Orange County toll roads: Slower rate hikes drives record usage

I’m not sure if it’s a sign of local economic vitality — or just a symbol of how horrible the region’s traffic has become — but there’s record-setting traffic on Orange County’s southern toll roads.

Use of Orange County’s Foothill/Eastern (133/241/261) and San Joaquin Hills (73) tollways has finally exceeded pre-recession peaks thanks to an economic recovery that has jammed competing freeways with commuters. As a result, rating agencies that follow the twin tollroads ability to repay what’s now $4.6 billion in construction-related debts have recently upgraded the creditworthiness of both roadways.

My trusty spreadsheet suggests one bit of secret sauce to the turnaround is old-fashioned business sense: toll hikes have been moderated. Average tolls paid per trip rose 2.6 percent annually in the past three years — half the rate of increase seen on average in the previous 10 years.

Transportation Corridors Agencies’ figures show a record 101.3 million trips were taken on the two tollways in the fiscal year ended in June, up 2.4 percent in a year. It’s the fifth consecutive year-over-year transaction increase. Such a lengthy upswing last happened in 2003-2007.

During this most recent five-year traffic surge, combined toll revenues rose 54 percent thanks to a 26 percent increase in trips taken. That’s a sharp reversal from the recession-scarred years of 2009-2013 when revenues rose only 9.5 percent as tollroad use fell 15 percent.

These tolls roads — governed by a board Orange County elected officials — have been financially struggling almost since they opened to modest consumer acceptance: the Foothill/Eastern debuted in 1993 and the San Joaquin Hills in 1996.

One bond refinancing of construction debts in 1997 didn’t fix the cash-flow challenges. A patchwork 2005 bailout of the San Joaquin Hills by the Foothill/Eastern was just a temporary financial Band-Aid.

Next was the recession. Toll road leadership felt forced to raise tolls to repay bondholders, but those pricier rates pushed drivers to freeways and further shook the twin roads’ financial underpinnings.

But by 2014, new refinancings seem to have put the tollways on a firmer monetary foundation and halted the need for large toll hikes to pay off debts.

In recent weeks, S&P Global Ratings upgraded the San Joaquin Hills bonds up two notches to “A-minus” and two Foothill/Eastern bond issues to “A-minus” and “BBB-plus,” respectively. Let’s be honest, these are not top-shelf ratings but nor is it junk-bond status.

Still, the roads face a host of challenges from broader economic fluctuations to possible transportation break-throughs — say, driverless cars — that might mitigate the traffic congestion that motivates the consumer to pay tolls.

And drivers, these tolls won’t go away anytime soon as you’ll pay until all bonds are paid off. If the current financial scenario works, tolls will end on the San Joaquin Hills in 2050 and Foothill/Eastern in 2053.

That’s only roughly two decades later than originally planned.