When it opened during the
1990s, Orange County's $2.4-billion tollway system was touted as an
innovative way to build public highways without taxpayer money.
Today, the roads offer smooth sailing for gridlock-weary commuters
willing to pay the price. But far fewer people are using the turnpikes
than officials predicted, which means the highways generate far less
revenue than expected to retire their debts.
There have long been questions about the long-term financial
viability of the San Joaquin Hills and Foothill-Eastern corridors. But
those concerns have now heightened, and a government oversight panel
chaired by state Treasurer Bill Lockyer has launched a formal inquiry
into whether the roads can cover mounting interest payments to private
investors who purchased tollway bonds.
The review was prompted by
former Orange County Assemblywoman Marilyn Brewer, who questions whether
the debt-laden toll road agency is “viable as a going concern.”
“I think they are in trouble,” Brewer said. “I don’t believe there is
malfeasance, but it’s no way to run a railroad or a toll road.”
The roads, which rely on motorist tolls and fees from new
developments in the area, have been battered by economic recessions,
lower-than-expected population growth and competing public highways,
such as Interstates 5 and 405, both of which have been widened and
improved by Caltrans.
Wall Street ratings agencies have reduced the San Joaquin Hills toll
road's bonds to junk status and the notes for the Foothill-Eastern
corridor to the lowest investment grade.
To meet expenses and debt payments, the corridor agency has
refinanced the San Joaquin Hills bonds, raised tolls more than
originally planned, slashed administrative costs and obtained repayment
concessions from bondholders. Early next year, officials plan to
refinance about $2.4 billion in notes issued to build the
Foothill-Eastern tollway.
In 2011, ridership on the San Joaquin Hills, which has never
performed as predicted, was only 43% of original forecasts, and its
revenue was 61% of projections. The road parallels the Orange County
coast, slicing south from Irvine through Newport Beach, Laguna Beach and
Aliso Viejo to the San Diego Freeway.
Motorists on the Foothill-Eastern last year numbered 33% less than
projected, and revenue was 75% of forecasts. Previously, the part of the
corridor between Yorba Linda and Rancho Santa Margarita had a revenue
surplus and ridership that was often 8% to 10% ahead of projections. The
extra money was used to help shore up the finances of the San Joaquin
Hills road.
Last year, the San Joaquin Hills restructured about $2.1 billion in
debt and pushed back the retirement of its bonds to 2042, meaning
motorists will have to pay tolls for an additional six years before the
road becomes a free highway. It is the second time the original deadline
of 2033 has been reset.
"Extending the payment time to make sure we can make our debt
payments is a necessary step," said Amy Potter, the Transportation
Corridor Agencies' chief financial officer. "We have to be flexible."
Overall, the agency has borrowed about $4.4 billion for the two roads
and faces at least $10.5 billion in debt payments by the time its bonds
mature, according to financial statements.
Despite the roads' sagging ridership, the agency has increased tolls
repeatedly to keep pace with expenses and debt payments—at least 12
times since 1996 on the San Joaquin Hills alone.
The tolls on both corridors are now among the highest in the nation
per mile. A round trip at peak travel times on the San Joaquin Hills
costs $11, almost three times what it was in 1996. The maximum toll for a
round trip on the Foothill-Eastern has roughly doubled to between $3.40
and $4.90 during peak times, depending on the section.
Tollway officials acknowledge the financial duress but say that they
have never missed a debt payment and that the latest traffic figures
show revenue has been increasing this year, though less than had been
hoped.
"We have a responsibility to make sure this works," said Lisa Telles,
acting chief executive of the Irvine-based toll agency, which operates
51 miles of highways. "Tolling is being talked about more and more
throughout the country as a way to build infrastructure. People still
look at us today as a model, but we have had to adjust with the times
and the recession, which has hit everybody."
In addition to being reviewed by the California Debt and Investment
Advisory Commission, the toll roads also are receiving scrutiny from a
major Los Angeles law firm that helped to defeat plans to extend the
Foothill-Eastern corridor through San Onofre State Park.
Among other things, SNR Denton found that the tollway agency
renegotiated an agreement with San Joaquin Hills bondholders in 2011
that lowered by almost 23% the amount of revenue the agency had promised
to take in for every dollar of debt.
In exchange, the agency agreed to increase debt payments to
bondholders by more than $850 million based on the deferral of $430
million in principal payments for up to 19 years.
"It is hard to see how they can grow their revenue to keep up with
the rapidly increasing levels of debt service," said attorney Tom
Vandiver, a public finance expert at the law firm.
Vandiver described the toll road's situation as "a time bomb waiting
to happen," adding that the economic problems could lead to a default on
bond payments or a potential bankruptcy.
Retired professor G.J. "Pete" Fielding, formerly of UC Irvine's
Institute of Transportation Studies, blamed the financial problems on
inaccurate revenue and ridership forecasts by private consultants,
resulting in six- and eight-lane highways that were larger and more
expensive to build than necessary.
Fielding predicted in the mid-1990s that the San Joaquin Hills, for
example, would suffer from a lack of motorists. He suggested that a
four-lane road would have been adequate for many years as long as tolls
were raised and lowered based on demand — so-called congestion pricing.
Given the current situation, Brewer and the Denton firm question
whether the toll road agency can afford to extend the southern end of
the Foothill-Eastern corridor — a proposal the agency is still pursuing
despite years of political and legal setbacks for a route
through San Onofre.
The revised project would cost an estimated $200 million and run five
miles between Oso Parkway in Rancho Santa Margarita and Ortega Highway
east of San Juan Capistrano.
Denton's investigation notes that if the Foothill extension cannot be
built, the San Joaquin Hills might have to return a $120-million
payment from the Foothill-Eastern corridor made in 2005. The money was
compensation for the possibility that the new road would siphon traffic
away from the San Joaquin Hills.
"An assessment needs to be done before further debt is incurred and
the citizens of Orange County are made to suffer serious consequences,"
Brewer stated in her letter to Lockyer.
Should the agency be unable to cover its debts, Telles, the acting
chief, said interest and principal payments to bondholders might have to
be reduced and spread out over more time. Tolls also could be adjusted
to increase revenue, and further budget cuts might have to be made.
"We will be monitoring things," Telles said. "If we get close to that point, obviously we will look at possible solutions."
Related previous articles:
Studies contradict forecast for O.C. tollway benefits
The controversial Foothill South route
proposed through a state park would not greatly ease congestion on
Interstate 5, according to new figures.
http://www.latimes.com/news/la-me-tollway14nov14,0,167749.story
By Dan Weikel and David Reyes
Times Staff Writers
November 14, 2006
New traffic studies contradict
optimistic predictions that a proposed tollway through San Onofre State
Beach would eliminate much of the congestion on Interstate 5 in South
County.
Most of I-5 in South County will be "consistently congested" at rush
hour by 2030 even if the controversial Foothill South toll road
extension is built, according to the Orange County Transportation
Authority's long-range transportation plan for 2006.
The forecasts assume construction of the tollway, a carpool lane each
way on the I-5 and some interchange improvements. If only the tollway is
built, the study suggests, the situation will be even worse, with
motorists on the interstate seeing "severely congested" conditions.
Environmentalists and other tollway opponents have seized on the
long-range plan as a sign that the benefits of the proposed six-lane
tollway do not justify sacrificing one of the state's most popular
parks.
The Irvine-based Transportation Corridor Agencies, which operates a
51-mile network of tollways in Orange County, plans to build the
Foothill South through the northern half of San Onofre. The park's
campgrounds, wildlife areas, panoramic views and world-renowned surf
spots attract about 2.7 million visitors a year.
The controversy has raged for more a decade and is unlikely to end soon.
Environmentalists and the state attorney general are pursuing lawsuits
to halt construction of the tollway, and it still requires state and
federal approval.
"Why are we building a project with a stated purpose that won't be
achieved, at the expense of our parkland?" said James Birkelund, an
attorney for the Natural Resources Defense Council, an environmental
advocacy group.
Opponents say the toll agency's forecasts have been unreliable in the
past, leading to financial problems for the San Joaquin Hills tollway
and a downsizing of the Foothill South project from eight lanes to six.
The toll agency, which is planning to build the Foothill South by 2011,
has predicted that the road would help create congestion-free driving
conditions on much of southern Interstate 5 by 2025. Traffic relief has
been one of the project's main selling points.
Without the Foothill South, tollway officials say, travel times on I-5
from the San Diego County line to Oso Parkway — roughly 16 miles — would
be an hour during peak periods in 2025 instead of 25 minutes.
"We know there's going to be more traffic on the 5 Freeway in
the future," said Lisa Telles, a tollway spokeswoman. "If you don't
build the toll road, there will just be more congestion."
TCA officials say that although most of their assumptions are the same,
the two agencies' studies are different and thus can't be compared
directly.
Now estimated to cost $875 million, the tollway extension would run from
Interstate 5 at Basilone Road south of San Clemente to Oso Parkway in
Rancho Santa Margarita. It would connect with the Foothill toll road
after coursing through San Onofre State Beach and the Donna O'Neill Land
Conservancy, a 1,200-acre open-space preserve set aside as mitigation
for housing development.
Tollway officials have concluded that the route — one of eight options
studied — would do the least harm to the environment and avoid the cost
of condemning hundreds of homes and businesses in South County.
Dubbed the "green alignment" by the agency, the Foothill South would
handle 24,000 to 52,000 daily trips by motorists in 2025 depending on
the section of highway, the toll agency predicts.
"Green means Go!" the agency's promotional materials state. "Foothill-South: Your road map to traffic relief."
Like OCTA's, the corridor agency's own forecasts assume the tollway will
be built as well as other improvements made to Interstate 5, including a
carpool lane each way.
Tollway officials estimate that vehicle trips on I-5 would be reduced
from 290,000 a day to 267,000 in the Dana Point-San Clemente area. The
least benefit would occur in the Lake Forest area, where traffic would
be reduced from 413,000 trips to 406,000.
The agency's studies predict that the number of congested I-5 segments
would be reduced 70% during the evening rush hour, usually the busiest
time of day.
Federal officials struggle to maintain order at toll road hearing
Raucous crowd of thousands of supporters and opponents packs a hot, stuffy hall at the Del Mar Fairgrounds for Monday's hearing.
http://www.latimes.com/news/local/la-me-tollroad23-2008sep23,0,523143.story
By Susannah Rosenblatt and Mike Anton
Los Angeles Times Staff Writers
September 23, 2008
DEL MAR, CALIF.—
Federal officials hoping for decorum laid down the
rules at the outset of Monday's public hearing on whether to build a
toll road through a state park: no booing, no cheering.
The
public's response: Boos and cheers reminiscent of February's raucous
marathon public meeting here in which the California Coastal Commission
turned down the proposed road through San Onofre State Beach.
A crowd estimated at more than
6,000 over the course of the day packed a hot, stuffy hall at the Del
Mar Fairgrounds for Monday's hearing before three representatives of the
U.S. Department of Commerce, to which the Irvine-based Transportation
Corridor Agencies appealed the California Coastal Commission's ruling.
Acoustics
were bad in the cavernous, corrugated-roof hall. Speakers at times
couldn't be heard clearly, and the noisy crowd exasperated the federal
attorney presiding over the hearing.
"Please keep the yelling down so we can hear the speakers," said Jane Luxton, general counsel for the
National Oceanic and Atmospheric Administration,
which is part of the Commerce Department. The department has
jurisdiction because the project falls under the Coastal Zone Management
Act, a federal-state partnership that regulates development.
Advocates
say the proposed $1.3-billion extension of California 241, which would
slice through San Onofre State Beach and connect Rancho Santa Margarita
with Interstate 5 in San Diego County, is needed to ease traffic
congestion in growing south Orange County.
They also argue that
it would create jobs and provide an alternative transportation link in
the event of wildfire or other disaster.
"This project is
essential to Southern California. It's key to the economic well-being of
Southern California," said Art Leahy, chief executive of the Orange
County Transportation Authority.
Opponents say the six-lane road
would spoil one of California's most popular parks, endanger animal
species and ruin the world-famous Trestles surf break.
"The
immense harm from this road would far outweigh any alleged benefit,"
said Jim Moriarty, chief executive of the Surfrider Foundation.
In
the muggy hall, opponents fanned themselves with "Save Trestles" signs
and waved dollar bills when politicians spoke in favor of the project.
When
a demonstrator in colorful board shorts toting a handmade sign that
read "If you want more freeways, move to the East Coast" wandered to the
front of the hall, security officers turned him back.
"They're
building so they can get the developer money. They're not building it so
they can improve traffic," said San Clemente resident Glen Frohlich,
50, who wore a T-shirt reading "Save the park / stop the toll road."
Outside
the hall, where vendors sold kielbasa and falafel, members of local
unions wore T-shirts with a different message: "Less traffic, more
jobs."
"People that have families down here need to eat," said
Rick Baptist, 49, a heavy-equipment operator. And "instead of being
caught in congestion and traffic, you [will] have easy access to where
you want to go."
Federal officials say they have received more
than 35,000 written comments on the issue. More than 650 people
registered to speak Monday; federal officials estimated that only 150
would have a chance.
Members of the public were allowed three minutes each to make their case, while elected officials were allowed four minutes.
The rules allowed for the "greatest voice for the greatest number," said Jeff Dillen, a federal lawyer.
"What we're facing here is a large amount of interested folks and a limited amount of time."
