San Joaquin Hills Drops Forecast

Walter Kreutzen CEO of the S Calif TCA toll roads says the San Joaquin Hills Toll Road has not been performing up to projected traffic and revenue levels. The authority can service its debt but could breach debt service coverage ratios in bond covenants. Revenue in the second half of the calendar year was $23.3m suggesting for the full financial year the toll road may garner $47m to $50m compared to the $58m projected by Wilbur Smith in their 1997 study and the number used in the financing plan. As a result the toll road could as soon as 2002 drop below the 1.3 cover of revenue to debt service that is required in the bond covenants.

The TCA is reducing its earning projections to 82% of those in the 1997 WSA study as ‘ramp-up’ seems to have been completed. Part of the revenue shortfall is due to the board’s failure to raise the mainline toll by 25c to the assumed $2.25. No moves to raise tolls, but the TCA is establishing a “cash defeasance portfolio” of $37m to guarantee repayment of an expected $45m shortfall between now and 2007.

The portfolio will come largely from the TCA’s share of monies finally being recovered from Orange County in the bankruptcy debacle of 1995 when ‘innovative’ financing and divers ‘smart’ cash management schemes put the county government and many associated agencies into a multi-billion-$ financial black hole.

The ‘defeasance portfolio’ will write down debt in order to maintain the 1.3x cover. TCA is also looking for ways to cut costs and improve revenues. Weekday tolls collected on the SJH are running at 83k and average daily at 73.4k, an approx 10% increase over a year ago. However most of the growth appears to have been in the first half of the year.

The Foothill/Eastern sister toll road is on track. It was forecast to make $60m this fiscal year and had gotten $30.6m in the first half. Daily transactions are 135k, weekday 152k, about a 45% rise over a year ago. Growth seems to continue but was at a reduced rate in the last 3 months from the dramatic growth earlier in the year.

The two toll roads have a common staff but separate boards of directors and financing. FOOTNOTE: they have been very successful in getting high transponder usage in rush hours. ET now does 77% of peak hour transactions on the SJ Hills, 82% on the Foothill/Eastern.