Tollway Agencies Turn to U.S. in Search for Funds

Orange County’s tollway agencies, caught in a severe credit crunch that is making it difficult to raise money for road construction, are seeking guarantees of federal bailout loans to reassure reluctant lenders, officials said Monday.

Wally Kreutzen, deputy director of finance for the Orange County Transportation Corridor Agencies, said officials for the Federal Highway Administration and Office of Management and Budget responded favorably when he proposed the idea during a visit last week to Washington.

“Both of them were agreeable,” Kreutzen said. “This would be a revolving line of credit available in all 50 states. . . . Toll roads are never going to be able to pay for themselves strictly on tolls.”

The Transportation Corridor Agencies are building three tollways in southern and eastern Orange County that are expected to cost about $2 billion. The roads--the San Joaquin Hills, Foothill and Eastern corridors--are to be financed 48.5% with developer fees; the rest of the money would come from grants and construction loans to be repaid from toll revenue later.

But since the agencies won’t have toll revenue until the roads open sometime in the mid-1990s, they are pressed for cash right now. They borrowed $13 million from the Orange County Transportation Commission in January and have asked for another $26 million. OCTC Executive Director Stanley T. Oftelie has told tollway officials that the extra $26 million isn’t available. Monday, however, he said that he hasn’t “closed the door” on loaning the money at a later date, possibly in September.

Meanwhile, the tollway agencies have had trouble obtaining financial commitments for construction loans that would be repaid by toll revenue, particularly at this time, officials said. There is only a slight chance that toll revenue won’t be sufficient to make installment payments on the construction debt, tollway officials argue, but banks are worried nonetheless.

Meanwhile, “the credit crunch is terrible right now,” Kreutzen said. “It’s the worst I’ve ever seen in my career.”

Wall Street investment brokers and rating services agreed that now is a difficult time to interest investors in public works projects as unusual as Orange County’s proposed projects. They noted that toll roads such as those planned in Orange County have never been tried in California, which makes lenders worry about toll revenue, and cited competing investment opportunities in rebuilding Kuwait and in Eastern Europe, along with declines in the Japanese stock market.

W. Leung, an analyst with Moody’s Investors Service in New York, added that “it’s difficult when you don’t have the state’s credit rating to fall back on.”

Tollway officials two years ago attempted to get permission to use the state’s credit rating, but it was found that too many legal roadblocks existed.

“The money markets are very tight and if we can get some sort of additional backing, certainly that makes these projects more feasible,” said Robert DeMoubrun, vice president of Prudential-Bache. “I think (federal loans are) a good concept in order to get some of these projects moving.”

The next step, Kreutzen said, is to provide details to federal officials about how such a revolving line of credit would actually work, and draft legislative language. A meeting between county officials and Rep. Glenn M. Anderson (D-Long Beach), an influential member of the House Public Works Committee, is being arranged for early next month.

Toll road opponents have criticized the projects mostly on environmental grounds, but recently they have raised questions about their financial viability as well.

“We’re very concerned about this (federal loan concept), because those are tax dollars that would be risked,” said former San Clemente Councilwoman Carolyn Koestler, a staunch toll road critic.