Merger of O.C. Tollway Boards to Be Explored

Directors of Orange County’s tollway operations Thursday approved an exploratory merger of their highways -- a step designed to solve the financial woes of the San Joaquin Hills tollway.

The decision establishes a 21-member board of directors to lay the groundwork for a permanent consolidation of the San Joaquin Hills and the Foothill-Eastern tollways if traffic and economic studies show a merger will work.

The San Joaquin Hills and Foothill-Eastern, each with its own board of directors, are run by the Transportation Corridor Agencies, a joint powers authority that operates 51 miles of tollways in Orange County.

Plagued by lower-than-expected traffic and revenue, the 16-mile San Joaquin Hills toll road through coastal Orange County has been the problem child of the operation for years.

If nothing is done, tollway officials say that within a few years the San Joaquin Hills road could default on about $1 billion in bonds used to finance the road’s construction.

Such a default would occur when the TCA can no longer maintain its promise to bondholders to earn $1.30 for every dollar of debt.

A possible solution, TCA officials say, is to form a joint powers authority that would buy and operate the San Joaquin Hills and the Foothill-Eastern, which has higher than expected traffic and revenue.

The purchase could be financed through $4 billion in tax-free bonds.

On Thursday, the boards of both toll roads agreed to form an interim body to test the waters for permanent consolidation. It is made up of 21 members drawn from the existing boards that oversee the two toll roads.

The only dissenting vote came from Eric Norby, the brother and chief of staff of Supervisor Chris Norby, who serves as his alternate on the Foothill-Eastern board.

Norby said an interim merger was premature.

The exploratory panel will hire financial and legal experts to complete an analysis of the proposed merger.

It is also responsible for developing a financial plan and drafting the documents for a bond sale.

All non-merger business specifically related to the Foothill-Eastern and the San Joaquin Hills will be continue to be handled by their respective boards.

At its first meeting Thursday, the new panel appointed Supervisor Tom Wilson as its chairman. Whether the merger proceeds depends on the findings of a traffic and revenue study due by July.

There is concern that decisions by the Irvine Co. to dramatically scale back residential and commercial development in east Orange County might hurt the Foothill-Eastern.

If it does, the merger could be in jeopardy. It could also dash plans for moving forward with the controversial Foothill South tollway through South County.

“If the studies show it is not feasible and it will not pencil out, there will be no sale and the exploratory joint powers authority will be disbanded,” said Lake Forest Councilman Peter Herzog, chairman of the Foothill-Eastern’s board of directors.