Colorado thinks it's immune from anemic toll traffic
Of course, every government thinks their toll road or toll project is immune from the obvious drop in traffic on toll roads across the country. With gas prices headed back to $3.50 a gallon or higher, there simply will never be enough people with the kind of disposable income needed to make any of these toll roads financially solvent without taxpayer subsidies. If taxpayer money is being used, then the road should be a free road, not a toll road.
Toll roads causing problems, but Colorado says it's immune
By Monte Whaley
The Denver Post
March 9, 2014
Colorado's controversial plunge into public-private partnerships to oversee and collect tolls from local highways comes as credit agencies and other states are struggling with the arrangement, mostly because America's driving boom could be over.
"The constant increase we saw in driving up until 2005 shows no sign of returning," said Danny Katz, director for the Colorado chapter of the nonprofit U.S. Public Interest Research Group, which released a study last year saying people ages 16 to 34 drove 23 percent fewer miles on average in 2009 than they did in 2001.
The apparent end of what that study calls the "driving boom" is causing problems for tolling projects from California to Texas, where reality is failing to match projections of growth in traffic and revenue. Some states, including Illinois and Indiana, are offering set payments to supplement toll projects.
Colorado officials insist they've built in safeguards for taxpayers in case traffic revenue doesn't meet expectations.
The state's recent 50-year agreement with Plenary Roads Denver — a six-company consortium — for the maintenance and tolling of U.S. 36 between Denver and Boulder includes no contractual guarantee for a minimum level of revenue, say officials with the Colorado Department of Transportation.
That means if toll revenue on the 21-mile stretch of U.S. 36 is lower than expected, the state carries no liability while Plenary Roads Denver will still be responsible for paying off loans and operating and maintaining the highway for 50 years.
That same deal is likely to be struck as Colorado looks to toll portions of Interstate 70 in east Denver and in the mountains, as well as C-470.
"We think we have struck a unique arrangement that carries little or no risk for us and the taxpayers," CDOT spokeswoman Amy Ford said.
Toll revenue from the new express lanes on U.S. 36 could reach $2.5 million in 2015 and more than $16 million annually within two decades, according to CDOT projections.
Plenary Roads Denver will collect tolls and use most of the revenue to pay off construction debt and cover the cost of maintaining the managed lanes.
Traffic to grow
Ford said the U.S. 36 project shows CDOT is adapting to the new realities of driving. The corridor will be fully "multimodal" with an express toll lane in each direction that will serve a dozen bus-rapid-transit stations. The project will also include bike lanes for commuting to work and home, Ford said.
"The tolling will be just part of the project and not the whole," she said.
As many as 100,000 commuters travel the U.S. 36 corridor each day. But that number is expected to grow as employment expands. Daily car counts are projected to reach about 117,000 by 2015.
Chris Johns, senior vice president and portfolio manager for Kirkpatrick Pettis Capital Management, said the busy nature of U.S. 36 should keep it immune from the driving downswing.
"That's a pretty crucial junction in the Denver metro area, and it attracts a tremendous amount of traffic," Johns said. "It's unlike many toll roads because for many people this is the only option to get from Denver to Boulder."
Other factors such as the recession and increased gas prices surely play a role in decreased driving. But Katz and others also point to broader changes, including technology, working from home and a population shift from suburban to urban areas.
"You can debate the reasons or that driving would return should the economy rebound quickly," said R. Richard Geddes, associate professor and director of the Cornell Program in Infrastructure Policy. "But there has still been a real shift in behavior, and I believe this is causing a real concern for bond-rating agencies toward some of these toll projects."
Having success
Some $27 billion was invested in private toll-road projects between 2003 and 2012 in the United States. Colorado has six, including E-470 along the eastern perimeter of metro Denver.
Post-2008 toll projects appear to be on more solid financial ground, say experts, mostly because of better traffic projections. The U.S. Department of Transportation this month said total vehicle miles will increase by 1.36 percent to 1.85 percent each year through 2030.
But credit agencies are taking USPIRG's per capita numbers seriously, downgrading companies and issuing warnings to investors to be leery of toll roads because of anemic traffic numbers.
Traffic on the San Joaquin Hills toll road in Orange County, Calif., is half of what was projected, while Moody's Investors Service has downgraded the company overseeing a recent toll-road extension in Austin, Texas.
And in San Diego County, the private company that built and operated the South Bay Expressway went bankrupt when vehicle miles didn't reach expectations.
"Toll roads with meaningful untolled competition, especially those designed to relieve congestions, could be vulnerable because their value would diminish with lower traffic growth," warned Fitch Ratings last year.
E-470, which opened in 1991, is bucking the downward trend in traffic and is seeing its fourth straight year of traffic growth. The highway also recently saw its bond rating increase from BBB- to BBB.
In all, traffic — as measured by the number of toll transactions — grew 8.2 percent in 2013 over 2012, with transactions rising from 54 million to 58.4 million.
The rise in traffic, coupled with a 2013 toll increase, resulted in a 10.6 percent, $12.4 million increase to $129.2 million in toll revenue.
E-470 bucks trend
Aurora Mayor Steve Hogan, who sits on the E-470 governing board, said the 75-mph toll road has shown it's a good alternative to congested public highways such as I-225 and I-70.
"Just think, if E-470 hadn't come along, there would be a traffic nightmare every day with people trying to get to the airport or trying to get to Douglas County," Hogan said. "E-470 fills that need for more alternatives."
A straight-shot alternative from Boulder to Denver was the reason U.S. 36 was built as a toll road in the first place, say officials.
"You really had to take U.S. 287 to Arapahoe Road and crisscross your way to Boulder," CDOT spokesman Bob Wilson said.
The road opened Jan. 21, 1952, to great fanfare. For the first two days, excited drivers traveled the length of the highway for free, from Baseline Road in Boulder to the Federal Boulevard exit to Denver.
It cut the route from Boulder to Denver by 7½ miles.
When the road officially opened for business, it cost 10 cents from Denver to Broomfield and 15 cents from Broomfield to Boulder.
Gross toll revenue was $365,447 in 1952 and $431,576 in 1953.
The toll road was so popular that in 1967, drivers paid off the highway's construction costs 13 years ahead of schedule.
"I remember sitting in the back seat of my family's car, and my dad would give me a dime and I'd flip it into the coin collector by the toll booth," Wilson said. "It was fun. It was a good memory for a little kid."
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17%: Projected growth in daily car count on U.S. 36 by 2015, up from today's 100,000 to 117,000
8.2%: Increase in use, based on total trans-actions, on the E-470 toll road, from 54 million in 2012 to 58.4 million in 2013