A Map for 91 Express Lanes

Everyone is in agreement that a public agency should purchase the 91 Express Lanes from California Private Transportation Co. And by this morning we’ll know whether or not AB 1010 has made it through the legislative traffic jam in Sacramento to the governor’s desk, clearing the way for the Orange County Transportation Authority to buy and operate the toll lanes.

But whether or not AB 1010 is signed into law, it isn’t clear that OCTA is necessarily the best public agency to operate the toll lanes. There is still a need for a true public dialogue in Orange County on this critical transportation issue.

Nearly three years ago I asked the governor to “tear down these cones” on the Riverside Freeway Express Lanes. Now, three proposals have surfaced that merit serious consideration. And if we take a regional approach to our transportation needs, there may even be a better alternative.

The first proposal is for OCTA to purchase the Express Lanes from the company. Absolutely. Let’s put this private-public fiasco out of its misery.

But the “appraisal” prepared by Ernst & Young that calls for OCTA to pay $202 million to $220 million is probably $20 million to $25 million too generous. The best price to pay the company is in the $180-million-to-$185-million range. The replacement cost is $180 million.

Give the company an 8% annual return on its investment and the price moves to $183 million. Other standard valuation methods, including the capitalization rate and discount rate, given current financial results, suggest that the proposed purchase price would be very liberal.

OCTA, however, is not a toll road operator, so it must go through significant legislative hoops to become one. AB 1010, carried by Assemblyman Lou Correa (D-Anaheim), was designed to let OCTA collect tolls on the Riverside Freeway.

The second idea calls for the Transportation Corridor Agencies to build a tunnel through the Santa Ana Mountains. We definitely need an alternate route to the Inland Empire. A tunnel is as technologically feasible, environmentally sensitive and financially achievable as a toll road. This option deserves serious consideration.

The third idea is to build a highway next to the Riverside Freeway, using railroad right of way. It’s an interesting proposal. It would be beneficial to determine if a double-deck road over a railroad right of way is economically viable.

I consider that proposal to be very tenuous from a financial perspective. Think about it: If it were viable, then why haven’t we pursued building a deck over existing freeway lanes? At least with a tunnel, we can compare the proposal with projects around the globe, including the costs and success rates.

Now for the fourth alternative. OCTA is not the natural agency to be purchasing the Express Lanes. A superior alternative already exists--the toll road agency.

The TCA operates two toll roads and has the infrastructure to handle the dashboard transponders. The company generates about $20 million in annual toll revenue. Half of the revenue is used to retire debt. The remainder is spent on administrative expenditures.

The TCA should be able to reduce these expenditures by at least 40% because it has staffing and technology already in place. CPTC’s current salaries and benefits of $2.8 million per year will be greatly reduced, as will $1.6 million in annual general and administrative expenses.

For now, let’s assume those costs can be cut in half, for $2.2 million in savings. Eliminate contracted services ($1 million), advertising, professional fees and other duplicated costs ($1.2 million) and the combined operations would save another $2.2 million per year for a total of $4.4 million.

If the TCA purchases the Express Lanes at a reasonable price--say $185 million--it could then:

Provide easy access to the Foothill toll road from both directions on the Riverside Freeway’s carpool and non-carpool lanes, helping to move traffic more efficiently and encouraging additional use of the express lanes.

Consider building a tunnel to Lake Matthews from the Foothill toll road. Preliminary studies indicate toll revenues will be sufficient to service construction debt.

Complete the extension of the Foothill toll road to Interstate 5, thus easing traffic on the only San Diego-bound public freeway and encouraging more drivers to utilize what would become a totally integrated toll road network.

I believe this would make the TCA, or its reconstituted successor, a financially viable entity. It would solve Orange County’s long-term transportation needs, deal with the San Joaquin toll road’s fiscal problems and provide funds needed to more quickly “tear down the cones.”

It would also provide an opportunity for improved cooperation with neighboring counties’ transportation agencies. In fact, an expanded joint-powers agency that included Riverside and San Diego counties would be a prudent long-term strategy for addressing our joint transportation congestion problems.

Momentum on addressing transportation concerns in Orange County and Southern California is beginning to develop. Let’s focus on where we want to end up. Let’s hope the political will and leadership exist to see planning through to its natural fruition.

Easing traffic congestion is something we can all agree on. Pursuing a cooperative long-term solution is the course we must pursue.