A New York bond rating agency has downgraded its rating of some of the Pennsylvania Turnpike's outstanding bonds, citing the agency's growing debt and projections of "flat to minimal traffic growth."
Moody's Investors Service said it downgraded the turnpike's senior lien revenue bond rating to A1 from Aa3 but at the same time changed the outlook for two categories of debt from negative to stable.
The turnpike has borrowed heavily in recent years to rebuild sections of the toll road and because of a state law requiring it to pay $450 million per year to the Pennsylvania Department of Transportation.
Moody's said the downgrade "reflects the turnpike's weakened credit profile given significant additional leverage plans that require higher than forecasted annual toll rate increases" and continuing underperformance of traffic and revenue forecasts.
"We expect traffic forecasts to be revised downward again in the future. In addition, traffic diversion to alternative free routes by price sensitive commercial users coupled with shifting residential demographics including an aging population, weak population growth, urbanization and out-migration of native residents lead us to believe that flat to minimal traffic growth can be expected for some time," the agency said.
Turnpike CEO Mark Compton said in a statement that the action is "not surprising."
"In fact, with our latest debt issuance of $172 million, the commission's total debt load is $7.5 billion today, and that factors into their decision. The overall state of the economy in general, shifting demographics and low traffic growth on the turnpike [like other toll facilities] also influenced the downgrade," he said.