Toll road merger alternatives pitched

Alicia Robinson

Seven new proposals to save the San Joaquin Hills Toll Road from

financial collapse were proposed this week, but most of those include

ideas already considered by the toll road’s governing board.

The boards that govern the San Joaquin Hills Toll Road and the

Foothill and Eastern toll roads agreed last week to look at

alternatives to merging the two toll roads to rescue the San Joaquin

Hills Toll Road from defaulting on its debts. They have twice

postponed voting on a merger between the two agencies that would sell

$3.9 billion in bonds and restructure the agencies’ debts.

Local representatives on the San Joaquin Hills Toll Road’s board

said they haven’t seen the new proposals but they will consider all

the options.

“I’m willing to consider any of them,” Newport Beach City

Councilman Gary Adams said.

But the proposals are based on ideas that toll road agency staff

members already considered and dismissed in favor of the $3.9 billion

bond sale and merger plan, he said.

“It doesn’t seem like any of them are going to pass muster, but

you never know,” Adams said.

Paris-based Cofiroute Global Mobility laid out a plan that

wouldn’t require a merger or the issuance of new bonds. Cofiroute

would operate both toll road systems for at least 15 years but would

guarantee the financial stability of the San Joaquin Hills Toll Road

during that time.

Orange County Supervisor Chris Norby proposed that, rather than a

merger, the Foothill and Eastern toll roads’ governing agency should

purchase the San Joaquin Hills Toll Road’s assets and pay its

$1.9-billion existing bond debt. The plan would not require any

additional bonds and would save drivers $3.6 billion in future tolls

when compared with the earlier $3.9 billion bond proposal, according

to Norby’s projections.

Other proposals came from Orange County Treasurer John Moorlach

and investment banking firms Morgan Stanley and Kinsell, Newcomb &

DeDios, and two from investment bank Merrill Lynch.

Foothill and Eastern toll roads board chairman Peter Herzog, who

is on the ad hoc committee that accepted the new proposals Thursday,

said in earlier deliberations the merger was the one plan that met

board members’ objectives, which include providing financial

stability and lowering debt service for the San Joaquin Hills Toll

Road and funding completion of the Foothill-South Toll Road.

“The thing that we’re focused on is making sure that the toll

payers of the San Joaquin Hills corridor don’t end up paying tolls

for an additional 18 years,” Herzog said.

It’s too early to say whether the new proposals will meet those

objectives, Herzog said. The ad hoc committee will hear presentations

Wednesday from those who submitted new proposals.

Costa Mesa Mayor Gary Monahan said he’s looking for whichever plan

is best for the toll roads.

“I felt comfortable with [the merger proposal] but if there’s

better ideas out there I’m more than happy to look at them,” he said.

The boards are under the gun to make a decision at their April

meeting after hearing Tuesday that Moody’s Investors Service could

downgrade the rating of the San Joaquin Hills Toll Road’s $1.9

billion in construction debt.

The possible downgrade would leave the bonds with a “noninvestment

grade,” or junk, status, Herzog said.

“I think what this shows is that the information we’ve been

receiving is accurate, that this is a serious situation, that it

needs a long-term fix and it’s one that needs to be resolved now,” he

said.