San Diego metro association hopes buy of 125/SBX tollroad will avert need for upgrade of I-805

December 4, 2011
By Peter Samuel

SANDAG (San Diego Association of Government) is finalizing a deal to buy the bankrupt South Bay Expressway (CA125) with a strategy of lowering tolls to attract more traffic away from the crowded 805 freeway that runs parallel. Money which would otherwise be used for adding a lane to the I-805 would provide the major chunk of money needed by SANDAG for its purchase from creditors at approximately 40% of cost.

They aim to close on the deal by Dec 31.

Toll revenues have been running at only $22m/year - covering operating costs but providing trivial surplus to apply to debt service.

SANDAG would settle with SBX creditors led by Spanish bank BBVA for $247.5m while the US Government backed TIFIA loan would stay on at the negotiated lower sum of $92m. These are writedowns of the original loans of $340m and $170m.

After filing for bankruptcy March 2010 the SBX company emerged from Chapter 11 bankruptcy April 15 2011 under the control of creditors led by two European banks BBVA and DEPFA.

Swap and loan

The financing of the SANDAG buy is a project swap and loan from TransNet, the transportation funding scheme based on a half-cent sales tax revenues that is the main source of local money for transit and highway initiatives in the San Diego metro area.  Lower tolls proposed on the 125 tollroad should - it is hoped -  attract sufficient traffic off the 805 to improve its level of service to E from F, and defer the need for widening with HOV Lanes. That widening was estimated to cost $192m (about $20m has already been spent) and this project would be "swapped" with the tollroad buy. Crediting that project would reduce the size of the loan needed by SANDAG for financing to $55.5m.

The proposal is to reduce tolls by about 50%. Some of the SANDAG board were worried about the strength of the forecast of extra traffic from the toll reduction. Stantec, the traffic consultant for SANDAG is modeling a 25% toll reduction and a phase-in of the lower tolls. The transition and adjustment of traffic to the new rates may be a year.

Present tolls for a car are $4.00 cash or creditcard and $3.85 with a FasTrak transponder for the full 10 miles - 40c or 38.5c/mile. For a 5-axle tractor-trailer the full length toll is twice the car toll so 80c or 77c/mile.

Under the agreement reached SBX would continue staffing the tollroad on cost-only basis for a six month transition period. During that time the staff would be overseen by SANDAG staff.

SANAG has rejected an SBX offer to sell it adjacent land it holds for $3m, saying it is worth less than $2m at current land values. A SANDAG staff report says some of the parcels are more likely to be needed - apparently for extra interchanges - than others, so negotiations seem likely.

SANDAG staff, Caltrans and consultant HNTB reported the 125/SBX tollroad has been properly maintained and operated by the franchise company in general - except for allowing birds to roost in the roof of the customer service center!

Toll system hit

HNTB had critical comments on the toll system:

"HNTB found that while the SR 125 toll collection system was constrained by a poor initial system implementation with the potential to affect revenue, customer service and operations; SBX has implemented 'work-arounds' to address the major system performance issues and continues to implement new functionality to address lingering system issues."

A summary of inadequacies found by HNTB:

- limited rights to core elements of the software making changes and upgrades problematic

- shortcomings of a trip based system matching entries and exits as compared to the more frequently used multiple point toll arrangement

- understanding of the system limited several key IT people

- poor performance of optical character recognition (OCR) at speed, need for new cameras and OCR system

- defective audit and financial reporting system, corrections being labor intensive

- poorly set up and secured automatic coin machines

- an inefficient customer service telephone system

- lack of integration of traffic systems with Caltrans

The SBX toll system was provided by the Long Island NY based toll systems company InTranS that subsequently disappeared in an acquisition by the large French systems group CS.

HISTORY: The CA125 tollroad known as the South Bay Expressway which opened November 19 2007 was built under a 35 year toll concession from the state at a cost to investors of about $800m.  The concession goes to 2042.

The company filed for Chapter 11 bankruptcy March 22 2010, 28 months after opening.

Traffic was below forecast from the start, and then as the housing bubble burst in 2008 was "eviscerated" in the words of their bankruptcy petition. The 2x2 lane expressway is located on the far eastern fringe of the San Diego metro area - in prime foreclosure country.

Compounding its problems the new Otay Mesa border crossing to Mexico at the southern end of the 125 has failed to develop as previously expected.  Traffic at the border declined from over 600k in 2005 to 400k now, while it had been projected to grow strongly.

Litigation

There has been expensive litigation against SBX by its construction contractor Otay River Constructors (ORC), and also InTranS the toll system provider. The claims number 120 and totaled $745m in value. SBX in turn filed claims against ORC and InTransS.

SBX reported lawyers fees alone of $40m.

Traffic

Traffic forecasts of 60k/day for 2009 were the basis for the financing of the project. In fact they were 23k/day.

Toll revenue was $22m in 2008 versus projections of $31m.

2009 saw no growth in revenue compared to the forecast growth of 36% to $42m.

CONTEXT: The San Diego area has three major north-south highways running parallel down toward the Mexican border:

- I-5 by the coast of San Diego Bay,

- I-805 two to three miles inland most of the way south (they merge near the border)

- the CA125 or SBX tollroad another four miles east.

Planning for the road began in 1998 but fierce battles with environmental groups and others delayed the start of construction until May 2003.

As part of a settlement with opposition groups the company did $38m of environmental good works including habitat awareness and training programs, plantings and insect propagation for endangered butterflies and birds (cactus wrens), an athletic complex for a Little League sports team, park improvements and extensive hiking and horse trails in the region.

The road is built through rolling country for the most part but at its southern end there is a large bridge over the Otay River gorge, a segmental box girder structure 3/4 mile, 1.2km long.

The projects was developed by a project company California Transportation Ventures in which Parsons Brinckerhoff initially had the major share. CTV was bought before construction began by the Australian Macquarie group in 2002, which had written off all its equity in the project before the 2010 bankruptcy.

The SBX got the very first loan announced for funding under the US Government's TIFIA program (TIFIA is the 1998 Transportation Infrastructure Finance  and Innovation Act) administered by USDOT.

TOLLROADSnews 2011-12-04

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