Concern on Toll Road Sale

There isn’t a lot of precedent for what should occur when a private toll road operator is disappointed with the financial results, as has happened in regards to the 10-mile stretch paralleling the Riverside Freeway in Orange County. What’s taking place shows that the state needs to have a better idea from the outset for how to guard the public interest on private roads.

Sacramento has approved tax-exempt bonds to finance a sale that is set to go forward this week. The seller is the private company that developed the toll road. The company loaned a nonprofit group $1 million to pay for consultants and others to help get the deal moving. This effectively uses the state as a facilitator in the overall financing but gives the public no seat at the table.

If a private toll road doesn’t make it, there ought to be ways to ensure that the road reverts to public hands, or at least that the state has the opportunity to shape what happens next.

State Treasurer Phil Angelides has questioned the revenue projections used in the pending sale, given the unprofitability of the project to date. You must wonder why the other board members of a state bank that approves loans and issues bonds haven’t raised similar concerns.

On Tuesday, state Atty. Gen. Bill Lockyer, deploring the planned bond sale, said that his office is taking a “hard look” and might try to block the transaction.

Locally, Orange County Treasurer John M.W. Moorlach and Riverside County officials have been asking good questions. Gov. Gray Davis could put the brakes on the sale and insist on a thorough reexamination of the future of the lanes.

The private construction and operation of the 91 Express Lanes was one of a number of alternatives to building new road capacity that emerged early in the decade. This particular arrangement was a purely private venture, and there always has been the question of what would happen if the investors ran into hard times. They knew there was risk in this undertaking.

The proposed remedy has been a questionable deal in which the owners helped finance the study and acquisition by the new group. The way this deal is constructed, the operators make a tidy profit while they walk away and roll over the financial obligation to new owners, who very well could do the same thing later. The public meanwhile is left standing on the sidelines while this transportation component changes private hands with the aid of tax-free bonds.

These important public assets need to be guarded, maybe even put into state hands. They certainly should not be traded in a closed process that would allow new owners to transfer long-term debt and then take a cut of the money before departing.