Purpose

Pursuant to Chapter 2, Item 441 C.7, of the 2024 Appropriation Act, the Virginia Department of Transportation (VDOT) evaluated the cost and feasibility of permitting free high occupancy vehicle (HOV) access at all times on the Downtown Tunnel and Midtown Tunnel (DTT-MTT) facilities. The report describes the project background, modeling/analysis and evaluation, and provides the conclusions and recommendations for consideration by the Governor, the Secretary of Transportation, Chairs of the House Committees on Appropriations, Finance, and Transportation and the Senate Committees on Finance and Appropriations and on Transportation.

The evaluation assumed, toll-free travel beginning in 2026 for passenger vehicles with two or more occupants (HOV2+) in the DTT-MTT facilities; this is consistent with the tolling program on the surrounding Hampton Roads Express Lanes (HREL) network. VDOT developed a series of models to estimate the impact of the change in tolling on traffic congestion, capital expenditures required to support the change, and operational expenditures through the 2070 concession period. VDOT also identified commercial and policy impacts associated with this tolling scenario.

Study Context

The DTT (I-264) and MTT (U.S. 58) facilities run beneath the Elizabeth River, connecting the cities of Norfolk and Portsmouth. The DTT opened as a toll facility in 1952, and the MTT in 1962. In 2011, VDOT entered into a $2.1 billion, 58-year Comprehensive Agreement (CA) with Elizabeth River Crossings OpCo, LLC (ERC), the concessionaire, to rehabilitate the existing DTT-MTT facilities, construct a new MTT facility to increase capacity, extend Martin Luther King Freeway (MLK Extension), and operate the facilities through 2070.

The new DTT-MTT facilities opened in August and October 2016, respectively, and rehabilitation of the existing MTT tube was completed in September 2017. ERC initiated tolling in February 2014 to cover the debt associated with construction, operations and maintenance through the 2070 concession period.

The DTT-MTT facilities are currently tolled for all vehicles, including single-occupancy vehicles (SOV) and high-occupancy vehicles (HOV), with exceptions for categories of exempt vehicles established in Va. Code § 33.2-613 and the CA. Toll rates are the same for both tunnels but vary by time of day, type of vehicle, day of the week, and payment method. As of January 1, 2024, EZPass paid tolls for passenger vehicles, those with two axles and motorcycles, are either $2.26 or $3.06 ($6.77 and $7.57 non-EZPass) and heavy vehicles, those with three or more axles and cars with trailers, are $6.77 or $12.24 ($11.28 and $16.75 non-EZPass) depending on the time of day, non-peak and peak travel, respectively.

Previous Toll Mitigation and Relief Efforts

VDOT, in conjunction with ERC, has developed and implemented numerous toll relief strategies to help ease the financial burden of tolls at the facilities. These include establishing categories for exempt vehicles; capping the rate of escalation at the higher of 3.5% or the annual change in Consumer Price Index (CPI); establishing and expanding a Toll Relief Fund (TRF) Program for low to middle income Portsmouth, Norfolk and Hampton Roads commuters which last until 2036; and delaying the annual toll rate increase during the COVID-19 pandemic. ERC has contributed nearly $11.3 million to the TRF Program since 2017 to assist in toll payment for qualified motorists.

Study Findings Related to Congestion and Safety

The Highway Capacity Manual uses Level of Service (LOS) to rank roadway facilities based on the density and flow of traffic, ranging from LOS A, completely free flowing, to LOS F, severely congested. Based on an analysis of 2023 traffic conditions, the DTT is currently operating at LOS F during peak periods west bound in the AM and east bound in the PM. The MTT is operating at LOS C and has some capacity remaining, but US 58 east of the tunnel in Norfolk is already experiencing significant congestion.

In 2019, VDOT performed a preliminary analysis to evaluate the potential impacts of a HOV2+ free tolling scenario on the subject facilities by 2025, concluding that the change in tolling would lead to reduced travel speeds. The most substantial impacts were observed in the DTT, with afternoon westbound speeds dropping from 35 MPH to 25 MPH and afternoon eastbound speeds dropping from 33 MPH to 20 MPH. An updated analysis would be required to confirm these 2019 preliminary results. A more comprehensive study of the impacts would also investigate typical trip origins and designation, traveler behavior patterns, regional economic development, local and regional growth plans and other factors.

If a HOV2+ free tolling scenario did increase congestion, it would also be expected to have corresponding safety impacts, such as a higher number of traffic incidents and slower response times for emergency responders. Traffic congestion has been found to contribute to incidents by interrupting traffic flow, reducing the range of vision for vehicle operators, and creating zones of potential conflict between vehicles in the congested location and high-speed drivers approaching these congested areas.

Study Findings Related to Cost of Removing Tolls for HOV2+

VDOT evaluated the estimated cost of HOV2+ free tolling by focusing on the capital expenditures (CapEx) and operational expenditures (OpEx) for implementation, specifically the modifications required to the DTT-MTT facilities and tolling systems.

In terms of CapEx, VDOT identified a range of $5 million to $12 million (expressed in 2026 dollars), the most significant cost for a Vehicle-Occupancy-Detection (VOD) system. VOD systems would be used to observe instances where a vehicle with an EZPass transponder set to HOV mode may not have a two-occupant minimum. The other major cost was for changes to existing signs on the facilities and surrounding network to inform drivers of the tolling policy.

The estimated OpEx through 2070 ranged from $68 million to $96 million (expressed in 2026 dollars) for:

• Additional staff to review VOD images
• Additional troopers from the Virginia State Police (VSP) to support occupancy enforcement
• Routine and major (lifecycle) maintenance of the VOD equipment
• Additional customer support staff to address motorist questions regarding HOV policies and enforcement

In addition to these costs, any Department Change to the facilities and the current toll policy that has a negative impact on the toll revenue collected by ERC, may result in a Compensation Event claim by ERC, pursuant to the CA, where the Commonwealth would be required to pay ERC for lost revenue. Based on a preliminary 2019 traffic and revenue study, a change in policy to HOV2+ free tolling could result in an estimated upfront payment, representing a Compensation Event, from the Commonwealth to ERC in the range of $450 million to $650 million, subject to negotiation with ERC.

If the actual number of HOVs traveling on the DTT-MTT facilities exceeds the level of HOV traffic assumed for the calculation of this upfront payment ERC may have insufficient revenues to maintain and operate the DTT-MTT facilities in accordance with the requirements of the CA. As a result, ERC would likely seek additional compensation from the Commonwealth.

Other provisions of the CA may be impacted by this proposed action and a full review of the CA and assessment of impacts would need to be initiated. Any change to the financial structure of the asset would require the consent of ERC’s lenders’, including the U.S. Department of Transportation (USDOT). Statutory and regulatory requirements governing state and federal highways (including the operation of HOV/HOT facilities), would also need to be addressed before a change in tolling policy could be implemented.

Recommendations

VDOT recommends that the HOV2+ free tolling scenario contemplated by Item 441 C.7 should not be implemented on the DTT-MTT facilities for the reasons summarized below:

• Traffic Congestion and Safety: VDOT’s traffic analysis showed that a HOV2+ free tolling scenario would negatively impact the DTT-MTT facilities by increasing congestion and further reducing speed. This would require significant capital investments to add capacity. In addition, an increase in congestion would also lead to delays in responding to incidents by emergency personnel.

• Impact on Capital and Operational Costs: VDOT estimated that implementation of a HOV2+ free tolling scenario would result in additional OpEx costs estimated between $68 million to $96 million through 2070 and an estimated $5 million to $12 million in additional CapEx.

• Commercial Impacts: A change in tolling policy to HOV2+ free would result in a compensation event to ERC, pursuant to the CA, estimated between $450 million to $650 million. The unknown risks around higher than expected HOV2+ use could result in further loss in revenue potentially jeopardizing ERC’s ability to operate and maintain the DTT-MTT facilities. This could result in a need for additional public contribution.