The Orange County Transportation Authority announced they would try to purchase the 91 Express Lanes. Six years after the Express Lanes opened, relieving congestion in the SR 91 corridor, continued growth has led to the return of serious congestion. Without more lane capacity, traffic will get far worse – today’s 240,000 cars per day will soar to 400,000 a day by 2015.
But Caltrans can’t add more regular lanes in the corridor without compensating the Express Lanes’ company, CPTC. That’s because when Caltrans awarded the franchise for the project, it agreed to a “non-compete” clause. You can’t persuade investors to buy toll road bonds if the state can build unlimited free competition. So back in 1990, when OCTA and Caltrans had no money to add lanes to the 91, it was a reasonable trade-off and commuters got new lanes right away, instead of decades later.
That was then, this is now. Riverside County officials are pursuing lawsuits, trying to void the non-compete provision. But that’s unlikely to work. The State Legislative Counsel has said so, and Gov. Gray Davis vetoed a recent bill that would have banned such provisions. So OCTA is now prepared to bite the bullet and buy out the Express Lanes. That isn’t the best solution though.
CPTC is making money and doesn’t want to sell, so OCTA would have to pay full market value. Standard business valuation techniques (based on future cash flows) suggest this would cost around $250-300 million. If OCTA did pay that huge sum, it would not add a single lane-mile of new capacity because new lanes would cost hundreds of millions more.
And it’s an illusion to think that “opening up” the Express Lanes to all drivers, by removing the tolls, would add capacity. According to a detailed analysis by Cal Poly researchers, the Express Lanes’ rush-hour throughput is about 1,700 cars per lane per hour-much higher than on the congested regular lanes. The only thing that removing tolls would do (besides eliminating an important revenue source) is spread the congestion. Drivers would no longer have the safety valve of an uncongested alternative on days when they absolutely have to get somewhere on time.
A less-bad approach would be for OCTA to buy out only the non-compete clause. They would negotiate a formula for compensating the company for revenue lost when new lanes are added to the 91.
But the best approach would be for OCTA and its Riverside counterpart, RCTC, to work out a win-win deal. It should be possible to craft a deal, under which CPTC extends the Express Lanes into Riverside County (to I-15 or perhaps Magnolia) and agrees to let RCTC and OCTA build additional free lanes in both Riverside and Orange County. The deal might even include a direct connection between the Express Lanes and the Eastern (241) Toll Road. To sweeten the pot even further, the original provision that car-pools can use the Express Lanes at no charge would be restored. Everyone would win from this deal:
- OCTA and Riverside officials get additional regular lanes
- Commuters get reduced congestion, thanks to more capacity
- All drivers get a longer zero-congestion alternative, doubling their available time savings
- Car-poolers get a much-improved deal
- Taxpayers save several hundred million dollars
Why would the private franchise-holder even consider such a deal? Because its potential revenue base would be doubled during the remaining 29 years of its franchise. What is already a profitable investment might be an even better one, especially if the company could finally make peace with Riverside County officials.
As Orange County and Riverside officials ponder their next steps, they should keep in mind several points. First, CPTC has a legally solid franchise with the state, including a non-compete clause, running through 2030. Second, there is great value to commuters in having an uncongested alternative available during rush hours and it’s crucial that this alternative remain in place. Third, buying out the Express Lanes would expend a huge sum of tax money, without easing traffic at all.
There are better ways to solve this problem. A win-win proposition like that sketched out above ought to be achievable, if our public officials are willing to think that boldly.
Robert W. Poole, Jr. is Director of Transportation Studies and founder of Reason Foundation.