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Agency Cites Costly Delays for Toll Road : Court: Judge is asked to consider expenses if construction is further delayed. Environmentalists opposed to the highway say that the cost shouldn't be a factor.


COSTA MESA — As the battle over the San Joaquin Hills toll road shifts to a paneled courtroom in Santa Ana, a new factor will come into play: Each month's delay in constructing the San Joaquin Hills toll road costs about $7.5 million.

U.S. District Judge Linda McLaughlin temporarily blocked construction of the toll road last Monday pending a Sept. 7 hearing on a preliminary injunction.

And in briefs filed last week, the San Joaquin Hills Transportation Corridor Agency asked a court to consider the economic impact of further delay as she weighs future rulings on the $1.1-billion project.

For their part, attorneys for the environmental groups say costs shouldn't be a legal issue at all and they are charging the corridor agency with resorting to scare tactics.

Nonsense, argues the corridor agency. Money was spent in reliance on clearances won from regulatory agencies, so costs due to delays now should weigh heavily in any ruling.

Tollway officials have also said that environmental groups are hoping that lengthy legal delays could make the project prohibitively expensive.

About $4.1 million of the $7.5 million in estimated monthly losses is from toll revenue that would never be collected unless the contractor, California Corridor Constructors, can recover lost time and finish the project as scheduled in 1997. And the contractor is entitled to charge more for extraordinary efforts.

Moreover, $2.85 million a month--$95,000 a day--represents interest paid to investors who purchased $1.1 billion in construction bonds earlier this year to finance the 17.5-mile toll road, portions of which were graded by developers before they transferred the land to the corridor agency.

An additional $360,400 per month may have to be paid to contractors and consultants to compensate them for the delay, the briefs filed by corridor agency said.

"They're raising (the money issue) now to put the courts in a very difficult position," said Joel R. Reynolds, attorney for the Natural Resources Defense Council. "They know that people are sensitive to economic issues. And once construction starts, the damage is done, and then it's harder to convince anyone to stop it. . . . But the truth is, (tollway officials) brought these costs on themselves."

In fact, some officials at the Orange County Transportation Authority, which doesn't control the San Joaquin Hills project, have questioned the corridor agency's decision to incur such heavy costs before the federal lawsuit challenging the adequacy of the project's environmental review is resolved.

"I'm glad it's not me," said OCTA's chief planner, Lisa Mills, who is also a Santa Ana City Council member. "I would not have recommended that (OCTA) do it."

In response, tollway officials said they decided to sell bonds and order the start of construction because they had all necessary regulatory approvals, and they wanted to jump on the lowest interest rates in 20 years, as well as bargain-basement construction fees.

"There's a point in time when, if you wait long enough, these projects die," said Wally Kreutzen, the corridor agency's chief financial officer.

Even though it was Kreutzen's agency that asked the judge to consider the daily costs of delay in making any ruling, Kreutzen refused comment on how long the agency can cover losses if the court requires additional environmental assessments sought by anti-toll-road activists.

Kreutzen said various elements of the project's financial plan--all of which was made public and sent to investors before bonds were sold, act as a cushion against costly delays. These include a $100-million reserve fund, as well as the agency's right to redeem bonds early to avoid future interest payments.

In fact, the NRDC's Reynolds has said that those protections should bar the corridor agency from raising the issue of costs due to delay. After all, he has argued, the agency itself forewarned investors who purchased construction bonds of the risks involved.

"That's for the court to decide," Kreutzen said. "I'm not going to argue this case with Mr. Reynolds in the press."

If environmentalists prevail at that hearing, road construction--previously scheduled to begin Aug. 21--could be delayed for months pending a full trial on the merits of the environmentalists' case.

However, the judge instructed corridor agency attorneys to prepare a plan that would allow road work in areas where it would not do irreparable harm to the ecosystem. Indeed, some of the right of way was graded by developers before they transferred the property to the corridor agency.

Environmentalists oppose an order that would permit some construction to go ahead, fearing that spending millions on such work would increase pressure on the court to allow it to be completed. The road would connect the terminus of the Corona del Mar Freeway near John Wayne Airport with Interstate 5 in San Juan Capistrano and motorists would pay a $2 toll to drive from one end to the other.

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