Illinois Toll Agency Wants $300 Million of New Bonding

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CHICAGO — The Illinois State Toll Highway Authority's proposed 2017 budget calls for nearly $1 billion in capital spending supported by $300 million in toll-backed borrowing.

The bonds would be sold late this year or early next year, said tollway spokesman Dan Rozek. In addition to capital spending, the budget authorizes $336 million for annual maintenance and operations of the 292-mile system of toll roads in northeast Illinois.

"This is a responsible budget that holds the line on spending and reduces employee headcount while maximizing the tollway's resources," tollway board chairman Bob Schillerstrom said in a statement.

Much of the planned capital spending is part of the authority's 15-year, $12 billion Move Illinois program that is moving into its sixth year. The capital program seeks to reduce congestion and pollution, expand the more than 50-year-old system, improve roads, and create jobs and economic development.

To support the program, the board adopted a one-time 87% increase in passenger tolls and is phasing in a 60% increase in commercial vehicle tolls that will also be adjusted annually based on inflation starting in 2018.

About $375 million of the 2017 budget will finance the new Illinois Route 390 tollway and planning for the new I-490 Elgin O'Hare Western Access project to O'Hare International Airport. Another $165 million will finance the Jane Addams Memorial Tollway's new smart road technology and complete interchange and local road improvements. About $57 million will go to plan and design a reconstructed Central Tri-State Tollway.

The authority is budgeting $295 million for systemwide roadway, interchange and bridge repairs to keep the existing tollway system in a state of good repair, a requirement of bond covenants.

The authority projects that revenues will grow by $80 million to $1.38 billion due to rising toll transactions, the previously approved truck toll hike, and collections on the new Route 390 toll road. Operating costs will rise by 4.4% due mostly to increasing healthcare, retirement and equipment expenses.

The authority board will review the budget at its meeting Thursday and vote on it at a future monthly meeting. The toll highway authority operates under its own independent state statutes with its revenues and operations segregated from the state's, although its leaders are appointed by the governor.

The agency has paid penalties on recent sales in line with those typically imposed on Illinois-based issuers, especially ones with a Chicago or state-related name, even when the issuer faces little exposure to the state's prolonged budget impasse, which has driven Illinois' ratings down to the triple-B category.

Ahead of a sale earlier this year, three rating agencies affirmed the authority's AA-minus-level ratings on about $6 billion of debt secured by toll revenues. All assign a stable outlook.

Strengths include the system's critical role in regional transportation around Chicago, historically strong debt service coverage, and steady traffic figures.

Challenges include the need for significant additional debt and the likely resulting drawdown of liquidity. The overall program relies on $4.7 billion of borrowing, including another $2 billion expected through 2022.

Moody's Investors Service said its stable outlook is based on the expectation that the authority will continue to generate revenues sufficient to maintain coverage ratios at or above two times and maintain strong liquidity, which is important because of its high exposure to variable rate debt and derivatives.

"The outlook is also based on the assumption that approved commercial toll increases will be implemented as planned and that the authority will maintain its independence from the state despite the state's current fiscal pressures," Moody's added.

The system has been sticking with fixed-rate issuance on its current capital program, lowering the percentage of variable-rate exposure incurred under its previous capital program.

The authority has nine liquidity or credit support contracts with eight banks that all expire in 2017, according to a May offering statement. The authority's nearly $1.2 billion of floating paper is swapped to a synthetic fixed rate under seven agreements with six banks. The swaps were negatively valued at $315 million at the end of March.

Rising pension costs pose a risk because the authority participates in the Illinois State Employees Retirement System, one of the state's five poorly funded pension accounts.

 

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Transportation industry Illinois
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