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The State Route 125 South project will consist of 11.5 miles of new highway alignment in San Diego County, California, extending from SR 905 near the U.S.-Mexico border to SR 54 near Sweetwater Reservoir. SR 125 South has long been regarded as a "missing link" in the San Diego highway network. In addition to serving cross-border traffic fueled by the North American Free Trade Agreement (NAFTA), the road is needed to accommodate population and economic growth in the southern San Diego region. Further, SR 125 South is vital to reducing out-of-direction travel by providing an inland alternative to Interstates 5, 15, and 805, which serve central San Diego and points north and south.
SR 125 South has been part of the California freeway/expressway system since 1959. Although formally adopted into the state highway system by the California Transportation Commission in the early 1960s, the route adoption was rescinded by the Commission in 1976 due in part to lack of funding. In 1984, the San Diego Association of Governments (SANDAG), the regional MPO, added SR 125 to the Regional Transportation Plan as part of San Diego County's future freeway system, but funding issues continued to affect the development of the project.
In April 1988, San Diego began collecting a voter-approved one-half-cent sales tax dedicated to transportation, as part of a local transportation improvement plan called "TransNet," a supplemental funding plan for transportation improvements administered by SANDAG. The motivation behind the TransNet initiative was a decline in state and Federal funding for highway projects during the mid-1980s and a growing backlog of needs. While the northern sections of SR 125 were partially funded by the TransNet program, only a two-mile segment of SR 125 from SR 54 south to San Miguel Road was included in the TransNet Ordinance. The remaining 9.5-mile portion of SR 125 South, from San Miguel Road to SR 905 was not included in the original legislation, and funding for SR 125 South was not expected to be available until 2020 or later.
In fact, SANDAG has identified a $12 billion shortfall in transportation funding over the 20-year period from 1999 through 2020, assuming the TransNet sales tax will not be extended when it expires in 2008. A new local sales tax dedicated to transportation would require a two-thirds majority in a ballot initiative. Further, Federal funds were not likely to increase substantially, and raising the motor fuel tax or initiating new user fees to fund transportation projects would have been very difficult. Given these constraints on public funding, California looked to the private sector to finance SR 125 South through tolls, private equity, and credit enhancement options.
In order to attract private capital to highway projects and build roads faster, California passed enabling legislation (Assembly Bill 680) in 1989, which allowed the state to enter into partnerships with private firms for the development of privately-financed transportation projects. The SR 125 South project was one of the four demonstration projects approved under the AB 680 legislation. In 1991, the California Department of Transportation (Caltrans) signed a franchise agreement with California Transportation Ventures (CTV), a private consortium, to design and construct the new SR 125 South facility as a limited access toll road. CTV will operate and maintain the toll road for 35 years at which time control reverts back to Caltrans.
The SR 125 South project will initially be constructed as a four-lane, 11.5-mile limited access highway. The project includes a two-mile non-tolled segment funded by SANDAG, known as the San Miguel Connector, and a 9.5-mile privately-financed toll road. CTV is combining both project elements into one design-build arrangement to realize economies of scale. Project design and construction are expected to begin in 2002 with the opening of the toll road by 2005.
The San Miguel Connector, including the freeway-to-freeway interchange between Route 54 and SR 125, will be funded by a mix of Federal funds and local funds from the one-half-cent sales tax TransNet Program. This $130 million portion of the project, once constructed, will be operated and maintained by Caltrans.
The 9.5-mile SR 125 South toll facility, currently estimated to cost $ 390 million (excluding financing costs during construction), will be funded on a "project financing" basis with the private capital markets and sponsor equity providing approximately two-thirds of the funding for the project. In addition, TIFIA credit assistance currently in the form of a $94 million direct loan and a $33 million line of credit will close the funding gap and enhance the creditworthiness of the project. Toll revenues will be the primary source to repay senior debt and the TIFIA direct loan.
The SR 125 South project is unique among major new transportation projects in the country today in that it encompasses a number of significant innovations:
With the innovative blending of private equity investment, debt issuance through the private capital markets, and the support of TIFIA credit assistance, the SR 125 South project is being advanced without any state or Federal funding assistance. If Caltrans had funded the project using traditional methods of financing, the operation of the road segment would have been delayed to 2020 or later. The delay would increase congestion, slow economic development, and continue to constrain international trade. In addition, funding delays would have increased project costs over time due to inflation.
Given anticipated growth of the region, combined with the increased trade and traffic across the border, SR 125 South will provide congestion relief, reduced emissions, improved traffic flow, and access to border area employment centers. SR 125 South will open as a four-lane highway with the southernmost 9.5 miles operated as a toll road with electronic toll collection. The project calls for ultimate construction of a six to eight-lane highway plus possible future carpool lanes and/or transit facilities in the median.
As a result of innovative funding and institutional approaches, an important link in the nation's highway network will be built ahead of schedule, with beneficiaries ranging from San Diego residents to international trucking companies and their clients. The infusion of private funding, combined with TIFIA credit assistance, will help ensure the timely completion of SR 125 South, providing access vital to the economic success of the San Diego region.
