By Matt Coker
By R. Scott Moxley
By Charles Lam
By Nick Schou
By Gustavo Arellano
By Gustavo Arellano
By Steve Lowery
By R. Scott Moxley
Three years ago, the Weekly revealed that topbureaucrats at Orange County's Transportation Corridor Agencies (TCA) had secretly tried to prevent their elected-official bosses from ever publicly revealing the ugly truth about toll-road finances.
No thanks to Orange County's two daily newspapers, we now know why. At a Feb. 10 hearing, TCA management reluctantly admitted that the three-year-old San Joaquin Hills toll road will never meet even minimum revenue or ridership projections needed to pay for billions of dollars in high-priced Wall Street bonds. To stave off immediate financial collapse, the agency created a "Stabilization Fund" that will divert $40 million from long-term savings to pay massive upcoming bond debts. The TCA also discussed forming additional marketing agreements with fast-food restaurants and raising what are already among the highest tolls in the nation.
County Supervisor Todd Spitzer, who is chairman of the TCA's board of directors, called the moves "absolutely critical." But he cautioned that the "positive steps" will keep the toll road afloat only until 2007. The TCA must make an additional billion dollars in payments through 2041.
"What happens after 2007, when many—if not most of us on this board—will no longer be supervisors or council members?" Spitzer asked. "We owe it to our customers, to our lenders, to Orange County's citizens and those who will follow us on this board to begin to tackle that question head on today."
Spitzer and the TCA owe the public something else: an honest explanation. How could a three-year-old road once hailed as an international model for future toll projects now face financial ruin? Why did senior TCA official Walter D. Kreutzen brag to Congress in 1996 that his "innovative" agency had "helped create, modify and perfect" private toll-road financing? Did the agency—which has handed out lucrative perks and questionable pay raises in the past—knowingly deceive the public about its finances?
Even Wall Street is alarmed. On Feb. 16, a major investment firm downgraded the agency's bond rating. Analysts complained that the TCA had yet to meet even one of its financial goals and "is faced with a rapidly escalating debt-service schedule." The TCA has more than $3 billion in debt, despite the fact that taxpayers have shelled out more than $100 million and continue to pay the costs of road maintenance and highway patrol. Thanks to a backroom deal between county real-estate developers (who craved the toll roads) and Republican members of Congress, the TCA also has a taxpayer-backed $265 million federal line of credit through 2007.
Evidence of a looming disaster was obvious as early as April 1997, when the Weekly published my review of official ridership and revenue figures and confidently declared the toll corridor a "road to disaster." After the article ran, an angry East Coast investment banker working with the TCA called me an "idiot" with "shit for brains." As if to confirm my findings, the TCA revised its revenue projections downward, refinanced the project for $1.7 billion (to further delay debt payments), and spent millions of dollars to advertise a road originally billed as "a road that would sell itself."
This year, the Weekly revisited the issue ("Highway Robbery," Jan. 14) and found the toll road's condition worse. The TCA's original 1999 revenue estimate was off by a whopping 420 percent. Spitzer now claims the ridership projections were "too optimistic." A more accurate adjective would be "hallucinatory." In its 1993 Securities & Exchange Commission filing, the TCA calculated "worst-case scenario" revenue projections to gauge the impact of an economic downturn on the toll road. Then reality hit: the number of toll-road users during economic good times from 1997 to 1999 was 20 million less than what the TCA predicted for a Second Great Depression.
The Times has been missing in action on the TCA crisis. Compare that with the paper's behavior four years ago on another matter: in hopes of proving Bob Dornan's voter-fraud allegations against Loretta Sanchez in 1996, the Times put on the story as many as 15 different reporters and numerous outside consultants. The Times, which has an exclusive joint-marketing contract with the TCA, apparently assigned no one to investigate and report on a financial mess easy enough for a high school journalist to unravel. Only after Spitzer publicly stated what had been obvious for more than three years did the Times and The Orange County Register bother to write the story. And don't even get us started on the Register: It wasn't long ago that the Reg opined that the toll roads are "looking more attractive than ever."