OCTA 405 Widening Project Refi Expected to Save $158 Million
Friday, September 17, 2021
The Orange County Transportation Authority expects to lop off more than $158 million in interest by resetting its federal loan for the 405 Freeway widening project, savings its officials said will help maintain cost-effective tolls on the new express lanes and get the agency out of debt sooner.
The OCTA on Sept. 9, closed on the $629 million loan at a new, lower interest rate of 1.95%, a drop from the 2.91% rate of its original loan, spokeswoman Megan Abba said.
The agency has 35 years to pay off the amount, though the refinancing means it likely won’t take that long, said OCTA Chief Financial Officer Andy Oftelie.
The 16-mile widening of the 405 between Costa Mesa and Seal Beach, which began in 2018, is adding one regular lane in each direction between Euclid Street in Fountain Valley and the 605, and one express lane to each side of the freeway between the 73 and the 605.
The current carpool lanes will also become express lanes, for a total of two pay-to-use lanes in each direction. The tolls from those will be used to pay back the $629 million loan.
Other sources of funding for the total $1.9 billion project are Measure M, Orange County’s half-cent sales tax for transportation needs, the federal government, which is throwing in $45.6 million, and the state, which is contributing $89.7 million.
Varying toll rates are planned for the express lanes, based on how many people are in a vehicle and whether they are passing through the express lanes at peak or non-peak hours. For example, solo drivers will always pay, but for the first three-and-a-half years, vehicles with two occupants will be able to use the tolls lanes for free during non-peak times.
The agency plans to allow cars holding three or more people to ride the lanes without charge any time.
OCTA officials began exploring the possibility of resetting the interest rate on the loan in August 2020.
“We were extremely happy to have that low of an interest rate… four years ago,” said OCTA CEO Darrell Johnson.
But with changes to the financial markets during the pandemic “interest rates really, really lowered, so it gave us an opportunity of thinking, what else can we do to benefit Orange County again,” he said.
Johnson said OCTA is the first to ever reset this type of federal loan. The agency on Tuesday paid back the portion of the original loan that had already been drawn, and “we’ll be able to repay ourselves with a new loan,” Oftelie said.
OCTA officials also expect to save an additional $20 million by taking advantage of some short-term borrowing options while construction continues on the project.
While the savings won’t directly impact drivers with lower toll rates, Johnson said it will make it easier for the agency to maintain its proposed toll structure, including allowing carpools of three or more people to always drive for free.
“This makes it much, much easier for that to occur sort of forever in the long term, as it relates to our ability to not be forced or pressured to pay back a higher interest rate loan with more tolls,” he said.
The lower rate also means getting out of debt sooner, Johnson said, though the tolls won’t end after the loan is paid off. Eventually, the fees will go toward maintenance or more improvements to the 405 corridor.
“We really do see this as a congestion relief tool, using sort of the economics of supply and demand during certain hours of the day,” Johnson said of the idea behind the express lanes.
In August, construction on the project hit its halfway point, Johnson said, and it remains on schedule to be completed in 2023. Years of work has already consumed the heavily trafficked freeway, “and I think where we’re at now, it’s going well, and people are starting to see what it’s going to look like,” he said.
“It’s one thing to see a big hole in the ground if you’re a resident,” he said. “It’s something else to see a new bridge, a new sound wall, a new on-ramp or off-ramp.”
OCTA is a silver-level Leaders Circle partner of the Greater Irvine Chamber.
Category: transportation, Orange County, Greater Irvine Chamber, Leaders Circle, OCTA