Pouring Money Into the Hole
In news from the Republic of Orange County, we found the not so surprising tidbit that OCTA has voted to refinance the 91 Express Lanes Bonds. The 91 toll roads, supposedly an award-winning design, has been a money losing operation from the beginning. Originally a private enterprise wherein mostly foreign investors bilked the state out of real estate on the center divider of the 91 freeway to build a business, that business turned out -as predicted by many- to be a deep hole to sink taxpayer money into. And, sink it they did.
When California Private Transportation Company developed the toll road complex, they quietly transferred ownership back to the State of California who then leased it back to CPTC (confused yet?). CPTC then continued to operate the toll road on a for-profit basis, presumably for the next 35 years.
In 2003, when CPTC couldn’t make a dime off the venture, they wisely conned the Orange County Transportation Authority to take it off their hands for a cool $207.5 million in cash and tokens (OK, I’m kidding about the tokens – everyone knows the toll road uses FastTrak).
The toll roads use “congestion pricing” to set toll prices for any given hour – except it’s not, really. True congestion pricing would require real-time input on congestion to determine pricing. That wouldn’t work for the toll road, which the developers (and OCTA) knew would display a grossly underused road at any hour of the day. Instead, they use a predictive model to determine the most heavily congested hours and adjust every so often for changes. That, of course, is not exactly transparency in government. But, then, one only has to look at the Toll Road website for the inside information. Oh, wait, that paints a rosy picture that just isn’t true.
And staff at OCTA know it.
In May of this year, a staff report titled, “91 Express Lanes Debt Restructuring” was sent to the OCTA Board, of which our own Al Murray and Todd Spitzer belong. That report, which you can read here, outlines deep trouble with the debt structure of the toll roads and the immediate need to refinance both the 2003 and current bonds for the Toll Roads. Recommendation by staff, of course, is to refinance.
Now, what I know about bonds and debt restructuring could be put on a pinhead. But, I do know how to read bond ratings (thanks, brother John) and can tell you that, when your bonds go from an original Aaa/AAA/AAA rating to A1/A/A-, you are in deep doody. This is akin to your going from an 800 credit score to a 400 credit score only, while your interest rate goes up to buy that house, the interest rate goes down on the bonds and they become difficult to sell-unless you offer artificially attractive interest. Oh, but there are laws against that sort of thing, aren’t there? Well, according to Spitzer, who sits on the OCTA Finance Committee, the rates went from 2.75% to 2.65% practically overnight. Spitzer, who in his latest newsletter to constituents is trying to paint a portrait of a rose from a picture of a sow, is clearly losing the battle on the Toll Road.
Al Murray, by the way, is of the same mind as his predecessor Jerry “Boss Tweed” Amante was, that we should turn the carpool lanes on the San Diego Freeway (there, I said it) into toll roads as well. All this while not one toll road in the county can meet its ridership or its financial goals. Another Tustin Councilmember, Chuck Puckett, is a member of the Foothill/Eastern Transportation Corridor Agency and, although we haven’t checked, we are betting he is in favor (like Amante was) of the Foothill Extension that would wreak havoc on the Trestles area.
Peas in a pod.
What we can’t figure out is why the Republicans in this county continue to chase after the toll roads, a proven money loser for government and a bane to the public. If you have ever ridden any of the county’s toll roads, you know that -at any time of the day- they are grossly underused. None of the toll roads have been able to reach their lofty projections. Their answer to low ridership? Raise tolls, making the roads even more expensive and out of reach for the everyday commuter. The 91 Toll Roads show the best ridership of any in Orange County. But, they are still vastly underused. An old non-compete agreement threatened a widening project at one time. When the issue was settled, mostly due to the sale to OCTA, ridership fell when the widening was completed. Will connecting the 91 and the 241 Toll Roads help matters? Possibly. But, are we, as taxpayers, willing to fund another possible boondoggle to find out?
We, as taxpayers, are stuck with the existing toll road boondoggle foisted upon us by a so-called conservative leadership shouting the privatization mantra. But, time and time again, we’ve seen that privatization of government enterprises creates substandard product amidst the cronyism and backroom deals. Toll roads are not the answer and it is time to tell our elected officials to get off the same broken record. We may be stuck with what we have. It doesn’t mean we should continue to propagate the species.