Illinois RTA readying $300 million in borrowing for cash flow and capital

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CHICAGO — The Regional Transportation Authority of Northeastern Illinois is prepping two sales totaling $300 million to manage its operating and capital needs.

The RTA board on Thursday approved $150 million in working cash flow notes slated for sale as soon as May and $150 million of 30-year general obligation bonds slated for sale as soon as June. The state is late in making aid payments and there are few signs that a capital funding drought will end soon.

“With all of the challenges we have faced and are facing, we continue to manage,” said RTA spokeswoman Susan Massel. “We have a state budget and a steady flow of payments and two-thirds of our revenue is sales tax and that is never late.”

Aid payments are not needed to meet debt service on the agency’s $2.2 billion of debt.

Despite the end to a two-year state budget impasse last July, the state owes the RTA $485 million, up from $447 million on which the state was in arrears last April. The RTA provides fiscal oversight of the Chicago Transit Authority, Metra commuter rail, and Pace suburban bus service.

“The notes will retire existing notes in the amount of $150 million as well as provide the opportunity to address cash flow interruptions related to the state’s late payments,” board documents say.

The RTA is using a team made up of minority, women, and service-disabled veteran-owned firms, including Loop Capital Markets LLC and Ramirez & Co. Inc. in the lead spots, and Drexel Hamilton LLC and Siebert Cisneros & Shank & Co. LLC.

The RTA had $100 million of short term borrowing authority. As as the state began to fall behind in payments in 2010, lawmakers granted $300 million in temporary additional authorization. The General Assembly has extended the extra authority through June, and future borrowing will depend on lawmakers renewing it this year. Short term borrowing cost the RTA $5.7 million in interest last year.

The RTA factored the long term borrowing into its five-year $4 billion capital program approved in December to pay for “a variety of projects including rolling stock, track and structure, electrical, signal and communications, support facilities and equipment, and stations and passenger amenities,” board documents show. Capital spending for 2018 is set at $1.2 billion.

The $150 million is what’s available in the RTA’s $800 million of state-approved Strategic Capital Improvement Program bond authorization. This marked the fourth year that the RTA hasn't received an infusion of either state capital cash or new bonding capacity. The CTA will receive 50% of the proceeds, Metra 45%, and Pace 5%.

The RTA carries ratings of AA from Fitch Ratings and S&P Global Ratings. Both assign a negative outlook. They affirmed the rating before a sale last year. Moody’s dropped the RTA two notches to A2 before the resolution of the state budget impasse last year. It wasn't asked to rate the RTA’s 2017 deal.

The RTA’s general obligations are secured by its share of pledged sales taxes collected in Chicago and its surrounding counties and state public transportation funds. The RTA operates on a $3 billion budget.

The RTA’s service boards raised fares last year to offset a state cut in funding. Lawmakers imposed a 2% state administrative fee on sales tax collections as part of the state’s fiscal 2018 budget, and the RTA’s aid appropriation was cut by 10%. The fee will cost $24 million this year, while the aid cut results in a $30 million loss.

“The recently passed state budget includes manageable reductions to authority revenues,” Fitch said of the cuts in its latest report. “However, there is a risk that continued fiscal stress at the state level could result in additional revenue reductions in the future, which could diminish resilience.”

The RTA has warned that existing capital resources fall far short of what’s needed to keep its stock in a state of good repair and undertake expansion projects, even with CTA borrowing and federal support for some projects. The agency has estimated its service boards face a $37.7 billion 10-year tab for maintenance and capital investments.

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Budgets Primary bond market Regional Transportation Authority of Northeastern Illinois Illinois