OFF THE WIRE
http://www.thenewspaper.com/news/40/4074.asp
California: Toll Roads Generate $1.7 Billion In Red Ink
California: Toll Roads Generate $1.7 Billion In Red Ink
Analysis shows two Southern California toll roads were
unsustainable from the very beginning.
The debt load accumulated by the toll roads in Orange County,
California is unsustainable, according to a study released Tuesday by the
Pacific Research Institute. Researchers Donna Arduin, former budget director for
California Governor Arnold Schwarzenegger (R) and Wayne Winegarden, a senior
fellow at PRI, examined the financial status of the publicly owned
Foothill-Eastern Transportation Corridor Agency's 241 toll road and the San
Joaquin Hills Transportation Corridor Agency's 73 toll road.
Advocates insist tolling is a superior transportation funding
mechanism because it is based on the concept of "user fees" -- those who use the
toll road are the ones who pay for it. This concept has gone out the window with
the Transportation Corridor Agency (TCA) toll roads, which the report found use
an estimated $1.7 billion in taxpayer subsidies. Worse, the roads are deeply in
debt.
"Based on our review, the operations of these toll roads
presently appear to be unsustainable and likely have been unworkable from their
inception," Arduin and Winegarden wrote. "The original financial plans for the
241 and 73 toll roads were based on overly optimistic growth assumptions and did
not leave a financial cushion for TCA to operate under reduced utilization or
economic downturns. Subsequent decisions by TCA board members and managers have
made matters worse."
In the 1970s, the state planned on building State Routes 241
and 73 as normal, gas-tax funded freeways. Around 1984, however, the tolling fad
began to take hold of transportation planners, and local officials decided to
create the public "joint-powers agencies" that is supposed to run the road as a
toll road until the bonds are paid off in 2035, though that date has since been
pushed back to 2042.
The report found that the toll roads have been unable to pay
their debt obligations since 2006. Initially, the roads were to cost $858
million to construct. The actual debt load is now $4.4 billion, with debt
payments totaling $11 billion over time. The primary culprit is the lack of use
of the roads. Traffic on the 241 was only 65 percent of the projected level last
year, and the 73 only saw 42 percent of the projected value. San Joaquin Hills
Transportation Corridor Agency has a junk bond rating, while the
Foothill-Eastern Transportation Corridor Agency is only slightly better at BBB-.
The roads have between three and five times more debt-per-mile than the national
average.
Because fewer people use the toll road, the agencies have been
raising the toll rates, leaving both roads among the most expensive routes in
the entire nation.
Far from being a model of private enterprise providing a
service "at no cost to taxpayers," the toll roads were given a $151 million
taxpayer subsidy during construction, Caltrans has spent $122 million on capital
improvements for the toll roads -- money that is diverted from use on general
purpose lanes. Caltrans kicks in up to $15 million per year in routine
maintenance. The road also enjoys a tax on developers and the benefit of an
anti-competition agreement that prevents improvements to nearby freeways. The
report estimates the total subsidy value at $1.7 billion.
"TCA's budget commitment over the past 4 years indicate that
over one-third of FETCA expenses represent marketing, consulting, legal and
costs relating to the 241 South extension along the same corridor previously
rejected by regulators," the report found. "This review clearly raises
significant concerns about the toll roads' sustainability, cost to taxpayers,
and ability to relieve traffic congestion."
