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    Document Summary
    - Report Published -

    House Document No. 9
    PUBLICATION YEAR 2011

    Document Title
    Review of Nonpublic Funding Options Available to the Virginia Department of Transportation for the Operation and Maintenance of Its Safety Rest Areas and Welcome Centers

    Author
    Virginia Transportation Research Council

    Enabling Authority
    HJR 126 (Regular Session, 2010)

    Executive Summary
    *This report was replaced in its entirety by the Virginia Transportation Research Council on April 12, 2011.

    Introduction

    Similar to many other states, recent budget constraints have caused the Commonwealth of Virginia to search for permanent and alternative funding of the operation and maintenance of its interstate safety rest areas (SRAs). Of the 42 SRAs in Virginia, 41 are interstate SRAs. The non-interstate SRA has a welcome center, and 10 of the interstate SRAs contain welcome centers. In this report, no distinction is made between those SRAs with welcome centers and those without, and both are referred to as SRAs. In FY 2009, the cost of operating and maintaining the 41 interstate SRAs was just over $16 million.

    In 2009, 19 Virginia interstate SRAs were closed with the intent of saving approximately $9 million per year in costs to the Virginia Department of Transportation (VDOT), but these closures were met with opposition by interstate travelers because of concerns regarding traveler safety, losses of state tourism dollars, and the Commonwealth’s reputation as a business-friendly state. All 19 SRAs were reopened during the spring of 2010 with funds from VDOT’s maintenance reserves. According to the American Association of State Highway and Transportation Officials (AASHTO), since 2005, Arizona, Kentucky, Louisiana, Maine, Missouri, and Texas have each closed five or more SRAs because of ongoing funding issues, although some SRAs have recently been reopened (Kane, 2009).

    Federal law prohibits federal-aid highways from offering any type of commerce for “serving motor vehicle users” at SRAs located on the interstate highway system right-of-way unless the establishment was in existence prior to 1960 and is owned by a state (23 U.S.C. 111). Congress enacted this law to preserve the scenic beauty of the then-rural interstate system and to encourage commercial development off-line along these corridors. Accordingly, commercial enterprises have located off-line at interstate interchanges and have mounted opposition to all efforts to amend directly or interpret innovatively federal code limiting commercial activity at SRAs. To summarize, given certain conditions, some SRAs in some states can be managed to generate funds for their support but other SRAs in many other states, as they are typically maintained and operated under the current constraints of federal code, are items of net expense in transportation budgets.

    Interest in commercializing interstate SRAs has persisted for the last 20 years (Phillips and Perfater, 1991) and has surged in the last 2 years as state transportation revenues declined across the United States. Yet the commercialization of SRAs is not the only possible access through federal code to nonpublic funding of these facilities. In the last 20 years, incremental changes—essentially “workarounds”—have been introduced to federal law through federal transportation authorizations either allowing charges for specific, limited services meeting national needs through interstate SRAs or providing innovative pilot programs aimed at generating “whole-facility” interstate funding, such as tolling. It should be stressed that these provisions were additions to federal code, usually through pilot programs, and required no arduous federal code repeal processes. Several of the workarounds added gradually since 1991 are scheduled for termination in the proposed federal transportation authorization, and another has already been repealed under opposition pressure, so it is possible that in the future the only approach to nonpublic funding of interstate SRAs at the federal level will be repeal or modification of the specific federal code prohibiting SRA commercialization (i.e., 23 U.S.C. 111). Nevertheless, although this specific federal code has been the focal point of advocates of commercialization for the last 20 years, there are other avenues to nonpublic funding of SRAs under current federal code and currently extended federal transportation authorization.

    Purpose and Scope

    This study was conducted in response to House Joint Resolution No. 126 and Senate Joint Resolution No. 99 (see Appendix A) passed during the 2010 Session of the Virginia General Assembly. The resolutions requested that “the Virginia Transportation Research Council . . . study alternatives to the public funding and operation of all or portions of the Commonwealth’s interstate safety rest areas.”

    The scope of the study was restricted to alternatives possible under the current regulations (potential near-term options) and those that would be possible only if relevant portions of the federal code were rescinded or revised (potential long-term options). For options in these two groups, the study attempted to identify comparative advantages and impediments to implementation and likely sources of opposition.

    The study did not investigate or address operational aspects, funding levels, maintenance, hours of operation, or bid-letting pertaining to any specific alternatives.

    Approach

    The following tasks were undertaken to fulfill the study purpose:

    1. Characterize VDOT’s current interstate SRA operations.

    2. Assess state departments of transportation (DOTs) for SRA funding initiatives.

    3. Review and summarize existing regulatory constraints pertaining to interstate SRAs.

    4. Survey users of Virginia’s interstate SRAs to determine their perspectives on potential funding alternatives.

    5. Interview representatives of affected trade groups to determine their perspectives on potential funding alternatives.

    Characterization of VDOT’s Current Interstate SRA Operations

    Details regarding the size, scope, and basic operations of VDOT’s interstate SRA operations were gathered through a review of relevant studies, a review of the VDOT Safety Rest Area and Welcome Center Master Plan developed for these assets (Kimley-Horn and Associates, 2009), and meetings with staff in VDOT’s Maintenance Division who manage the program.

    Assessment of State DOTs for SRA Funding Initiatives

    To accomplish this task, two steps were taken. First, relevant transportation research regarding SRAs was reviewed to provide a context and background for SRA funding nationwide, particularly in the last 20 years. Second, two surveys were sent to 49 state DOTs asking them to provide information about (1) implemented actions intended to augment revenues for interstate SRAs; (2) planned actions that were prevented by state or federal code or tabled because of organized opposition; and (3) commercial truck policies and accommodations at interstate SRAs.

    Review and Summary of Existing Regulatory Constraints Pertaining to Interstate SRAs

    To determine the limitations regarding nonpublic funding of interstate SRAs, the federal and state codes governing the characteristics and operations of rest areas located in interstate highway rights-of-way were reviewed and summarized. In consideration of the fact that the United States is currently operating under an extension of the authorization legislation (i.e., the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users [SAFETEA-LU] that expired in September 2009), the proposed federal authorization (i.e., the Surface Transportation Authorization Act [STAA] of 2009 ([Committee on Transportation and Infrastructure], 2009a) was reviewed for potential changes in federal policy with respect to highway infrastructure funding if relevant to SRA funding in the future.

    Survey of Users of Virginia’s Interstate SRAs to Determine Their Perspectives on Potential Funding Alternatives

    Users of Virginia’s interstate SRAs were surveyed to determine their perspectives on potential funding alternatives for Virginia’s interstate SRAs. Known methods used by state DOTs and new ideas gathered from the review of approximately 3,600 comment cards collected by VDOT at Virginia’s interstate SRAs from 2008 through the spring of 2010 were integrated into two survey instruments (see Appendices E and F). The survey was administered by Virginia Commonwealth University’s Survey and Evaluation Research Laboratory to travelers at 12 interstate SRAs randomly selected from Virginia’s 42 interstate SRAs.

    Interviews of Representatives of Affected Trade Groups to Determine Their Perspectives on Potential Funding Alternatives

    Fifteen groups anticipated to be interested directly in how interstate SRAs are funded and operated in Virginia were contacted for interviews to obtain their perspectives on potential funding alternatives. Trade groups representing both interstate SRA users (e.g., American Bus Association, Owner Operator Independent Driver Association, Virginia Trucking Association, and American Trucking Association) and interstate interchange businesses (e.g., National Association of Truck Stop Operators, National Association of Convenience Stores, and Virginia Petroleum, Convenience and Grocery Association) were contacted. Some were identified because of their public record in support of current federal statutory limitations on SRAs, and others were recommended by VDOT Maintenance Division staff, and some were specifically included by the sponsors of the legislation directing this study. The questions used in the interviews are provided in Appendix G.

    Results and Discussion

    Characterization of VDOT’s Current Interstate SRA Operations

    VDOT currently maintains 42 SRAs on Virginia’s highways, 41 of which are on the interstate system. VDOT estimated that nearly 32 million visitors used SRAs in 2008 (VDOT, undated). VDOT’s contract costs for maintaining and operating SRAs are only partially offset by vending sales commissions—the only commercial activity permissible under current federal and state law as specified in the next section.

    The VDOT Safety Rest Area and Welcome Center Master Plan, developed for VDOT in 2009 for the period ending 2026 (Kimley-Horn and Associates, 2009), recommended 14 sites for reconstruction or renovation at an approximate cost of $42 million (see Table 2 in the full report). The master plan also recommended additional car and truck parking at existing SRAs at a total approximate cost of $16 million. In addition, the master plan proposed 6 new SRAs at a total cost of approximately $64 million (Kimley-Horn and Associates, 2009).

    Assessment of State DOTs for SRA Funding Initiatives

    Review of Relevant Research Regarding SRAs

    In 1957, more than 2,100 miles of state-built toll roads in 14 states were grafted into the interstate highway system (Federal Highway Administration [FHWA], 2009a). Commercial facilities located on these turnpikes as of 1960 were grandfathered in federal code, i.e., exempted from closure in accordance with the provisions of 23 U.S.C. 111(a). Therefore, SRAs on these portions of state turnpikes could be developed into large enterprises if they had been established by 1960. All other SRAs on the National Highway System (NHS) in the interstate right-of-way of the federal-aid highway system—including those in Virginia—have always been subject to the limitations on commercialization imposed by 23 U.S.C. 111 with no exceptions.

    Although states have long been interested in the commercialization of SRAs and have conducted studies on the subject for more than 20 years, earlier studies did not develop solutions that were consistent with the provisions of 23 U.S.C. 111 and other interstate-related sections of federal code and therefore did not lead to a permanent alteration of traditional SRA funding. Over the last 2 years, however, the funding of SRAs became a public subject of urgent interest when state DOTs faced unexpectedly irate citizens after SRA closures. To keep their SRAs open, state DOTS have tried to develop new approaches within federal code and have reconsidered older ones.

    Ultimately, the literature review of state DOT initiatives showed that SRA funding ideas thought to require no changes to federal code have emerged along two tracks, the first requiring “small-scale” business changes of limited, practical scope—as well as immediate but limited revenue potential—and the second requiring large-scale physical redesign, relocation, and/or conceptual transformation of SRAs into different entities expected to be capable of self-funding over the long term.

    Small-scale nonpublic funding strategies for interstate SRAs that do not appear to challenge the legal status quo include the expansion of vending sales; the expansion and enhancement of paid advertising, and solicitation for paid corporate sponsorship of SRAs possibly based on concessionaire management (and possibly through public-private partnership [PPP] agreements), the leasing of space at SRAs for cell tower and solar energy enterprises, and the provision of a wireless Internet connection for travelers in exchange for viewing electronic advertisements prior to connecting to the Internet. [As used in this report, advertisement is any visual display or brochure promoting an entity (e.g., Virginia Blood Services or McDonald’s). Sponsorship, a subset of advertisement, describes various arrangements from most prominent advertiser to SRA naming rights.]

    Large-scale strategies that appear to be permissible (i.e., subject to FHWA approval) at present include the commercial development of properties adjacent to (but outside the interstate right-of-way and therefore outside the purview of federal code restricting commercialization) and with pedestrian access to interstate SRAs (known as traveler services rest areas, or TSRAs) (Kress and Dornbusch, 1991; Dornbusch and Associates, 2007) and the replacement of interstate SRAs with regional welcome/tourist centers under PPPs (Masteller, 2003).

    State DOT Surveys

    Two surveys of 49 state DOTs were conducted; the first (see Appendix C) was designed to identify funding alternatives employed or explored by state DOTs with the same commercialization restrictions as VDOT. Although most of the 17 responding states have considered different funding alternatives, including increased advertising, increased vending, and PPPs, no responding states were applying any type of funding alternative at the time of the survey. Most responding states reported that their major efforts to fund their SRA programs are directed toward cost reductions. Fifteen of the responding states indicated an interest in commercialization, but most are taking a “wait-and-see” approach. The full results of the survey are provided in Appendix I.

    The second survey of 49 state DOTs (see Appendix D) comprised a closer inquiry into truck parking policies and whether states anticipated any revenue potential in enhanced truck parking facilities (to include electrification for idling reductions). Of the 19 states that responded, 14 legally allow “sundown to sunup” (overnight) truck parking; 4 have 2- to 3-hour parking limits but do not enforce them for trucks; and 1 prohibits overnight parking and reported that this regulation is enforced. No responding states provide electrification for truck idling reduction. The full results of the survey are provided in Appendix J.

    Existing Regulatory Constraints Pertaining to Interstate SRAs

    In Virginia, interstate SRAs were originally simple pull-offs, or “waysides,” on federally funded interstate highways. Thus Virginia and similar states are subject to the full restrictions of 23 U.S.C. 111 and related federal statutes; Virginia is also subject to state laws intended generally to comport with federal law (although some more recent state laws were crafted to allow flexibility from a change in federal code prohibiting interstate tolling should it ever occur). In addition, however, federal code contains several programs originating in the federal transportation authorizations since 1991 that are specifically intended to generate long-term highway infrastructure funding and therefore have relevance for interstate SRA funding.

    The task of identifying feasible sources of nonpublic SRA funding was complicated by the expiration of SAFETEA-LU in September 2009 and the uncertainty about the shape of the next federal authorization, to be enacted possibly in the fall of 2011. The proposed federal transportation authorization, i.e., the STAA of 2009 ([Committee on Transportation and Infrastructure], 2009a), departs substantially from the user fee (i.e., nonpublic) funding concepts preserved and advanced over the last three federal transportation authorizations by emphasizing a need for closer federal oversight of PPPs and highway tolling projects undertaken by states.

    Perspectives of Users of Virginia’s Interstate SRAs Regarding Potential Funding Alternatives

    The survey of the Virginia interstate SRA users revealed that, in general, respondents were more likely to support VDOT raising money for SRAs through some type of commercialization than through any other means of raising funds. Respondents were less likely to support VDOT raising money by way of charging some type of user fee (i.e., vehicle entrance/exit, restroom, and parking). Approximately one-half of freight truck driver respondents were at least somewhat likely to support VDOT raising money for SRAs by charging a fee for use of expanded truck facilities (including registered overnight parking and fee-based electrification / idle reduction facilities). Eighty percent of the survey respondents “would consider buying” items not currently offered at SRAs to include health care items (e.g., pain relievers, toothpaste), fresh foods (e.g., sandwiches, ice cream, fruit), and additional drink selections (nonalcoholic). A summary of the results of the survey are presented in Figure 1 in the full report.

    Perspectives of Representatives of Affected Trade Groups Regarding Potential Funding Alternatives

    Twelve (of 15) trade groups responded to the various interstate SRA funding options provided in the interview questions. Expanded vending and expanded advertising were at least somewhat likely to be supported by the majority of the trade group respondents; 2 responding trade groups were neutral regarding expanded vending on the grounds that the sales of their constituents might be adversely affected. About one-half of responding trade groups were at least somewhat likely to support SRA sponsorships. Responses regarding lifting restrictions on commercial activity at SRAs were mixed. No trade groups were in support of tolling interstate highways. The full results of the trade group survey are provided in Table 3 in the full report.

    Conclusions

    • There appear to be near-term methods for increasing nonpublic revenues at interstate SRAs under current federal law, some of which may require FHWA approval. These include expansion of vending options, indoor advertising, facility sponsorship, relocated facilities under regional management at scenic/historic locations, and commercial facilities on private land adjacent to existing SRAs in the interstate right-of-way.

    • Long-term methods for nonpublic funding of SRAs require changes to federal code. A modification of the provisions of 23 U.S.C. 111 or the repeal of 23 U.S.C. 301 would allow states more flexibility in nonpublic funding options.

    • The majority (approximately 70%) of the Virginia interstate SRA user survey respondents in this study are at least somewhat likely to support commercialization of Virginia’s interstate SRAs. Approximately 30% of respondents are at least somewhat likely to support charging fees for use of Virginia’s interstate SRA facilities (out of 579 surveys administered).

    • The results of the survey of users of Virginia’s interstate SRAs indicate that the product selection at SRA vending machines can be augmented to have increased appeal to travelers. Only 54% of the travelers surveyed purchased any vended product, yet more than 80% of respondents were interested in purchasing products that are not currently available.

    • Expanded indoor advertising was at least somewhat likely to be supported by 8 of the 12 trade groups responding to the interview questions as a means for VDOT to generate nonpublic funds for SRAs. This option was very likely to be supported by 5 of the 8 groups supporting it.

    • SRA sponsorship is at least somewhat likely to be supported by 6 of the 12 of the responding trade groups. Trade groups that expressed reservations over sponsorship were concerned with competition between members of their trade group that are potential sponsors.

    • VDOT’s interstate SRA infrastructure, operations, and maintenance expenses are high relative to current vending commissions. Parts of VDOT’s interstate SRA infrastructure (i.e., water/septic systems) are approaching the end of their service lives and will require replacement in the foreseeable future.

    • To fully offset only interstate SRA operations and maintenance costs (based on FY 2009 data), estimated additional annual VDOT vending commissions of about $0.48 per visitor per interstate SRA would be required. Based on VDOT’s current vending agreements, this increase in commissions per visitor translates into an average increase in annual vending sales per visitor per interstate SRA of $1.54.

    • The federal regulatory framework of the NHS places substantial constraints on SRAs in interstate rights-of-way on federal-aid highways. 23 U.S.C. 116 prohibits federal funding of routine maintenance of SRAs on federal-aid highways and 23 U.S.C. 111 prohibits commercialization serving motor vehicle users at SRAs in the interstate rights-of-way. On the other hand, 23 U.S.C. 111(b) allows limited vending sales at interstate SRAs. Tolling of interstate highways is prohibited under 23 U.S.C. 301, whereas 23 U.S.C. 129 allows limited applications of tolling, including two programs allowing pilot tolling projects for interstate highway facilities.

    Recommendations for Consideration Should the Commonwealth Decide to Pursue Funding of Interstate SRAs with Nonpublic Revenue Streams

    If the Commonwealth of Virginia decides that SRAs can and should in principle be funded with nonpublic revenue streams, two actions should be taken concurrently: (1) pursue changes in existing federal law and regulations, and (2) undertake the state-level, revenue-generating options for increasing nonpublic revenue described in this report.

    Pursue Changes in Existing Federal Law and Regulations

    To the extent that Virginia desires more flexibility in managing its interstate SRAs to maximize revenues, the Commonwealth should join with other states and AASHTO to continue to work for changes to those sections of federal law and regulations that currently restrict (1) commercialization of interstate SRAs; (2) fee-based, electrified truck parking facilities at interstate SRAs; and (3) tolling of interstate highways.

    Each section of federal code discussed in this report bears on the funding of interstate SRAs in a unique way. The economic success of commercialization at an interstate SRA could be expected to be sensitive to both the location and the footprint of a facility as it presently exists. Fee-based electrified truck parking facilities would constitute a “partial” commercialization of interstate SRAs that advances the Commonwealth’s compelling interest in the safety of all highway users by aiding and supporting (1) compliance of commercial vehicle operators with federal code regarding hours of operation and (2) enforcement of interstate shoulder and ramp parking regulations. Tolling of an interstate highway could provide funding for the facility as a whole, thereby avoiding the issue of commercialization of SRAs.

    Changes to federal code and regulations in any of the three areas delineated will take collective action with other states and AASHTO as well as time, and therefore the development of a long-term strategy or strategies to accomplish such change should begin immediately to take advantage of the high interest in the issue across the nation.

    Undertake State-Level, Revenue-Generating Options for Increasing Nonpublic Revenue at Interstate SRAs

    Strategies at the state level should be pursued concurrently with collective action to modify federal code. Small-scale options that VDOT should explore for immediate implementation include expanded vending, advertising, and sponsorship of SRAs. Large-scale options that VDOT should explore for eventual implementation include the transfer of interstate SRAs to regional (e.g., county) management in historic or scenic areas and commercial development on private land adjacent to interstate SRAs.

    Small-scale Options

    Federal code does permit vending sales at interstate SRAs as well as the leasing of information centers to contractors. Since vending sales and advertising/sponsorship revenues will reflect value added, travelers, taxpayers and local communities are all likely to benefit economically from specialized SRA business management focused on revenue maximization in comparison with current practices. The results of this research indicate that among visitors to Virginia’s interstate SRAs, there is considerable latent demand for expanded vended products, although it is possible that some interstate SRAs in Virginia have little additional revenue potential because of their location or space limitations. Therefore, it is recommended that VDOT identify and lease selected interstate SRAs to management enterprises that would focus on generating maximum revenues through vending, advertisement, and/or sponsorships to offset the costs of the facilities.

    VDOT should also authorize renegotiations of advertising agreements to maximize its return on paid advertisement at interstate SRAs. Some interstate SRAs can provide invaluable exposure of local or statewide businesses and attractions to travelers, yet VDOT’s income from advertising has been negligible. The Commonwealth is most likely to maximize revenue earned from interior advertising, however, by returning commensurate value to business customers through modern, attractive displays with current information via user-friendly technology that reflects the capabilities and needs of travelers and tourists.

    In contracting out the management and transformation of interstate SRAs into a self-funding program, VDOT would distance itself from ancillary business activities that could diminish its effectiveness in its primary mission to plan, deliver, operate, and maintain a safe transportation system. As nearby states add features of value to travelers and advertisers to augment basic interstate SRA services with the goal of self-funding, VDOT would benefit from tapping the same traveler base by meeting the rising service norms for interstate travelers and tourists as described in the review of relevant research regarding SRAs in the full report.

    Large-scale Options

    Two large-scale options emerged from the review of DOT initiatives in other states. The first is the traveler services rest area, in which private property adjacent to an SRA located in the interstate right-of-way with exclusively pedestrian access to the SRA is developed commercially. Pursuing approval from FHWA of traveler services rest areas appears prudent and should include the identification of locations where such an arrangement seems economically and logistically viable.

    The second consists of transferring the function of an interstate SRA from VDOT to a regionally or privately managed information center, located most likely at an interchange—but in all cases outside the interstate right-of-way—that can serve travelers and tourists without the type of commercial restrictions presently applied to interstate SRAs. Federal transportation enhancement funds may provide a means for offsetting some of the costs of an eligible project related to a scenic or historic attraction, subject to FHWA approval. In the absence of a project eligible for such funds, however, potential local economic growth could nevertheless justify directing interstate travelers and tourists to full-service off-line information centers and away from simple interstate SRAs with services restricted to brochures and vending. VDOT should be authorized to explore this option fully in the near future.