By Melissa Daniels | PA Independent
HARRISBURG – Lower-than-expected usage and a steady stream of debt caused Moody’s Investors Services to downgrade the bond rating for the Pennsylvania Turnpike Commission.
Announced Wednesday, Moody’s downgraded the rating to A1 from Aa3 on approximately $3.1 billion worth of revenue bonds.
Tolls on the turnpike have increased for five consecutive years and are expected to increase annually for at least the next decade, according to state projections. Despite those increases, state officials have maintained that the turnpike has a sustainable level of debt and will not lose customers due to higher tolls.
Moody’s appears to disagree. The rating agency concluded that commercial users sensitive to higher tolls will use alterative free routes.
Combined with Pennsylvania’s demographic shifts of an aging population and weak growth, Moody’s concluded “flat to minimal traffic growth can be expected for some time.”
Moody’s also said it expects the turnpike to continue its annual toll hikes in order to keep up with its debt service ratios.
Chief among the challenges facing the turnpike is Act 44, the 2007 state law requiring the turnpike to pay $450 million to the Pennsylvania Department of Transportation annually. Moody’s listed Act 44 as a challenge because the payment is inflexible regardless of how much the turnpike earns.
If there is a silver lining in the report, this is it: the agency declared the turnpike has “a long history of well-managed financial operation,” and that it has “demonstrated willingness to raise toll rates evidenced by annual toll rate increases since 2009.”
Auditor General Eugene DePasquale issued a statement following the downgrade announcement, saying it is no surprise.
“Previous audits from this department repeatedly raised concerns about the commissions’ debt and borrowing practices brought on by Act 44 obligations,” DePasquale’s statement said. “Today’s bond rating downgrade is further proof that fixing Act 44 and implementing a comprehensive transportation funding solution should be a top priority in Pennsylvania.”
Contact Melissa Daniels at [email protected]