State reviewing Orange County toll road finances
IRVINE, Calif. (AP) – Orange County’s toll roads, paved with good intentions, are now the target of a state investigation after borrowing billions of dollars and struggling to attract riders.
The California Debt and Investment Advisory Commission, chaired by state Treasurer Bill Lockyer, is reviewing whether the tollway system can pay off its bondholders, the Los Angeles Times reported.
The $2.4 billion system opened in the 1990s and was touted as a way to build highways without taxpayer money. However, ridership on the 51 miles of road has suffered because of the recession, county population growth that was lower than expected, and competition from improved public highways.
Last year, ridership on the San Joaquin Hills roadway near the coast was only 43 percent of original forecasts. The figure was 33 percent for the Foothill-Eastern corridor.
The review was requested by former Orange County Assemblywoman Marilyn Brewer.
“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.”
“An assessment needs to be done before further debt is incurred and the citizens of Orange County are made to suffer serious consequences,” Brewer said in a letter to Lockyer.
Ratings agencies have reduced the bonds for the San Joaquin Hills to junk status and notes for the Foothill-Eastern corridor to the lowest investment grade.
Irvine-based Transportation Corridors Agencies, which manages the toll roads, has borrowed about $4.4 billion for the two roads. It also restructured some debt and pushed back bond retirement for the San Joaquin Hills project by six years, slashed costs and repeatedly increased tolls.
In fact, the tolls are now among the highest per mile in the nation.
The agency will face at least $10.5 billion in debt payments by the time its bonds mature, according to financial statements cited by the Times.
“Extending the payment time to make sure we can make our debt payments is a necessary step,” said Amy Potter, the agency’s chief financial officer. “We have to be flexible.”
“We have a responsibility to make sure this works,” said Lisa Telles, the agency’s acting chief executive. “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.”
If the agency is unable to cover its debts, it may have to make further budget cuts, reduce payments to bondholders and spread them out over a longer period.
“We will be monitoring things,” Telles said. “If we get close to that point, obviously we will look at possible solutions.”