In November 2007, a new toll road opened up in San Diego County. The South Bay Expressway (SBX), a 10-mile road running from SR-54 in Spring Valley through eastern Chula Vista down to SR-905 in Otay Mesa near the Mexican border, was built primarily with private money and will be operated under a 35-year lease agreement with the State of California. The road was made possible through a public-private partnership among the California Department of Transportation (Caltrans), San Diego Association of Governments (SANDAG), Federal Highways Administration, and South Bay Expressway. I had the opportunity to sit down with South Bay Expressway CEO Greg Hulsizer to discuss how the project came about and how it will benefit drivers, taxpayers, and the region in general.
Reason Foundation's Adam Summers: How long has this project been in the works?
South Bay Expressway CEO Greg Hulsizer: It's been a line on the map since 1959, so the project has been thought of for a long time, but there's never been any money to build it. And so, in 1989, when AB 680 was passed, it provided for four demonstration projects-public-private partnerships-this is one of the projects that was proposed. Even then, the franchise was signed in 1991, it took twelve more years to get through environmental approvals and permitting. [Macquarie Infrastructure Group and Macquarie Infrastructure Partners] financed the project in May of 2003, and it took us four years to build it and open it.
Summers: Can you explain how private financing has helped to advance the project?
Hulsizer: Without the public-private partnership, without the private-sector participation, this road would not be here for another 10 to 15 years at least. And it's one thing to think that there just wouldn't be a road here and it wouldn't be convenient for commuters, who just have to go the long way around, but, in addition to that, the economic development that this road will bring, that's creating jobs and economic vitality. It's immeasurable, it's just huge, and in this part of San Diego County that's growing so rapidly, it's sorely needed and it really could not wait another 10 to 15 years.
Summers: I've noticed a lot of new development, particularly in this area of Otay Ranch. Was the opening of this road a factor in some of those plans for development?
Hulsizer: Yes, absolutely. In fact, any future development is conditioned on this road getting opened because you simply can't build, you can't just add more people without the infrastructure. How can you have economic vitality if you can't provide transportation? In this case, using private-sector investment and a partnership with the public sector, we were able to accomplish something decades before it otherwise would have been accomplished.
Summers: How will this road benefit drivers-and taxpayers as well?
Hulsizer: Well, from a driver's perspective, they're going to save 20 minutes per trip-maybe even more depending on how crowded the freeway is. And that's huge. One of our customers told me that he works down in Otay Mesa and goes to school up at San Diego State in La Mesa two or three nights a week and he lives right here in Eastlake in eastern Chula Vista. The road is going to allow him to actually have dinner with his family on those nights instead of having to go directly to school. Twenty minutes might not sound like a lot, but for him it's huge. For other people, it's the ability to stay home and maybe have breakfast with their family before they leave in the morning, or for a businessperson to make a meeting on time, to make a sale, things like that. And [then there are] the benefits of less stress and [greater] reliability, knowing that you're going to have a reliable commute, that it really is only going to take you 10 minutes to go end to end, regardless of what else is happening anywhere else on the freeway, because we guarantee our customers they're going to have a reliable commute.
Summers: How will this toll road benefit the region in general?
Hulsizer: Well, for the south county, South Bay Expressway is the key to its future. Without South Bay Expressway, we wouldn't see this 800,000 square-foot regional shopping center over here, we wouldn't see, in a few years, an 80 square-block eastern [county] urban center of Class A office and mixed-use, residential, university park. We would not see a four-year university that's going to go in over here at the university site, and we wouldn't see potential for a Charger stadium. In Otay Mesa, if you look at that area today, it's truck yards, it's junkyards, it's warehouse distribution. In the next five to 20 years, [that area] is going to completely transform, and it will go from what it is today to probably low-rise commercial/industrial and then, over time, move into biotech and transform into a real job-producing and economically-growing and vital area.
Summers: Some critics of privately-operated toll roads have argued that only the rich will benefit. How do you respond to those arguments?
Hulsizer: The best response is to look at what really happens. And if you look at the toll roads that we've opened here in Southern California, what you'll see is that the users run the full range of the economic spectrum. That's because the value of time is different for everybody, and it's different day by day, quite honestly. And so, for example, if you're working, let's say you're working two jobs, to make ends meet and you absolutely, positively have to be there on time, then what better way than to have a reliable commute? Let's say that you have two working parents and you have child care responsibilities and they charge you $5 or $8 or $10 for every five minutes that you're late. Being able to know that you're going to get there on time, that's a good economic decision. So, we'll be no different here. We've spent the last four years out in this community talking with our customers and we will have customers from every part of the economic spectrum, I guarantee it.
Summers: Can the toll roads benefit even the people who do not use them?
Hulsizer: Certainly. [SANDAG is] saying that they expect we'll take 20-25 percent of the traffic off the 805 freeway. Think about that. That's one out of every four, one out of every five cars. So, for every car that uses South Bay Expressway instead of the 905 or the 805, that's one less car causing congestion [on those freeways]. So it's going to help the people-even those who don't use the toll road-and it's going to help overall mobility in the region. And that's why there's such a strong partnership here with the public sector, which has been so supportive of our efforts on this road, because we know that everybody's going to win, everybody's going to benefit from it.
Summers: So what about concerns that maybe a private company will raise tolls so high trying to increase their profits?
Hulsizer: We're like any other business. We have to deliver a service at a quality price, and so we're sensitive to that. And we think that the private sector can result in higher levels of service because we went out to make sure, absolutely, that our customers are satisfied with our service, with the benefits that they get. Otherwise, they won't pay to go through.
Summers: How are your prices determined and how often are they adjusted?
Hulsizer: Well, we've set our initial toll schedule based upon spending a lot of time with our customers, both formally and informally. But we've spent a lot of time just hanging out with our customers. We used to have a booth in front of the supermarket every weekend. We have a booth over here at the Town Center every weekend. And we'll do community town hall meetings. And so we listen to them and hear what they have to say. And so we've taken that into account as we've set our tolls. And then, obviously, from a business perspective, we have to look at how long we have the franchise and what our costs are, what it's going to take to operate it. We think we've reached a good opening toll level. At this point, I can't say when we might adjust our tolls the first time. We're going to open up, see how we do. The most important thing is making sure that we have good, satisfied customers.
Summers: Do you vary them throughout the day?
Hulsizer: No, we're opening with a very simple toll schedule based upon how far you travel. And, eventually, we could go to value pricing-that's certainly a possibility for us-but today we're opening with a very simple schedule.
Summers: How are drivers informed what the current tolls are?
Hulsizer: They can go on the Web site and we have a cool thing called Toll Wizard and you can click on where you start and where you stop and it tells you exactly what the toll is for that trip. And then also when [customers] get their transponders, in their welcome kit they have a toll schedule.
Summers: Does SBX have its own incident management program? Who maintains the roads?
Hulsizer: Yes, we pay for all the services on the road, so we pay for the [California] Highway Patrol to do law enforcement and emergency response, safety. We pay for CalTrans to do the routine maintenance and the incident response also. And then we have our own courtesy patrol. The courtesy patrol is there roving to make sure that if someone has a flat tire we change their tire for them, if they need gas we give them gas or we tow them to a safe area, and all this is managed out of our 24/7 traffic operation center in Otay Mesa. We have cameras the full length of the road and sensors in the road so we can see what's happening on the road, and if we notice something's happening then we can dispatch either Highway Patrol or CalTrans or a courtesy patrol to help out.
Summers: What are the greatest obstacles you have encountered in the SBX project-politically, financially, or otherwise?
Hulsizer: The project had tremendous environmental hurdles. It took 12 years to get through environmental-and that was everything from opposition to discovering new species in the middle of the environmental process. Once that was cleared, and we financed the job, then the last four years it's just been under construction. The best thing has been the support of the community, from the elected officials to the staffs of the [metropolitan planning organization] and CalTrans to the cities to the economic development organizations. This really is someplace where it's about as good as you can get from community support.
Summers: Is there anything else you would like people to know about South Bay Expressway?
Hulsizer: Just that we're so excited about opening up and serving our customers. I mentioned that we do roads as a retail operation. It's a service operation. This is a fantastic day; we've completed construction, we're ready to open the road, but we have 35 years to make and keep our customers delighted with our service. And the more that we can do that, the more we're going to raise up champions so we can do more of these types of projects, and that's what excites me. You know, the thing I love most about these projects is the interaction with the people. I love interacting with real, live customers and [seeing] what it's doing for their quality of life, so that's why I live, that's why I do this project. The construction is fantastic, but that's what really makes me excited.