Congressman has financial stake in O.C. tollway

Rep. Gary Miller has an investment in Foothill/Eastern bonds. He says that's not why he supports the tollway extension.

Publication: Orange County Register

Morgan Cook
July 15, 2008

One of Congress' strongest supporters of the Foothill tollway's controversial southern extension steered taxpayer money to and lobbied for the project while holding a financial interest in a connected tollway.

Financial disclosures for Rep. Gary Miller, a land developer who represents Orange, San Bernardino and Los Angeles Counties, show he purchased $20,000 in Foothill/Eastern Transportation Corridor Agency bonds in 2000. The bonds pay investors a fixed rate and are repaid by drivers' tolls.

The Eastern and Foothill (SR-241) toll roads run from the 91 Freeway to Irvine and Rancho Santa Margarita. The Southern extension is the final 16-mile segment of SR-241 and would run from Rancho Santa Margarita to the I-5 near San Clemente, if it overcomes public and official objections.

In an interview, Miller acknowledged getting an $8 million appropriation for Foothill-South's construction in 2005. He has subsequently signed letters to the state Coastal Commission and the Commerce Secretary as part of a lobbying effort in support of the tollway agency's plan to build the road through a coastal park.

Though Miller has repeatedly signed financial disclosure forms listing the bonds. he expressed surprise when asked about that investment. Miller said his wife must have purchased the bonds and added that she is largely responsible for the family's investment decisions.

Miller said he's not backing the tollway because of any personal interest.

"It's a privately funded project with tremendous public benefits and that's the only way I'm looking at it," he said.

House rules bar lawmakers from appropriating money or using their official position to benefit projects and organizations in which they have even a small financial investment. New rules approved in 2006 require that lawmakers certify in writing that they have no financial interest in their earmarks. But those rules had not been written when Miller steered money toward the project in 2005.

In a series of e-mails, Miller's press secretary, Scott Toussaint, drew a distinction between the Foothill-South extension, which is yet to be funded or built, and Foothill/Eastern, the tollway in which the Millers are invested. Toussaint added that Miller is confident that he has not run afoul of House ethics rules.

Ethics experts at three non-profit, non-partisan government watchdog groups agreed that Miller probably did not violate the letter of the rules because his investment is small, indirect, and his financial gain is not assured.

Still, they said, his behavior does raise ethical questions.

"Any time you have a member of Congress who earmarks money for a project in which he has a financial interest, even if it's tangential, it does raise some questions," said. Bill Allison, a senior fellow at the Sunlight Foundation, which works for greater government transparency.

Jennifer Seaton, a spokesperson for the Transportation Corridor Agencies, said the Foothill-South project is a part of the Foothill/Eastern system and confirmed that tolls from the entire system will be used to repay the long-term construction debt of the Foothill/Eastern Agency. Extending the tollway to the south is expected to increase traffic on the Foothill/Eastern, Seaton

But Toussant said that doesn't amount to a conflict for Miller.

"If the Foothill South project, once constructed, encourages more commuters to ride on the 241 and therefore pay additional tolls as you have suggested, the Millers' investment will not be affected in any way, shape, or form. The fact remains that the Millers' investment of $20,000 will not yield any more or any less than the set 5.12 percent. The rate will stay static despite future projects that may be built within the toll road system," Toussaint said.

That's true, tollway officials and bond analysts agreed, as long as the agency can make its debt payments. But if costs continue to outpace the toll road's income – as they have done so far in 2008, according to agency records and Fitch Rating Service, a firm that tracks the bonds – the tollway could be forced to default on the bonds, curtailing interest payments and making the bonds difficult to sell.

When the tollway agency issued $1.6 billion in bonds in 1999, the Fitch bond rating agency noted that the "the Foothill/Eastern Corridor remains one of the most highly leveraged toll roads in the U.S. with $10.4 million of long-term debt per lane mile." At the time Fitch rated the bonds BBB, or "minimum investment grade," which is still the current rating, according to Fitch.

Michael McDermott, a Fitch analyst who helps rate the bonds, noted that a default is unlikely given the agency's current financial situation.

But critics weren't mollified by Miller's explanation.

"Ethics rules say members of Congress are supposed to avoid even the appearance of conflict of interest because you want the public to think you're working for them and not for your own interests," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, another non-partisan watchdog group.

The $875 million Foothill South extension is in trouble because the California Coastal Commission has denied the tollway's proposed alignment, which would have cut through San Onofre State Beach park, home of threatened and endangered species, and pass within a few hundred feet of a popular campground.

Miller and other lawmakers signed a letter to the Coastal Commission on February 2, asking the agency to look favorably on the project. But the commission rejected the project four days later on an 8-2 vote, after a contentious, 14-hour meeting.

Since then, Miller has joined a campaign to reverse the Coastal Commission's decision. In a letter signed by Miller and other lawmakers on May 28, they asked Secretary of Commerce Carlos Gutierrez, to overturn the state commission's decision.

Mark Rauscher, assistant environmental director at Surfrider Foundation, an organization that has opposed Foothill-South's construction on environmental grounds, called Miller's investment, and explanation, "questionable."

"The Foothill Eastern will be connected to the Foothill-South physically, so saying his investment in (Foothill Eastern) has nothing to do with his support for Foothill-South sounds a little disingenuous," Rauscher said.