Toll road’s bond ratings drop to junk

Alicia Robinson

The San Joaquin Hills toll road is making money, but its profits

didn’t deter a bond-rating agency from lowering the toll road’s bonds

to junk status this week.

Moody’s Investors Service on Tuesday announced it downgraded the

$1.9 billion in bonds issued by the San Joaquin Hills Transportation

Corridor Agency and placed the bonds on a watch list for possible

future downgrades.

The bond ratings were lowered mainly because the toll road’s

traffic and revenue have not met projections on which the bonds’

initial ratings were based, Moody analyst Aaron Freedman said. Toll

roads spokeswoman Clare Climaco said road-usage projections were too

high for various reasons, including changes to the county’s

transportation plans and the 1990s recession that slowed

traffic-producing development.

Junk status means the San Joaquin Hills bonds carry an increased

risk that their debt won’t be paid on time or in full, but the

downgrade doesn’t make the bonds a less attractive investment,

Freedman said.

“If the agency should want to borrow money in the future, it will

be more difficult for them to do so as a result of the downgrade,” he

said.

Traffic on the toll road continues to increase but revenues are

only 78.5% of projections, Climaco said.

Moody’s also cited the “protracted lack of clear political

consensus” by the governing boards of the San Joaquin, Foothill and

Eastern toll roads, which delayed and ultimately shelved a plan to

merge operations of the two toll road systems. Foothill and Eastern

toll road board members voted on May 13 to instead pursue a plan

created by Orange County Supervisor Bill Campbell that has the

financially healthier Foothill and Eastern toll roads lending money

to the cash-strapped San Joaquin Hills toll road.

“The bottom line is [the downgrade is] very bad news,” said

Foothill and Eastern toll roads board chairman Peter Herzog. “It

confirms that there’s a severe problem with the San Joaquin Hills

toll road. It shows that the action taken [May 13] was not well received by the financial community.”

Herzog said he’s concerned that Moody’s said it will monitor the

potential impact of whatever plan is chosen on the credit-worthiness

of the Foothill and Eastern toll roads.

Operations and finance committees of both toll roads’ boards are

set to meet next week with meetings of the full boards scheduled June

10.