001, (202) 366-4050, 
robert.tuccillo@dot.gov. Office hours are from 8:30 a.m. to 5 p.m., 
Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION: This document is organized in the following 
sections:

I. Background
II. Final Policy Statement on HOV-to-HOT Conversion
III. Response to Comments Received

I. Background

    On September 7, 2006, the Federal Transit Administration (FTA) 
published in the Federal Register (at 71 FR 52849), a proposed policy 
on (i) when High-Occupancy Vehicle (HOV) lanes converted to High-
Occupancy/Toll (HOT) lanes shall be classified as ``fixed guideway 
miles'' for the purpose of FTA's funding formulas and (ii) when HOT 
lanes shall not be classified as fixed guideway miles for the purpose 
of FTA's funding formulas. The proposed policy reads as follows:

    FTA would classify HOT lanes as ``fixed guideway miles'' for 
purposes of the funding formulas administered under 49 U.S.C. 5307 
and 49 U.S.C. 5309, so long as each of the following conditions is 
satisfied: (i) The HOT lanes were previously HOV lanes reported in 
the National Transit Database as fixed guideway miles for purposes 
of the funding formulas administered by FTA under 49 U.S.C. 5307 and 
49 U.S.C. 5309; (ii) The HOT lanes are continuously monitored and 
continue to meet performance standards that preserve free flow 
traffic conditions as specified in 23 U.S.C. 166(d); and (iii) 
Program income from the HOT lane facility, including all toll 
revenue, is used solely for ``permissible uses.''

The proposed policy also addressed whether FTA should require certain 
transit and tolling policies with respect to HOT lanes classified as 
fixed guideway miles, and whether FTA should require the return of 
funds made available under Full Funding Grant Agreements for the 
construction of HOV lanes that have later been converted to HOT lanes.

II. Final Policy Statement on HOV-to-HOT Conversion

    This final policy statement explains when FTA shall classify HOV 
lanes converted to HOT lanes as ``fixed guideway miles'' for the 
purpose of FTA's funding formulas and when FTA shall not classify HOT 
lanes as fixed guideway miles for the purpose of its funding formulas.

Overview

    Since the early 1980s, transportation officials have sought to 
manage traffic congestion and increase vehicle occupancy by means of 
High-Occupancy Vehicle (HOV) lanes--highway lanes reserved for the 
exclusive use of car pools and transit vehicles. Today, there are over 
130 freeway HOV facilities in metropolitan areas in the US,\1\ of which 
approximately ten have received funding through FTA's Major Capital 
Investment program and approximately eighty are counted as fixed 
guideway miles for purposes of FTA's formula grant programs.\2\ Since 
1990, however, HOV mode share in thirty-six of the forty largest 
metropolitan areas has steadily declined,\3\ while both excess capacity 
on HOV lanes and congestion on general purpose lanes have increased.\4\
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    \1\ Office of Operations, Federal Highway Administration, U.S. 
Department of Transportation.
    \2\ National Transit Database.
    \3\ Journey to Work Trends in the United States and its Major 
Metropolitan Areas 1960-2000, Publication No. FHWA-EP-03-058 
Prepared for: U.S. Department of Transportation, Federal Highway 
Administration, Office of Planning, Prepared by: Nancy McGuckin, 
Consultant, Nanda Srinivasan, Cambridge Systematics, Inc.
    \4\ Office of Operations, Federal Highway Administration, U.S. 
Department of Transportation. Demand for highway travel by Americans 
continues to grow as population increases, particularly in 
metropolitan areas. Construction of new highway capacity to 
accommodate this growth in travel has not kept pace. Between 1980 
and 1999, route miles of highways increased 1.5 percent while 
vehicle miles of travel increased seventy-six percent. The Texas 
Transportation Institute estimates that, in 2000, the seventy-five 
largest metropolitan areas experienced 3.6 billion vehicle-hours of 
delay, resulting in 5.7 billion gallons in wasted fuel and $67.5 
billion in lost productivity. And traffic volumes are projected to 
continue to grow. The volume of freight movement alone is forecast 
to nearly double by 2020. Congestion is largely thought of as a big 
city problem, but delays are becoming increasingly common in small 
cities and some rural areas as well.
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    An increasing number of metropolitan areas are considering new 
demand management strategies as alternatives to HOV lanes. One emerging 
alternative is the variably-priced High-Occupancy/Toll (HOT) lane. HOT 
lanes combine HOV and pricing strategies by allowing Single-Occupant 
Vehicles (SOVs) to access HOV lanes by paying a toll. The lanes are 
``managed'' through pricing to maintain free flow conditions even 
during the height of rush hours.
    HOT lanes provide multiple benefits to metropolitan areas that are 
experiencing severe and worsening congestion and significant 
transportation funding shortages. First, variably-priced HOT lanes 
expand mobility options in congested urban areas by providing an 
opportunity for reliable travel times for users prepared to pay a 
premium for this service. HOT lanes also improve the efficiency of HOV 
facilities by allowing toll-paying

[[Page 1367]]

SOVs to utilize excess lane capacity on HOVs. In addition, HOT lanes 
generate new revenue which can be used to pay for transportation 
improvements, including enhanced transit service.
    In August of 2005, recognizing the advantages of HOT lanes, the 
U.S. Congress enacted Section 112 of the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), 
codified at 23 U.S.C. 166, to authorize States to permit use of HOV 
lanes by SOVs, so long as the performance of the HOV lanes is 
continuously monitored and continues to meet specified performance 
standards. The U.S. Department of Transportation (Department) has 
strongly endorsed the conversion of HOV lanes to variably-priced HOT 
lanes, most recently in its Initiative to Reduce Congestion on the 
Nation's Transportation Network. It is the Department's policy to 
encourage jurisdictions to consider ``HOV-to-HOT'' conversion as a 
means of congestion relief and possible revenue enhancement.
    The ability of HOT lanes to introduce additional traffic to 
existing HOV facilities, while using pricing and other management 
techniques to control the number of additional motorists, maintain high 
service levels and provide new revenue, make HOT lanes an effective 
means of reducing congestion and improving mobility. For this reason, 
and given the new authority enacted by Congress to promote ``HOV-to-
HOT'' conversions, many States, transportation agencies and 
metropolitan areas are seriously considering applying variable pricing 
to both new and existing roadways. For example, the current long-range 
transportation plan for the Washington, DC, metropolitan area includes 
four new HOT lanes along fifteen miles of the Capital Beltway in 
Virginia, and six new variably-priced lanes along eighteen miles on the 
Inter-County Connector in Montgomery and Prince George's Counties in 
Maryland.\5\ Virginia is also exploring the possibility of converting 
existing HOV lanes along the I-95/395 corridor into HOT lanes.\6\ 
Maryland is considering express toll lanes along I-495, I-95 and I-270, 
as well as along other facilities.\7\ Similarly, in San Francisco, the 
Metropolitan Transportation Commission's Transportation 2030 Plan 
advocates development of a HOT network that would convert that region's 
existing HOV lanes to HOT lanes; \8\ Houston's 2025 Regional 
Transportation Plan includes plans to implement peak period pricing 
within the managed HOT lanes of the major freeway corridors in the 
region; \9\ and the Miami-Dade, Florida 2030 Transportation Plan 
includes conversion of existing HOV lanes to reversible HOV/HOT lanes 
to provide additional capacity to I-95 in Miami-Dade County.\10\ Other 
jurisdictions are exploring the potential for HOT lanes with grants 
provided by the Department's Value Pricing Pilot Program.\11\ These 
include the Port Authority of New York/New Jersey; San Antonio, Texas; 
Seattle, Washington; Atlanta, Georgia; and Portland, Oregon.\12\
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    \5\ Letter to U.S. Department of Transportation, August 28, 
2006, from National Capital Region Transportation Planning Board.
    \6\ Id.
    \7\ Id.
    \8\ A Vision for the Future Transportation 2030, February 2005, 
Chapter 1, Page 6.
    \9\ 2025 Regional Transportation Plan Houston-Galveston Area, 
June 2005, Page 31.
    \10\ Miami-Dade Transportation Plan (to the Year 2030) December 
2004, FINAL DRAFT, Page 24.
    \11\ Federal Highway Administration, U.S. Department of 
Transportation. The Department's Value Pricing Pilot Program (VPPP), 
initially authorized by the Intermodal Surface Transportation 
Efficiency Act as the Congestion Pricing Pilot Program and continued 
as the VPPP under SAFETEA-LU, encourages implementation and 
evaluation of value pricing pilot projects, offering flexibility to 
encompass a variety of innovative applications including areawide 
pricing, pricing of multiple or single facilities or corridors, 
single lane pricing, and implementation of other market-based 
strategies.
    \12\ Federal Highway Administration, U.S. Department of 
Transportation.
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    While an increasing number of metropolitan planning organizations 
and State departments of transportation are studying the HOT lane 
concept as a strategy to improve mobility, six HOT lane facilities 
currently operate in the United States: State Route 91 (SR 91) Express 
Lanes in Orange County, California; the I-15 FasTrak in San Diego, 
California; the Katy Freeway QuickRide and the Northwest Freeway (US 
290) in Harris County, Texas; I-394 in Minneapolis and St. Paul, 
Minnesota; and I-25 in Denver, Colorado.

Prior FTA Policy

    Since 2002, FTA's policy has been to continue to classify the lanes 
of an HOV facility converted to HOT lanes as fixed guideway miles for 
funding formula purposes on the condition that the facility meets two 
requirements: (i) The HOT facility manages SOV use so that it does not 
impede the free-flow and high speed of transit and high-occupancy 
vehicles and (ii) toll revenues collected on the facility will be used 
for mass transit purposes.\13\ FTA has considered requiring as an 
additional condition for eligibility that the lowest toll payable by 
SOVs on a HOT facility be not less than the fare charged for transit 
services on the HOT facility.
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    \13\ In a Letter to U.S. Representative Randall Cunningham, 
dated June 10, 2002, concerning the I-15 FasTrak facility in San 
Diego, FTA stated: ``* * * FTA will recognize, for formula 
allocation purposes, exclusive fixed guideway transit facilities 
that permit toll-paying SOVs on an incidental basis (often called 
high occupancy/toll (HOT) lanes) under the following conditions: the 
facility must be able to control SOV use so that it does not impede 
the free flow and high speed of transit and HOV vehicles, and the 
toll revenues collected must be used for mass transit purposes.''
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Final FTA Policy

    (a) Purpose of Final Policy. This final policy statement will help 
ensure that Federal transit funding for congested urban areas is not 
decreased when existing HOV facilities are converted to variably-priced 
HOT lanes in an effort by localities to reduce congestion, improve air 
quality, and maximize throughput using excess HOV lane capacity. The 
policy will also promote a uniform approach by the Department's 
operating agencies concerning HOV-to-HOT conversions. In particular, 
FTA's policy will be coordinated with the statutes enacted by the U.S. 
Congress under Section 112 of SAFETEA-LU applicable to the Federal 
Highway Administration that are intended to simplify conversion of HOV 
lanes to HOT lanes. The policy will also support the Department's 
objective of encouraging HOV-to-HOT conversions.
    (b) Final Policy. FTA shall classify HOT lanes as fixed guideway 
miles for purposes of the funding formulas administered under 49 U.S.C. 
5307 and 49 U.S.C. 5309, so long as each of the following conditions is 
satisfied:
    (i) The HOT lanes were previously \14\ HOV lanes reported in the 
National Transit Database as fixed guideway miles for purposes of the 
funding formulas administered by FTA under 49

[[Page 1368]]

U.S.C. 5307(b) and 49 U.S.C. 5309(a)(E).\15\ Facilities that were not 
eligible HOV lanes prior to being converted to HOT lanes will remain 
ineligible for inclusion as fixed guideway miles in FTA's funding 
formulas. Therefore, neither non-HOV facilities converted directly to 
HOT facilities nor facilities constructed as HOT lanes will be eligible 
for classification as fixed guideway miles.\16\
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    \14\ With respect to whether HOT lanes were previously HOV lanes 
reported in the National Transit Database (``NTD'') as ``fixed 
guideway miles,'' HOV facilities classified as ``fixed guideway 
miles'' in the NTD on or before date of the publication of this 
final policy statement shall satisfy this requirement. With respect 
to HOV lanes that have not been classified as ``fixed guideway 
miles'' in the NTD on or before the date of publication of this 
final policy statement, such HOV lanes may not be converted to HOT 
lanes and maintain their classification as ``fixed guideway miles'' 
unless: (i) The HOV lanes have reported to the NTD as ``fixed 
guideway miles'' for three years prior to their conversion to HOT 
lanes, (ii) users of public transportation have accounted for at 
least 50% of the passenger miles traveled on the HOV lanes in their 
last twelve months of service (or once the HOV lanes are converted 
to HOT lanes, users of public transportation are reasonably expected 
to account for at least 50% of the passenger miles traveled on the 
HOT lanes in their first twelve months of service), or (iii) in his 
or her discretion, the Administrator so approves.
    \15\ FTA apportions amounts made available for fixed guideway 
modernization under 49 U.S.C. 5309 pursuant to fixed guideway 
factors detailed at 49 U.S.C. 5337. One of these fixed guideway 
factors, located at 49 U.S.C. 5337(a)(5)(B), apportions a percentage 
of the available fixed guideway modernization funds to `fixed 
guideway systems placed in revenue service at least seven years 
before the fiscal year in which amounts are made available.' For 
purposes of 49 U.S.C. 5337(a)(5)(B), (i) no HOV facility that has 
been in revenue service at least seven years shall forfeit its 
eligibility for fixed guideway modernization funds because it is 
converted to a HOT lane facility in accordance with this final 
policy statement; and (ii) no HOV facility that has been in revenue 
service for less than seven years shall forfeit the years it has 
accrued under 49 U.S.C. 5337(a)(5)(B) because it is converted to a 
HOT lane facility and for so long as the HOT lane facility maintains 
its ``fixed guideway'' classification in accordance with this final 
policy statement, it shall continue to accrue years thereunder.
    \16\ FTA recognizes one exception to this statement--bus-only 
shoulders. Accordingly, FTA shall classify HOT lane facilities 
converted from bus-only shoulders as fixed guideway miles, so long 
as such HOT lanes satisfy the conditions set forth in sections 
II(b)(ii) and (iii) of this final policy statement and were bus-only 
shoulders previously reported in the National Transit Database as 
fixed guideway miles for purposes of the funding formulas 
administered by FTA under 49 U.S.C. 5307 and 5309.
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    (ii) The HOT lanes are continuously monitored and continue to meet 
performance standards that preserve free flow traffic conditions as 
specified in 23 U.S.C. 166(d). 23 U.S.C. 166(d) provides operational 
performance standards for an HOV facility converted to a HOT facility. 
It also requires that the performance of the facility be continuously 
monitored and that it continue to meet specified performance standards. 
Due to original project commitments, HOV facilities constructed using 
capital funds available under 49 U.S.C. 5309(d) or (e) may be required, 
when converted to HOT lanes, to achieve a higher performance standard 
than required under 23 U.S.C. 166(d). Standards for operational 
performance and determining degradation of operational performance for 
facilities constructed with funds from FTA's New Starts program shall 
be determined by FTA on a case-by-case basis. FTA will require real-
time monitoring of traffic flows to ensure on-going compliance with 
operational performance standards.
    (iii) Program income from the HOT lane facility, including all toll 
revenue, is used solely for ``permissible uses.'' ``Permissible uses'' 
means any of the following uses with respect to any HOT lane facility, 
whether operated by a public or private entity: (a) Debt service, (b) a 
reasonable return on investment of any private financing, (c) the costs 
necessary for the proper operation and maintenance of such 
facility,\17\ and (d) if the operating entity annually certifies that 
the facility is being adequately operated and maintained (including 
that the permissible uses described in (a), (b) and (c) above, if 
applicable, are being duly paid), any other purpose relating to a 
project carried out under Title 49 U.S.C. 5301 et seq. In cases where 
the HOT lane facility has received (or receives) funding from FTA and 
another Federal agency, such that use of the facility's program income 
is governed by more than one Federal program, FTA's restrictions 
concerning permissible use shall not apply to more than transit's 
available share \18\ of the facility's program income. FTA shall not 
require recipients to assign priority in payment to any permissible 
use.
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    \17\ The costs necessary for the proper operation and 
maintenance of a HOT lane facility may include reconstruction, 
rehabilitation, and the costs associated with operating transit 
service on the facility.
    \18\ Transit's allocable share of the facility's program income 
shall be an amount equal to the facility's total program income, for 
any period, multiplied by a ratio, (a) The numerator of which shall 
be the cumulative amount of funds contributed to the facility 
through a program established by transit law, and (b) the 
denominator of which shall be the cumulative amount of all Federal, 
State and local capital funds contributed to the facility, in each 
case at the time transit's allocable share is calculated. For 
purposes of 49 CFR part 18.25, (i) amounts other than transit's 
allocable share shall not constitute program income and (ii) any 
expenditure of transit's allocable share that is not deducted from 
outlays made under transit law shall be deemed an ``alternative'' 
under 49 U.S.C. 18.25(g) and deemed by FTA a term of the grant 
agreement.
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    (c) Transit Fares and Tolls on HOT Lane Facilities. FTA shall not 
condition the classification of HOT lanes converted from HOV lanes as 
fixed guideway miles, or condition any approval or waiver under a Full 
Funding Grant Agreement, on a grantee's adopting transit fare policies 
or a tolling authority's adopting of tolling policies concerning, 
respectively, the price of transit services on the HOT lane facility 
and the tolls payable by SOVs. Instead, FTA shall permit grantees and 
tolling authorities to develop their own fare structures for transit 
services and tolls, respectively, on HOT lane facilities. Transit fares 
shall remain subject to 49 U.S.C. 332 (Nondiscrimination) and 49 U.S.C. 
5307 (Urbanized area formula grants), however.
    (d) No Return of Funds under Full Funding Grant Agreements. In the 
event that an HOV facility is converted to a HOT facility and the HOV 
facility has received funds through FTA's New Starts program, FTA shall 
not require the grantee to return such funds so long as the facility 
complies with the conditions set forth in this final policy statement 
and the original grant agreement or Full Funding Grant Agreement, as 
applicable.

III. Response to Comments Received

    Thirty-four parties submitted comments in response to FTA's 
proposed policy, published in the Federal Register on September 7, 
2006, at 71 FR 52849 (the proposed policy). This section responds to 
those comments by topic in the following order: (a) Policy Statement 
Generally; (b) HOT Lanes Were Previously HOV Lanes Reported in the 
National Transit Database as ``Fixed Guideway Miles''; (c) Monitoring 
and Performance Standards; (d) Program Income and Toll Revenues; (e) 
Transit Fares and Tolls; (f) Return of Funds under Full Funding Grant 
Agreements; and (g) Miscellaneous Comments.
    (a) Policy Statement Generally. The purpose of the proposed policy 
was to ensure that Federal transit funding for congested urban areas 
would not be decreased if HOV facilities were converted to variably-
priced HOT lanes. The proposed policy also sought to achieve a uniform 
approach among the operating agencies of the Department concerning HOV-
to-HOT conversions, and supported the Department's policy of 
encouraging HOV-to-HOT conversions. Eight commenters agreed generally 
with FTA's proposed policy. Six parties submitted general comments. 
Four commenters asked FTA to defer its final policy determination until 
the impacts become more apparent. One commenter articulated four policy 
principles that discuss ways to integrate transit into toll roads and 
HOT lanes.\19\ Another commenter stated that one of FTA's top 
priorities in developing the policy should be to foster an increase in 
alternative transportation ridership--whether that alternative is 
carpool, vanpool, transit, or other shared-mode--and suggested four 
ways the policy

[[Page 1369]]

statement could better support this end.\20\
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    \19\ The commenter's suggested policy principles are as follows: 
(1) Metropolitan areas and states should have greater latitude to 
use roadway tolling; (2) Tolling should be a supplement to and not a 
substitution for existing transportation funding; (3) Local sponsors 
should have the discretion to fund public transportation with toll 
revenues; and (4) Tolling should be permitted as a long-term 
strategy.
    \20\ The commenter's four suggestions on how FTA's policy 
statement could foster alternative transportation ridership are as 
follows: (1) The policy statement should support transportation 
demand management and HOV usage; (2) Greater emphasis on enforcement 
should be considered; (3) FTA should tie fixed guideway 
qualification to integrity of the lane; and (4) FTA should emphasize 
language at 23 U.S.C. 166(c)(3), which section requests that States, 
in the use of toll revenues, give priority consideration to projects 
for developing alternatives to single occupancy vehicle travel and 
projects for improving highway safety.
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    FTA Response: The commenters that asked FTA to defer its final 
policy determination until the impacts are more apparent seemed to 
misunderstand the scope of FTA's proposed policy. FTA's HOV-to-HOT 
policy will not result in all HOT lane facilities being classified as 
fixed guideway miles for purposes of FTA's funding formulas. Rather, 
only those HOT lane facilities converted from HOV lanes that have been 
previously classified as fixed guideway miles shall qualify for 
continued classification as such, subject to the conditions set forth 
in the final policy statement in section II of this notice.
    In response to the four policy principles summarized at footnote 
(19), FTA reminds the commenter that, without this final policy 
statement, transit formula funding for congested urban areas would 
decrease if existing HOV facilities were converted to variably-priced 
HOT lanes. For this reason, FTA believes that this policy statement: 
(1) Gives states greater latitude to use tolling without negatively 
impacting available transit resources; (2) enhances existing 
transportation funding through the collection of toll revenues; (3) 
grants project sponsors discretion to use toll revenues for any 
``permissible use'' (as defined in section II of this notice); and (4) 
encourages variably-priced HOT lanes as a long-term strategy, 
consistent with the policy of the Department.
    In response to the commenter that stated FTA should consider 
fostering an increase in alternative transportation ridership as one of 
its top priorities in developing this guidance, FTA reemphasizes its 
primary purpose in drafting this guidance--to ensure that Federal 
transit funding for congested urban areas is not decreased when exiting 
HOV facilities are converted to HOT lanes. FTA responds to the 
commenter's four suggestions summarized at footnote (20) in turn. With 
respect to the first suggestion, the final policy statement supports 
HOV usage, but recognizes that many HOV facilities are underutilized; 
the ability of HOT lanes to introduce additional traffic to existing 
HOV facilities, while using pricing and other demand management 
techniques to control the number of additional motorists, maintain high 
service levels and provide new revenue, make HOT lanes an effective 
means of reducing congestion and improving mobility. With respect to 
the second and third suggestions, FTA will rely on the management, 
operation, monitoring and enforcement provisions of 23 U.S.C. 166(d). 
With respect to the fourth suggestion, the final policy statement does 
not modify language at 23 U.S.C. 166(c)(3).
    Accordingly, FTA has adopted as final the general provisions of its 
proposed policy.
    (b) HOT Lanes Were Previously HOV Lanes Reported in the National 
Transit Database as Fixed Guideway Miles. In its notice describing the 
proposed policy, FTA requested comments on its proposal to classify HOT 
lanes as fixed guideway miles for purposes of the funding formulas 
administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each 
of three conditions is satisfied. The first condition is that the HOT 
lanes were previously HOV lanes reported in the National Transit 
Database as fixed guideway miles for purposes of the funding formulas 
administered by FTA under 49 U.S.C. 5307 and 49 U.S.C. 5309. FTA 
received thirty-five comments on this condition, with some parties 
offering multiple comments. Eight commenters favored FTA's proposed 
policy. Eighteen commenters asked FTA to expand its policy to classify 
all HOT lanes as fixed guideway miles for purposes of the funding 
formulas administered by FTA, regardless of whether the HOT lane 
facility was newly constructed or was previously an HOV facility. Seven 
commenters asked FTA not to fund HOT lane facilities at a level that 
would dilute the pool of transit funding available for existing fixed 
guideway facilities. Two commenters proposed that FTA require converted 
HOV lanes to have operated as HOV lanes for seven years prior to their 
conversion to HOT lanes before FTA would classify them as fixed 
guideway miles.
    FTA Response: FTA recognizes that all HOT lanes provide similar 
benefits to metropolitan areas that are experiencing severe and 
worsening congestion, regardless of whether the facility is newly 
constructed or converted from HOV or general purpose lanes. However, 
the purpose of the final policy statement is to ensure that Federal 
transit funding for congested urban areas is not decreased when 
existing HOV facilities are converted to variably-priced HOT lanes in 
an effort by localities to reduce congestion, improve air quality, or 
maximize throughput using excess HOV lane capacity and to promote a 
uniform approach by the Department's operating agencies concerning HOV-
to-HOT conversions. If FTA were to classify all HOT lanes as fixed 
guideway miles without a commensurate increase in overall funding 
levels, it could negatively impact the ability of many transit 
operators to finance needed capital maintenance on existing 
infrastructure. For this reason, FTA has limited the scope of the final 
policy statement to classifying as fixed guideway miles only those HOT 
lane facilities that are converted from HOV lanes which had previously 
been classified as fixed guideway miles. In this way, FTA will ensure 
that Federal transit funding for congested urban areas is not decreased 
when existing HOV facilities are converted to variably-priced HOT 
lanes. FTA believes it appropriate to leave for the U.S. Congress, and 
not to determine on an administrative basis, the question of whether 
and on what terms facilities newly constructed as HOT lanes or general 
purpose lanes converted directly to HOT lanes would be classified as 
fixed guideway miles given the substantial reallocation of formula 
funds among transit authorities that might result over time if such 
facilities were also classified as fixed guideway miles.
    FTA has included the following footnote (15) in section II (b)(i) 
of this notice in response to the recommendation that FTA require HOV 
lanes to have operated as HOV lanes for seven years before they may be 
converted to HOT lanes and remain classified as fixed guideway miles:

    FTA apportions amounts made available for fixed guideway 
modernization under 49 U.S.C. 5309 pursuant to fixed guideway 
factors detailed at 49 U.S.C. 5337. One of these fixed guideway 
factors, located at 49 U.S.C. 5337(a)(5)(B), apportions a percentage 
of the available fixed guideway modernization funds to `fixed 
guideway systems placed in revenue service at least seven years 
before the fiscal year in which amounts are made available.' For 
purposes of 49 U.S.C. 5337(a)(5)(B), (i) no HOV facility that has 
been in revenue service at least seven years shall forfeit its 
eligibility for fixed guideway modernization funds because it is 
converted to a HOT lane facility in accordance with this final 
policy statement; and (ii) no HOV facility that has been in revenue 
service for less than seven years shall forfeit the years it has 
accrued thereunder because it is converted to a HOT lane facility, 
and for so long as the HOT lane facility maintains its fixed 
guideway classification in accordance with this policy

[[Page 1370]]

statement, it shall continue to accrue years thereunder.

Accordingly, FTA will not require that converted HOV lanes operate as 
HOV lanes for seven years before they may be converted to HOT lanes and 
remain classified as fixed guideway miles in accordance with this final 
policy statement.
    (c) Monitoring and Performance Standards. In its notice describing 
the proposed policy, FTA requested comments on its proposal to classify 
HOT lanes as fixed guideway miles for purposes of the funding formulas 
administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each 
of three conditions is satisfied. The second condition is that the HOT 
lanes are continuously monitored and continue to meet performance 
standards that preserve free flow traffic conditions as specified in 23 
U.S.C. 166(d). FTA received twenty comments on this topic. Four 
commenters favored FTA's proposed position. Seven commenters proposed 
that FTA require a minimum level of transit service on a HOT lane 
facility before its lanes could be classified as fixed guideway miles 
for purposes of the funding formulas administered by FTA. Five 
commenters requested that FTA adopt more exacting performance 
standards. One commenter requested that FTA state explicitly that local 
agencies may increase HOV occupancy levels as necessary to ensure free 
flow conditions needed for transit bus service. Another commenter asked 
FTA to amend its policy to state that single occupant vehicles may be 
permitted on HOT lanes that are classified as fixed guideway miles, 
provided that the lanes satisfy the conditions set forth in FTA's final 
policy statement. One commenter requested that FTA acknowledge that 
compliance with State law governing performance standards for HOT lanes 
suffices in terms of meeting the condition that the HOT lanes are 
continuously monitored and continue to meet performance standards that 
preserve free flow traffic conditions as specified in 23 U.S.C. 166(d). 
One commenter asked FTA to require a study on degradation of transit 
service before an HOV facility may convert to a HOT lane facility and 
be classified as fixed guideway miles for purposes of funding formulas 
administered by FTA.
    FTA Response: FTA disagrees that it should require a more exacting 
performance standard, including a minimum level of transit service. FTA 
recognizes that a more exacting standard would be necessary if all HOT 
lane facilities were eligible for classification as fixed guideway 
miles, for under this scenario rural or suburban HOT lane facilities 
with little or no transit service could receive a significant portion 
of the Federal transit funds needed by the Nation's largest transit 
providers to maintain their current infrastructure. For this reason, 
FTA has limited the benefits of the final policy to HOV lanes that have 
previously been classified as fixed guideway miles. Such designation as 
a fixed guideway mile indicates that a facility has a minimum level of 
transit service. FTA believes that compliance with the performance 
standards codified at 23 U.S.C. 166(d) is sufficient to ensure free 
flow traffic conditions and to avoid degradation of transit service on 
these facilities when converted from HOV lanes to HOT lane facilities. 
Moreover, HOV facilities constructed using capital funds available 
under 49 U.S.C. 5309(d) or (e) could be required, when an HOV facility 
converts to a HOT lane facility, to achieve a higher performance 
standard than required under 23 U.S.C. 166(d). In all circumstances, 
FTA shall require real-time monitoring of traffic flows to ensure on-
going compliance with 23 U.S.C. 166(d).
    FTA does not agree that compliance with State law governing HOT 
lane performance standards will satisfy FTA's requirements in all 
circumstances. Rather, FTA shall require all HOT lane facilities to 
comply with the statutory requirements of 23 U.S.C. 166 to be 
classified as fixed guideway miles for purposes of FTA's funding 
formulas. It may be the case that the laws of certain states require a 
higher level of performance than the Federal standard articulated here. 
In these instances, the lesser Federal standard should present no 
obstacle to HOT conversion.
    With respect to the request that FTA require a study on the 
degradation of transit service before an HOV facility may convert to a 
HOT facility, FTA (i) believes that compliance with the free flow 
traffic requirements of 23 U.S.C. 166 is sufficient to avoid the 
degradation of transit service on these facilities and accordingly (ii) 
will not require that project sponsors incur the additional expense of 
a formal study on the degradation of transit service.
    (d) Program Income and Toll Revenues. In its notice describing the 
proposed policy, FTA requested comments on its proposal to classify HOT 
lanes as fixed guideway miles for purposes of the funding formulas 
administered under 49 U.S.C. 5307 and 49 U.S.C. 5309, so long as each 
of three conditions is satisfied. The third condition is that program 
income from the HOT lane facility, including all toll revenue, is used 
solely for ``permissible uses.'' FTA received twenty-five comments on 
this condition. Five commenters favored FTA's proposed policy. Seven 
commenters requested that FTA expressly state in its final policy that 
grantees may use toll revenues for transit operating costs. Four 
commenters stated that FTA funds should not be used for the maintenance 
and/or construction of HOT lane facilities. Four commenters asked FTA 
to require that all Federal transit funds generated by HOT lane 
facilities because of their classification as fixed guideway miles be 
directed to the ``designated recipient'' for Federal transit funding. 
Three commenters stated that FTA should not permit the operators of HOT 
lane facilities to finance a HOT lane facility's operating losses with 
Federal funds generated by the facility's classification as fixed 
guideway miles. One commenter asked FTA not to limit the use of HOT 
lane toll revenues to transit. Another commenter asked FTA to require 
that priority of payment be provided for in the project implementation 
documents.
    FTA Response: Based on the recommendation of several commenters 
that FTA expressly state that grantees may use toll revenues for 
transit operating costs, and pursuant to 49 CFR part 18.25, which 
states that FTA ``grantees may retain program income for allowable 
capital or operating expenses,'' FTA has added transit operating costs 
to its description of ``permissible uses'' at section II(b)(iii) of 
this notice.
    FTA disagrees with the comment that its grantees should not use 
Federal transit funds for the maintenance and/or construction of HOT 
lane facilities. The commenter did not indicate whether it referred to 
the use of grant funds or program income. While FTA recognizes both HOV 
and HOT lanes as permissible incidental uses of FTA-funded assets, FTA 
grant funds shall not be used to construct a HOT lane facility beyond 
what is allowed by 49 U.S.C. 5302(a)(4), as implemented by FTA's 
regulations, as amended from time to time.\21\ Any facility that 
converts from an HOV to a HOT facility, and retains its classification 
as a fixed guideway by satisfying the conditions of this policy 
statement, may use program income in accordance with this final policy

[[Page 1371]]

statement, the Department's regulation at 49 CFR part 18.25, and other 
applicable statutes, regulations and requirements. Similarly, FTA 
disagrees with the comment that it should limit the use of HOT lane 
toll revenues to transit. In many cases, a HOT lane facility may have 
received (or receives) funding from FTA and another Federal agency, 
such that use of the facility's program income is governed by more than 
one Federal program. In these instances, FTA's restrictions concerning 
permissible use shall not apply to more than transit's allocable share 
of the facility's program income, as described in section II of this 
notice. FTA will not require recipients to assign priority in payment 
to any permissible use.
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    \21\ 49 U.S.C. 5302(a)(4) defines ``fixed guideway'' as ``a 
public transportation facility (A) using and occupying a separate 
right-of-way or rail for the exclusive use of public transportation 
and other high occupancy vehicles; or (B) using a fixed catenary 
system and a right-of-way usable by other forms of transportation.''
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    Federal transit law requires FTA to disburse certain funds to the 
designated recipient. The designated recipient for FTA formula funds 
shall not be changed because the grantee converted an HOV facility to a 
HOT facility, in accordance with the final policy statement. FTA shall 
not prevent such designated recipients from using the funds for 
eligible activities in accordance with the process for programming 
transit funds described at 23 CFR part 450.324(l) of the joint FTA-FHWA 
planning regulations.
    (e) Transit Fares and Tolls. In its notice describing the proposed 
policy, FTA requested comments on transit fares and tolls on HOT lane 
facilities. FTA stated that it would not condition the receipt of 
Federal transit funds by a qualifying HOT lane facility on the tolling 
authority's adoption of policies concerning the price of transit 
services on the HOT lane facility or the tolls payable by single 
occupant vehicles. FTA would allow grantees and tolling authorities to 
develop their own fare structures for transit services and tolls on HOT 
lane facilities. FTA received sixteen comments on this topic. Without 
further comment, five commenters agreed with FTA's proposed policy not 
to regulate toll prices. Ten commenters stated that transit vehicles 
should be exempt from tolls charged on Federally-funded HOT lane 
facilities for its lanes to be classified as fixed guideway miles for 
purposes of the funding formulas administered by FTA. One commenter 
asked FTA to require that transit fares and tolls remain competitive.
    FTA Response: Federal transit law prohibits FTA from regulating the 
``rates, fares, tolls, rentals, or other charges prescribed by any 
provider of public transportation.'' 49 U.S.C. 5334(b)(1). Accordingly, 
FTA shall not condition the receipt of Federal transit funds by a 
qualifying HOT lane facility on the tolling authority's adoption of 
policies concerning the price of transit services on the HOT lane 
facility or the tolls payable by single occupant vehicles. FTA will 
allow grantees and tolling authorities to develop their own fare 
structures for transit services and tolls, respectively, on HOT lane 
facilities. Transit fares shall remain subject to 49 U.S.C. 5332 
(Nondiscrimination) and 49 U.S.C. 5307 (Urbanized area formula grants), 
however.
    (f) Return of Funds under Full Funding Grant Agreements. In its 
notice describing the proposed policy, FTA requested comments on its 
proposal that, in the event that an HOV facility is converted to a HOT 
facility and the HOV facility has received funds through FTA's New 
Starts program, FTA would not require the grantee to return such funds, 
so long as the facility complied with the conditions set forth in the 
proposed policy. FTA received one comment on this topic. The commenter 
expressed concern that, when the grantee is not also the tolling 
authority, the tolling authority may make business decisions contrary 
to the interest of the grantee/transit provider, thus forcing the 
grantee/transit provider to repay New Starts funding to FTA.
    FTA Response: It appears that the commenter misunderstood the scope 
of FTA's proposed policy, which states that ``in the event that an HOV 
facility is converted to a HOT facility and the HOV facility has 
received funds through FTA's New Starts program, FTA would not require 
the grantee to return such funds so long as the facility complied with 
the conditions set forth in this guidance.'' If a grantee wishes to 
convert an existing HOV facility to a HOT lane facility and maintain 
the classification of its facility as a fixed guideway for purposes of 
FTA's funding formulas, it must comply with the conditions set forth in 
the final policy statement. To the extent that the facility is subject 
to a Full Funding Grant Agreement, the grantee is obligated to abide by 
the requirements thereof, just as it is bound to any other contractual 
or legal obligation.
    (g) Miscellaneous Comments. FTA received seven miscellaneous 
comments in response to its proposed policy. One commenter asked FTA to 
address a circumstance in which a previously eligible HOV lane (or a 
portion of an HOV lane) is temporarily or permanently taken out of 
service in order to be reconstructed and expanded into an improved HOT 
lane facility in the same corridor. A second commenter requested that 
FTA indicate whether it would classify as fixed guideway miles bus-only 
shoulders converted to HOT lanes when the bus-only shoulders are 
currently classified as fixed guideway miles. Another commenter asked 
FTA to clarify its policy with respect to variable-priced express 
lanes. Two commenters asked FTA to require coordination between 
privately operated HOT lane facilities and public transportation 
agencies. One commenter asked FTA to connect this policy with transit 
supportive land use. And another commenter argued that FTA's policy 
should not affect New Starts project eligibility criteria.
    FTA Response: FTA recognizes that it may be necessary to 
temporarily remove an HOV lane from service in order to convert it into 
a HOT lane facility. Such a HOT lane facility will not lose its 
classification as a fixed guideway so long as it satisfies the 
conditions set forth in the final policy statement.
    FTA agrees with the proposal that it classify as fixed guideway 
miles bus-only shoulders converted to HOT lanes as long as the bus-only 
shoulders are currently classified as fixed guideway miles and satisfy 
the conditions of this final policy statement. Accordingly, FTA has 
included the following language at footnote (16) in section II(b)(i) of 
this notice:

    FTA shall classify HOT lane facilities converted from bus-only 
shoulders as fixed guideway miles, so long as such HOT lanes satisfy 
conditions (ii) and (iii) of this final policy statement and were 
bus-only shoulders previously reported in the National Transit 
Database as fixed guideway miles for purposes of the funding 
formulas administered by FTA under 49 U.S.C. 5307 and 5309.

    The commenter that asked FTA to consider variably-priced express 
lanes did not provide enough information for FTA to determine whether 
such facility could satisfy the conditions set forth in the proposed 
policy. FTA responds by reiterating its statement at section II(b)(i) 
of this notice, that with the exception of bus-only shoulders, 
``neither non-HOV facilities nor facilities constructed as HOT lanes 
would be eligible for classification as fixed guideway miles.''
    The comment requesting that FTA require coordination between 
privately operated HOT lane facilities and public transportation is 
beyond the scope of this notice. FTA's Planning and Assistance 
Standards are located at 49 CFR part 613.
    Similarly, the comments requesting that FTA connect this policy 
with transit supportive land use and that this policy not affect FTA's 
New Starts project eligibility criteria are beyond the scope of this 
notice, which is limited to the classification of HOT lane facilities

[[Page 1372]]

as fixed guideway miles for purposes of FTA's funding formulas.

    Issued on January 8, 2007.
James S. Simpson,
Administrator.
 [FR Doc. E7-263 Filed 1-10-07; 8:45 am]
BILLING CODE 4910-57-P

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