9 responses to findings and recommendations
F1
When the TCA completes the 91 Express Connector, its major necessary construction work will be finished.
Response: Disagree
Score: -1
The San Joaquin Hills Transportation Corridor Agency (SJHTCA) and the Foothill/Eastern Transportation Corridor Agency (F/ETCA) Boards of Directors review and adopt each Agency's Capital Improvement Plan (CIP) on an annual basis, including the Fiscal Year 2022 CIP that was reviewed and adopted by the Boards at their June 10, 2021, meeting. Within the adopted CIP, both the SJHTCA and F/ETCA have on-system projects identified for completion post-2035 that will require significant financial commitments and are well beyond the completion date for the 241/91 Express Connector. As the recommendation(...
R1
The Grand Jury recommends the TCA develop and implement a written plan to pay off all debt by 2040, the original maturity date of the initial debt offering. The written plan should be completed by December 31, 2021 with annual written updates on December 31 of each successive year. This allows for completion of the 91 Express Connector and other projects currently in planning. This will result in debt service savings of approximately $1 billion. (F1, F2)
Response: Will Not Implement
Score: -1
As noted in response to Findings 1 and 2, the Grand Jury's analysis did not take several aspects into consideration, including the fact that the Boards have recently taken proactive steps to develop a plan for the Agencies' financial futures through strategic planning discussions and adoption of debt management strategies, which include early bond payments and Capital Improvement Plans that consider needed future improvements. These planned improvements were considered within the original environmental documents. The Boards have been forward thinking and considering the potential construction ...
F2
By focusing on bond payoff, the TCA could retire its debt by 2037.
Response: Agree
Score: +1
This finding is more complex than presented by the Grand Jury. The Boards have taken proactive steps to develop a plan for the Agencies' financial futures that include early bond payments, targeting longest dated bond maturities. Like all other bond issuers, TCAs bonds cannot simply be paid early without a significant cost impact. Combined, the Agencies have over 10 bond series/issuances with multiple subseries and maturities that have to be considered in light of specific call dates (when the issuer can buy the bonds back prior to maturity) and other provisions. These provisions need to be co...
R2
The Grand Jury recommends the TCA eliminate DIFs once the debt is paid off. Until that time, the DIFs should be used exclusively for the payoff of debt. (F4)
Response: Will Not Implement
Score: -1
The Agencies' respective Joint Powers Agreements already authorize the elimination of DIFS once the bonds are retired; however, using DIFs exclusively for the payoff of debt ignores the potential for any contribution towards infrastructure investments and also ignores the potential impacts of economic downturns; therefore, this recommendation does not warrant implementation. R3. The Grand Jury recommends the TCA research the possibility of merging the two agencies and develop a written plan of action by December 31, 2021. Merging allows for the elimination of any cost redundancies present in t...
F3
Based on the TCA's current debt repayment plan, the total cost of the toll roads will amount to $28 billion by 2053.
Response: Disagree
Score: -1
The wording of this finding could be somewhat misleading as someone reading it without reading the body of the report could conclude that costs and projected revenues are "one in the same" which would be in error. The Grand Jury's report includes a section titled "What is the cost of the Toll Roads?" that includes opinions about different ways to calculate the cost and value of a major asset. The first method presented by the Grand Jury was the cost of construction. The Grand Jury noted that consistent with standard accounting practices, capital expenses include construction and material costs...
R3
The Grand Jury recommends the TCA research the possibility of merging the two agencies and develop a written plan of action by December 31, 2021. Merging allows for the elimination of any cost redundancies present in the two agencies. It also allows SJHTCA to pay off its debt at the same time as F/ETCA. (F6) 2020-2021 Orange County Grand Jury $28 Billion for a $2.8 Billion Road RESPONSES The following excerpts from the California Penal Code provide the requirements for public agencies to respond...
Response: Will Not Implement
Score: -1
Merging the two Agencies is a complicated financial endeavor with little reward and a loss of representation and decision-making authority. Each Agency issued nonrecourse toll revenue bonds to pay for the construction of The Toll Roads. Because those bonds are only secured by toll revenues and DIFs, the bond indentures do not allow either Agency to transfer its right to receive revenues to another agency while any of the Agency's bonds remain outstanding. In order to merge the Agencies, all outstanding bonds would need to be defeased 5
(i.e., replaced with new bonds as substitute income-produ...
F4
The TCA can cover its debt obligations without the use of Development Impact Fees.
Response: Agree
Score: +1
TCA constructed The Toll Roads in advance of collecting Development Impact Fees (DIFs) by issuing non-recourse toll revenue bonds that are pledged for repayment through the collection of tolls and DIFs. The Agencies' master indentures of trust pledge and assign "Pledged Funds" to the applicable indenture trustee, and each of the definitions of the term "Pledged Funds" includes DIFs. Accordingly, all of each Agency's outstanding bonds are secured by such fees. When developers build revenue generating projects, they have a responsibility to underwrite some of the cost of the infrastructure that ...
F5
Even when the TCA's debt is retired, the roads will likely not become toll-free.
Response: Agree
Score: +1
The assessment and decision on covering the cost of maintaining and improving South County's transportation infrastructure will be coincident to the repayment of all outstanding bonds and discussions between South Orange County policy makers and Caltrans. The needs and ability to cover these costs, as well as decisions regarding revenue, will be addressed through appropriate planning studies and negotiations for which the member cities and county's representatives will have a full seat at the table. However, based on 1) the increased costs associated with maintenance and rehabilitation of the ...
F6
Maintaining two agencies creates cost inefficiencies and extends the amount of time required by SJHTCA to pay off its debt.
Response: Disagree
Score: -1
The Agencies have been in place for nearly 30 years, and during this maturation process, efficiencies in administration and operations have been honed and are extremely effective. As the Grand Jury noted, a single staff manages both Agencies; procurement processes and contracts are shared; and joint board and committee meetings are employed to further promote efficiency and avoid rework. Merging the two distinct Agencies would be a complicated endeavor, both legally and financially, with little reward. Each Agency issued non-recourse toll revenue bonds to pay for the construction of The Toll R...
