CHICAGO — The Regional Transportation Authority of Illinois will receive $442 million in long-awaited state bonding proceeds for capital projects, representing the first installment of $2.7 billion of transit funding in the state’s capital budget, Gov. Pat Quinn announced Thursday.
“Our mass transit systems drive Illinois’ economy and we must invest in them to continue our economic recovery and create jobs,” Quinn said at a news conference where he announced $500 million for transit projects. “This important capital investment will improve the safety, reliability and efficiency of the public transportation systems that people throughout Illinois rely on.”
The RTA will receive $442 million of the $500 million for its service boards, which include the Chicago Transit Authority, Metra commuter rail and PACE suburban bus service. The RTA will distribute $253 million to the CTA, $157 million to Metra and $32 million to PACE. The remaining $58 million will be distributed by the state to other transit agencies outside the Chicago area to finance improvements.
The CTA will use the funds to help eliminate slow zones, rehabilitate elevated train stations, improve the safety of existing infrastructure, and increase accessibility, according to officials. Metra will use its share to buy new electric cars and to fund reconstruction and improvement projects at eight stations. PACE will finance bus improvements, purchase new paratransit vehicles and upgrade its radio system.
The announcement marks an end of a long funding drought for the RTA in new state capital assistance. The authority exhausted its legislatively approved bonding authority in 2006 and the financially strapped agency has diverted $300 million in federal capital funds to permitted operating costs the last two years.
Transit officials were bolstered by the inclusion of $2.7 billion in the $31 billion capital budget approved by the General Assembly and signed by Quinn last summer, but the allocation left the RTA reliant on the timing of state bonding because it did not authorize new issuance.
The state issued $900 million of Build America Bonds last week. The taxable general obligation bonds add to the pot of new-money debt sold in recent months to bankroll the capital budget.
Illinois debt manager John Sinsheimer said the state won’t need to borrow again until next spring. Additional legislative authority will also be needed for more bonding tied to the capital budget.
The RTA and its service boards have struggled to meet both operational and capital needs, although a sales tax increase last year helped on the operations side. State delays in aid for operations prompted the authority last week to issue $140 million in working cash flow notes.
All three rating agencies downgraded the RTA’s $2.3 billion of debt ahead of that sale due to its revenue struggles and state payment delays exceeding $300 million. The agency is rated AA-minus with a negative outlook by Fitch Ratings, AA and stable by Standard & Poor’s, and Aa3 and stable by Moody’s Investors Service.
The RTA’s ability to address ongoing capital needs while maintaining prudent leverage ratios will be closely watched by analysts who view that challenge as a potential downgrade factor. The agency’s current five-year capital program from 2010 to 2014 totals $4.7 billion. About $1.4 billion of that is estimated for projects in 2010, with nearly all of that amount being devoted to repairs to existing equipment.
“The authority’s aging equipment forces operating expenses that would normally be used for improving or expanding service to be diverted to habitual system repair,” Fitch wrote. “Timely action and proactive cost controls will be necessary to maintain adequate levels of service, safety, and state of good repair.”
The RTA recently unveiled its first formal capital-needs assessment report, warning that $24 billion worth of infrastructure work is required over the next decade. About $13 billion is needed for overdue work on equipment and facilities.