91 Express Lanes Pull in a Profit for First Time

The 91 Express Lanes moved into the black last year for the first time since opening in late 1995, with toll revenue outpacing both operating costs and debt service on the privately owned and operated road.

The 10 miles of toll lanes run parallel to the Riverside Freeway--one of the most notoriously congested corridors in Southern California. Nearly 9.3 million drivers last year chose to pay the toll--which now ranges from 75 cents to $3.50.

But even with more than $20 million collected in tolls last year--a 45% increase from the previous year--the road cleared only $307,000, pointing out how hard it is to turn a dime in the private road business. That profit was achieved only after the road’s owner and operator trimmed more than $400,000 from the previous year’s operating expenses.

Still, the bottom line was a great improvement from past years, when the California Private Transportation Co. fell millions short of breaking even. Investors had to raise an additional $6.6 million in 1997 to close the budget deficit.

News of growing ridership and a rosier financial outlook comes as the road’s owner continues to shop the lanes to a nonprofit group as one of the ways to make more money and avoid paying taxes. The private operator paid more than $1.2 million in property and franchise taxes last year.

Steve George, the company’s managing director, said selling the lanes to a nonprofit organization is one of several refinancing options being explored.

“We’ve always known that once we were up and running, we would look at ways to get lower interest rates,” George said. Debt service for the road is currently $9 million to $12 million a year, he said.

A sale to NewTrac, a group of Orange County businessmen led by former San Juan Capistrano Mayor Gary Hausdorfer, would not necessarily mean that the current owner and operators would bow out. George said the company’s hope is that the majority of its staff would be retained to help run the road.

But such a sale faces many hurdles, including setting a price for the road, whether NewTrac will qualify for nonprofit status, and whether Caltrans will go along with a sale.

Talk of unloading the road just 3 1/2 years into the company’s 35-year franchise agreement with Caltrans has raised some eyebrows. Once touted as the future for building roads, the 91 Express Lanes, one of four private road projects approved through state legislation in 1989, was the only project to be built.

The road has seen a steady growth in customers, with traffic nearly doubling since its first full year of operation in 1996. The road’s “value pricing” system, which charges more money for use of the lanes during rush hour, has been praised by industry observers. So far, tolls on the road have been raised four times to thin out traffic. Free use of the lanes for cars with three or more passengers was rescinded last year.

Greg Hulsizer, a spokesman for the toll lanes, said the new pricing and the decision to charge for car pools contributed to the rise in revenue.

The private road may face a setback if plans by Caltrans to add free lanes along a four-mile stretch of the Riverside Freeway go forward. Toll road officials filed a lawsuit last month to block the project, saying the additional free lanes would irreparably damage the economic viability of their road.

The road also has lost some customers since the new Eastern toll road opened in October. There is no direct connection between the two toll roads, and 91 Express Lanes officials say such a project is too expensive to tackle any time soon.

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In the Black

By trimming their operating expenses, the 91 Express Lanes moved into the black last year for the first time, with toll revenues outpacing both operating costs and debt service on about $100 million in financing. Nearly 9.3 million vehicles used the lanes last year.

Total Income (revenue minus expenses)

1996 $733,586

1997 $4,748,258

1998 $11,426,338

Debt Service

1996 $4,845,414

1997 $9,667,996

1998 $11,118,585

Profit (income minus debt service)

1996 -$4,111,828

1997 -$4,919,738

1998 $307,753

Source: California Private Transportation Co.