Toll roads: Future fodder for the Junk Bond Market
By Al Lewis
The Denver Post
Robin Wiesner was cruising home from work at more than 75 miles an hour in her Land Rover when she called me back on her cellphone last week.
Wiesner, 32, works for Frontier Airlines near Denver International Airport, and she drives E-470 and the Northwest Parkway several days a week. I wanted to ask what she thought of her commute on the toll roads.
"It's glorious," she said. "It's the most beautiful way home from work. ... You will never stop or even put on your brake. All you do is pass people."
When Wiesner takes the toll road, her 32-mile commute between work and her home in Superior shrinks to 28 minutes.Otherwise, she spends 40 to 90 minutes in traffic.
On the toll road, she says, there are few other cars to interrupt her cruise-control setting.
"You won't see anything but Land Rovers, Mercedes and Beamers," she said. "No one else can afford it."
Wiesner is from one of those double-income-no-kid families. She can afford to shell out several dollars a day in tolls.
She can even afford the 25-cent increase that both Northwest Parkway and E-470 put in place at their toll plazas and many access ramps effective today. But the tolls irritate her, so she takes the toll roads only one way on her daily commute.
"I am about to be paying $2 more a day, which doesn't sound like a lot, but there goes my Starbucks," said Wiesner.
"I won't get to go to Nordstrom as much as I want to," she said. "But what about all these people who work at the airport who make $8 to $10 an hour? What about the workers at the hotels? They can't afford it. They get up at 5 a.m., don't see their kids, and take the long way to work to beat the traffic."
The Northwest Parkway and E-470 are not for everybody. They are roads for the rich. They are now tied for third place as the most expensive urban toll roads in the nation. You have to drive in Orange County, Calif., to pay more per mile.
Toll roads provide a way of keeping government small and taxes lower, but at what cost? Toll roads are often more expensive to build than a government-funded highway because of the infrastructure needed to collect tolls.
Colorado's toll roads now cost more than 21 cents per mile. But it only costs about 2 cents per mile to drive on a government-funded road when you prorate registration fees and the 22 cents you pay per gallon of gas for highway taxes.
People won't use toll roads if they find them too expensive. Northwest Parkway's traffic is woefully below projections, though it blames slower than anticipated growth. So what are the toll road authorities doing? Raising prices. The recent toll increases have nothing to do with supply versus demand. They have to do with financing. And Northwest Parkway's financing is sliding toward trouble. Last month, Fitch Ratings downgraded its debt to junk bond status.
The downgrade came after the toll authority was unable to restructure part of its debt load by issuing new bonds. The junk bond rating may mean the toll road authority will pay higher interest rates in the future - which may in turn lead to still higher tolls.
E-470's finances were bumpy during its early years too, but they are now more stable thanks to rampant growth in southeast metro Denver. Nevertheless, E-470 has no choice but to raise tolls as it faces a 24 percent increase in debt payments.
Love it or leave it, if you can. In the mid-1990s, to get the toll roads built, eight communities agreed that they would not compete with the toll road. They cut a deal to limit what roads could be improved, expanded or even built.
The good news is, E-470 is scheduled to be turned over to the state as a public road in 2076. Of course by that time, many of you now reading this column will have died, gone to hell and learned it's a less aggravating place than Colorado's toll roads.
"We're in the upper middle class, and I am still complaining about it," said Wiesner. "It's ridiculous what I am paying, and now they are going to raise it? ... By the way, I have a Land Rover for sale, if you want to throw that in your column. ... I think I need to get a Volkswagen Jetta or a Honda."
Al Lewis' column appears Sunday, Tuesday and Friday. Respond to Lewis at denverpostbloghouse.com/lewis, 303-820-1967, or email@example.com.
© 2006 The Denver Post