State Taking ‘Hard Look’ at Road Sale

State Atty. Gen. Bill Lockyer said Tuesday that his office is taking a “hard look” at every aspect of the planned sale of the private 91 Express Lanes to a nonprofit group and may try to block the bond sale scheduled for later this week.

Lockyer, who as a state senator vigorously opposed the 1989 legislation that made the Express Lanes possible, called the planned $274-million bond sale “deplorable.” He said the sale of tax-exempt bonds would create a situation in which taxpayers who are forced to pay tolls to use the lanes would also be bailing out what was supposed to have been a private venture.

It is a scenario Lockyer said he envisioned when he voted no on private road projects a decade ago.

“At the time these arrangements were made, I thought they were too cozy,” Lockyer said. “The law was basically written by toll-road proponents, and contracts were written by an administration that wanted the toll roads to succeed. It amazes me that even with all that help, the roads have still been a dud.”

Lockyer conceded that even after a careful review, his office may have no recourse to stop the sale from moving forward unless serious problems are uncovered.

“I don’t know that there are ways for the attorney general or anyone else to block the sale,” Lockyer said. “I have asked experts on my staff to review the bond sale and transfer to see if there is any obvious defect or role for my department.”

Lockyer is the latest of a number of public officials to question the deal, which would transfer the franchise agreement for the road from the private company that owns it, California Private Transportation Co., to a nonprofit company called NewTrac, made up of Orange and Riverside county businessmen. The nonprofit was created expressly to acquire the 10 miles of toll lanes that run alongside the heavily traveled Riverside Freeway, and its officers say their acquisition of the lanes would benefit the public.

Although a definite sale price has not been set, the parties involved say it is likely to be about $220 million, leaving the seller with $70 million to $90 million in profit on the 5-year-old road. NewTrac plans to issue bonds in excess of the sale price in order to pay off various fees and commissions as well as set up a mandatory reserve fund to help cover debt payments.

On Tuesday, Riverside County supervisors voted unanimously to send letters asking Gov. Gray Davis to block or delay the sale of the NewTrac bonds and asking Lockyer to review the deal.

It was unclear Tuesday if the governor would intervene.

“No decision has been reached,” said Hilary McLean, the governor’s spokeswoman. “The governor has not weighed in on the issue yet, and he hasn’t indicated he would weigh in on the issue at all.”

The supervisors, concerned that the deal is a bad one for local commuters, are also exploring other ways to block the sale, asking their counsel to look at a provision in the Express Lanes agreement with the Riverside County Transportation Commission that assured a 30-day notice on any bond sale, a clause they believe was violated.

The supervisors will meet again today to discuss possible legal action, an option that will also be discussed by Riverside’s transportation commissioners.

“People over here are really disturbed,” said Riverside County Supervisor Bob Buster, who said the deal has little upside for his county. “It seems like the only ones left [out] were Riverside County and commuters, the ones who will end up paying with higher tolls. That’s what bothers us.”

From the time the deal was announced last month, some have questioned the close relationship between seller and buyer, specifically the agreement on the part of NewTrac to hire back the current management team to run the lanes for at least the next five years.

The concept of forming a nonprofit group to buy the toll lanes was the brainchild of the sellers, bond documents show. They also helped identify board members for the nonprofit and loaned it $1 million to hire consultants and prepare for the bond sale.

The two entities are also sharing legal services. In addition, the sellers paid for the consultant, Wilbur Smith Associates, that came up with revenue and traffic projections for the toll lanes, according to the bond documents.

Some, including state Treasurer Phil Angelides and Orange County Treasurer John M.W. Moorlach, question the validity of those ridership projections.

Angelides, one of three public officials overseeing the state bank issuing the bonds, withheld his vote when the matter came before them but said he would not block the sale because he had no reason to believe the transaction was illegal or unfavorable under current market conditions.

Moorlach has been highly critical of the projections, as well as the deal’s structure. The 30-year bond issue, he pointed out, lasts for the entire franchise agreement, which ends in December 2030.

“They’ve got a significant amount of debt that has to be paid in the last few years,” Moorlach said.

Former San Juan Capistrano Mayor Gary Hausdorfer, NewTrac’s chairman, has argued that the acquisition of the lanes by a nonprofit will benefit commuters in the region.

The Orange County Transportation Authority, under the terms of the sale, will get $9 million in planning funds returned.

And the sale would make the lanes free for carpools of three or more people starting Jan. 1, a practice discontinued by the private owner.

Most significantly, Hausdorfer’s group has the potential to turn back as much as $6 million each year to both Orange and Riverside county transportation agencies. Those funds, however, will only be made available if the Express Lanes generate revenue in excess of the debt payments NewTrac must make, a scenario some say is unlikely in light of the road’s performance so far.

The 91 Express Lanes, for example, moved into the black last year for the first time since opening in late 1995 only after the owner trimmed about $400,000 from the operating budget.

*

Times staff writer Deane Wylie contributed to this report.