Controversy Stops Sale of Toll Road in Orange County

The controversial sale of the 91 Express Lanes fell apart Monday, as the seller abandoned its attempts to unload the private tollway and the state attorney general launched a formal investigation into whether the buyer and seller have too close a relationship.

The decision to pull the 10-mile private toll road off the market came after weeks of harsh criticism from high-ranking state and local officials, many of whom said the public would be ill-served if the road were sold by its private developer to NewTrac, an Irvine-based nonprofit group of local businessmen.

“It’s great. This deal needed to stop. This was not a legitimate transaction,” said Orange County Treasurer John M.W. Moorlach.

But for Moorlach and many others who were critical of the sale, simply going back to the status quo will not be enough. The troubled proposal has focused scrutiny not only on the sale itself but also on policies that allowed a private road to be built on a public right-of-way in the first place.

The 91 Express Lanes is the only project to be built of four private roads that got the go-ahead under a 1989 state law. Under the legislation, the private builder, California Private Transportation Co., was given the right to charge tolls on the lanes for 35 years.

“This monopoly continues to have a stranglehold on the 91 Freeway for the next 30 years,” said Riverside County Supervisor Bob Buster, who led a delegation of local officials to Sacramento Monday to ask that the state buy the lanes and make them free to use.

The group, which included Moorlach as well as Riverside County transportation officials and the county’s tax collector, met with top aides to Gov. Gray Davis and Atty. Gen. Bill Lockyer. Today, they will meet with officials from other state agencies.

“As long as CPTC continues to operate the toll road, we will continue to have these [problems],” Buster said. “We must wrest control of the 91 from this monopolistic stranglehold.”

The proposed sale unraveled rapidly over the last week under a barrage of questions, including whether the $225-million sale price was too high, whether traffic projections were inflated and whether the seller inappropriately helped create the nonprofit buyer.

Critics have charged that public interest has been sacrificed for private gain in a deal that would have been made possible by public bonds.

In a written statement released Monday, the private company’s general manager, Greg Hulsizer, said “public confusion over the transaction” caused the firm to abandon the sale.

Gary Hausdorfer, NewTrac’s president, did not return calls for comment.

Peter J. Siggins, chief deputy attorney general, said the investigation of NewTrac and California Private Transportation Co. would continue despite the decision to abandon the sale.

The state agency will comb through documents on how the nonprofit was formed, examine the preliminary statement sent to potential bond buyers and try to learn more about the conditions attached to the $1-million loan that the seller made to the buyer.

“Could that truly be an arm’s-length transaction?” Siggins asked of the arrangement.

Buster said he would also turn over tapes of the 2 1/2-hour meeting with potential investors to the Securities and Exchange Commission, the Riverside County district attorney’s office and other law enforcement agencies. He gave copies of the tape to the offices of the governor and attorney general Monday. In the Dec. 3 teleconference, investors expressed concerns about the nonprofit status of the arrangement as well as what some called “too-rosy” traffic forecasts for the road.

Hilary McLean, a spokeswoman for Davis, said he was noncommittal on the issue.

“The governor has not reached any conclusion as to what role he will play in the culmination of this issue,” McLean said. “I don’t know what decision the governor will reach if he decides to weigh in at all.”

The developer was four years into a 35-year lease when the proposed sale arose. The chance for that sale improved significantly two months ago when Caltrans backed away from planned improvements on the Riverside Freeway after it was sued by the private operator, which contended that ridership would plummet if the work was done.

The state agency, which had hoped to add auxiliary lanes to improve safety conditions on the freeway, has delayed any such work for at least six years or until traffic increases 53%, according to the legal settlement reached in October.

And it was that settlement, Wall Street analysts say, that cleared the way for a sale.

But concerns about the deal led state Treasurer Phil Angelides last Wednesday to halt the scheduled bond sale.

Times staff writer David Reyes contributed to this story.