CHICAGO Illinois hopes to select a private partner to develop its estimated $1.1 billion share of the proposed Illiana toll road by next fall with the goal of closing on a finance package as soon as early 2015, a top state transportation official said Thursday.
The state has cautioned that it would not move forward without sufficient investor interest in its first public-private partnership that would offer the state an affordable option for building the road with limited risk. The estimated price tag includes costs for construction, right-of-way acquisition, utility costs, and tolling installation.
The state is considering a financing structure that would rely on a P3 availability payment model with the package possibly including a private activity borrowing component, a Transportation Infrastructure and Innovation Act loan, private equity, and other sources.
Illinois Department of Transportation deputy director of Highways Roger Driskell said the department recently submitted a TIFIA letter of intent the U.S. Department of Transportation. The state is looking at the eligibility requirements for capturing the program’s rural rate which is significantly lower than the standard rate.
Driskell spoke on the state’s interest in TIFIA during a panel discussion at The Bond Buyer’s Transportation Finance/Public-Private Partnership. The TIFIA program provides assistance for surface transportation projects in the form of loans, loan guarantees and standby lines of credit. The 1998 program was expanded and reformed in the Moving Ahead for Progress in the 21st Century (MAP-21) transportation bill that was signed into law in July 2012.
The state recently launched a request for qualifications for interested parties to design, build, finance, operate, and maintain its share of the 47-mile Illiana Corridor Project that will link Interstate 55 far south of Chicago with Interstate 65 in northwest Indiana. The Illinois and Indiana portions of the road would be developed through separate procurement processes managed by each state.
Responses are due back by Dec. 19. The state plans to review the responses to determine eligibility and qualifications to develop a shortlist of the most qualified potential bidders. A formal request for proposals would be conducted next year. The state hopes to announce a private partner -- if the numbers work -- by next fall and close on a financing by the first quarter of 2015, Driskell said. Illinois wants to complete the project by December 2018.
The Illinois Finance Authority would serve as issuer for any PABs built into the financing structure.
The state currently anticipates using an availability payment concession structure under which the developer would design and build the project, provide project financing, operate and maintain the road and provide performance security for its work obligations, according to the RFQ.
In exchange, the developer would receive so-called milestone payments during the construction period and then availability payments according to an agreed schedule over a proposed 35-year period. The state is considering making one or more milestone payments when construction goals are met. The availability payments would be made after much of the project is completed but would be subject to reduction if performance targets are not met.
While the developer “would be solely responsible for financing the Illinois Project,” IDOT expects to pursue a PAB allocation and/or TIFIA credit assistance, the RFQ said.
Illinois’ P3 proposal closely resembles the one used by Indiana for its half of the $2.6 billion Ohio River Bridges project launched earlier this year. Kentucky is responsible for the other half of that project. The project marked the first inclusion of a milestone payment component.
Illinois’ piece of the road will run 35-miles long with four lanes combined and safety shoulders on each side. “Tolling will be a key element of the facility. An All-Electronic Open Road Tolling system will be utilized throughout the Illinois project,” the RFQ reads.
Illinois recently cleared a major hurdle for the project when a regional planning committee voted to include the project in the area's long-range transportation and land use plan. Inclusion in the plan was considered crucial to advancing the project because it is needed to garner federal support. The project faces a similar test with an Indiana agency later this year.
The project is controversial with prominent opponents including Chicago Mayor Rahm Emanuel, Cook County Board President Toni Preckwinkle, and several Chicago planning agencies and environmental groups. A recent report from one slammed the project's value to the region and warned that Illinois could be on the hook for as much as $1 billion.
Gov. Pat Quinn, Indiana Gov. Mike Pence and other supporters defend the project as needed to support the region's traffic, steer trucks off local roads, improve safety, and promote development along its corridor. They estimate it would create 9,000 construction jobs and 28,000 long term jobs. Opponents call those numbers inflated and argue that the highway won’t support serve sufficient traffic to justify the state risks. The project also still needs final approval from environmental regulators.