SJ Hills/CA-73 Refinancing for Orange Co pike

The San Joaquin Hills (SJH) pike in Orange Co Calif is refinancing a billion dollars of debt to take advantage of lower interest rates and improve its chances of coping with lower than expected revenues. By midyear the SJH was running 52,000 tolls/day which at an average toll of $1.65 gives annual revenues of $31m — way short of the 98,000 daily tolls and $62m that Wilbur Smith Associates predicted for the first year in forecasts prepared for the bond issue of 1993. (These numbers are 12/10 of the raw WSA figures, which assumed a March 1 startup.) In other words the road was doing barely more than half the forecast level.

At least there has been steady growth in traffic through this year. Each month has been seeing a 1,000 to 2,000 rise, an average of 2 to 3%/month. By mid-Aug AADT was 53k. By year’s end daily tolls should be in the 60k to 65k range, based on growth in the first half of the year and annual toll revenues running $36m to $40m. If this kind of growth is maintained then by mid-98 daily toll trips should be 70k to 80k, revenues/yr $45 to $52m. The original WSA forecasts pitched average daily tolls in 1998 at 106k and revenues at $72m.

A new traffic and revenue study (T&RS) has been prepared by WSA for the debt refinancing as we write. It attributes the forecasting fiasco of 1993 to the southern California economy and the failure to anticipate the extent of the recession there. Even in 1997 it says employment was lower than in 1990 and 21% less than projected in 1992. Hadn’t noticed the cold war was ending and that the Pentagon mightn’t be going to need all that stealth gear and other cool fight’n stuff that the LA area churned out, eh? In addition the new WSA T&RS acknowledges a “much more extended ramp-up period than had been anticipated,” and says other downers were poor signage, low public awareness and little demand from truckers.

The new study projects daily trips (revenue) at the turn of the year at 64k ($38m) rising to 78k ($51m) by end 1998, 97k ($63m) in 2000, 164k$144m) in 2010. WSA projects the year 2000 97k trips as producing point daily flows ranging between 50k and 70k, or between 8 and 10% of total corridor traffic. The corridor is big! I-5 and I-405 run will over 500k veh/day. In large part what the SJH gets is spillover from I-5/I-405 congestion, which makes forecasting tough.

JP Morgan wrote in a MUNICIPAL MARKET MONITOR piece in March that they expect the SJH to be “at least 25% off original forecast for 1998.” The SJH has really bombed out on getting truck traffic — hardly 500/day compared to 3,000 to 4,000/day forecast. The steep grades (to 6%) compared with I-5/I-405 are mentioned as a deterrent. The modelling is apparently systematically faulty in this and also in its overestimations of early traffic. A number of recent toll roads first year results have been very poor but in the 2 to 4 -year time range traffic growth has converged closer to forecast numbers. One subscriber in the area told us he thinks the TCA was unlucky in that the SJH’s opening coincided with the opening of major improvements to the I-5/405 free roadways that compete with the toll road, and that while still heavily loaded, conditions on the freeways are noticeably improved on what motorists had grown used to. If there is latent demand for highway space and the freer flows induce new tripmaking, things could look up for the SJH. The freeways are so big that small proportional diversions would be big absolute numbers for the toll road. (Of course that latent demand stuff could be just green scaremongering, and not eventuate!)

Ed Regan of WSA, the local paper said, presented the TCA with revised forecasts recently which said traffic would most likely be 59% of that originally forecast for this year — 57k AADT rising to 93% of the previously forecast 2024 traffic level assuming “moderate” economic growth.

Morgan’s wrote that the Transp Corridors Agencies (TCA), owner of the SJ Hills appears to have sufficient financial reserves through 2005 but that its margin for error is “small.” Colleen Clark the agency’s financial officer agrees with that based on the current debt structure. The agency now hopes to refinance about $1b of 1993 debt on which it is presently paying 7% and to move over to c5.5% debt. The av $15m/yr saving will give the agency a margin for setbacks, she says.

The agency is pushing ahead with a billion dollar -plus third toll road, the Eastern, now half built. This highway is being scraped and blasted out of rugged hilly country south of SR-91 and will have an interchange with that 12-lane facility at its northern end. It will split halfway south making connections into the giant I-5 and into the existing Foothills road. This smaller toll road, the first built by TCA, ran below forecast for three years but is now running almost exactly to forecast traffic, Michele Sperl-Miller the TCA spokesy, points out. It is running 33k trips/day, 53% by ETC overall, 72% ETC in peak hours.

TCA is installing more informative fixed signage this fall on the approaches to the SJH and a variable message sign on the freeway approaches at either end — due for operation around year’s end. The electronic signs will enable it to pitch its quicker travel times directly to the thousands of drivers rolling along the freeways. Interesting to see how much they help. (Contact TCA 714 513 3444 www.tcagencies.com, Bob Rich JP Morgan 212 648 6545)

Background: The SJH is a 23km 6-lane 11-interchange road built through open coastal hills, runs parallel with the Pacific coast in the southern half of Orange Co Calif and links a number of coastal communties more directly northwards to the LA area mway network and also provides for more direct connections to major county shopping malls and the John Wayne Airport. At its southern end it takes off from the 10-lane I-5 in San Juan Capistrano providing an alternate route for drivers headed north into the larger LA area. At its northern end it is connected to the freeway network via an existing stub freeway to I-405 and CA-55. Though built for highway speed electronic tolling it also has attended cash toll booths at one main barrier plaza and ramp plazas. 42% of total tolls and 67% of peak hour tolls are taken by transponder, and the transponders are interoperable on the Foothill pike and the 91-Express Lanes. Lockheed Martin runs the tolling under contract to TCA. (see TR#5 July 96 p1, TR#10 Dec 96 p8)

“Low traffic” Local reporters have called the SJH toll road “unpopular” and reported on its “low” traffic numbers. Which makes sense given that the 1993 WSA forecasts were the official forecasts until recently. Point flows (AADT) are presently in the range 30k to 40k veh/day on the SJH which is not a lot by California standards. FHWA stats show that of 3845km of urban area motorway in Calif, 85% runs over 60k veh/day, which leaves 15% or 570km of mwy in the same volume league as the SJH currently. Outside Calif such volumes are quite respectable. In Texas for example which has a comparable mileage of urban mwy (3633km) only 32% runs over 60k veh/day and there are 2477km of urban mwy with point flows in the same ballpark as the SJH! New York and Florida look similar. Remember PR guys: you provide the yardstick and you get measured by it, sometimes beaten with it! (FHWA “Highway Statistics 1995” pV-57)