ORANGE COUNTY PERSPECTIVE : The Checkbook Curve in Toll Roads

To understand the complexities of three quasi-public toll roads proposed for Orange County, the ordinary citizen may at times feel the need to be: 1) an expert on the intricacies of environmental review and 2) a financial whiz.

The environmental review process has a dynamic of its own, if recent developments in the case of the $680-million San Joaquin Hills tollway are an indication. After receiving a record-setting number of public comments, and after objections were voiced by the federal government, the San Joaquin Hills Transportation Corridor Agency on March 14 readily approved its own key environmental document. That could allow construction to commence on the 15-mile road by the end of the year, with a likelihood that those who disagree will want their day in court.

What will happen next on the financing side is far less predictable, if no less complicated. The three roads are to be 48.5% financed by developer fees, and the rest is a question mark. The funds are expected to come from grants and construction loans, repaid later with toll revenue.

Proponents recently have come up with an interesting and novel proposal that would, in effect, put the federal government in the position of loan guarantor. It’s an idea worth exploring. The federal government could back bonds that would be used to pay off construction loans--in effect, creating a financing scheme of several steps.

The route may be circuitous, but it’s appealing in these economic times. It’s clear that lenders, burned by bad loans of the 1980s, have been reluctant to advance construction money for a new highway in the current financial environment. And several years ago, using the state’s credit rating was seen as too fraught with obstacles.

The early reaction of the financial community, and the favorable reception the loan guarantee idea reportedly received in Washington, should encourage further consideration. But the public may have to be patient, since road users probably would pay tolls longer to pay off debt incurred for construction.

It’s important to remember, though, that the idea of tolls first gained currency when it became clear the roads couldn’t be built by government as freeways. There already was a financing problem. So it may take more creative financing--and maybe a boost from Uncle Sam--if the tollways are to be built at all.