Move Toward Tollways Hits Numerous Roadblocks

It was a grand experiment, the first push to begin privatizing California’s public highway network: In 1989, state lawmakers gave big business permission to build four toll roads in traffic-snarled sections of the state.

The intentions were noble, but critics say the effort has largely been a flop.

Only one project--a set of toll lanes to relieve traffic along the eastern end of the Riverside Freeway into and out of Orange County--has been built. A second tollway in San Diego County is inching ahead with environmental clearance, years behind schedule.

Two others--an elevated expressway planned down the Santa Ana River and a back-country route in fast-growing Alameda and Contra Costa counties in the Bay Area--are on hold and may be dead, victims of lofty sticker prices and political opposition. (A public agency runs Orange County’s toll roads, the San Joaquin Hills Transportation Corridor and the Foothill/Eastern Transportation Corridor.)

“It’s simply not panning out,” said John Stevens, a transportation expert who works for the Legislature. “None of these projects have performed to the expectation state lawmakers had, and most certainly not to the expectation the business community had.”

California’s first stumbling step into highway privatization comes as planners around the state and nation continue to push for more toll projects, including a proposal to open car-pool lanes in Los Angeles to paying users and long-range efforts to build tollways around Southern California.

But given the troubles, even ardent advocates of privatization have begun to question whether a free-market approach is the right one.

“It’s been much slower than any of us expected,” said Robert W. Poole, president of Reason Foundation, a free-market think tank in Los Angeles. “In much of the U.S., including California, it has been difficult to build these roads because of all the environmental impacts and general opposition to new roads as well as paying tolls.”

With years of environmental reviews to overcome and no solid guarantees a road would even be built, some private sector executives say the upfront risk is too great to warrant tackling toll projects.

“I know our parent companies would not get into another one again, not unless it already had environmental approval,” said Kent A. Olsen, president of California Transportation Ventures Inc., which hopes to have the San Diego tollway finished by 2001, five years late. “Had we known it would take this long, we never would have started.”

Boosters of the privatization effort agree that tinkering is needed in state law to ease the risks. But they insist that toll roads remain firmly in California’s future.

“Pioneering efforts like this are equivalent to being the point man walking through a minefield,” said Carl Williams, deputy secretary of the state Business, Transportation and Housing Agency. “You are going to step on some mines. These projects have gone through all the hardships, the criticism, the politics, the environmental difficulties. But they will make it easier for those that come after.”

Boosters say toll roads are inevitable for several reasons.

Even as highway traffic has increased, money for road construction has plummeted because gas-tax funds have dwindled with jumps in automobile fuel economy. The state is simply strapped for cash to build freeways. Meanwhile, the state can’t afford the bond debt needed to build tollways on its own.

“You have only so big a financial pie for roads,” Williams said. “But once you bring private capital to the effort, you make the pie larger. That’s what we’re trying to do.”

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The stumbling block for the private firms has been the environmental review process, which has proven too time-consuming, costly and risky.

A preferable alternative, supporters say, would be to have state or local governments finance and conduct the environmental reviews. Once a project has the green light, a private firm could repay government the costs it incurred and then finance and build the road.

With the possibility of failure reduced, a private firm could get better financing, government can demand a heftier slice of profits and lower tolls can be charged motorists, the theory goes.

“That’s where the risk comes in these projects,” said Mark Watts, a lobbyist who helped push the 1989 law while a legislative staffer. “You’ve got several years of environmental clearance and you’re not making any money. If a project is waived off, you may have sunk millions into it with nothing to show.”

Efforts to change the law, however, have failed. On at least four occasions, bills have been introduced to tweak the original legislation. None have escaped their first committee.

Privatization backers blame state Sen. Bill Lockyer (D-Hayward), former Senate leader and an ardent foe of the Bay Area’s Mid-State Tollway, which even the most devout privateers consider dead.

Lockyer believes toll roads add to the bureaucracy and overhead of building roads. He also calls them “a polite form of highway robbery,” ruing the social inequity of letting the rich pay for a quicker commute while the less fortunate jam congested highways.

With Lockyer leaving office at year’s end, toll road advocates are hopeful the Legislature will make needed changes to strengthen privatization efforts, perhaps as soon as next year.

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Meanwhile, there are other hopeful signs for private tollways. In Congress, pending legislation would let the private sector issue $15 billion in tax-exempt debt, which would create tremendous incentives for firms to take on toll road projects while also reducing costs for motorists.

But some transportation experts say even under the best circumstances, toll roads will help only in the most limited venues. “It’s not a panacea,” said Stevens, chief consultant to the Assembly Transportation Committee. “It’s not a substitute for strong public financing. There are limited circumstances where it can work.”

So far, the lanes along the median strip of the Riverside Freeway are the only showcase for the state’s privatization efforts. The project has won numerous national transportation awards and attracts 29,000 cars a day.

But the tollway has yet to pay its full freight, prompting operators to hike rates and yank free-passage privileges to three-or-more car pools, which now pay a 50% fare.

Stevens said the denial of a free trip to car pools runs counter to the spirit of the 1989 law and provides proof that tollway promoters typically inflate expectations of traffic volume to entice investors. “Their initial prognosis, like it is for most of these things, was ridiculous.”

Williams countered that “there are very few businesses I know that invest $130 million and immediately turn a profit.” He said the project probably will be over the hump by the end of the year and soon after the car pools will again get free entrance.

Moreover, since the lanes were opened, gridlock along the freeway has been reduced from the typical four hours each morning and evening to three hours. Said Williams: “I think it’s a smashing success.”

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Conversely, the San Diego County tollway is plodding forward. Delayed by lawsuits, squabbles over what would be the best route and environmental concerns, the 10-mile road is now expected to be under construction in 1999 and open in 2001.

Despite the delays, backers are hopeful the toll road will quickly prove a financial success. It would serve the booming Otay Mesa area and Chula Vista, and siphon truck traffic crossing the border with Mexico.

“We’ve probably spent triple what we expected to at this point,” Olsen, of builder California Transportation Ventures, said. “If it weren’t for the fact [that] this project has so much going for it, we wouldn’t have stayed in. But we feel it can be a real showcase.”

The elevated 11.2-mile tollway down the concrete bed of the Santa Ana River, however, isn’t going anywhere. Though it would provide a vital highway link through the heart of Orange County, some experts say the cost of building elevated structures would boost toll prices too high to attract drivers.

A few months ago, one of two partners in the project, Texas billionaire Ross Perot, pulled out. Williams, however, said other big engineering conglomerates have expressed interest and he confidently predicted that the project “has life coming back into it.”

Williams said that the fact that just one of the four projects is open after nearly a decade can hardly serve as a yardstick for judgment. “If you look at the state’s own efforts to build roads, I can point to a few projects that have taken a whole lot longer,” he said. “Look at the 710 Freeway in South Pasadena. We’ve been at that one 35 years.”

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Toll Road Troubles

Nearly a decade after state lawmakers approved four private tollways for California, just one is built and the others are in various stages:

Southern California projects:

1. Riverside Freeway Express Lanes: Ten miles of toll lanes opened December 1995 in the center median of the crowded Riverside Freeway; recent move to charge fares for carpools irked critics.

2. Santa Ana Riverbed Tollway: Proposed $700-million project is on hold; four elevated lanes would run 11 miles along the Santa Ana River.

3. California 125: A $275-million, 10-mile toll road serving fast-growing Otay Mesa and truck traffic from the international border, plans are now for it to open in 2001, which would be five years behind schedule

Northern California project:

Mid-State Tollway: 40-mile toll road through the back country of Alameda and Contra Costa counties is considered dead

Source: Caltrans; Researched by ERIC BAILEY/Los Angeles Times