91 Tollway Refinancing Bond Is OKd

More than 10 months after buying the 91 Express Lanes, the Orange County Transportation Authority on Monday approved a $200-million bond deal to refinance the controversial tollway that runs along the middle of the Riverside Freeway.

The deal marks the final step in the purchase of the lanes, which offer paying customers an alternative to the traffic-swamped freeway. The lanes will eventually be opened to all traffic.

The refinancing package will allow OCTA to save money while freeing capital to improve the lanes and make them more profitable, said Cypress City Councilman Tim Keenan, chairman of the OCTA board of directors.

At the same time, OCTA board members Monday decided to include an alternative four-lane highway in a major study of transportation needs in the 91 corridor, which has become one of the most congested highways in the state.

The proposed expressway would parallel the Riverside Freeway from the Eastern Toll Road in Orange County to the Ontario Freeway in Riverside County. The route also would connect to the Corona Freeway.

OCTA bought the 10-mile Express Lanes for $207.5 million in January from California Private Transportation Co., a consortium of companies that included Level 3 Communications, Granite Construction and Cofiroute, a French toll road builder.

The purchase followed years of controversy over a noncompete agreement between the company and Caltrans that severely restricted widenings and other improvements to the Riverside Freeway.

As part of the deal, OCTA assumed responsibility for paying the interest and principle on $135 million in taxable bonds issued by the previous owners. To help finance the purchase, the authority also borrowed about $72.5 million from itself.

The new bond issue will refinance the $135 million in taxable bonds at interest rates below 5%, almost three percentage points lower than the original rate.

By refinancing, OCTA officials estimate, they will save about $22 million between 2004 and the bonds’ maturity date of 2030.

The rest of the money from the bond sale will be used to pay a $26-million penalty for early retirement of the taxable bonds, reimburse OCTA for $22.5 million borrowed from its bus operations fund, set up a reserve account and pay for refinancing.

Under the proposal, OCTA will sell equal amounts of tax-exempt fixed and variable rate bonds by mid-November. The agency’s total debt service will be $12.6 million annually, about $400,000 more a year than if the taxable bonds had not been refinanced.

OCTA officials say Express Lanes revenue can cover the increased debt service.

The balance of the agency’s loan to itself will be repaid with interest each year from surplus toll revenue.

Three Wall Street ratings agencies -- Moody’s Investors Service, Standard & Poor’s, and Fitch -- already have issued an “A” grade for the tollway bonds, a solid investment rating.

OCTA’s acquisition of the toll lanes is viewed as a first step in uncorking the daily traffic snarls on the road, largely by eliminating the non-compete clauses that blocked widenings.

The idea of building a parallel highway is the latest proposal to bring relief to the Riverside Freeway, that which serves as a connector between affordable housing in Riverside County and jobs in Orange and Los Angeles counties.

OCTA board member Bill Campbell said the expressway proposal stems from an earlier Irvine Co. plan that called for a second freeway through the 91 corridor as an alternative to a road or tunnel through the Cleveland National Forest.

If the new highway is finished by 2025, it could handle 91,000 to 109,000 vehicles a day, according to a preliminary analysis by OCTA. Officials say more detailed study is needed, however, to identify potential traffic impacts, engineering problems, and environmental issues.