Turning then to Federal sources, the Commission succeeded in obtaining grants totaling $29.5 million from the Public Works Administration and, with over 40 percent of the needed capital then at hand, sold $40.8 million of Turnpike bonds to the Federal Reconstruction Finance Corporation. These bonds, bearing 3¾ percent interest, were sold at a discount sufficient to make them yield 4.01 percent.
Two other issues of $1.5 million each were subsequently sold: One in 1943, to cover final construction costs, and one in 1946, in connection with a refinancing to take advantage of a lower interest rate. In 1948 the financing of the original turnpike was merged with that of the eastern extension which had earlier been authorized by the legislature. Bonds were issued in that year, in part to redeem the outstanding indebtedness on the original section and partly to finance the 101-mile extension. These bonds were sold to private interests at a net interest rate of 3.08 percent.
This brief tracing of the financing of the Pennsylvania Turnpike is of interest to show the change in public attitude toward toll highway revenue bonds during the period 1937–48. In 1937, with recollections of the long economic depression fresh in the minds of investors, and with road systems then not generally regarded as seriously inadequate, the Pennsylvania Turnpike was not expected to be fully self-liquidating. Despite its favorable position geographically and topographically, and the fact that only 60 percent of the cost needed to be liquidated through tolls, the Reconstruction Finance Corporation, in accepting the bonds, required a net interest rate of 4.01 percent. Net interest rate or cost is the actual rate of return on the investment in the bonds, taking into consideration the discount or premium at which the bonds were sold.
Opened in October 1940, the turnpike had only 15 months of operation before wartime restrictions curtailed its traffic and forced it to operate at a loss during the war years. But with the return to peace and the advent of unprecedented economic prosperity, traffic volumes increased everywhere, and the turnpike received more than its proportionate share of the general growth.
Gradually the obsolescence of other routes became increasingly apparent, and the speed, comfort, and convenience available over long distances on this road of modern design standards became more widely known. Increasing toll revenues not only assured the liquidation of the loan on the original section, but also showed prospects of being sufficient to have liquidated the entire cost of the facility including the amount of the PWA grant. By 1948 there was wide public acceptance of this first modern toll road. Far more optimistic views of the economic future existed than prevailed in 1938. Bonds offered by the Pennsylvania Turnpike Commission in 1948 were readily sold, and at an interest rate of but three-fourths of the rate found necessary 10 years earlier. By the end of 1954 the original 159-mile section had been extended to the Ohio border on the west and to the Delaware River on the east, a total of 360 miles. A summary of some of the features of this and the five other major toll roads in operation at the end of 1953 is shown in table 1.
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