Moody's sees US toller prospects negative - traffic flat, costs under control

[cpzilliacus]

TOLLROADSnews: Moody's sees US toller prospects negative - traffic flat, costs under control, but debt growing strongly, big toll rate hikes needed

Moody's Investor Services say the immediate outlook for the 42 US toll operations they review is negative. They see no overall traffic growth due to the weak economy and growing risks from debt "leverage." Medium and longer term they see a good future for tolling due to the lack of tax funding for free roads.

"We expect that rising toll rates and a sluggish economic recovery will continue to keep traffic volumes somewhat flat. Rising fuel prices also could constrain future traffic growth, particularly if gas at the pumps rises above $4 a gallon for (a) protracted period."

[wxfree]

I haven't been keeping up with roadbuilding in other states, but here in Texas there's been a shift from building toll roads in urban areas with heavy congestion toward building bypasses and spurs through and into the wilderness.  Even the urban Dallas North Tollway is planned to spur out into cow pastures.

This is at a time when younger people seem to want more urban lifestyles with less driving.  I continue to wonder about how much driving will decrease.  We haven't even built big cities to accommodate a non-driving lifestyle, but almost all the younger people I know see driving as a necessary evil and would like to reduce the need for it.  When I go somewhere, I consider the drive there to be an added bonus.  This next generation sees the drive as a reason not to go, or to go less often.  Maybe that'll change when they get older and have children.  Maybe they'll want yards and long commutes, or maybe they'll want yards and long commutes by train or bus.

It'll be a slow change, but over time cities will grow to accommodate the wishes of aspiring non-drivers.  I do think this is good, as the driving I love to do is, until some technological breakthrough, quite inefficient a use of energy and source of pollution, as well as roadway space in busy areas.

I don't suspect there will be rapid changes, at least not more rapid than the changes that have already happened, but I suspect that toll roads with meaningful non-toll competition will be the first to lose traffic if overall counts fall.  As the non-toll route becomes slightly less congested, more people will choose it over the toll route.

[Alps]

I can say with certainty that the NJ Turnpike Authority runs a good operation and has positive future prospects, even if traffic levels and toll rates stay the same for several years.

[cpzilliacus]

I can say with certainty that the NJ Turnpike Authority runs a good operation and has positive future prospects, even if traffic levels and toll rates stay the same for several years.

I agree.  There will always be a steady stream of truck traffic on much of the Turnpike (and I am always impressed by how many trucks prefer the Turnpike over "free" I-295 in South Jersey).

[ET21]

IL Toll Authority is in the midst of major updates and construction (I-90 rebuild and widen, Elgin-O'Hare bypass, I-57/294 interchange) amongst other small projects. Reason why our tolls have increased steadily over the past 10 years is due to widening, rebuilding, and expanding the system.

Now whether they lower it once all this is done is unknown (probably not, knowing Illinois  )

[J N Winkler]

I don't agree with Moody's assessment for the medium and long term.  What I see instead is a re-creation of the dynamic in the late 1940's and early 1950's, which culminated in a federal legislative package in 1956 which decisively rejected toll finance in favor of taxes on motor fuel as the dominant method of financing Interstate construction.

My reasoning for thinking this way:

*  A lot of the recently built toll roads (e.g., Triangle Expressway) have had to rely on sui generis financing packages involving some element of public subsidy.  This was also true of some of the early (1930's and 1940's) public authority toll roads, such as the Pennsylvania Turnpike and the Bay Bridge (both built using loans from the Reconstruction Finance Corporation).  Some of the later public-authority toll roads, such as the Kansas Turnpike, had problems covering debt service owing to insufficient traffic demand, and that is also true of some recently built toll roads.

*  Toll roads have always been an accounting hassle and will continue to be so even if national interoperability were introduced tomorrow, or pay-as-you-go transponders became the norm.  With the gasoline tax, the accounting workload is folded in with the gasoline purchase.

*  Toll finance has been and will always be unworkable for certain corridors where traffic demand justifies provision of expanded facilities.

My bet for the medium to long term is a "Son of Interstate" financing plan, relying either on fuel taxes or on some other form of transparent pay-as-you-go taxation which relieves the consumer of the burden of payment in lumps and tracking of individual payments.  When this comes along, the toll operators will be running scared, with many new public toll operators phasing themselves out of existence while private toll operators seek to relieve themselves of nonproducing assets.

Edit:  New Jersey will continue to be an exception to this general analysis, as it was in the 1940's and 1950's.  Revenues for tolled facilities in NJ have been and will continue to be robust because NJ has always underinvested in its untolled highway infrastructure, and will almost certainly continue to do so.  For similar reasons, other localized exceptions will also persist.