Persistence Paves Way for Toll Lane : Transportation: Neither geography nor bankers could sidetrack Gerald S. Pfeffer’s dream of a $125-million express route on the Riverside Freeway.

It’s a matter of geography, said Gerald S. Pfeffer, the architect-turned-business executive who fashioned Orange County’s $125-million private toll lane project on the Riverside Freeway, for which ground was broken Tuesday.

“Rivers cut paths through virgin land, followed by the railroads, and then the interstate highway system,” Pfeffer reflected in a recent interview.

But unlike other highways that cross unsettled areas and spawn new development, the severely congested Riverside Freeway already serves 250,000 vehicles a day, increasing at the rate of 8.4% annually. The traffic is crammed into a narrow corridor hemmed in by canyon walls, with a mountain range separating communities.

“The geography helps make this feasible,” said Pfeffer, referring to the innovative toll lanes that are scheduled to open in 1995 with rush-hour fees of $2 each way.

It was Pfeffer, 47, and his Irvine-based California Private Transportation Co., who doggedly pursued both the concept and financial support for the Riverside Freeway project--the first private toll lanes in the United States in more than 50 years.

What’s more, the express lanes, built in the freeway median, will be the world’s first totally automated toll facility. Vehicles equipped with electronic devices will be scanned by sensors. A computer system will bill motorists’ prepaid accounts, eliminating the need for toll booths.

But first, Pfeffer, who wears dark gray suits and white monogrammed shirts, had to fight Wall Street skepticism that tolls would be too unpopular in auto-crazed Southern California, where roads seem free despite taxes and other costs.

“He’s tenacious, a very hard worker,” said Lisa Mills, an Orange County Transportation Authority executive who negotiated the Riverside Freeway express lane project over a three-year period with Pfeffer.

“He was single-minded like nobody I’ve ever seen,” Mills said recently.

Still, it was touch and go in New York until two weeks ago, when Citibank in New York and two Paris-based banks agreed to loan $65 million.

In securing the financing agreement, Pfeffer said he drew upon his background as an architect, urban planner, computer systems specialist and frustrated developer of Florida’s high-speed rail project, now on hold.

As senior vice president of Texas-based CRSS Equity Projects Inc. from 1988 through last year, Pfeffer said he learned much from the Florida high-speed rail effort.

The Florida project involved a proposed 325-mile, $3-billion rail link between Miami, Orlando and Tampa. CRSS’ competitors had been eliminated from the project just as the floor dropped out of the Florida real estate market, hurting potential revenue.

An aircraft pilot and woodworker in his free time, the Tulane and Rice University-educated Pfeffer said the Florida enterprise taught him that Wall Street investors are more comfortable with less costly, smaller projects to start with in the untested, innovative, privatized transportation arena.

“The Riverside Freeway express lanes fit that profile,” said Pfeffer, a veteran of several domestic and international military projects, as well as electronic data systems development for IBM and the World Bank, which makes loans to developing countries. “With the Riverside Freeway, we were working with an existing, overcrowded highway, with the cooperation of all levels of government, and we weren’t seeking billions of dollars.”

Pfeffer, who is married to the former Patricia LaFaye Lamb, whom he met in college, spent much of the last two years jetting between Orange County, Sacramento, Omaha, New York and his home in Houston. The couple have no children.

Facing a July 31 financing deadline set by anxious Orange County transportation officials, Pfeffer’s quest for the money needed to build and operate the Riverside Freeway express lanes took him to a final round of meetings in New York during May and June.

Credit committees from the three banks providing $65 million to the project--Citibank, Banque Nationale de Paris and Societe Generale--met separately and gave their final blessing.

Partners in the project, led by Omaha-based Peter Kiewit Sons’ Inc., the French-owned Cofiroute firm, and Granite Construction Inc. of Watsonville, Calif., put up $19 million. Another $35 million was raised from other investors, such as insurance companies.

Under 1989 California legislation that allows for four private, experimental toll roads, the state Department of Transportation has granted Pfeffer’s firm an exclusive, 35-year lease to operate the Riverside Freeway express lanes and keep toll revenue--the reward earned by Pfeffer’s company for building the lanes without taxpayers’ money. Caltrans gets the lanes when the lease expires.

The lease envisions a 17% to 23% rate of return on the private money invested in the project, despite an obligation to reimburse the state $120 million over 35 years for road maintenance by Caltrans and law enforcement by the California Highway Patrol.

The time savings on the 10-mile stretch of express lanes is expected to be as much as 50 minutes each way during rush-hour commutes.

One of the financing hurdles, however, was persuading U.S. executives of the banks involved that Pfeffer’s project fit into a regional transportation system, some elements of which would have to be built on schedule by Caltrans and other agencies.

And the same bankers questioned the system’s ability to communicate with toll systems elsewhere, including automated parking garages at airports.

Approved just seven days before the July 27 groundbreaking, the final agreements covered 2,000 pages.

“When people see the quality of service provided in the express lanes, people will be willing to pay,” Pfeffer said confidently. “We’re going to give people an hour and half more of their lives back to them each day.”