Conflict has surrounded the South Bay Expressway, the southern extension of State Route 125, since its inception. Prior to groundbreaking in 2003, the privately held four-lane toll road was opposed by community and environmental groups. Since opening, riders have complained about toll hikes, unwarranted notices of toll evasion, and problems with automated toll-collection machines. Caltrans had predicted that 162,000 vehicles a day would travel this road by 2010. But the South Bay Expressway looks like a ghost road. Where are the shoppers, commuters, and truck drivers that so desperately needed this road?
The South Bay Expressway traverses nine and a half miles of eastern Chula Vista, linking SR 125, northwest of the Sweetwater Reservoir, to State Route 905, which runs south to the Otay Mesa border crossing. The ten-minute trip costs a car, light truck, or motorcycle $4.50. A three- or four-axle vehicle pays double that, and a five-axle vehicle pays triple.
The expressway’s route and toll rates were common threads among comments I heard when I recently spoke with 12 people in an EastLake shopping center. Some called it the road to nowhere. “It doesn’t go anywhere I need to go,” said John Markham. “I’d have to travel out of my way to get to it.” Others said the cost was too much when you could get to the same place on surface streets. Alex Lloyd said simply, “It should be free.” One woman, who declined to give her name, said she was canceling her prepaid FasTrak account on principle. She said that when she signed up, South Bay Expressway told her there would be no minimum-use charge, and now there is one.
Truck traffic is often the financial backbone of a toll road, but on the South Bay Expressway freight trucks are a rare sight. Jaime Vasquez, secretary-treasurer of Teamsters Local 542 and a Chula Vista resident, says, “The cost of fuel impacted freight cost tremendously.” Instead of adding to expenses by paying a toll, “Companies are going to choose the regular highway to send their merchandise.” Besides, says Vasquez, SR 125, to which the expressway connects, “gets you over to El Cajon, basically, but most of the shipping heads over to L.A. Those trucks headed for L.A. are going to use the 5 and the 805.”
Easing truck traffic on I-805 was one of the biggest promises made, says Harriet Taylor, a founding member of Preserve South Bay, a group that fought the toll road. “But that has just not happened.” Taylor notes that the expressway “doesn’t really take people who live in Chula Vista’s bedroom communities to Sorrento Valley, Del Mar, Mission Valley — it just doesn’t take them where the major businesses are.” Another promise was that the toll road would relieve surface street congestion, and Taylor says initially it did in Bonita, but since the economic downturn, surface traffic has increased again.
The toll road is operated by an Australian outfit, Macquarie Infrastructure Group. Macquarie Infrastructure, which is managed by Macquarie Bank, bought the 35-year toll franchise in 2003. In 2006, a New York Times article, titled “Turning Asphalt to Gold,” called Macquarie Bank “the envy of Wall Street.” According to the story, Macquarie acquires “giant assets by borrowing other people’s money, then packages the assets into funds, which are sold to investors through public offerings.… Along the way, it makes a killing on fees.”
But the “Macquarie model” came under scrutiny in 2007, when Fortune magazine published an article titled “Would You Buy a Bridge From This Man?” In the story, James Chanos, president of Kynikos Association and famous as an early critic of Enron, called the Macquarie model a Ponzi scheme. Matthew Davison, a Morgan Stanley analyst, pointed out that Macquarie has an “ ‘aggressive structuring’ of the debt at the asset level,” which the article said was “akin to a mortgage with a low teaser rate.” Last year, a Time magazine story, “End of the Toll Road?”, predicted the future for Macquarie Infrastructure Group: “But with asset prices falling and easy debt a thing of the past, some believe the Macquarie model is in for a shakeup.”
And Macquarie Infrastructure has been shaken up. The company’s end-of-the-year report, given in June 2009, stated that toll-road revenue and traffic have been down across Macquarie’s portfolio. (On the South Bay Expressway, between July and September, traffic was down 13.6 percent.) Macquarie’s year-end report acknowledged that the company has a $30 billion asset debt. On October 30, Macquarie’s chief executive announced that in order to “create value for security holders,” the company was proposing to stockholders a split in the toll-road portfolio, calling one group of toll roads “mature” and the other group “active.” The “active,” or poorly performing, portfolio includes the South Bay Expressway. Online publication Tollroadnews on August 19 said that the South Bay Expressway “is totally written off now — A$0.00 [Australian dollars].” But even back on April 18, an Australian stock analyst told the Sydney Morning Herald, “We basically view [the South Bay Expressway] as worthless.”
When asked by email in mid-October if Macquarie was considering unloading any of its U.S. toll roads, Jane Rotsey, media manager for Macquarie Infrastructure Group, replied: “MIG continually looks to create value for security holders through a number of different mechanisms, which in the past has included asset sales. Should an offer be made for a MIG asset it is incumbent on the directors to consider whether it is in the best interests of security holders.”
Greg Hulsizer, chief executive of South Bay Expressway, said in an interview in early October that the expressway has a 35-year franchise and that his company is not going anywhere. Hulsizer said that, like every business, the expressway has been affected by the recession. Although traffic is down from 30,000 cars per day last year to 25,000 to 28,000 this year (22,500 in July–September), Hulsizer is confident that when the economy turns around, the expressway will turn around as well. He was enthusiastic about a new 80-block development in Chula Vista, the Eastern Urban Center, which he expects to contribute to toll-road business. When asked about Macquarie Infrastructure’s financial situation, Hulsizer said he couldn’t comment on that.