The Handbook of Municipal Bonds

CHAPTER 58

Toll Road Analysis

Robert H. Muller Managing Director JPMorgan Securities

 

 

 

This chapter describes the methodology and approaches needed to analyze toll road revenue bonds. Distinctions between the analysis required to study an already established entity and that needed to determine the risks entailed in a new project for a “greenfield” road will be explored as well. Because defaults have occurred on startup toll road projects, the analyst faces a potentially greater burden in evaluating these kinds of bonds than what is the norm for a typical government-created entity.

HISTORY

We begin the chapter with a look at the short history of toll road financing in the United States.

1792-1940

Toll roads have been part of the United States transportation system since the time of George Washington. “Pennsylvania chartered the first, connecting Philadelphia and Lancaster, in 1792 and it opened in 1794.”⁷²⁴ The road was heavily used by Conestoga wagons heading westward. Its success “led other states to adopt the new plan. By 1800, 69 companies had been chartered.”⁷²⁵ Many of these turnpikes were privately run, but some were publicly built or subsidized. This wave began to peter out as canals and railroads displaced the toll roads and many eventually failed. Beginning in the 1920s, toll revenues were used to secure the construction and financing of the Holland Tunnel between New York and New Jersey and the Benjamin Franklin Bridge in Philadelphia. The Golden Gate Bridge in ...