CHICAGO - The Regional Transportation Authority of Illinois yesterday approved a $2.6 billion budget for next year that relies on federal aid to fund capital projects amid the ongoing drought in new state borrowing.

The RTA spending plan includes a $1.3 billion budget for the Chicago Transit Authority, a $600 million budget for Metra commuter rail, a $200 million spending plan for Pace suburban bus service, and $100 million for disabled services, said chief financial officer Joseph Costello. The agency will receive $400 million in federal capital aid to distribute to the three boards.

The CTA and Pace recently announced an increase in fares to avoid service cuts. Metra earlier this year also raised fares. The RTA had warned in September of a combined $190 million shortfall at the three service boards under its direction due to rising fuel and maintenance costs, a drop in state funding, and sluggish sales tax collections.

The agency expects about $30 million in lost revenue from free rides provided to seniors under a provision added by Gov. Rod Blagojevich to a transportation bailout package approved last January by state lawmakers. The bailout included an increase in the region's sales tax and an increase in Chicago's tax on real estate transactions that are expected to provide an additional $530 million annually for transportation.

About $1.4 billion of the agency's budget comes from sales tax collections and matching state grants. The current budget anticipated a more than 2% growth rate in sales taxes but now only flat growth is expected. The RTA does not anticipate much improvement next year as the economy continues to falter.

The RTA last year unveiled a strategic proposal - called Moving Beyond Congestion - that sought state legislative support for $10 billion of capital investments over the next decade. The plan projects the need for $34 billion over the next three decades to maintain the current transit system, and $57 billion to expand it.

"We need a capital bill. Not only does the lack of new capital dollars keep us from renewing and improving equipment, but it costs more to operate the system with old equipment," he said, adding that the agency has a list of projects worth hundreds of millions of dollars it could move quickly on should the federal government adopt a construction stimulus package for local governments.

Various capital plans of at least $25 billion have been floated at the state level, but funding plans remained elusive as lawmakers and the governor feuded. The state wanted to lease the lottery to raise $7 billion, but the U.S. Department of Justice said states must retain a majority interest in their lotteries. State officials are hoping for a rule change next year after President-elect Barack Obama takes office.

Officials acknowledge that a capital budget will take a backseat in the legislative session that begins next month as the state faces a $2 billion budget deficit and is considering impeachment proceedings against the governor following his arrest last week on federal corruption charges. But, they are hopeful that should Lieut. Gov. Pat Quinn take office, he would enjoy a more cooperative relationship with lawmakers.

The authority, which has more than $2 billion of outstanding debt, was last granted new bonding capacity of $1.3 billion in 1999. Only about $10 million of authorization remains under its Strategic Capital Investment Program, in which the state reimburses the agency for debt service. Another $100 million of non-SCIP authorization also remains unused, but the agency can't afford to issue it. The agency's debt is rated in the mid-to-high double-A category by the three rating agencies.

The RTA board also gave Costello authority to look for a replacement for Depfa Bank as the liquidity provider on a $148 million floating-rate issue from 2005. Since the bank's downgrades, all of the debt has been put back to the bank and the RTA is paying a rate in the 3% range. Public Financial Management Inc. is acting as the agency's financial adviser.

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