An Orange County Grand Jury investigation into the Transportation Corridor Agencies found, among other things, that the toll road operators have continued to place themselves in future road planning efforts and projects likely outside of their legislative purview, despite having fulfilled much of their original mandates—to build toll roads.
The 55-page report
released Monday, June 29, outlines several key findings of the Grand Jury’s
investigation while laying out a laundry list of policy recommendations,
largely advocating for the agencies to withdraw from such projects and focus on
repaying their debt so it could dissolve as planned per state legislation.
“The TCA clearly has the
mission to operate the toll roads and pay off the bonds but beyond that, any
additional planning and activities could be considered out of its legislatively
authorized scope of activity since the toll roads are essentially complete,”
the report stated.
The Grand Jury noted that
the TCA’s duties and responsibilities are currently already under the purview
of the California Department of Transportation (Caltrans) and the Orange County
Transportation Authority (OCTA).
“An important fact here is
that the Grand Jury did not find anything the TCA does that is unique and can’t
be accomplished by OCTA and Caltrans other than the repayment of its
substantial debt,” the report said.
In response, the TCA
flatly rejected much of the findings, calling the report incomplete and lacking
information as the investigation was cut short because of the COVID-19
pandemic—a predicament the Grand Jury noted in the report’s preface.
“The report contains
outdated information and neglected to address the fact that TCA is responsible
for the operations of the largest network of toll roads in the state serving
nearly two million accountholders and processing more than 100,000,000 tolls
last year,” the agencies said in a press release.
The TCA goes on to state
that “all projects undertaken by TCA are well within TCA’s legal authority” and
that state law authorizes the agencies to “fund, plan, acquire and construct
major thoroughfares and bridges in Orange County.”
Entitled “The
Transportation Corridor Agencies – Are They Taking Their Toll on Orange
County?” the report came about after the Grand Jury received three citizen
complaints alleging that the TCA was mismanaging its funds, was conducting
unethical political practices and violating the 1986 legislation that
established the agencies.
According to the report,
the San Joaquin Hills agency (SJHTCA) completed construction of the SR-73 in
1998 and completed two widening projects in 2009 to add 5.7 lane miles in each
direction. Since then, “the SJHTCA has developed no additional plans whatsoever
for additional lane miles or additions to their network nor the need for
additional interchanges or other significant actions.”
“The Grand Jury was unable
to discover why this (Joint Power Authority) has not instituted plans to pay
off its debt and sunset its operations per its founding document recital,” the
report added.
Similarly, the Foothill
Eastern agency (F/ETCA) has just about completed its intended purpose of
constructing the SR-133, 241 and 261, with the exception of two outstanding
projects—completing the connection between the northern SR-241 and the SR-91,
and the connection of the 241 to Interstate 5.
The former is a $181.3
million project that is expected to be completed in Fiscal Year 2023. However,
the Grand Jury found that the project is expected to cost between $200 million
and $220 million, and likely completed in FY 2025 because of a delay in the
completion of an HOV lane connection between the 91 and Interstate 15.
The latter, as it stands,
is essentially moot, as the agency’s board of directors this past March
unanimously voted in favor of pursuing an untolled, arterial route from the 241
to the San Clemente city limit, abandoning contentious proposals to extend the
241 to the I-5 via San Clemente.
BOND OBLIGATIONS
Regarding its debt, the
TCA is currently slated to owe more than $11 billion, including interest,
according to the report. The F/ETCA is expected to complete its payments by
January 2053 and the SJHTCA is scheduled to complete payments by January 2050.
According to the report,
since 1993 and 1995, the TCA has twice refinanced the bonds that had been
floated to construct the highways and raised nearly $2.42 billion. Both times,
the report stated, were when the agencies were scheduled to start repaying the
principal amounts.
Citing the TCA’s financial
documents, the Grand Jury said that the agencies refinanced the bonds to take
advantage of lower interest rates, as well as remain solvent. That meant
delaying the payment, and in turn meant that the interest needed to be paid
increased to more than 3.4 times the borrowed amount.
“The Grand Jury noted the
claim that refinancing at lower interest rates may have extended the pay-off
date and supposedly saved millions of dollars in interest payments, but the
reality is the action drove up the overall cost of repaying the debts,”
according to the report.
“What this means is that
every time the debt of each (Joint Powers Authority) is restructured to a later
pay-off date, the TCA extends its life, which is in direct contradiction to the
founding principal cited when the agency was established in 1986,” the reported
added.
According to the Grand
Jury, the TCA is reportedly looking to refinance portions of its debt again in
2023 and 2025—when the TCA is required to begin making “substantive payments on
the debt principal.”
The TCA explained that
their refinancing efforts have been done to “strengthen the Agencies’ finances”
while the boards of directors have held talks regarding strategies to begin
paying the bonds early.
“The Boards have been considering strategies for
early payment and/or reducing the Agencies’ debt as a high priority,” the TCA
said. “The recent bond transactions executed by the Agencies, reduced the
overall debt payments by approximately $400 million without extending the
maturity dates. The Agencies have also approved debt management policies that
include best practices and guidance, as well as
ensuring the Agencies’ commitment to transparency. ”
COLLECTING FEES
Between 1986 and Fiscal
Year 2019, the TCA collected approximately $703.6 million in development impact
fees—payments from property owners of new developments built within the
associated cities and unincorporated areas that benefit from the toll roads—and
fee credits, according to the report.
Those fees, the report
noted, have consistently gone up since 1986, when the DIF was $1,305 for a
single-family residence within the SJHTCA area and $760 per unit for a
multi-family residence. This past fiscal year, the DIF was $5,740 or $4,448 per
multi-family unit.
Unless the state
legislature amends the current law governing the TCA’s charter, “the collection
of these fees only terminates when the TCA has fully repaid its bond debt and
ceases to exist,” the report explained.
And with the expected
construction of low-rent homes and apartments to address the county’s
homelessness problem, known as Permanent Supportive Housing, the TCA, the
report claims, is likely to benefit from development fees from those
projects—even if such tenants are unlikely to use the toll roads.
“It appears likely that
hundreds of thousands of PSH dollars appropriated to benefit less fortunate
citizens will be paid directly to the coffers of the TCA,” the Grand Jury said.
The TCA contended the
finding and argued that it would waive the fees for the supportive housing
projects.
“TCA’s DIF Program
supports the development of affordable housing by waiving fees for
developments, which qualify for exemptions from property taxes,” the TCA said.
“In addition, pursuant to the Agencies’ DIF Program, accessory dwelling units
of less than 750 square feet are not charged any fees.”
GOING ON THE ATTACK
The Grand Jury said it
also found that proponents of the TCA have launched personal attack campaigns
against politicians who have come out against the agencies, namely 73rd
District Assemblymember Bill Brough (R-Dana Point).
Brough, who this past
March lost his bid for reelection, finishing fourth in the Primary race,
introduced legislation last year that would have vastly restricted the TCA’s
authority and put a moratorium on constructing new roads and incurring
additional debt.
That measure, Assembly
Bill 1273, died in committee this January, after receiving considerable
opposition from several Orange County cities and business groups.
Since introducing the
measure, Brough has faced accusations of campaign finance misuse and sexual
misconduct—notably from OC Board Supervisor Lisa Bartlett who served on the
Dana Point City Council with Brough in 2011 when, she alleges, he made sexual
advances toward her.
Brough has vehemently
denied those claims and has argued that the allegations only surfaced as
retribution for his political positions on the Toll Roads.
Bartlett, who serves on
both the SJHTCA and F/ETCA, is among four other women who have made similar
allegations.
An investigation conducted
by the state Legislature’s Workplace Conduct Unit concluded in May that Brough
provided “political help” in exchange for sexual favors. He has since been
removed from his position on California Assembly committees.
“This bill has fostered
quite a bit of animosity between the bill’s author and other TCA opponents
against TCA proponents,” the Grand Jury report stated, regarding AB 1273. It
later added that “The Grand Jury learned that other TCA critics believe they have
been personally targeted suggesting there should be a Fair Political Practices
Commission investigation of TCA lobbying, financial dealings, and advocacy
activities.”
But claims of retaliation
cut both ways, the report notes, as advocates of the TCA said they too believe
they’ve come “unfairly under fire” from TCA opponents.
Rancho Santa Margarita
Councilmember and TCA Director Anthony Beall, the report said, made such a
claim in his address to the board on March 12, when he “blamed his recent
recall notice and FPPC investigation on TCA opponents.”
DISSENTING VIEWS
In a press release from
Brough’s office, the assemblymember said the report raises questions on whether
public funds are being spent responsibly and whether the TCA’s actions are
transparent.
“However, the TCA has a
history of refusing oversight and transparency. This is not the first report
that has been critical of TCA operations,” Brough said in the release, noting a
similar Grand Jury report from 2015.
“Extensive changes are
simply long overdue to instill greater accountability, transparency and
finality to an agency that Orange County taxpayers, who fund this operation,
deserve and expect.” Brough concluded in the release.
In its response, the TCA
continued to slam the Grand Jury for not being “fair, balanced and
independent.”
“Unfortunately, the report
does not appear to meet these expectations and, again, we are forced to assume
that is a result of the abbreviated nature of the investigation,” the TCA said,
before accusing the Grand Jury of taking the allegations raised by those
calling for the report “at face value.”
“From the noted editorial
comments throughout, the report paints a picture that the Grand Jury took at
face value the allegations of the three citizens who requested the
investigation and, in fact, took their side, implying that any ‘pro-TCA elected
source’ was not legitimate, honest and open,” the TCA said.
Per state law, the TCA has
90 days to file a response with the Orange County Superior Court regarding the
report.
The TCA said it is
preparing its formal response that will “address in greater detail the
overwhelming inaccuracies.”
SC [San Clemente] Times
Shawn Raymundo
June 29, 2020
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