Illinois bulldozes tollway board for incoming governor
CHICAGO — The Illinois General Assembly passed bipartisan legislation Wednesday to scrap the current state tollway board, paving the way for Gov.-elect J.B. Pritzker to swiftly put his mark on a top state borrower.
The Senate passed the measure canceling the current terms of nine Illinois State Toll Highway Authority board members following passage by the House on Tuesday.
The governor and secretary of the Department of Transportation serve as ex-officio members bringing the number to 11. The chairman and directors are appointed by the governor and serve four-year terms with no more than five of the members coming from one political party. The executive director is typically hand-picked by the governor.
The bill, along with one giving a 15% pay raises to most agency heads, were the final pieces of legislation approved by lawmakers before adjourning. The new legislature was then sworn in based on the results of the November election.
“These reforms will build transparency and accountability at the Illinois Tollway and help us attract top talent to key positions in our administration,” Pritzker said in a statement.
Pritzker, a Democrat, takes office on Monday. Senate Democrats held on to their three-fifths supermajority and the House’s Democratic simple majority was boosted to a supermajority.
Deep policy, tax, and spending divisions between Republican Gov. Bruce Rauner and the Democratic majorites drove a more than two-year budget impasse that dragged down the state’s ratings, leaving two at the lowest investment grade level.
Legislative leaders were re-elected to their posts. Senate President John Cullerton, D-Chicago, sought to put behind the acrimony of the last four years. “Today a new chapter in Illinois history opens just for us,” Cullerton said. “The people back home have no tolerance for impasse and infighting they want us to get things done.”
Minority House Leader Jim Durkin, R-Western Springs, spoke of the need to take the state in a new direction and move pass “partisan politics” to stem the outflow of residents.
The tollway board shakeup proved an easy sell for Democrats and Republicans as the authority has come under criticism on ethics issues stemming from patronage hiring and favoritism in the awarding of contracts.
Republicans also portrayed their support as a good-faith gesture toward working with the new governor. The authority operates 294 miles of interstate tollways for 12 counties in northern Illinois, including the greater Chicago area.
The authority has through the years faced similar allegations and legislative efforts to exert more control over the otherwise autonomous agency. Leadership has shifted over the years, but the current finance team is led by Chief Financial Officer Michael Colsch, who has been with the tollway since 2003 after spending a decade as state debt manager, and tollway debt manager William O’Connell. Both have managed finances under multiple governors from both parties.
The authority last month refunded $500 million of debt, some for savings and some to trim floating-rate exposure in its $6 billion debt portfolio and shed swaps. Ahead of the sale, Fitch Ratings affirmed its AA-minus rating, S&P Global Ratings affirmed its AA-minus and Moody’s Investors Service affirmed its Aa3. All assign a stable outlook.
The tollway plans $704 million in 2019 capital spending as part of the ongoing 15-year, $12 billion Move Illinois program that began in 2011 and was expanded in 2017 to $14.3 billion. The board has raised toll rates to help finance the program.
The authority has issued $2.8 billion so far of about $6 billion of borrowing planned for the program.
“As an independent authority ISTHA's credit strength is rooted in its strong financial metrics, autonomy to set toll rates to recover costs, and state statute and the bond indenture requirements that keep all excess revenues in the system to be used only for tollway system purposes,” Moody’s said.
Lawmakers face a roughly $1 billion deficit in the current $38.5 billion that runs through June 30 and a more than $1 billion structural deficit going forward. The fiscal 2020 budget is expected to be unveiled in February. The incoming administration has not yet released a report from a transition budget committee with ideas for improving the state’s fiscal picture.
To preserve its ratings, the state must avoid adding to a current $7.4 billion bill backlog and Pritzker and lawmakers will need to identify new revenues to fund a new capital budget. Legalizing marijuana, raising the gasoline tax, and expanding gambling, sports betting are measures under discussion. Leaders said Wednesday a capital plan is a priority this year.
On tackling the rising payment tab for a $133.7 billion unfunded pension burden, Pritzker has said he’s looking at a reamortization of the current pension funding schedule to boost upfront funding levels, and may consider bonding.
Either or both options could threaten the state’s already-low bond ratings.
The authority on Wednesday posted a supplement to its last offering statement notifying bondholders of the legislation's passage. The yield on the 10-year in the tollway's December sale landed at 2.78%, a spread of 38 basis points to the Municipal Market Data's top-rated benchmark.