4/15/2020Toll Roads Falter During Pandemic
Traffic is down by two-thirds on US toll roads, threatening the revenue model of the foreign companies that operate them.
Americans throughout the country are being told to stay at home as much as possible during the Covid-19 virus scare. Road traffic as a result has plunged, hurting the foreign companies that attempt to monetize congestion as part of their business model.
Transurban, the Australian firm that runs toll roads in Virginia, last week saw its credit rating take a hit as Standard and Poor's Global Ratings dropped its outlook for the company to negative. The company saw US toll road traffic plunge 65 percent in the last week of March.
"Express Lanes traffic and revenue (eleven percent of total first half of 2020 revenue) is more sensitive given lack of congestion on adjacent general purpose lanes (correlated with mandated lockdowns in the Greater Washington Area region from mid-March)," the firm told the Australian Securities Exchange.
Many of the latest US toll road projects involve the conversion of existing high occupancy vehicle (HOV) lanes into high occupancy toll (HOT) lanes, also known as express lanes. In the Washington DC area, for example, there is no cap on the toll rate that Transurban can charge for the use of these routes, so the congestion can drive the cost of a ten-mile trip as high as $50 each way during rush hour. Virginia officials signed contracts designed to lock in congestion on the free, general purpose lanes to maintain the toll route's profitability. Those provisions have proved insufficient in a pandemic.
In California, cash toll collection was suspended, forcing drivers without a transponder to pay tolls online. New York drivers will receive a bill in the mail for unpaid tolls. Virginia did not immediately close its toll booths. Likewise, the Ohio Turnpike kept toll plazas open, as that is the source of a third of the revenue for the state-run entity.
"To help mitigate the spread of Covid-19, toll plaza personnel have been provided with nitrile gloves, hand sanitizer and disinfectant wipes for their mandatory use," Turnpike officials explained.
If sustained, the lack of revenue could threaten the ongoing viability of the privately owned toll road companies that in many cases are designed to fail. Nearly every major "managed" toll road project in the US has gone bankrupt within a few years of opening. One of the first to go under was the 91 freeway high occupancy toll lanes in Orange County, California, with county taxpayers in 2003 paying more than the original cost of construction to buy back the project from a foreign company. More recently, the SH130 toll project in Austin went under. The Indiana Toll Road went bankrupt in 2014. San Diego's South Bay Expressway went bankrupt in 2010 and was bought out by county government. California's Foothill-Eastern Transportation Corridor Agency, which runs the 241, 261 and 133 toll roads in Orange County, has been teetering on the edge of default despite $1.7 billion in subsidies from the taxpayer.