Grand jury report says TCA should focus on paying off its debt

Orange County’s toll road agency should focus on paying off its bonds and ending its operations – perhaps possible even more than a decade before its planned date in 2053 – the county’s grand jury said in a report published on Monday, June 29.

“The (Transportation Corridor Agencies) 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,” jurors said in their report.

The coronavirus pandemic limited the jurors from making multiple planned interviews and doing independent research. Nevertheless, they took a skeptical look at the TCA, which had drawn criticism from some legislators and residents over the agency’s spending and debt and planning for additional projects.

“If the TCA creates new projects requiring additional funding and additional bond debt extending the current termination date, Orange County residents and business developers will continue to pay these fees at the ever inflating rate seemingly in perpetuity,” jurors said in their report.

In response, TCA officials said the report is “replete with unsubstantiated opinion” and contains incomplete, inaccurate and outdated information.

“It is likely that a more collaborative approach by the grand jury could have benefited from current data and factual statements supported by evidence, instead of relying on sensationalized news stories and one-sided input,” the agency said a response.

Here is some of what the jurors said:

• They couldn’t conclusively prove complaints of fiscal mismanagement that people have lodged against the TCA.
• The agency has “gone into a ‘self-perpetuation’ mode,” jurors said. “The grand jury was repeatedly left with theimpression that the question, “What new project or network expansion can we find that will add a new goal for the agency?” was an underlying activity for TCA management and board members.”
• While most TCA board members earned less than $2,000 per year for their service, “a few were paid significantly more,” jurors said, according to their review of “relevant records.” Jurors didn’t name specific board members.
• Developers building homes in the area of the toll roads are paying a fee of up to $5,925 per single-family unit to the TCA, which could go up as high as $12,757 by the 2050 with inflation.
• The TCA was to repay its $3.26 billion in bonds by 2035, but has refinanced its debt and will likely again in the next two to four years possibly even further extending the life of the agency. “If carried to term, most homeowners mortgages result in a payment of around twice the amount of funds initially borrowed. In this case, the TCA will pay back more than 3.4 times the amount of money borrowed to close out the debt.”
• Because the 73 Toll Road doesn’t have many widening or extension projects planned, the TCA could pay off debt on that link by 2036, and make it free by 2032, jurors said.
• Because of the significant time and effort required to be fully informed of TCA operations, many of the agency’s activities often go unsupervised by its board members, jurors said.

Responding to the report, TCA officials said jurors found “no evidence of fiscal mismanagement.” Also, the board’s committee structure and decision making processes are typical of other similar agencies, and any board member can request and receive a briefing from TCA staff on various topics, officials said.

TCA officials said the agency’s “innovative approach to financing” enabled it to build an infrastructure that has a value of more than $12 billion, without subsidy from the federal or state government or sales tax revenue. It operated the 73, 133, 241 and 261 toll roads.

The TCA has always made its debt payments on time, and the refinancing was done to put the agency in a solid financial position, officials said.

Because of the agency’s strong finances, the TCA board has been considering strategies to reduce the agency’s debt and paying it off early, officials said. “The recent bond transactions executed by the agencies, reduced the overall debt payments by approximately $400 million without extending the maturity dates.”

Officials also said many affordable housing projects are exempt from paying the TCA’s developer fee.

The TCA is preparing a formal response to the report to be submitted to the grand jury no later than 90 days from Monday, officials said.

OCR-L-TCAGRANDJURY-0630

Source: Orange County Register