Refinancing Sought for Freeway Toll Lanes

Owners of the controversial Riverside Freeway toll lanes are seeking to refinance the private thoroughfare in an attempt to lower their debt and eventually eliminate tolls for carpools, motorcyclists and the disabled.

Greg Hulsizer, general manager of the 91 Express Lanes, said that if the California Private Transportation Co. can refinance, the move will help push the 6-year-old operation closer to profitability.

The company borrowed about $100 million of the $130 million it needed to build 10 miles of toll lanes in the median of the Riverside Freeway between Anaheim and the Riverside County border. The stretch of freeway is one of the most congested in Southern California.

“This has been on our agenda for quite some time,” Hulsizer said. “The timing seems to be getting better. Interest rates are declining, and we have had good, solid improvements in revenue for five years.”

Last week, the company took an initial step in the process by obtaining required approval from the Orange County Transportation Authority, which loaned the express lane owners about $5.6 million at 9% interest in 1992. The money does not have to be paid back until other debts are settled.

According to county records, the owners of the toll lanes have not made any payments to the transportation authority in six years. If the company refinances, the loan will be paid back in full with interest--roughly $11 million.

Carpools with at least three people, motorcyclists and the disabled also stand to benefit if refinancing occurs. They now pay half-fares to use the toll lanes, which cost up to $4.25 each way at peak hours. Should the company reach a certain level of profitability, those reduced tolls might be lifted.

Refinancing the debt, Hulsizer said, will improve the company’s bottom line by lowering interest and eliminating the terms of the current loans, which are “front-loaded,” meaning the owners face rising debt payments until 2008.

Company officials contend the express lanes are now well-positioned for the undertaking. Annual reports show that revenue has steadily improved from about $7 million in 1996 to $21.3 million in 2000--the best year for earnings.

California Private Transportation claimed a slim profit in 1998, but revenue the following year dropped dramatically, when the Foothill Eastern Toll Road opened in Orange County. Revenue rebounded in 2000, jumping 9%.

Hulsizer said the company reached the break-even point last year.

The 91 Express Lanes, however, faces an uncertain future in court, where Riverside County is contesting a noncompetition agreement the company entered into with Caltrans before the lanes were built. The clause prohibits the state from making freeway improvements that might draw motorists away from the express lanes.

Lawyers for Riverside County argue that the agreement is illegal. If they prevail, they say, the private lanes will be opened to the public and future improvements to the highway can be made.

Toll lane officials say they have a valid state contract to limit freeway improvements that might make the pay-to-drive lanes less attractive. Without the agreement, Hulsizer says, the lanes would have been impossible to build.

Last week, the company’s position was bolstered by an opinion from the Legislative Counsel, which provides legal analysis for the state Assembly and Senate. The opinion relates to a pending bill by Assemblyman Rod Pacheco (R-Riverside) that seeks to end noncompetition agreements.

In a short verbal report to Pacheco’s office, attorneys for the Legislative Counsel said that it would be unconstitutional to make the measure apply retroactively to the 91 Express Lanes or similar highway projects. The attorneys noted the state contract would be difficult to cancel.

“This is consistent with what we have been saying--that the bill cannot be applied retroactively,” Hulsizer said. “We successfully brought that argument to light and the Legislative Counsel has concluded the same thing.”