IRVINE, Calif.--(EON: Enhanced Online News)--The Foothill/Eastern Transportation Corridor Agency (F/ETCA) Board of Directors today approved a plan to issue toll road refunding revenue bonds totaling $2.3 billion, which allows for the refinancing of current bond obligations. The Board also approved amendments to Cooperative Agreements between the F/ETCA and the California Department of Transportation (Caltrans). These actions will allow the F/ETCA to restructure its debt and lower annual debt payments.
“Subject to market conditions and interest rates, the plan is to sell the bonds before Thanksgiving and close the transaction in early December”
“Easing traffic congestion is our top priority. Our actions today will help us take the steps necessary to ensure that our finances will be sound and we can continue offering Southern California commuters a safe and reliable toll road choice that saves them valuable time,” said Lisa Bartlett, chairwoman of the F/ETCA and mayor pro tem for the City of Dana Point.
Neil Peterson, CEO of the Transportation Corridor Agencies, outlined three reasons for approving the Cooperative Agreement and refinancing during the meeting: 1) The refinancing will put the agencies' finances in order; 2) lowering annual debt payments will provide cash flow for important projects such as the SR241 to 91 Express Lanes direct connector; and 3) lower payments will also provide for pricing flexibility to allow the agency to partner with regional transportation organizations to improve mobility through increasing use of the toll road system.
“The more people who choose to drive on The Toll Roads, means less congestion on free alternatives,” said Peterson. “Less congestion improves mobility and traffic circulation for everybody in the region.
“The refinancing plan is similar to refinancing your home mortgage,” said Peterson. “The current market situation will allow us to lower our annual debt service growth rate, lower annual payments and reduce the maximum annual payment.”
A refinancing plan was approved in June, but it was not executed because negotiations on the ultimate language in the Cooperative Agreement was not finalized until this week. The Cooperative Agreement amendment that will allow the F/ETCA to collect tolls until 2053 is required to issue the refinance bonds. Since June, interest rates have risen to a level that would not allow the agency to improve its finances. In the past few weeks, interest rates have fallen. That coupled with some modifications to the original plan make refinancing economically prudent.
"Today's decision is good news for business. It is important to an efficient and effective movement of people and goods that California's transportation systems are fiscally sound. With a region's mobility comes a more predictable economic recovery," said Lucy Dunn, president and CEO of the Orange County Business Council.
One important aspect of TCA’s refinancing program is the use of short-term, fixed-rate Rate Reset Bonds (RRBs), which gives the Agency maximum flexibility as interest rates change. RRBs have been used by many other issuers, including the State of California, the University of California and recently Grand Parkway toll road in Texas. The refinancing will lower the annual debt growth rate to 3.6% - 3.75% instead of the current 4.4% rate on existing debt.
The Board’s actions come as ridership is increasing on the routes operated by the F/ETCA – State Routes 133, 241 and 261. For the first three months in the fiscal year that began in June, traffic has increased 2% compared to the similar period in 2012, and revenue is up 7.1%.
Ridership is beginning to grow after U.S. toll roads saw a significant decline in traffic because of the Great Recession.
“Subject to market conditions and interest rates, the plan is to sell the bonds before Thanksgiving and close the transaction in early December,” said Chief Financial Officer, Amy Potter.
The Foothill/Eastern Transportation Corridor Agency is a public agency governed by local elected officials responsible for the planning, financing, construction and operations of State Routes 133, 241 and 261 located in Orange County, California. The agency’s fiscal year 2014 budget, which began July 1, 2013, is $179.9 million.