Because of the weakened financial condition of Orange County’s largest tollway network, a new study recommends that its leadership postpone a road project and stop borrowing money until state authorities can review the operation.

The assessment released Wednesday by the nonprofit Pacific Research Institute in San Francisco is the second critical review in recent months of the Irvine-based Transportation Corridor Agencies, which oversees 51 miles of tollways, the biggest system of its type in the state.


In December, SNR Denton, a Los Angeles law firm that helped stop the TCA from building a route through San Onofre State Park, disclosed documents that revealed a host of issues plaguing the agency. They included sagging ridership and revenue as well as mounting debts and declining ratings for bonds sold to investors.

The institute’s report also coincides with plans by the California Debt and Investment Advisory Commission to assess the viability of a proposed refinancing of $2.4 billion in TCA bonds.


The new study agrees with many of Denton’s findings, but it goes one step further in recommending that the TCA halt the refinancing and shelve a proposed tollway project in southern Orange County until the agency’s finances are vetted.

Tollway officials said the issues raised by the new study are “old news regenerated by some of the same opposition groups” to TCA projects. They noted that the operation has a quarter million riders daily, earns about $200 million in annual revenue and has not missed a debt payment.


“We’ve had clean opinions on all our independent audits since the TCA was formed in 1986,” said Lori Olin, a spokesperson for the corridor agencies.

Rowena Itchon of the Pacific Research Institute said the organization has never opposed a TCA project until now. She described the tollway report as an independent effort under the institute’s California Studies Program.


Researchers looked at the economic health of the San Joaquin Hills and Foothill-Eastern corridors, two toll networks that were once touted as an innovative way to build public highways without taxpayer money.

Overall, their study concluded that construction of the corridors was based on overly optimistic ridership projections and plans that failed to provide a financial cushion during economic downturns or periods of slow growth.


“The operations of these toll roads presently appear to be unsustainable and may have been unworkable from their inception,” said researcher Donna Arduin, a former budget director for four states, including California during the Schwarzenegger administration. “Subsequent decisions by the TCA board members and managers have made matters worse.”

The report states that to make its debt payments, the TCA has raised tolls so much that its debt per mile is now far higher than the national average for toll roads. The Foothill-Eastern’s is $64 million, while the San Joaquin’s is $136 million. The national average is $17.1 million, the study notes.


Arduin warned that almost a quarter of the TCA’s total debt payments of more than $10 billion stem from capital appreciation bonds that delay principal and interest payments for years and can result in huge debt payments.

As such, tolls for both corridors are now among the highest in the country, researchers said, causing many price-sensitive motorists to avoid them in favor of free public highways.


Researchers contend that a refinancing would be “extremely risky” at this time and, like earlier borrowings, would rely heavily on costly capital appreciation bonds that might be difficult to pay off.

Olin said, however, that it is a good time to refinance because of today’s low interest rates. She added that board members are expected to consider the refinance plan by the end of June.

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dan.weikel@latimes.com