Merging Safely on Toll Lanes

To merge or not to merge is the big question facing operators of the Foothill-Eastern and San Joaquin Hills toll roads. But given Orange County’s history with toll roads, board members at the two tollways shouldn’t answer the question until they -- and motorists who pay the tolls -- are clear on the merger’s ultimate costs.

The proposal to put the two toll roads under one roof is driven by the San Joaquin Hills toll road’s continued failure to meet rosy traffic and revenue predictions. The 16-mile tollway is expected to slip into technical default in 2005 on $1.5 billion in bonds sold to build the toll road. The proposed merger partner is the financially healthy 35-mile Foothill-Eastern toll road.

Few motorists have reason to know about the San Joaquin Hills’ financial problems or the fact that the toll roads are separate legal entities with their own revenue streams and financing obligations. A merger seems to make sense for motorists because the Transportation Corridor Agencies already set fares and handle enforcement and other operational issues.

These roads were envisioned as part of a countywide system, and a merger would knock down legal barriers that prevent the TCA from using revenue from the relatively robust Foothill-Eastern to assist the struggling San Joaquin Hills road.

The San Joaquin Hills toll road’s financial problems weren’t envisioned in the 1980s when Orange County embraced toll roads as the solution to the growing problem of how to finance highway lanes absent government funding.

Results of the county’s toll road experiments, though, have been mixed.

The Foothill-Eastern is financially healthy, but the San Joaquin Hills road can’t pay its debt. An optimistic proposal to build an eight-lane extension to the Foothill-Eastern has been cut back to just four lanes -- and there’s concern that the San Joaquin Hills’ financial problems could bleed over and stall the proposed extension.

Although it’s not part of the TCA’s current headache, the 91 Express Lanes added to the nightmare facing motorists stuck in the free lanes on the clogged Riverside Freeway.

TCA studies support merging the two toll roads and taking advantage of historically low interest rates to refinance their combined debt. TCA officials make a strong argument that a merger and the refinancing are the best way to keep both toll roads viable. That is probably the case.

But the toll roads’ boards should ensure that private investors who willingly gambled on the San Joaquin Hills toll road share in any financial pain a merger creates. Though not the preferred option, the toll roads’ boards also could let the troubled tollway slip into default, paving the way for lenders to take over and prove that they know how to operate it more efficiently.