Illinois Highway Has $12B Plan

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CHICAGO — With its seven-year-old $6 billion capital program nearing completion, the Illinois State Toll Highway Authority on Thursday unveiled a follow-up $12 billion, 15-year plan that relies on a toll increase to help repay an estimated $4.8 billion of new borrowing.

The proposal funds construction of new toll roads and projects aimed at keeping 286 miles of roadways that make up the 52-year-old system in a state of good repair through 2026.

Authority officials promoted the projects as necessary to serve the region’s transportation needs,  spur economic development and create jobs. Officials said the projects would create at least 120,000 jobs and generate $21 billion in economic activity.

“Illinois residents, business owners, planners, elected officials and others understand that new roads can improve quality of life by saving people time and money, creating jobs and stimulating local economies,” toll authority executive director Kristi Lafleur said in outlining the plan for board members at their July meeting.

Facing an end of the year legislative deadline, the agency has worked over the last year and a half to craft a encore to its $6.1 billion program launched seven years ago that relied on $3.6 billion of bonding. The tollway wrapped up borrowing for that program in 2009, and nearly 85% of projects are complete.

The congestion-relief capital plan that introduced electronic tolling to Illinois relied on an increase in tolls paid by cash users and commercial traffic. Debt service on existing bonds has a priority claim on toll and system revenues after the authority’s operating expenses. The authority has exhausted its borrowing capacity under the current toll structure if it is to maintain a two times debt service coverage ratio considered critical to its double-a level ratings.

The new program’s bonds would be repaid by revenues from a proposed toll hike for all passenger vehicles and a previously approved commercial vehicle increase that takes effect in 2015. Additional revenues would also come from tolls collected on new toll roads slated for construction.

The toll increases and new tollways are projected to generate sufficient revenue to repay bonding and provide cash financing. The authority proposes to issue 25-year bonds with higher interest payments in the early to mid years and much of the principal backloaded to 2035 and beyond when existing bonds are retired. The proposed schedule allows the authority to maintain a two times debt service coverage ratio and is based on a conservative estimate of 6% interest rate costs. 

If the new rates are approved, tolls are projected to generate an additional $250 million next year, bringing total revenue to $960 million. They should generate an additional $390 million in 2020 bringing revenue up to $1.5 billion, and by $470 million in 2026 lifting revenue to $1.7 billion.

The average toll plaza rate would rise to 75 cents from 40 cents for passenger vehicles with the cost of the average car trip on the system rising to about $1.18 from $.63 cents. Cash payers would continue to pay double what is paid by electronic tolling users who make up about 75% of the 1.4 million daily users of the system. Commercial rate increases approved in 2008 that will lift rates by 60% between 2015 and 2017 would go unchanged.

“A 21st century transportation system can’t be paid for in 1983 dollars,” said Lafleur. “No one is going to step up — not Washington, D.C., nor anyone else — to help us pay for these infrastructure improvements that are needed to keep our competitive advantage.”

The program — billed as the “cleanest and greenest” by promoting recycling and reuse of materials — provides $8 billion in funding for improvements to existing roads and $4 billion for new and expanded roadways.

The major projects include the reconstruction of the Jane Addams Memorial Tollway known as Interstate 90, the reconstruction of a portion of Interstate 294, and a new Elgin O’Hare West Bypass to provide airport access from the western suburbs. The program also funds planning studies on the extension of Illinois Route 53 and the Illiana Expressway and funding for road and bridge maintenance.

The authority will hold five public hearings next month before an expected board vote on the plan and toll increase at its Aug. 25 meeting.

Moody’s Investors Service rates the agency’s roughly $4 billion of debt Aa3. Fitch Ratings and Standard & Poor’s rate the credit AA-minus. Fitch assigns a negative outlook, while Standard & Poor’s outlook is stable.

Analysts have said the rating reflects the tollway’s status as an essential component of the Chicago area’s transportation network, a long history of strong debt-service coverage and operating reserve levels, on-budget and on-schedule capital plan implementation, and increased revenue concentration in commercial traffic.

The issuer’s challenges include a reliance on increased toll revenues from commercial traffic and the risk posed by slowing traffic growth that would pressure debt-service coverage levels. Toll revenues were up in fiscal 2010 over the previous year following the completion of various construction projects.

The authority’s previous administration and board had backed a $1.8 billion second phase to the $6 billion capital program in 2008 but it was put on hold following accusations in court documents that former Gov. Rod Blagojevich used the program to shake down concrete contractors for contributions. After Blagojevich’s ouster from office in early 2009, new Gov. Pat Quinn revamped the tollway’s leadership.

Board member Bill Morris, a former public finance banker, during the meeting voiced his objections to the size of the toll increase and the lack of notice given to the public before the meeting. “It’s a proposed 87% increase in tolls at a time when the economy is still rocky,” Morris said of the burden he fears the increase will pose for some of the system’s users.

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Transportation industry Illinois
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