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Transportation Funding & Financing

Toll Credits (Soft Match)


Section 120(j) of Title 23 permits states to substitute certain previous toll-financed investments for state matching funds on current Federal-aid projects. This provision dates back to ISTEA and has since been modified by TEA-21 and SAFETEA-LU. It permits the non-Federal share of a project's cost to be met through a "soft match" of toll credits. The flexibility of state transportation finance programs is increased by allowing states to use toll revenues when other state highway funds are not available to meet nonfederal share matching requirements.

Toll credits are earned when the state, a toll authority, or a private entity funds a capital transportation investment with toll revenues earned on existing toll facilities (excluding revenues needed for debt service, returns to investors, or the operation and maintenance of toll facilities). The amount of credit earned equals the amount of excess toll revenues spent on Title 23 highway capital improvement projects (except emergency relief program projects) and Title 49, Chapter 53 transit projects. If Federal funds were used for the project, the credit is reduced by the percentage of the total project cost derived from Federal funds.

To utilize this tool, the state must pass an annual maintenance of effort (MOE) test. The MOE determination covers a state's nonfederal transportation capital expenditures over a four-year period, and must certify that its toll facilities are being properly maintained before excess revenues can be credited. The expenditures in the last year of the four-year period generally must meet or exceed the annual average of the expenditures in the preceding three years of the four-year period.

By using toll credits to substitute for the required nonfederal share on a new Federal-aid project, the Federal share can effectively be increased to 100 percent.

Toll credits are designed to:

  1. Encourage states to increase capital investment in infrastructure.

  2. increase the flexibility of state transportation finance programs.

  3. Enable states to more effectively utilize existing resources.


A February 8, 2007 FHWA memo provides guidance on using toll credits as a nonfederal share of a Federal-aid highway or public transportation project.

Toll credit calculations based on expenditures prior to enactment of SAFETEA-LU (August 10, 2005) follows FHWA's August 7, 1998 memo.