Plan to Sell Toll Lanes Is Criticized

State and local transportation officials representing Riverside County are criticizing the planned sale of 10 miles of toll lanes in Orange County to an Irvine-based nonprofit group, calling it a secretive and questionable deal that will do little more than gouge commuters.

Last week, a group of Orange and Riverside county businessmen announced that they were buying the 91 Express Lanes, the first private toll road built in California. The four lanes straddle the median of the Riverside Freeway between Anaheim and the Riverside County border.

Members of the nonprofit group, called NewTrac, said that Orange and Riverside county taxpayers will benefit from the sale because it will cost less for a nonprofit group to finance the project, generating millions of dollars for other road improvements in Orange and Riverside counties.

But critics said those promises are hollow.

“We’ll find our folks in Riverside and San Bernardino counties paying higher tolls for no reason other than to pay off the profits of the original investors,” said state Transportation Commissioner Robert A. Wolf, who lives in Moreno Valley.

NewTrac based its long-term financial estimates on what it expects to be sharp increases in revenue, Wall Street analysts have said. If those projections are met, NewTrac will have an extra $6 million a year to split between the Orange and Riverside county transportation agencies, its backers said.

But Wolf and others contend that the counties will be unlikely to get any money back because the 91 Express Lanes will be so heavily in debt. And if the nonprofit group fails, Wolf said, California taxpayers will have to step in and make the outstanding bond payments.

“I’m not against profit,” said Wolf, transportation undersecretary under former Gov. Pete Wilson. “But what we have here is a nonprofit organization selling bonds with the name ‘The state of California’ on them and flying under the flag of a public benefit. But they have so leveraged themselves that there is no money left for any additional road improvements. I defy anyone to say this is for the public benefit.”

Gary Hausdorfer, chairman of NewTrac, disagrees.

“I would not be involved in this transaction if I did not think it had enormous public benefit,” Hausdorfer said Friday. “We’ve done extensive research. This deal has been looked at by rating agencies, insurance companies and the state. . . . Traffic volume will only increase on the Riverside Freeway; it will never decrease. And that will just make the toll facility more attractive in the years to come.

“This simply gives commuters a choice of either sitting in traffic or moving a little bit faster,” said Hausdorfer, former mayor of San Juan Capistrano. “People don’t have to use it; it’s simply an option.”

His nonprofit group was formed earlier this year to buy the toll lanes from a consortium of three corporations called the California Private Transportation Co. That group spent $135 million to build the 10-mile stretch that opened in 1995 and turned a slim profit for the first time last year. The group plans to sell its interest for about $220 million.

To buy the project, NewTrac will use up to $260 million in bonds issued in the next few weeks. That money will cover the purchase price, a mandatory $26-million reserve fund and financing fees. The three companies that originally invested in the project will divide the remaining $100 million, money that will be used to cover previous operating losses and an unspecified profit.

Riverside County Supervisor Bob Buster said the state, not a nonprofit group, should take over the toll lanes, charging that California’s experiment in road privatization has failed.

“These toll lanes have been an unmitigated disaster for us. This sale is only confirmation of that,” Buster said. “They lost their shirts, and now they are going to be bailed out by the sale of tax-exempt bonds.”

Buster said NewTrac directors should disclose more details about the deal.

“This is being done in secret to bury or smudge what should have been the lessons we learned from this whole private venture,” he said. “I’m bothered by the fact they haven’t made the terms of the deal public. This should meet the sunlight test.”

Hausdorfer scoffed at Buster’s charges.

“It’s been very public. It’s been in the newspapers,” Hausdorfer said. “But keep in mind that these are two private organizations consenting to this transaction. We’re not government, but we have made every attempt to be as open as we possibly can be.”

Eric Haley, executive director of the Riverside Transportation Commission, said that although Riverside County commuters use the road most, county leaders have long been excluded from negotiations that led state officials to grant a 35-year franchise agreement to the for-profit California Private Transportation Co., as well as a settlement agreement struck last month between that group and the California Department of Transportation.

As part of that settlement, Caltrans agreed to abandon plans to improve or widen the free lanes of the Riverside Freeway until more than 370,000 cars travel the freeway each day. Currently, the Riverside Freeway is used by about 240,000 cars a day. However, Caltrans will be allowed to make improvements to a 3,000-foot segment linking a westbound auxiliary lane--but not until the year 2006.

Still, Haley is optimistic that some good will come out of the planned sale. After all, he said, NewTrac has agreed to let cars with three or more riders use the toll lanes for free. That arrangement had been allowed until the California Private Transportation Co. began charging car-poolers last year.

“That will help several hundred residents, who will once again travel for free,” Haley said. “We’ll see how this plays out. We’re hoping for a more open process, although it’s difficult to conceive of a worse situation than we have had during the past few years.”

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91 Toll Road Sale

Riverside County officials are critical of pending sale of the 91 Express Lanes.