New York City’s Central Business District Tolling Program: Background, Federal Role, and Selected Legal Issues

https://crsreports.congress.gov

February 26, 2025

Termination by the U.S. Department of Transportation of New York City’s Central Business District Tolling Program

Congress has prohibitedNew York City's Central Business District Tolling Program: Background, Federal Role, and Selected Legal Issues

Congress has prohibited tolling of federal-aid highways and passed a series of exceptions to the prohibition. One such exception is the Value Pricing Pilot Program (VPPP). On November 21, 2024, the Federal Highway Administration (FHWA) and multiple New York transportation agencies signed a VPPP cooperative agreement to allow value pricing on federal-aid highways in New York City. On January 5, 2025, New York City launchedlaunched its Central Business District (CBD) Tolling Program. On February 19, 2025, Secretary of Transportation Sean Duffy announced the terminationtermination of the cooperative agreement, though tolling under the program is ongoing.

Background

Definitions leading to litigation. A U.S. District Court preliminarily enjoined the termination in May 2025 and vacated the termination in March 2026. Tolling under the program has continued uninterrupted.

Definitions

A range of terms have been used to describe the CBD Tolling Program. New York City’'s Metropolitan Transportation Authority (MTA) refers to it as a congestion relief program. The state authorizing act refers to it as a tolling program. FHWA has described it as a congestion pricing or cordon congestion pricing toll zone.

Between May 2025 and March 2026, FHWA removed multiple web pages and publications related to congestion pricing from its website. FHWA provides or previously provided the following definitions:

Tolling was previously defined as charging drivers a fee for use of a highway, with fees going to building, maintaining, and improving the highway.

Congestion pricing was previously defined as.

Title 23 of the U.S. Code, which covers highways, does not define tolling, value pricing, congestion pricing, or cordon pricing. The following are definitions according to FHWA’s Office of Operations:

• Tolling is charging drivers a fee for use of a highway.

• Congestion pricing is a type of tolling in which toll

levels are varied a type of tolling in which toll levels vary by time of day or traffic volume in order to manage congestion.

• Cordon pricing is a type of zone-based congestion

pricing that involves charging a fee to enter or drive within a congested area, usually a city center. Area pricing is another type of zone-based congestion pricing.

In the most recent VPPP solicitation in the Federal Register (October 19, 2010), FHWA defined value pricing as encompassing “

Zone-based charging is levying fees for access to or use of a designated road network in or around heavily congested areas or urban centers. Cordon pricing and area pricing are types of zone-based charging.

Value pricing encompasses "a variety of strategies to manage congestion on highways, including tolling of highway facilities through congestion pricing, as well as other strategies that do not involve tolls, such as mileage-based car insurance and parking pricing.” "In some publications, FHWA useshas used the terms value pricing and congestion pricing interchangeably interchangeably.

Tolling Federal-Aid Highways In general, federal law prohibits tolling on federal-aid highways (23 U.S.C. §301), but Congress has created some exceptions to this ban (23 U.S.C. §301). Exceptions include tolling on newly

constructed lanes or highways and tolling of existing highways, bridges, and tunnels after reconstruction or replacement (23 U.S.C. §129(a)(1)); tolling of vehicles that do not otherwise meet the occupancy requirement for a high occupancy vehicle (HOV) lane (23 U.S.C. §166(b)(4)); the Congestion Relief Program, which allows for tolling on Interstate highways in up to 10 states; and the VPPP.

VPPP.

Value Pricing Pilot Program The VPPP (23 U.S.C. §149 note) is a continuation of the Congestion Pricing Pilot Program, initially established in FY1992 as part of the Intermodal Surface Transportation Efficiency Act (ISTEA; (P.L. 102-240, §1012(b)). The VPPPIt allows FHWA to enter into cooperative enter into agreements with up to 15 state and local governments to establish, maintain, and monitor value pricing programs. Any profit generated by a program funded through the VPPPRevenue generated must be usedused for projects eligible under Title 23 (Highways). Every two years, FHWA must reportreport to Congress on how the authorized programs have affected driver behavior, traffic volume, transit ridership, air quality, and transportation funding.

The VPPP originally provided grants to cooperative agreement holders. The grant funding covered a project’s development and implementation costs for up to three years or until the project began generating sufficient revenue to cover its operating expenses, whichever came first. In the Moving Ahead for Progress in the 21^st Century Act (MAP- 21; P.L. 112-141), which passed in FY2012, Congress did not authorize further funding for the VPPP, and the program subsequently ceased to offer grantsIt ceased to offer grants when Congress decided in 2012 not to authorize further funding for the program. FHWA may still enter into cooperative agreements for value pricing projects under the VPPP but encourages use of the other exceptions to the tolling ban when possible.

As of without a grant. As of the most recent reporting from FHWA in May 2022, FHWA had 13 active cooperative agreements for VPPP programs in 7 states: California, Florida, Maryland, Minnesota, Texas, Virginia, and Washington. Through the VPPP, FHWA has authorized a varietyvariety of value pricing strategies, including tolling of HOV lanes, variable pricing of new express lanes, variable pricing of existing toll highways, road user fees, mileage- based vehicle leases, and mileage-based car insurance.

Prior to approval of New York City’'s CBD Tolling Program, the VPPP had not authorized a cordon pricing program. The VPPP previously funded two studies related to cordon pricing. The first study considered the establishment of a “"charging area”" and parking pricing program in downtown San Francisco. The second study examined the potential for cordon or area-wide pricing in Los Angeles, coupled with a build-out of HOV toll lanes.

Termination by the U.S. Department of Transportation of New York City’s Central Business District Tolling Program

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New York City Tolling Efforts

New York City Tolling Efforts

New York City officials have twice sought to implement a tolling program under the VPPP.

First UPA/VPPP Proposal In 2007, the U.S. Department of Transportation (DOT) selected five states, including New York, to participate in congestion demonstration projects through the Urban Partnership Agreements (UPA) initiative. . The then New York City Mayor Michael Bloomberg proposed an area pricing program. Because the UPA did not have its own funding, this projectproject would have been funded through the VPPP, with DOT drawing funding from multiple other competitive grant programs. In 20082007, New York City Mayor Michael Bloomberg proposed an area pricing program for New York's demonstration project. The next year, the New York City council voted in favor of the project, but the project never received a vote in the New York state legislature and did not move forward..

Second VPPP Proposal and Tolling Program In October 2017, then New York Governor Andrew Cuomo appointed In January 2018, an advisory panel appointed by then-New York Governor Andrew Cuomo recommended improvements to New York City's public transportation system andadvisory panel to consider how to ease congestion in New York City and provide a dedicated funding stream for public transportation. In January 2018, the panel recommended improvements to New York City’s public transportation system, coupled with a phased implementation of congestion pricing in the CBD. In April 2019, the New York state legislature passed legislationlegislation that authorized and funded theNew York City's CBD Tolling Program. Among other provisions, theThe legislation required that (1) New York City enterenter into a memorandum of understanding with the Triborough Bridge and Tunnel Authority (TBTA) to plan and operate the tolling program; (2) tolls be setset at a high enough rate to cover the program’'s operating costs and “"provide for sufficient revenues ... to fund fifteen billion dollars for capital projects for the 2020 to 2024 MTA capital program”"; and (3) tolling begin no earlier than December 31, 20212020. The TBTA developed a planplan to vary tolls by time and type of vehicle.

Political and procedural issues impacted the timeline for implementation of the CBD Tolling Program. For example, it took about two years for FHWA to determine the appropriate FHWA completed the National Environmental Policy Act (NEPA) review process for the program and another two years to complete the reviewNEPA) analysis in June 2023 and affirmed the original finding of no significant impact in June 2024. Shortly before tolling was scheduled to go into effect on June 30, 2024, New York Governor Kathy Hochul temporarily haltedhalted the program. In early November 2024, Governor Hochul revivedrevived the program, and the TBTA lowered the initial toll prices (e.g., the toll$9 instead of $15 for a passenger vehicle entering the CBD during the peak period was lowered from $15 to $9). The new plan included increases tolls in three phases spanning 2025-2031, with tolls increasing in each phase.

from 2025 to 2031. On November 21, 2024, FHWA, the New York state department of transportationState DOT, the TBTA, and the New York City department of transportationDOT signed a VPPP cooperative agreement. The agreement includes. The agreement describes the project’s purpose: “to reduce traffic congestion in the [CBD] in a manner that will generate revenue for future transportation improvements.” It outlines provisions to address effects on low-income drivers, includingsuch as a tax credit and a low-income discount plan for frequent drivers.

Tolling went into effect on January 5, 2025. MTA's first evaluation report for the program, covering data from January to October 2025, indicates a reduced number of vehicles entering the CBD. Vehicle speeds increased on tolled and non-tolled routes and for nearby bridges and tunnels. Transit ridership increased for most but not all transit providers serving the CBD. As of November 2025, net revenue was $518 million, exceeding projections.

Legal Issues

On February 19, 2025, FHWA terminated approval for the CBD Tolling Program under the VPPP. In a letter on January 5, 2025. Initial data indicated that the program reduced traffic and trip times on most routes within the CBD while increasing traffic and trip times on some non-tolled routes. According to MTA, by January 29, buses across the Hudson and East River crossings were traveling faster and were more reliable. MTA also reported an increase in bus, subway, and train ridership compared with the same days the previous year.

On February 19, 2025, FHWA terminated approval for the CBD Tolling Program under the VPPP. In a letter to the governor of New York, the Secretary of Transportation concluded that FHWA lacked statutory authority to approve the CBD Tolling Program as a pilot project under the VPPP because the program is not an eligible “"value pricing pilot program.” According" According to the Secretary, the long-standing prohibition on tolling of federal-aid highways requires that exceptions such as the VPPP be narrowly construed. As of February 26, 2025, New York represented that tolling remains in effect under the program.

Legal Issues

The Secretary of Transportation acknowledged The Secretary acknowledged that Congress did not define value pricing pilot program but assertedasserted that the CBD Tolling Program does not qualify for two reasons. The Secretary maintainedFirst, the Secretary maintained that cordon pricing without non-toll alternatives for motor vehicles is unprecedented under the VPPP or any other statutory exception, and that permitting such pricing would require more explicit authorization than the “"vague phrase” used in the VPPP. The Secretary noted similar claims raised by a New York town in litigation opposing the CBD Tolling Program.

The Secretary also asserted" used in the VPPP. Second, the Secretary asserted that the calculation of tolls under the VPPP cannot be grounded in concerns other than congestion reduction or other road-related goals, but tolls under the CBD Tolling Program have been calculated primarily to generate specific revenues for MTA projects. While acknowledging that VPPP programs may generate revenue and the CBD Tolling Program’s tolls may in fact reduce congestion, the Secretary contendedwhile CBD Tolling Program toll rates were driven primarily by revenue targets for MTA projects. The Secretary acknowledged that VPPP congestion pricing programs necessarily generate revenue, but contended that the consideration of revenue targets in calculating these tolls renderstoll rates rendered the program ineligible for the VPPP. The Secretary rescinded FHWA’rescinded FHWA's approval of the CBD Tolling Program and terminated the November 2024 agreement.

Within hours of the release of the Secretary’'s letter, MTA and the TBTA filed a lawsuitlawsuit in the U.S. District Court for the Southern District of New York challenging the Secretary’'s attempt to terminate the VPPP cooperative agreement. The transportation agencies arguedagencies argued that termination is not permitted by any law and would be contrary to the Due Process Clause of the Fifth Amendment, the Administrative Procedure Act, NEPA (APA), NEPA, and federal regulations.

On April 21, 2025, the Secretary sent an additional letter to the Governor of New York threatening to halt certain transportation project approvals if New York did not cease toll collection. The Secretary also expanded on his policy concerns with cordon pricing and claimed that these provided an independent basis for his termination of the VPPP agreement. In May 2025, the district court preliminarily enjoined the Secretary and DOT from taking any action to enforce the attempted termination.

In March 2026, the district court determined that the attempted termination of the VPPP agreement violated the APA, and the court vacated the February 19 and April 21 letters. The court held that cordon pricing may be permitted under the VPPP and that the applicable statutes did not limit the consideration of transit funding. It also concluded that the Secretary could not rely on the post hoc policy justification in his April 21 letter to support an earlier termination decision, and, in any case, the Secretary lacked authority to rely on policy reasons to terminate the VPPP agreement. The court issued a declaratory judgment "that the Secretary is permitted to terminate the VPPP Agreement only pursuant to the terms expressly stated therein, that the Defendants' termination of the VPPP Agreement was unlawful, and that any attempt to enforce the February 19 Letter or April 21 Letter would be unlawful." While other legal challenges to the CBD Tolling Program are pending, the program remains in place and tolling is ongoing. federal regulations. They asked the court for a declaratory judgment that the purported termination of the VPPP agreement is null and void and for an order vacating the purported termination.

Ali E. Lohman, Analyst in Transportation Policy Alexander H. Pepper, Legislative Attorney

IF12929

Termination by the U.S. Department of Transportation of New York City’s Central Business District Tolling Program

https://crsreports.congress.gov | IF12929 · VERSION 1 · NEW

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