Turnpike bond ratings cut as trucks flee toll hikes

As more drivers refuse to pay the Pennsylvania Turnpike's rising tolls, and opt instead for free Interstates and state highways, Moody's Investors Service says it has cut its rating for $3.1 billion in Pennsylvania Turnpike Commission senior-lien revenue bond rating to A1, from Aa3. Subordinate bonds, including a new $76.7 million issue due next week, will remain at A3. Lower ratings typically force borrowers to pay more interest.

In his report, Moody's analyst John Medina cited the Turnpike's "weakened credit profile" as growing debts and weaker-than-expected traffic force commissioners to enact "higher than forecasted annual toll rate increases." The Turnpike's future traffic and revenue forecasts are overly optimistic, Medina added. Commercial shippers are refusing to pay higher tolls and instead using "alternate free routes," and more are expected to shift as planned annual toll increases drive Turnpike costs higher and higher.

Also, Pennsylvania's economic decline is likely to continue, leaving "an aging population, weak population growth, urbanization and out-migration of native residents," and "weakening demand" for the Turnpike and its tolls. Noting that Pennsylvania law (the Rendell-era Act 44) forces the Turnpike to pay for roadwork around the state, the Turnpike's resulting deteriorating financial condition is "not in line with an Aa3 rating," and the Turnpike's financial condition will likely "weaken further" as borrowing doubles over the next ten years, Medina concluded.