Toll road merger likely dead

Alicia Robinson

Foothill and Eastern toll road officials voted Thursday to pursue a

loan proposal crafted by Orange County Supervisor Bill Campbell

despite an independent financial advisor’s contention that the plan

is unworkable.

Members of the Foothill and Eastern and San Joaquin Hills toll

roads’ governing boards have been considering a merger of toll road

operations and a $3.9-billion bond sale to rescue the San Joaquin

Hills toll road from financial default, which could happen as soon as

2005. Thursday’s decision by Foothill and Eastern board members to

explore Campbell’s plan makes the proposed merger moot.

Campbell’s plan has the financially healthy Foothill and Eastern

toll roads compensating the cash-strapped San Joaquin Hills toll road

with $120 million for taking some of its traffic by opening the

Foothill South extension in 2008 or 2009. The Foothill and Eastern

toll roads also would lend $1 billion to keep San Joaquin Hills from

defaulting on its construction debts, which could also happen as soon

as 2005.

“It lets us do all the projects we want to do in Foothill South

and it keeps San Joaquin from going into technical and cash default,”

Campbell said. “My calculations showed that this can be done. The

financial advisor ... got up and said they can’t make it work, and I

pointed out one thing that he hadn’t considered.”

The financial advisor didn’t take into account development impact

fees that will offset the cost of building the Foothill South

extension, Campbell said.

But Mark Young, a principal for financial advisory firm Gardner,

Underwood & Bacon LLC, said the Foothill and Eastern toll roads won’t

generate enough revenue to manage their current debts, add new debt

to build the Foothill South extension and pay the promised funds to

the San Joaquin Hills toll road.

“I was not comfortable coming to a conclusion that it was viable,”

Young said.

The merger proposal, on the other hand, can be insured and has

already been checked out by bond-rating agencies, he said.

One local representative agreed that Campbell’s plan seemed iffy.

“I’m a little disappointed that they didn’t go ahead with the

merger,” said Costa Mesa City Councilman Mike Scheafer, who was

representing the city on the San Joaquin Hills board. “His plan is

looking at something that they’re not even sure is feasible to do.”

Costa Mesa Mayor Gary Monahan and Newport Beach City Councilman

Gary Adams have said they support the merger plan.

Campbell said he objected to the merger because the commission

fees and other costs would be unnecessarily high, and any action

would require the vote of a supermajority of board members, which

would be difficult to get.

The boards are scheduled to meet June 10, but toll roads

spokeswoman Clare Climaco said it’s unclear what the next step is.

Campbell maintains he’s proposed a plan that’s superior to the

merger, but Scheafer and Young said they got the sense that the

board’s vote was political rather than financial.

“It obviously had nothing to do with numbers,” Young said.