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By Shawn Raymundo
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“The report contains outdated information and neglected to address the fact that TCA is responsible for the operations of the largest network of toll roads in the state serving nearly two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.
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. ”
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.”
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.”
Shawn Raymundo is the city editor for the San Clemente Times. He graduated from Arizona State University with a bachelor’s degree in Global Studies. Before joining Picket Fence Media, he worked as the government accountability reporter for the Pacific Daily News in the U.S. territory of Guam. Follow him on Twitter @ShawnzyTsunami and follow San Clemente Times @SCTimesNews.