Moody’s: US Toll Road Industry Outlook Revised to Positive on Traffic Growth

Low gas prices and continued economic improvement will support continued traffic gains, but further delays in federal highway funding could exert more pressure on toll roads as a state and local funding source

Moody's Investors Service

Moody’s Investors Service has revised its outlook for the US toll road industry to positive from stable, reflecting stronger than-expected recovery in 2015 traffic growth, which is expected to continue into next year. Moody’s anticipates a median traffic growth of 3% through 2016 among 45 rated toll roads, according to the report, “Toll Roads – US: 2016 Outlook – Jump in Traffic Growth Drives Change to Positive.”

We expect that low gasoline prices and continued improvement in the US economy will support the continued gains in traffic,” says Maria Matesanz, Moody’s Senior Vice President and the lead author of the outlook.

Moody’s 3% growth rate projection is based on a preliminary study showing median toll road traffic growth of 5.7% through June 2015, based on information from 13 rated toll roads. This significantly exceeds the previous 2015 forecast of 1% to 2% growth for the toll roads Moody’s rates.

The growth in traffic is underpinned by expectations of sustained low gas prices and gains in the US economy, which the Moody’s Macroeconomic Board expects to expand between 2% and 3% in 2015 and 2016. In past years, growth in vehicle miles traveled has been roughly in sync with both average growth in the retail price of gasoline and real growth in GDP.

In 2015 and 2016, Moody’s expects median toll revenue to increase between 5% and 6%, owing to traffic growth and annual toll rate increases. Of the 45 Moody’s-rated toll roads, about 30% have put annual toll increases or inflation-indexed toll increases into effect.

However, increasing leverage remains a credit risk due to a widening funding gap for transportation infrastructure. A delayed funding authorization for the Highway Transportation Trust Fund could add to toll road leverage, and exert more funding pressure for toll roads.

“State and local governments continue to tap into the excess cash flows of toll roads to subsidize their own capital and operating needs, or have shifted some of their transportation financing responsibilities to existing toll roads,” says Matesanz.

Toll roads with the highest leverage, usually those in operation for less than 10 years, are the North Carolina Turnpike Authority (Baa3 stable), which opened in December 2012 and the Central Texas Regional Mobility Authority (Baa2 stable). Others with high leverage include the Foothill Eastern (Ba1 stable) and San Joaquin Hills (Ba2) Transportation Corridor Agencies in Southern California.

A change in Moody’s outlook for a sector does not connote rating or outlook changes for individual issuers. The report is part of a series of outlooks on a wide variety of sectors globally published by Moody’s. For other reports in the series, go to

The report is available to Moody’s subscribers at or can be downloaded here.