O.C. Tollway’s Chair Calls for Review

The board chairwoman of the San Joaquin Hills toll road on Tuesday called for an independent financial analysis of the west Orange County turnpike, which has fallen short of revenue projections since it opened in 1996.

Linda Lindholm, also a Laguna Niguel council member, said she will ask the tollway’s board of directors Thursday to consider hiring a consultant to evaluate the road’s economic problems and possible solutions.

“It’s absolutely time to have another set of eyes look at this,” said Lindholm, the board’s new chairwoman. “We need to decide on a direction for the next 20 years, and before things get to a critical state.”

Lindholm said she was concerned about the turnpike’s chronic failure to meet its traffic forecasts and last week’s decision by a Wall Street ratings agency to downgrade more than $1 billion in toll road bonds to junk status.

The San Joaquin Hills tollway, which runs from Newport Beach to just north of San Juan Capistrano, is part of a 51-mile network of toll roads operated by the Transportation Corridor Agencies in Irvine. The other tollways are the Foothill, the Eastern and a small part of California 133.

Wilbur Smith & Associates, the traffic consultant for the San Joaquin Hills tollway, had predicted that the road would have almost 94,500 riders a day within the first year of opening.

But TCA records show that as of December 2001, the road has never had more than 72,000 toll-paying motorists a day and continues to fall below revised, more conservative projections made in 1997.

The question facing corridor officials is whether the highway’s traffic volume will generate enough revenue to keep up with the road’s escalating bond payments. The debt service is expected to grow from $46.7 million in January 2003 to $186 million in 2034.

Walter D. Kreutzen, the TCA’s chief executive officer, said that by 2007 the San Joaquin Hills tollway could be in technical default on its bonds by failing to take in $1.30 in revenue for every $1 owed.

“The analysis that was done in the past has put us in a challenging position,” Lindholm said. “The projected increases in ridership have been too optimistic. We’re not coming close to what they’ve predicted.”

Lindholm envisions hiring a transportation consulting firm that will answer to the San Joaquin Hills board of directors, not Kreutzen or TCA staff. She said that whoever is selected by the board will work jointly with agency officials during the evaluation.

If the board approves her plan, the consultant would assess the road’s financial picture and possible solutions, such as refinancing debt and pursuing a merger of the Foothill/Eastern and the San Joaquin Hills operations.

Lisa Telles, the TCA’s communications director, said the agency’s staff is supportive of Lindholm’s proposal and willing to work with an independent consultant if one is hired. She added that Kreutzen is scheduled to present possible refinancing options to the board Thursday. She described the discussions as preliminary.

County Supervisor Todd Spitzer, who sits on the tollway’s board, has echoed the call for an outside review. He says the road needs more than gimmicky promotions to increase ridership.

“Coupons and taking a cut of hamburger sales at McDonald’s isn’t going to fix the toll road’s finances,” Spitzer said. “An independent consultant will help us ask the right questions and get the proper direction.”

Spitzer warned that merging the TCA’s toll roads might not be the right thing to do. Under that proposal, the outstanding bonds for all the TCA turnpikes would be refinanced. Toll revenue would then be combined to cover the debt service of the unified system.

The Foothill and Eastern traffic forecasts were partly based on the projected population growth of east Orange, Spitzer said. But Irvine Co. proposals to build 12,000-plus homes in that area have been scaled back to about 4,000-plus homes.

“The staff has jumped on the idea of consolidation,” Spitzer said. “It might be fine at the end of the day when all is evaluated, but if you jump on it prematurely, you could hurt the road’s finances even more.”