Mischief on 91 Tollway

In the early 1990s, the idea of building some demonstration private toll roads in California was so appealing as to be irresistible. But in its infatuation with privatization, the state left open loopholes for profiteers. The recent fiasco on the Orange County section of the Riverside Freeway with the 91 Express Lanes reveals how much tightening up remains.

The state’s automobile culture expanded around the freeway, but by the end of the 1980s it was clear that privatization offered a way to get new pavement built when there was little prospect it could be done publicly. But from the beginning, the public interest in access to new road capacity and the private sector’s drive for profit were set on a collision course.

The recent crumbling of a deal to transfer ownership of the private lanes on the Riverside Freeway has revealed the depths of potential problems with these roads. There is plenty for the Legislature to examine.

The problem at the beginning of the toll road experiment was that it was easy to imagine the public getting taken advantage of, but hard to foresee exactly how that might play out. We expressed concern before the road was built that the public might be enlisted at some point to bail out developers if ridership and revenues proved disappointing. The intent of Sacramento from the outset was to avoid this pitfall, but the tension between public and private interests was always a potential for mischief.

With all the problems that the recent proposed sale of the private road had, the most shocking disclosure of recent days was that road improvements on the freeway were to be put off to bolster the financial position of the operators. When state officials recently were fighting the proposed sale of the 91 Express Lanes, it was revealed that Caltrans officials delayed planned upgrades for at least six years, or at least until freeway traffic increased, as part of a legal settlement with the California Private Transportation Co. The business officials were concerned that plans for freeway improvements violated their contract and would have hurt their business.

As far back as 1991, when Caltrans first made this agreement, we expressed concern that there was too much the public did not know. We wondered how much profit would be allowed, and whether the public-private agreements would rule out the future construction of competing free roads. The problem with delaying freeway improvements is really a variation of the second concern.

What’s obvious from all this is that the deal went forward without sufficient public disclosure. Caltrans has been secretive in its dealings with the private sector during this entire experiment in privatization, and the result has been a near disaster for the public. The state may yet have to take over this road, but whatever happens Caltrans should get new marching orders.

The unconscionable agreement to defer improvements may not have been a direct subsidy to a losing business venture, but it surely mortgaged the public’s welfare and safety to advance private interests. The settlement helped get an investment-grade bond rating for the sale. Great for the road operator, but who was Caltrans working for?

We now know that it is possible for the public to get stuck any number of ways on these private toll roads. While the original fears about a direct bailout did not materialize, it is important to remember that the sale of the lanes almost went through before being called off by state officials. The state’s good name was nearly leveraged to roll over debt so that a seller who was losing money could walk with a handsome profit, and at the same time set up a buyer in a position to do the same later on when its ridership projections fell flat. The public would have been left on the sidelines while profit-taking occurred in a game of musical toll booths, and while a state bank charged with guarding the public interest waved through tax-exempt bonds without questioning much of anything.

The Legislature needs to do more than investigate what happened on the Riverside Freeway. It must do a better job protecting the interests of the motoring public. The 91 Express Lanes “demonstration project” turned out to be a demonstration of a different kind from originally intended. Instead of a model for the future, it’s a case study for what can go wrong.