OCTA 91 Express Lanes Bonds Get 2 A's from S&P

In an historic move, Standard & Poor’s upgraded the Orange County Transportation Agency SR91 Express Lanes Toll Revenue Bonds to “AA-”, making it one the highest rated managed lanes projects in the world.  The bonds were issued last year to refund bonds that were issued in 2003 when OCTA acquired the SR91 Express Lanes project from the private consortium that developed the project under California’s prior P3 law.

The 91 Express Lanes is a four-lane, 10-mile toll road built in the median of California’s Riverside Freeway, State Route 91, between the Orange/Riverside County line and the Costa Mesa Freeway, SR 55. “It was the first privately financed toll road built in the U.S. in more than 50 years, the world's first fully automated toll facility, and the first application of value pricing in the U.S.,” according to the S&P report.

S&P analysts cited an expectation that the region's fundamental economic and demographic trends will continue to support growth for the upgrade, and that traffic and revenue performance will meet or exceed projected levels.  Annual traffic volume in the corridor grew to 12.1 million vehicles in fiscal 2013 from 5.5 million in 1996, according to the S&P report.  The availability of high-paying jobs in Orange County combined with the more reasonably priced homes available in Riverside and San Bernardino counties has kept traffic to the managed-lane toll road robust.

Riverside County Transportation Commission Closes on Billion Dollar Finance Plan for the SR-91 Project

Commuters using the heavily congested SR-91 corridor between Riverside and Orange County in Southern California can enjoy an early July 4th celebration—on July 3, 2013, the Riverside County Transportation Commission closed on a billion dollars of financing for the SR-91 project which will provide needed relief of congestion in the corridor when the project is completed in May of 2017.  RCTC achieved financial close on the project less than 60 days after awarding the design-build contract for the project to a joint venture of Atkinson/Walsh.  The SR-91 corridor improvement project includes an eight-mile extension of the highly successful SR-91 Express Lanes operated by the Orange County Transportation Authority, the first all-electronic toll collection facility in the United States.  The two counties have entered into a cooperative agreement to coordinate the development and operation of the two express lanes projects.  The project also involves adding two new general purpose lanes in Riverside County, one in each direction.

The finance plan optimizes an innovative combination of toll road revenue bonds, sales tax revenue bonds, a subordinate TIFIA loan, as well as the use of sales taxes on a pay-go basis during the construction period.  The toll road revenue bonds are sold in two series—the Series A bonds are current interest bonds in the principal amount of $123,825,000 maturing June 1, 2048, the Series B bonds are capital appreciation bonds in the initial outstanding amount of $52,829,601.60 maturing June 1, 2043.  Both series received investment grade ratings from Fitch and S&P.  The sales tax revenue bonds are made up of serial bonds with maturities ranging from 2018 to 2033 and a term bond maturing June 1, 2039; Fitch, S&P and Moody’s assigned ratings in the “AA” category to the sales tax revenue bonds.
The TIFIA loan is in the initial principal amount of $421,054,409, and, despite the run up in US Treasury bond rates in recent weeks, was assigned an interest rate of 3.47% and matures June 1, 2051 or the last payment date occurring no later than 35 years after the Substantial Completion Date, whichever date is earlier.  The TIFIA loan is subordinate in lien priority to the senior toll road revenue bonds except if a bankruptcy related event occurs in which case the TIFIA loan “springs” to parity with the senior bonds.

Lead investment bankers for the toll road revenue bonds and the sales tax revenue bonds are Goldman and BofA Merrill Lynch; Nossaman LLP acts as special counsel to RCTC in connection with the design/build contract and negotiation and closing of the TIFIA loan.