91X ORANGE Co CA:CPTC reports “positive” financials

Given that the total capital cost of the project was $130m any other debt would have to be rather artificial and depreciation charges should be small, so the project must be close to operating at a true net profit.

Says the report: “During our first two years of operation, we demonstrated that private capital and initiative can improve the quality of life for tens of thousands of commuters each day. In 1998 we were able to show what we’ve believed all along – that as an investment, the 91 Express Lanes is on solid financial footing and poised for long-term success.”

CPTC’s revenue increased 45% in its third year of operations, mainly because it was able to steeply increase average tolls. Vehicle trips rose 8% to 25.4k/day for the year, at an average $2.17 toll, up a spectacular 35% over 1997’s av$1.60 toll. A part of that was the application of a half toll to HOV3 vehicles that had previously traveled free, but most of it was drumming up more business and raising tolls to meter out enough travelers with lower value trips in order to maintain free flow conditions.

Weekday traffic was averaging 32k at year’s end with 115k customers having 91X transponders. The number of users would be greater however because TCA are interoperable with the 91X tags. 91X was the first to attempt to implement the toll express lane concept in which money is made by offering a ride by congestion in adjacent free lanes. Pricing has to be adjusted according to congestion in the free lanes because that determines the value of the toll lanes to motorists. Time savings vary from 10 to 20mins in the normal peaks of the peak down to nil midday and contra-peak direction. At those times a better riding asphalt pavement, the exclusion of heavy trucks from the X-lanes and a high level of surveillance and patrols attract a certain level of patronage.

Operating expenses are laid out as $5.7m for customer service (subbed out to Lockheed M) facility operations and administration, $1.2m for county taxes and franchise charges, $0.8m managerial and technical services from affilates, $0.6m for police, $0.2m maintenance and repairs, and $0.1m professional services. The major economy as compared to the previous two years was a big cut in those professional services. Consultants?

Omissions

The report makes no mention of what many – including us – saw as the greatest threat to CPTC’s financial viability, namely the opening of the country Transp Corridors Agencies (TCA) competitive Eastern Toll Road (CA-241) – see map below.

Some 70k veh/day are using the Eastern, most of whom might have previously been expected to travel the 91 and then CA-55 to get to Irvine and points south from Riverside Co. They now are able to avoid the section of 91 to CA-55 where the X-lanes operate. But there appears to have been major pent-up demand in the corridor because 91 traffic west of the Eastern’s start quickly bounced back after the new toll road opened Oct 98. As a result 91X is going strong and has raised (or in 91Xspeak “adjusted”) its toll rates.

It seems most unlikely to be able to ‘adjust’ its toll rates this year as strongly as last, but appears to have a solid financial future so long as it remains as well managed as it has been to date.

The report has nothing on negotiations for a piece of X-lane operations at the eastern end in Riverside Co, as provided for in the group’s agreement with the state of California, or of its litigation over Caltrans plans to add an extra lane each side on 91 for traffic to the Eastern pike. It also omits reference to proposals revealed last autumn to spin off the whole operation to Newtrac, a private non-profit it established.

BACKGROUND: 91X lanes consist of 2x2 lanes built in what was previously a 15m (50') median in some 16km (10mi) of 8-lane CA-91 through the canyon of the Santa Ana river some 50km (30mi) southeast of downtown LA. The highway which carries over 250k veh/day connects the lower cost housing areas in the valleys of Riverside and San Bernardino counties with the job rich Orange county to the west of the Santa Ana mountain range.

Toll rates vary between about $1 and $3.50 according to a schedule of toll rates by blocks of hours. In rush hours the X-lanes carry approximately the same volume of traffic as the free lanes right alongside, but because price has been used to prevent overloading the X-lanes avoid concertina style breakdowns in flow and therefore offer a smoother, higher speed and more predictable trip. 91Xinvented the term ‘value pricing.’

The 91X facility cost $130m and opened Dec 27 1995, being the second investor built toll road in the automotive age after the Dulles Gwy in VA. It was brought to fruition by Gerry Pfeffer VP at Peter Kiewit & Sons which was the principal partner. Its share, now a majority has passed to Level 3 Communications a spin-off of Kiewit. Cofiroute the major investor owned toll road company in France is another general partner in CPTC and Granite Construction is a limited partner. Hulsizer says CPTC is actively working with Riverside Co and other agencies on plans to extend express lanes west as far as I-15. This could greatly enhance the value of the facility. This extension could have reversible lanage. (Contact Greg Hulsizer 714 637 9191x328 91expresslanes.com)