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Illinois RTA Still Waiting on State

CHICAGO – The Illinois Regional Transportation Authority Thursday will consider a $3 billion operating budget and $5.1 billion five-year capital plan that boosts spending next year but still falls far short of its needs as a new state capital program languishes amid the ongoing budget impasse.

The double-A rated RTA faces state-related pressures on both the operational and capital sides.

The ongoing impasse in the state capitol has Illinois approaching 18 months without a full budget in place, and state aid payments to the RTA have lagged due to a cash crunch that has driven the state's backlog of unpaid bills past $10 billion. The RTA also could take a hit in an eventual budget deal reached by Gov. Bruce Rauner and lawmakers.

The state was $356.5 million behind in RTA payments at the close of November.

The RTA has weathered the delays by issuing working cash notes in recent years but they come at a cost, which this year is about $1.8 million, according to RTA officials.

On the capital side, the RTA's service boards plan to spend $1.8 billion next year.

It's part of a five-year $5.1 billion infrastructure program being undertaken by the Chicago Transit Authority, the Metra commuter rail system, and Pace suburban bus service.

"For the third year in a row, the transit system cannot expect new capital money from the state of Illinois," RTA executive director Leanne Redden wrote in budget documents. "We estimate that in order to address our growing backlog of capital needs and move forward, we should be investing $2 billion to $3 billion annually. Our current capital program falls far short of that goal."

The state's seven-year-old, $31 billion capital program, which provided $2.7 billion for Chicago-area transit, is winding down. Despite bipartisan support, a new capital plan has taken a backseat to the first-term GOP governor's prolonged dispute with the General Assembly's Democratic majorities over an operating budget.

"We need state lawmakers to pass a capital bill," RTA board chairman Kirk Dillard, a former state senator, said during a recent Chicago City Club address, adding that the state should consider transit funding as essential to the economic viability of the state because it's part of the "life blood" of the Chicago region.

Federal funds are anticipated to cover 68% of the five-year capital program, with RTA bonds proceeds accounting for 6.1% and CTA borrowing accounting for 5.6%. More modest borrowing by Pace accounts for less than 1%.

"The RTA capital program emphasizes the need to preserve and enhance the region's transit infrastructure," budget documents say. "CTA, Pace, and the RTA each plan to issue bonds during the five-year period, totaling $604 million or about 12% of the total capital funding."

The 2017 capital plan more than doubles 2016 spending due primarily to phase one of the CTA's massive Red and Purple line renovation project. Overall, the CTA accounts for $3.5 billion of the RTA's proposed five-year capital spending.

A new transit tax-increment financing district recently approved by the Chicago City Council to raise local funds to leverage federal grant dollars for the renovation of a major light-rail line will cover 12.2% of its five-year capital spending.

The CTA has applied for about $700 million in core capacity grant funding from the federal government to help finance phase one of the $1.75 billion modernization of its Red and Purple lines. Bus and rail car fleet upgrades account for $511 million of the five-year plan.

Chicago and the CTA rushed to get the grant application in so it can be considered before President Obama leaves office. The city has benefitted from numerous federal funding programs including grants and Transportation Infrastructure Finance and Innovation Act loans over the last eight years. Obama is a former Illinois senator and Emanuel was his first chief of staff and CTA executive director Dorval Carter is a former federal transit official.

The rail project's funding scheme relies on $428 million of CTA bonding. The proposed TIF as well as the CTA's proposed $1.52 billion 2017 budget won the Civic Federation of Chicago's endorsement.

Metra makes up $1.206 billion of the five-year capital program with $592 million earmarked for fleet upgrades and $185 million for track and structure projects and $60.5 million for the ongoing implementation of the federally mandated Positive Train Control system to improve safety for commuter and freight trains.

Pace's proposed a five-year capital plan for $342 million will finance the upgrades of its buses and facilities, with many of the projects considered critical to achieving a state of good repair.

Operating revenue, which comes from passenger fares and other system-generated funds such as leases and advertising, is projected to increase by 2.2% to nearly $1.2 billion in 2017 and accounts for 38% of system revenue.

Public funding, which comes from the RTA's share of sales taxes, state transit funding, and other sources, is projected at nearly $1.9 billion and accounts for the other 62%.

Under their proposed budgets, only Metra is seeking a fare increase that will average 5.8% and provide funding for its capital projects. Metra and CTA will operate at similar 2016 service levels while Pace will add service.

Ridership this year is expected to drop by 2.8% from 2015 and is forecast at 614.5 million rides next year which represents a less than 1% decrease over 2016. CTA accounts for about 496 million rides.

At the federal level, Dillard said the passage last year of the Fixing America's Surface Transportation FAST Act marked a bright spot for transit because the five year plan provides $61 billion for public transportation. He also sees hope with the incoming Trump administration given statements about his plans for infrastructure investments and the fact that he hails from New York City where transit is central to the city's transportation system.

"We are cautiously optimistic," he said. "The devil is always in the details."

Dillard also said during the speech that preservation of the RTA's ratings remains a priority.

The RTA has limited available long-term borrowing capacity. It borrowed $150 million of working cash notes this past spring, tapping its $400 million of short-term borrowing authority. The taxable notes mature May 4, 2018.

Ahead of that sale Fitch Ratings and Standard & Poor's affirmed their AA ratings on the notes and the RTA's outstanding long-term bonds.

Both assign a stable outlook.

Moody' Investors Service was not asked to rate the notes but rates the RTA's long-term debt Aa3. It shifted the agency's outlook to negative last year, citing exposure to the state government's continuing credit deterioration which could impact the timing of aid payments and size after Rauner proposed cuts.

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