Aid Plan for O.C. Tollway Unveiled

After almost 18 months of secret negotiations, board members of Orange County’s toll road system on Thursday unveiled a $1.16-billion package of loans and payments to bail out the financially struggling San Joaquin Hills tollway.

The proposed rescue plan by the Transportation Corridor Agencies is an alternative to the failed attempt in May 2004 to merge the operations of the Foothill-Eastern and San Joaquin Hills toll roads and refinance them with a $4-billion bond issue.

Orange County Supervisor Bill Campbell initiated the plan, which is designed to keep the San Joaquin Hills out of default on $1.9 billion in bonds. The coastal tollway could slide into the first stages of default by July.

Campbell’s proposal is also an effort to win support from San Joaquin Hills board members for building the Foothill South tollway through south Orange County.

“We have worked very, very hard on this,” said Yorba Linda City Councilman Ken Ryan, chairman of the Foothill-Eastern board of directors. “It will allow us to move forward with the Foothill South and help a sister agency avoid default. It is a benefit to the citizens of Orange County and toll-road users alike.”

The Foothill-Eastern and San Joaquin Hills form a 51-mile network of highways operated by the Transportation Corridor Agencies, a joint powers authority based in Irvine. The turnpikes are governed by separate boards, which have been negotiating the San Joaquin bailout plan for 1 1/2 years behind closed doors.

Opened with much fanfare in 1996, the 16-mile San Joaquin, which snakes through the coastal foothills between Newport Beach and Laguna Niguel, has been plagued by lower-than-projected traffic and revenue. Meanwhile, the Foothill-Eastern has had revenue surpluses of 5% to 8% a year.

If nothing is done, tollway officials say the San Joaquin Hills will be in technical default as early as July and unable to give bondholders their promised return by 2017. Technical default happens when the agency violates an agreement with bondholders to make $1.30 in tolls for every $1 in expenses.

Under the plan, surplus revenue from the Foothill-Eastern would be used to provide $120 million in payments and up to $1.04 billion in loans to the San Joaquin. The financial aid, however, hinges on continued surpluses at the Foothill-Eastern.

In exchange for the bailout, San Joaquin Hills board members would agree not sue to halt the planned Foothill South toll road, the final link in the county’s toll road network. The proposed highway would extend 16 miles from Rancho Santa Margarita to Interstate 5 near San Clemente.

Tollway studies indicate that the Foothill South could reduce revenue on the struggling San Joaquin Hills by $320 million.

“We negotiated with a lot of give and take,” said Laguna Woods Councilman Bert Hack, who chairs the San Joaquin Hills board. “It is not everything we wanted, and there is more on the table than they wanted.”

Though the plan was made public Thursday, both tollway boards delayed a vote until November to give the public time to review the proposal. A two-thirds board majority is required for approval.

The Foothill-Eastern board released details of the plan after convening in closed session during its regular meeting. A short time before, Brittany McKee, a Sierra Club representative, said the public has been barred from the negotiations and board discussions for the last 18 months.

Attorneys for the Sierra Club and other environmental groups have asked the state attorney general’s office to investigate whether the agency violated open meetings laws, McKee said.

“There has been virtually no public discussion of this,” she said. “We are concerned about the secrecy. The public has a right to know about the finances and deliberations” involving the San Joaquin Hills.

Agency officials say negotiators and board members have been meeting in secret because the San Joaquin Hills board might sue to block the construction of Foothill South.

Under the Brown Act, which establishes public meeting rules, government bodies can meet in closed session to discuss matters that involve “significant exposure” to lawsuits.

“We have been operating under the threat of litigation,” Ryan said. “We are confident there are no violations of the Brown Act.”

The Sierra Club and a coalition of environmental groups question the bailout package because it could help clear the way for construction of the Foothill South, a road they oppose because of potential impacts on San Onofre State Beach Park and open space in south Orange County.

“The threat of litigation is just a pretext. It’s a sham to use as a cover to keep the negotiations secret,” said Bill White, an attorney for the environmental groups.

White, who contacted the state attorney general, said his firm was studying whether the proposed bailout plan violated a state law that prevents using revenue from one Orange County toll road to pay the construction costs of another, including bond-related payments.

Agency officials contend the Foothill-Eastern can make the payments and loans to the San Joaquin Hills because there are substantial benefits to the Foothill-Eastern, such as proceeding unfettered with the development of Foothill South.