Hb 5045 (2017)

Prepared for the Oregon Legislature’s Joint Committee on Transportation per HB 5045 by the Oregon Department of

Transportation I-205: STAFFORD ROAD TO OR 213 FUNDING SCENARIOS

December 2018 Legislative Report

I-205: Stafford Road to OR 213 Funding Scenarios

Purpose of this Funding Scenarios Report

During the 2017 Legislative Session, the Oregon Legislature made historic investment in Oregon’s transportation system via passage of HB 2017, Keep Oregon Moving. The package invested in projects directed to provide congestion relief, including I-5 Rose Quarter and OR217, and establishing a Value Pricing Program to manage congestion and generate revenue for bottleneck relief projects.

The budget report accompanying this investment package, HB 5045 (2017), directed ODOT to ensure an ongoing commitment to fully funding the I-205: Stafford Road to OR 213 project, including direction of any value pricing revenues to this project, and identification of potential funding opportunities in the event value pricing revenues are insufficient. The budget note further directed ODOT to report to the Legislature during December 2018 Legislative Days.1 This report satisfies this directive and includes:

• I-205 Project overview; • Proposed tolling projects; • I-205 funding options and scenarios for consideration by the Joint Transportation Committee to deliver the project on the schedule provided in the I-205 Cost to Complete (CTC) Report presented to the Joint Transportation Committee in January 2018.

1 HB 5045 Budget Note: “(ODOT) is directed to ensure an ongoing commitment to fully fund congestion relief on I-205, including but not limited to the Stafford Rd to Abernethy Bridge bottleneck. Pursuant to HB 2017, any value pricing revenue shall be dedicated to I-205. In the event that value pricing revenue is not sufficient, or should value pricing prove not to be a viable funding source, the agency shall report immediately to the Legislative Assembly on the funding issues along with specifics on funding needs and options available to the Legislative Assembly to quickly remedy such funding gaps. An initial report shall be provided to the Joint Transportation Committee no later than the last legislative days in calendar year 2018.”

I-205: Stafford Road to OR 213 Project

I-205 is a designated seismic life-line route and must be functional following a major Cascadia Subduction Zone event to bring life-saving services and supplies to Oregonians. This segment of I-205 sees high levels of use and is often unreliable due to approximately 5.5 hours of daily congestion impacting more than 100,000 daily drivers and 8,900 freight vehicles daily.

Most of I-205 in Oregon is three lanes in each direction with the third lane currently ending near the OR 99E interchange to the north and at Stafford Road to the south. I-205 in this area consists of an urban freeway that includes two travel lanes in each direction with auxiliary lanes at the Abernethy Bridge over the Willamette River in Clackamas County Oregon.

With this Project, ODOT would add a third travel lane in each direction between OR 99E and Stafford Road, as well as a new northbound auxiliary lane between OR 99E and OR 213. Improvements include widening the Abernethy Bridge over the Willamette River to address morning and evening operational bottlenecks, which have grown significantly between 2013 and 2015. In addition, ODOT proposes to widen and seismically upgrade eight other bridges, and replace four bridges.

I-205: Stafford Road to OR 213 Project Costs: $500 million

In January 2018 the Oregon Transportation Commission (OTC) presented the Joint Committee on Transportation a Cost to Complete (CTC) Report for the I-205 Freeway widening project as required by HB 2017 (Section 27c.(1)). The CTC Report provided a plan for accountable, transparent, and efficient project delivery. The CTC Report defined the Project’s scope, a clear delivery timeline, and a recommended delivery method. Importantly, the CTC Report identified the total cost to complete the project with the assumption funding would be made available as required to maintain schedule; project delays would cause costs to increase as a result of inefficiencies, escalation, and inflation.

Since completion of the CTC Report, further progress has been made on project engineering and design. Cost estimates are refined as more analysis becomes available and design decisions are made. The current cost estimate, November 2018, ranges between $495 million and $515 million, reflecting the ongoing nature of some project decisions, risks that will be mitigated through design refinement, and other project unknowns (e.g. cost of steel prices). The project’s future estimates are expected to remain in line with the project cost estimate presented in the CTC Report around $500 million.

After comprehensive analysis of multiple construction scenarios, the CTC Report recommended delivery of the project in three packages:

COST TO COMPLETE DESCRIPTION FINANCIAL CONSTRUCTION ESTIMATE NEED (if funding is available) Package A: Abernethy Abernethy Bridge widening and By May 2020 the Spring 2020 – 2025 Bridge Widening retrofit, the OR 43 and OR 99E Project needs (pending funding) $252 million interchange reconstructions on $250 million either end of the bridge, the widening and retrofit of the West ≈ Linn Main Street Bridge, and the construction of a new I-205 NB auxiliary lane from OR 99E/ OR 213 Package B: I-205 I-205 widening from Stafford Road By August 2020 Fall 2020 – 2025 Widening to the Abernethy Bridge. Project the Project (pending funding) $200 million includes significant rock cuts to needs accommodate three traffic lanes $200 million

and the replacement or widening including seismic retrofits of all ≈ bridges carrying I-205 from 10th Street to Stafford Road. Package C: Active Traffic A total of seven electronic message 100% funded Fall 2019 – Fall 2020 Management signs, changeable advisory speeds $5.1 million and warning information aimed to reduce crashes, better manage incidents, and improve travel time reliability for the road users.

The State’s Strong Commitment to the Project - $53,700,000 Committed

To keep the project on schedule, consistent with legislative direction and to meet the needs identified in the CTC Report, ODOT has recommended and the OTC has approved the dedication of $53,700,000 from a variety of sources, including:

I-205 Project Funding to Date March 2016 FAST Act Freight Formula Funds $2,500,000 August 2017 Federal National Highway Freight $10,000,000 Funds March 2018 Regional Flexible Funds process $2,500,000 from TriMet & Metro April 2018 Sunrise Jobs & Transportation Act $15,400,000 reallocated savings September 2018 Federal revenue (unanticipated) $17,100,000 Cancelled projects and program $6,200,000 funds TOTAL $53,700,000

With the funding allocated to date, the project remains on schedule to complete construction for Package C (Traffic Management) and develop “bid ready” plans for Package A (Abernethy Bridge Widening) and Package B (I-205 widening) by mid-2020, consistent with the CTC Report.

Based on the estimated construction costs and the funding already committed to the Project a funding gap of $450 million ($500m CTC Report Estimate minus $50 million of committed funds) remains for construction of packages A and B. ≈ ≈

Existing Interstate 205 Abernethy Bridge

Anticipated Tolling Revenue

HB 2017 Section 120 directed the OTC to implement value pricing on I-5 and I-205 in the Portland metropolitan area and submit an application to FHWA by Dec. 31, 2018. Oregon’s proposed congestion pricing projects on I-5 and I-205 are shown in the following figure. The preliminary toll revenue projections for I-205 assume gross revenue of $45-55 million per year in 2017 dollars (see Attachment 1). The I-5 tolling project is also anticipated to generate $45-55 million in gross revenue per year in 2017 dollars. These numbers are preliminary and will be refined upon further analysis. Together these segments are anticipated to generate enough revenue to fund the remaining balance of the I-205 Stafford Road to OR 213 Project, however, there are implications and issues associated with each.

Value pricing, also known as congestion pricing or peak-period pricing, is a type of tolling in which a higher price is set for driving on a road when demand is greater, usually in the morning and evening rush hours. The goal is to provide a more reliable travel time for paying users and reduce congestion by improving traffic flow or encouraging people to travel at less congested times or by other modes. Transit improvements typically accompany pricing programs.

Recommended Value Pricing Concepts

Funding Issues and Opportunities

This report identifies three key funding issues for potential legislative consideration.

1) While tolling revenue may provide sufficient funding to construct the I-205 project in 2026 when tolling could feasibly begin, the $450 million ($500 million CTC Report estimate minus $50 million on-hand) needed for construction cannot be made available by the mid-2020 timeframe required to ≈ meet CTC Report timelines. 2) The $102 million necessary to conduct the required National Environmental Policy Act work ($17 million) and tolling system build out ($85 million) as described in ODOT’s Tolling Application to FHWA was not provided for in HB 2017. 3) ODOT has identified the opportunity to advance Rose Quarter final design if funding ($60 million) could be advanced to 2020 instead of 2022 as currently anticipated. This opportunity could provide $32 million of inflationary savings over the course of the project.

Funding Scenarios

To address these three issues, per legislative Funding and Project Delivery Objectives direction, ODOT provides a “current course of action” scenario (showing current anticipated Although this report focuses on the ability to fund the project delivery and tolling implementation I-205 project with toll revenue, it is important for ODOT timelines) and two additional illustrative scenarios to continue to meet other, existing requirements and for discussion and consideration. The two expectations, including: illustrative scenarios are not intended to represent two exclusive options or pathways;  Construct the I-5 and I-205 projects as instead, the illustrative scenarios are presented to quickly and efficiently as possible. inform future scenario development and  Implement tolling as quickly and efficiently as refinement work that could include shifting of possible. project delivery timelines, tolling implementation  Preserve ODOT’s financial balance sheet and timelines, project phasing, and funding current schedules for HB 2017 project opportunities. schedules.

Scenario Summary

ODOT describes the current course of action and two illustrative scenarios to demonstrate the range of options available to remedy identified funding gaps. The scenario descriptions attempt to describe the outcomes and considerations of each scenario in general terms. However, should the Legislature wish to explore opportunities to deliver tolling or projects sooner than presented in Scenario 1 “current course of action,” more refined funding, timing, and cost implications will be needed to fully inform the decision-making.

Should the Legislature choose not to pursue changes to the current course of action, ODOT will pursue implementing actions consistent with Scenario 1. These actions include:

• Continuing to design and prepare the I-205 Project for construction. • Identifying projects and program cuts to existing STIP projects and programs to fund tolling system build as outlined in ODOT’s tolling application to the Federal Highway Administration (FHWA). • Continuing to pursue discretionary federal funding opportunities.

Scenario Objective 1: Current Course of 2: Delay Other 3: Provide Additional Action HB 2017 Projects Revenue Construct the I-5 and I-205 projects as quickly and efficiently as possible X Implement tolling as quickly and efficiently as possible Preserve ODOT’s financial balance sheet and current schedules for other HB 2017 X X project schedules

Planned Construction I-205: Stafford Road to OR 213 Start CTC Report Schedule 2020 1: Current Course of Action +6 years 2: Delay Other HB 2017 Projects 0 years 3: Provide Additional Revenue 0 years I-5/Rose Quarter Project Planned Construction Start 1: Current Course of Action Schedule 2025 2: Delay Other HB 2017 Projects -2 years 3: Provide Additional Revenue -2 years Tolling Project Planned Construction Start 1: Current Course of Action Schedule 2026 2: Delay Other HB 2017 Projects 2026 3: Provide Additional Revenue 2026

Scenario 1: Current Course of Action

Scenario Outcomes → Construction of I-205 project cannot begin until toll revenue is collected in 2026 (see Table 1). → $60 million of Rose Quarter design will begin in 2022 when $30 million/year begins. → STIP Program reductions ($102 million) to pay for tolling NEPA ($17 million) and tolling system build ($85 million). → State bonds toll revenues, backed by the highway fund, to pay for construction of the I-205 project.

Table 1. Schedule Summary

I-205/Abernethy Project Project Construction Start CTC Report Schedule 2020 Scenario 1 Schedule 2026 Delay 6 years

I-5/Rose Quarter Project Project Construction Start Current Schedule 2025 Scenario 1 Schedule 2025

Trade-offs/Risks → Delayed construction of I-205 project. → Delaying I-205 project and not advancing the I-5/Rose Quarter design would increase project costs a total of $113.8 million. . For the I-205 project, delay would result in annual cost increases of $13.6 million for 6 years, or $81.6 million total. . For the I-5/Rose Quarter project, not advancing the design would result in annual cost increases of $1.8 million per year for design, and $14.3 million per year for construction or approximately 32 million total. → STIP reductions may be required in the STIP years 2019-2026 to fund tolling NEPA and tolling system build, resulting in delay or cancellation of STIP projects around the State. → Tolling implemented on I-205 and I-5 prior to observable benefits. Legislative Action(s) Required → Provide bonding authority for I-205 project prior to 2026.

Scenario 2: Delay Other HB 2017 Projects

Scenario Outcomes → No change to planned I-205 project construction beginning in 2020. → Advances Rose Quarter design ($60 million) two years earlier, in January 2020 to save $32 million of expected inflationary costs over the course of the project. → Some HB 2017 projects are delayed and the revenue is bonded against to pay for construction of the I-205 project, tolling NEPA and tolling system build and the I-5/Rose Quarter design. → Once toll revenue is established, delayed HB 2017 projects move forward and department restores STIP reductions.

Trade-offs/Risks → Some HB 2017 projects would be delayed until tolling revenues are available (2026 and after), resulting in community and regional impacts, including construction cost increases from inflation. → If tolling is not implemented, the delayed HB 2017 projects would remain unfunded until sufficient revenues are identified.

Legislative Action(s) Required → Amend ORS 367.620 to delay allocation of bond revenue for many named HB 2017 projects and reallocate it in the short term to fund the I-205 project, I-5/Rose Quarter design and tolling system development.

Scenario 3: Provide Additional Revenue

Scenario Outcomes → New revenue (fuels tax, registration fee, federal funds, bond, etc.) funds construction I-205 project delivery schedule per the CTC Report timeline, early design of I-5/Rose Quarter project, NEPA and tolling system development and build. → Oregon satisfies the requirements of the National Environmental Policy Act (NEPA) prior to developing a toll system. → Upon completion of toll system in 2026, tolling commences at identified locations on I-5 and I-205.

Trade-offs/Risks → Requires identification and approval of additional revenues.

Legislative Action(s) Required → Identify/establish new source(s) of revenue and dedicate those funds to construction of I-205 project, I-5/Rose Quarter design, as well as tolling NEPA and tolling system build.

ATTACHMENT #1

Portland Area Value Pricing Feasibility Analysis Costs and Revenue Assumptions

Portland Area Value Pricing Feasibility Analysis

SUMMARY OF CONCEPT E: ABERNETHY BRIDGE PRICED ROADWAY

Executive Summary

Concept E would apply variable pricing over all lanes of the Abernethy Bridge to generate revenue for seismic bridge upgrades and adding a third lane between OR99E and Stafford Road as shown in the figure below. All vehicles would be subject to the toll and all vehicles are assumed to use electronic toll collection technology. Rates would vary based on a pre-set schedule with higher rates during weekday peak periods to help manage demand, and no tolls assumed overnight from 11 PM to 5 AM. Tolls would not vary in response to real time traffic conditions. Concept E would result in major congestion reduction at the Abernethy Bridge but the traffic management benefits would decline the further one travels away from the bridge. Preliminary estimates show that Concept E would generate $66 million in potential gross toll revenues in 2027 ($53 million in 2017 dollars). Assuming 1% per year traffic and revenue growth, allowances for revenue adjustments and leakage of $7 million, an estimated $9 million in toll collection operations, enforcement and maintenance expenses, and about $2 million in facility routine maintenance costs would likely be sufficient to support in the range of $350-550 million in capital costs for the bridge and lane expansion through toll-backed financing.

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Overview of Concept E

Description: Concept E prices applies pricing on all lanes of the Abernethy Bridge including the existing lanes as well as an additional lane in each direction to be constructed as part of the planned bridge widening. There would be no free alternatives for crossing the I-205 bridge. The new lanes were assumed to be present in the traffic modeling for all other concepts including the baseline concept; however, assumptions regarding their pricing varied across the other concepts. The third lane would extend over the Abernethy Bridge, requiring the upgrade of that structure to support the new lanes.

Objective: The primary objective of Concept E is revenue generation. This differs from all other concepts which were modeled with the objective of traffic management in the priced lane(s). However, revenue and demand management are not mutually exclusive, and the tolls proposed in Concept E would effectively manage demand to maintain free flow travel speeds in the vicinity of the bridge.

Assumptions: The following assumptions were made for Concept E:

• Model year. Concept E and a baseline concept were analyzed in future year 2027. • Baseline concept. Included the third lane in each direction between OR99E to Stafford Road with no pricing. • Standalone Concepts. Each concept was modeled as a standalone implementation. If different concepts were assumed to be implemented at the same time, then modeling results would differ from what is reported here. • All vehicles pay. The project team assumed that all vehicles would pay the full price including High Occupancy Vehicles (HOV), motorcycles, “green” vehicles, and other vehicle classes that often have free or discounted access on some other U.S. priced lane facilities. • Trucks can use the priced lanes. Unlike the single lane pricing concepts where it was assumed trucks would not have access due to inside lane restrictions, Concept E assumes that trucks and other heavy vehicles can use the facility. • Single Tolling Point. Unlike other concepts where there were no assumptions made about tolling zone location, for Concept E the Abernethy Bridge itself was treated as a single tolling point (in each direction). Toll rates were set based on a single passage through that point. • Electronic Toll Collection. Tolls would be collected using electronic toll collection and no cash options (with toll booths) would be offered. • Value of Time. The traffic model assumed a regional value-of-time for all passenger vehicles of $21.62 per hour during peak hours and $14.38 per during off-peak hours. The value of time for trucks was assumed to be $43.75 per hour during the peak and off-peak. All values of time were in 2017 dollars.

Modeling Results Compared to the baseline concept, Concept E resulted in the following findings:

• Targeted congestion reduction. o Congested conditions on I-205 would be virtually eliminated at the Abernethy Bridge, with congestion reduction improvements gradually diminishing with distance away from the bridge. o Passenger vehicle travel times increase modestly on I-5 due to the diversion of traffic (especially longer distance trips made by trucks) from I-205. • Lower vehicle volumes during the peak periods.

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o Concept E would decrease passenger vehicle throughput on I-205 in the southbound direction in some segments during the AM peak hour as speeds increase and the volume of trucks decline to avoid the peak tolls at the Abernethy Bridge. o Approximately 1,000 fewer vehicles per hour (up to 25% during the peak hours) would cross the Abernethy Bridge in each direction. Diversion was only compared to the baseline condition which assumes that all three lanes are in place, but are not tolled. The model used did not compare diversion with the existing unpriced two lanes versus a three lane priced facility. • High probability of diversion. o Some vehicles will seek to avoid the toll by using adjacent toll-free facilities (although some trips may also be diverted to different modes or times of day). Some freight traffic and longer distance trips, in particular, would divert to I-5, slightly increasing I-5 travel times.

Costs and Revenue

Capital Costs: Capital cost of Concept E was estimated at $500 million. This includes $250 million to construct priced lanes from Stafford Road to the Abernethy Bridge and $250 million to widen and seismically upgrade the Abernethy Bridge.

Operations and Maintenance Costs: Preliminary annual operations and maintenance (O&M) costs for Concept E were estimated at nearly $11 million (expressed in 2027 dollars).

• Routine annual toll collection O&M estimates total $9 million in 2027 (2027 dollars) and include: credit card / bank processing fees, state agency-related O&M costs per transaction, back office customer service center (CSC) vendor(s) costs per transaction for systems software and operations, fixed roadway toll systems (RTS) O&M costs based on the number of toll gantries and lanes, and enforcement costs. Enforcement costs for Concept E did not assume occupancy verification as in Concept A and Concept D. • Routine bridge facility O&M costs were estimated at slightly less than $2 million in 2027 (expressed in 2027 dollars). • Routine annual toll collection and facility O&M costs exclude periodic capital repair and replacement (R&R) cost items, including periodic replacement of roadway toll equipment and systems, periodic back office CSC vendor and RTS vendor procurement costs, and periodic bridge deck replacement, etc. • Uncollectible revenue or leakage was estimated at $7 million in 2027 under the assumption of account-based all electronic toll collection with no provision for collection from travelers without an account-based travelers

Revenues: Annual gross toll revenue for Concept E in 2027 is estimated at $53 million (in 2017 dollars) or $66 million in 2027 year of collection dollars. Under the assumption of 1% annual growth in traffic and revenue, net revenue projections over a 30-year period would likely support $350 to $550 million in up-front capital investments through toll-backed financing.

• The traffic modeling analysis estimated the highest tolls during the weekday peak periods — $3.50 northbound and $3.00 southbound in 2017 dollars ($4.35 northbound and $3.70 southbound in 2027 year of collection dollars), with lower tolls at other times and no toll overnight between 11 PM and 5 AM. Weekend traffic was not modeled but weekends were assumed to have a midday peak toll, with weekend tolls generally lower than weekdays.

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Discussion and Findings

Preliminary estimates for toll revenues from Concept E would appear to cover all routine annual toll collection and roadway facility O&M costs, with sufficient net toll revenues to contribute approximately $350-550 million to capital investments. Concept E net toll revenues may also be able to contribute to periodic toll system R&R costs, roadway R&R costs, and/or support mitigation solutions. Additional analysis will be needed to determine appropriate financing assumptions, including the flow of funds, in order to better assess the toll funding contribution for capital and periodic R&R expenses.

Pricing revenues show good potential to provide funding that would allow the expansion of the Abernethy Bridge to be accelerated.

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