CHICAGO — The Illinois General Assembly reluctantly approved a revised Chicago-area transit bailout package yesterday that will raise $550 million of new annual operating aid from a local sales tax increase and allow the Chicago Transit Authority to issue $2 billion of bonds to rescue its pension and retiree health care plans.
Ahead of the expected approval of the bill, the CTA this week launched a new request for letters of interest and qualifications from financial advisers and underwriters, setting a 3:30 p.m. deadline on Feb. 4 for firms interested in working with the agency on its operating and capital plans and upcoming debt issues.
The House and Senate votes averted drastic service cuts and fare hikes set to take effect Sunday and capped a months-long, acrimonious debate among lawmakers and Gov. Rod Blagojevich over how to provide a long-term revenue solution to the Chicago-area transit system’s annual fiscal woes.
The lengthy bill raises the sales tax in Chicago’s Cook County by one-quarter of a percent and in the surrounding counties by one-half percent. It also authorizes Chicago — pending City Council approval — to raise its real estate transfer tax.
The proposals would generate $500 million for the Illinois Regional Transportation Authority and $50 million for counties elsewhere to spend on transportation measures. The bill also includes sweeping reforms that give the RTA more fiscal and management oversight of its three service boards — the CTA, Metra commuter rail, and Pace suburban bus service.
The bill authorizes the CTA to issue up to $2 billion of bonds to dramatically improve its unfunded pension liability and to establish a trust to begin funding on an actuarial basis the health care benefit it provides retirees. As part of the borrowing plan, the CTA and its unions agreed to funding reforms that provide for increased employee contributions.
The pension overhaul resolves a looming fiscal crisis for the CTA, which at the close of 2006 faced a $1.5 billion unfunded liability in its pension fund — representing only a 34.4% funded level — and an accrued liability of $1.1 billion for health care benefits that are covered on a pay-as-you-go basis.
Under a bill approved in 2006, the CTA is required by next year to adopt a plan to achieve a 90% funded ratio in its pension plan by 2058. Without any action, the authority estimated that annual contributions of $232 million would be needed — a figure substantially higher than the $45 million both the CTA and employees now contribute. In addition to the mammoth increase the agency faced in its pension payment, the CTA has nearly exhausted the revenues in an account to cover its retiree health care liability.
The CTA this week launched a search for financial advisers and underwriters on an as-needed basis. The agency plans to compile a list of qualified firms to choose from and submit it to the CTA board for approval. The agency is seeking input from the financial community on its capital and operating programs and to “develop financing strategies and make recommendations to address CTA’s financing needs,” the documents read. The authority is the second largest public transit agency in the nation serving the city and 40 suburbs and employing 12,500.
Lawmakers originally approved the funding plan last week after downstate Democrats and Republicans dropped their requirement that a capital bill be approved at the same time. However, the governor then issued an amendatory veto requiring that seniors ride for free on public transit statewide at an estimated cost $30 million a year.
The governor had long been opposed to the sales tax-funded bill due to a campaign pledge against raising the sales or income taxes. He favored one that would have diverted gasoline taxes collected in the Chicago area from the general fund, but legislative support faltered for that plan because of the hole it would leave in state coffers.
Frustrated lawmakers resumed their session yesterday to vote on the amended bill but not before leveling bipartisan attacks on Blagojevich. Many lawmakers who voted in favor of the measure questioned the governor’s motives for making the change and criticized him for not raising the issue earlier during negotiations.
“It’s time to call the governor into account … we will pass this today … but we must speak out against abuses by the chief executive of our state,” said Rep. Lou Lang, D-Skokie, who called the move “unconscionable” and an attempt to “pander” to a group of voters for his own political profit. One representative said he planned to draft legislation stripping the governor of his amendatory veto powers.
The House ultimately voted 61 to 47 to approve the bill and the Senate later in the day approved it as well.
“Finally, the long struggle to find a long-term transit funding solution is over. Crippling service cuts, fare hikes, and lay-offs were averted and Illinois seniors will be able to travel for free on public transportation,” Blagojevich said. “A good compromise never makes everyone happy, but I thank the General Assembly for coming together and approving my change.”
The bill approved by the General Assembly addresses the RTA’s operating needs only. Lawmakers remain at odds over how far to expand gaming in the state to finance a roughly $25 billion multiyear capital bill. The RTA is hoping to receive several billion in new borrowing authority in any capital budget.
