Financing Foothill South: The Free Market in Action
May 05, 2004 06:12PM
By Shelly Cormack
by Rick Anderson
As a San Clemente small businessman, I know the power of the free-market and Orange County’s toll roads are based on the simple business premise of weighing the cost of the toll against the value of your time sitting in traffic. As traffic congestion gets worse here in San Clemente, the prospect of the Foothill-South Toll Road will become more and more desirable.
The Transportation Corridor Agencies’ (TCA) Toll Roads currently provide 51 miles of traffic relief in South Orange County and carry 250,000 trips per day. These roads were designed to be freeways, but when both state and federal funding dried up, the options were “toll roads or no roads.”
In order to improve traffic flow and prevent gridlock on the I-5 freeway and the city streets in South Orange County, local elected officials formed the Transportation Corridor Agencies – a public joint powers authority – in order to issue bonds to build the Toll Roads. Once the bonds are paid off, the tolls will be lifted and the roads will become freeways.
The final leg of the toll road system is Foothill-South, which will connect the 241 Toll Road to the I-5 freeway. Like the rest of the toll road system, Foothill-South will be financed primarily through the sale of bonds in the municipal bond market. Other major public infrastructure projects such as school construction or water projects are often paid for through bonds, however those types of bonds are repaid through future tax dollars. In contrast, the bonds used to build and operate the Toll Roads are paid back primarily through toll revenue.
While the municipal bond market will provide most of the funding for Foothill-South, TCA will have other economic options to enhance the financing of this project. In Congress, the House Transportation Committee has approved $10 million in federal funding for Foothill-South. This is money that has already been earmarked for transportation and if these dollars aren’t used for Foothill-South, they’ll be used for transportation projects in other parts of the country.
Additionally, TCA has set aside approximately $80 million to go toward Foothill-South. Each year this investment income grows and will be used as a down payment that is expected to cover more than 10% of the total cost of the project.
Right now the two toll road agencies that make up TCA and oversee Orange County’s toll roads are studying the financial feasibility of consolidating and forming a single agency called the Transportation Corridor System (TCS). Analysis has shown that consolidation would strengthen the ability to finance Foothill-South. However, if the agencies stay separate, the Foothill-Eastern Transportation Corridor Agency will continue the planning for the construction and operation of Foothill-South.
As we consider the cost of Foothill-South, it is important to consider the cost of the alternatives, in economic terms as well as in terms of quality of life. Widening the I-5 freeway would result in the destruction of as many as 800 homes and businesses in San Clemente. Widening our city streets would help with the overflow of the worsening freeway traffic, but it would bring additional congestion to our neighborhoods. Of course, considering the state’s economic situation, it seems highly unlikely that either of these alternatives would be funded, even if they were chosen.
Then there is always the “do nothing” alternative, which is also a choice. Ignoring our traffic problem will do nothing to alleviate the congestion that gets worse every year.
Foothill-South is the best opportunity San Clemente has to improve the growing traffic congestion problem. It will complete the toll road system and finally give San Clemente residents and commuters a choice. b