Taking Its Toll

It was a grand experiment, the first push to begin privatizing California’s public highway network: In 1989, state legislators 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 of the projects--a set of toll lanes to relieve traffic along the bottle-necked Riverside Freeway into 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 down the Santa Ana River in Orange County and a back-country route in fast-growing Alameda and Contra Costa counties--are on hold and may be dead, victims of lofty sticker prices and political opposition.

“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.”

The state’s stumbling step into highway privatization comes as planners around the state and nation continue to push for more toll projects. Proposals include having motorists in Los Angeles pay for using car-pool lanes and long-range efforts to build tollways around Southern California.

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

“It’s been much slower than any of us expected,” said Robert W. Poole, president of the 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 that a road would even be built, some private sector executives say the risk of tackling toll projects is too great.

“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, 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 highway privatization effort agree that tinkering is needed in state law to ease the risk of such ventures. 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, a state Business, Transportation and Housing Agency deputy secretary. “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.

As traffic has increased on the state’s highways, money for road construction has plummeted because gas tax funds have dwindled as automobile fuel economy improves. 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.”

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

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

With the possibility of failure reduced, a private firm could get better financing, the government could demand a heftier slice of profits, and lower tolls could be charged to 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 he was 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.”

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Efforts to change the law have failed in the state Capitol. On at least four occasions, bills have been introduced to tweak the legislation. None has escaped the first committee.

Privatization backers blame it on state Sen. Bill Lockyer (D-Hayward), a 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 that 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 onto congested highways.

With Lockyer leaving office at year’s end, toll road advocates hope that the Legislature will make needed changes to strengthen privatization efforts, perhaps even next year.

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

But some transportation experts say that 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. It has won numerous national transportation awards and attracted 29,000 cars a day.

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

Stevens said the denial of a free trip to carpools 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 facility probably will be over the hump by the end of this year and that, soon after, carpools will again get free entrance.

Moreover, since the lanes were opened, rush-hour gridlock has been reduced from four hours to three. “I think it’s a smashing success,” Williams said.

Meanwhile, 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, the project’s backers hope that the toll road will quickly prove a financial success. It would serve the booming Otay Mesa area with Chula Vista and siphon truck traffic crossing the international border with Mexico.

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

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Meanwhile, the elevated 11.2-mile tollway down the concrete bed of the Santa Ana River hasn’t budged. Although it would provide a vital missing 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 that other big engineering conglomerates have expressed interest, adding that the project “has life coming back into it.”

Williams also said the reality 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