The office of the California state treasurer has agreed to allow an Orange County toll road agency to refinance its debts and extend toll collection by another 13 years after the agency failed to live up to traffic and revenue projections.
The Foothills/Eastern Corridor Transportation Agency, which oversees the Foothill/Eastern and San Joaquin Hills toll roads, applied to restructure its debts and toll collection earlier this year.
The application prompted a review by the California Debt and Investment Advisory Commission under the office of state Treasurer Bill Lockyer. The commission retained Montague DeRose and Associates to conduct the review.
Montague consultants point out in their final report to the commission that the toll roads have been on an unsustainable path based on traffic and revenue projections dating back to the 1990s.
The consultant firm Wilbur Smith Associates, which is now CDM Smith, initially projected that traffic and toll rates would increase 4.4 percent per year and keep up with debt service.
That didn’t happen. According to Montague, traffic and toll rates have only grown an average of 3 percent per year, and there are reasons.
A weakened economy in 2007 and 2008 drove transactions and revenue downward by 3 percent and 8 percent respectively, according to the report. The agency increased tolls by 12 percent in 2009, which caused traffic to dip again but helped the agency recover 6 percent of its lost revenue.
From 2010 to 2012, revenue and transactions were flat despite a system-wide toll increase of 7 percent in July 2011.
The agency has already approved a 4.8 percent toll increase for fiscal year 2013-14 to help keep the agency at or close to its projections.
The toll agency plans to issue new bonds that would drop the debt service rate from 4.4 percent to a maximum of 3.5 percent per year. A direct effect of that restructuring means the agency needs to collect tolls another 13 years to pay off those bonds.
Montague consultants said in the report that the new debt service amount and toll extension are justified.