Two southern CA toll roads are so severely underperforming that the state treasurer is investigating whether the bondholders can be paid their interest. The San Joaquin Hills toll road's bonds are rated at junk status. Widening I-5 & 405 didn't help.Here's a link to the post.
Los Angeles Times, December 11, 2012
Orange County toll roads under review by California
With ridership and revenue on Orange County's toll roads falling short of projections, the state of California has launched a formal inquiry into their economic viability.
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| A view looking west from Aliso Viejo at the San Joaquin Hills Transportation corridor toll road where it crosses El Toro Road and snakes up the hill in Laguna Beach towards Newport Beach and Irvine. The photo was taken in 2004. (Don Kelsen / Los Angeles Times / February 19, 2004) |
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. . .
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. . . .Click here for the rest of this lengthy and alarming article.
The forecasts for both of these tolls roads were prepared and revised by Wilbur Smith Associates, now CDM/Smith, the company that has prepared three similar forecasts for the Dulles Toll Road. An excellent article in TollRoadsNews (May 15, 2012) shows that, over a 15-year history, the forecasts for the Foothill-Eastern toll road went from on target to off by 25% after the recession hit in 2007. The forecasts have never been close for the San Joaquin Hills toll road. The article shows the annual results for the two toll roads and discusses the possible causes for the errors.
Given the history of experience with the two toll roads, the LA Times report raises questions anew about the viability of the latest CDM/Smith Dulles Toll Road traffic and revenue forecast. Will the already outrageous forecast tolls have to go higher if CDMS has over-estimated traffic on the toll road? So far, CDMS' latest traffic forecast has been very close to the mark--as it should be in forecasting behavior on a toll road that has been in operation for two decades. It is unclear why the experience in Orange County hasn't led to forecasts with lower traffic and revenue outcomes.
It is a cause for worry about future toll increases on the Dulles Toll Road.
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