CHICAGO -- A $1.3 billion toll road linking Indiana and Illinois is eligible for a key federal loan that could cover for up to one-third of construction costs, transportation officials announced March 17.

The proposed Illiana project can now apply for a Transportation Infrastructure Finance and Innovation Act, or TIFIA, loan. If approved, the loan's relatively low interest rate could mean a savings of as much as 20%, officials said.

"Today's announcement will help to ensure that Illinois and Indiana can get the best deal on Illiana Corridor," Illinois transportation secretary Ann Schneider said in a statement. "Receiving the green light to proceed with an application for TIFIA funding is just more proof that the widespread support for our innovative public-private partnership continues to build."

The Indiana Finance Authority and the Illinois Department of Transportation will now begin to negotiate with the U.S. Department of Transportation on the terms of the loan, the states said in a press release.

The Illiana is to be a 47-mile highway linking Interstate 55 in Illinois to Indiana's Interstate 65. The two states hope to begin construction in the spring of 2015.

Illinois and Indiana are pursuing separate public-private partners to finance the $1.3 billion project.

Last week, the Illinois Finance Authority approved a resolution authorizing an intergovernmental agreement with the state transportation department that paves the way for the agency to select a ratings agency and provide a preliminary rating opinion on a possible financing.

The IFA would serve as the financing arm for an Illiana-related borrowing on the Illinois side.

The Indiana Finance Authority is acting as the financing arm on the Hoosier side.

The states also hope to finalize their environmental impact statements this spring.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.