Illinois RTA sets budget, turns to search for long-term capital
CHICAGO — The Illinois Regional Transportation Authority heads into the New Year with a $3.1 billion operating budget, a $4.3 billion five-year capital program and improved odds that its infrastructure funding drought will end.
The RTA board has signed off on the budgets for its three service boards that operate in the Chicago area: the Chicago Transit Authority, Metra commuter rail, and Pace Suburban Bus. The RTA provides fiscal oversight of the three.
CTA and Metra will maintain existing service levels while Pace is making some reductions and route eliminations. None are raising fares.
Operating revenue comes from passenger fares and other system-generated revenues such as leases and advertising, which is forecast to rise by 2% to $1.2 billion. Public funding from sales tax, state funding, and other sources is projected to increase to $1.9 billion in 2019.
Regional transit ridership in 2019 is forecast at 571.6 million rides, a decrease of 1.1% from 2018. Low gas prices, the growth of transportation network companies such as Uber, and changing consumer habits such as telecommuting and online shopping continue to impact transit ridership, officials said.
“Together, we produced a fiscally responsible and balanced regional transit budget and capital program with a focus on benefiting our region’s riders,” RTA executive director Leanne Redden said in a statement Thursday. “As we move towards the future, the RTA will continue to push for sustainable, long-term funding for our transit system.”
While the RTA has identified funding for a five-year $4.3 billion program, its long-strategic plan adopted earlier this year prioritizes projects totaling $31 billion over the next decade if more funding can be found. State capital aid ebbed in 2015 as a $2.7 billion transit authorization from the 2009 infrastructure package dried up and the RTA has little room left in its state-approved bonding capacity.
Transit officials are joining others in amplifying the volume of calls to approve an infrastructure program although a funding scheme has not yet been identified.
Chicago Mayor Rahm Emanuel and other planning organization are calling for a motor fuel tax increase to help pay for it. Gov.-elect J.B. Pritzker has called a capital bill a priority he hopes to move on quickly after taking office and has suggested expanded gambling and legalizing recreational marijuana are potential revenue sources.
“If you want us to run a next century transportation system we need to actually fund it and support it with a model that is actually sustainable,” Redden said during a panel discussion on transit needs hosted by the City Club of Chicago earlier this month. “We should be investing triple what we have today. Transit does not operate in a vacuum; it’s really a driving factor of the vibrancy and economic vitality of this region as a whole.”
The CTA, which operates the second largest transit system in the nation, accounts for $1.55 billion of the RTA’s overall operating budget, up by 2.5% due to increases in labor, fuel, power, and other expenses.
Metra, which runs commuter trains linking suburbs with Chicago, accounts for $822 million, up 3.1% due to similar reasons as the CTA. Pace will spend $236 million, up 4.8% due to ridership growth and contractor price increases.
Debt service consumes $237 million and the authority will spend $187 million on paratransit for individuals with disabilities. Insurance and other programs make up the rest of annual operations.
The 2019 budget incorporates a $29 million state funding hit from the General Assembly’s imposition of a 1.5% surcharge on RTA sales tax collections and a 5% reduction in the state public transportation fund match of the sales tax and the real estate transfer tax.
The service boards will spend $841 million in 2019 on capital, down from $1.15 billion spent this year. The number falls far short of what’s needed “to address the region’s growing backlog of capital needs and move forward,” the agency warned. “The region should be investing $2 billion to $3 billion annually.”
Federal funds cover about three-fourths of the five-year funding proposals, with RTA, CTA, and Pace bond proceeds covering 21%, and other local funds rounding out the program.
The five-year capital plan calls for CTA spending of $2.88 billion to modernize and add capacity with funds earmarked for its Red Purple Modernization project, new bus fleet, and new rolling stock improvements. Strapped for funds, the CTA has made use of the federal government’s Transportation Infrastructure Finance and Innovation Act for low-cost borrowing and benefited from a special transit tax-increment financing district.
Metra will spend $1.16 billion over five years with a focus on bringing its fleet to a state of good repair and improving service.
Pace makes up the remaining $290 million with the majority of funding going towards state of good repair projects that focus on acquiring new buses, updating and improving support facilities and equipment, and renovating and improving the passenger experience at stations and stops.
The RTA and CTA won an outlook boost from Moody's Investors Service over the summer on $5 billion of combined debt as the city and state’s downward credit pressures stabilized.
Moody’s affirmed the A2 rating and raised the outlook on the RTA’s sales tax bonds to stable from negative affecting $1.6 billion of debt. The RTA has about $2.2 billion of debt, including $285 million of working cash notes not rated by Moody's. The RTA has relied on a note program to manage through state aid delays during the budget impasse that ended in July 2017.
The RTA credit profile benefits from ample coverage of maximum annual debt service from a regional sales tax that’s levied on a broad economic base, and the importance of mass transit to the greater Chicago area served by RTA's service boards.
The strengths are offset by the RTA’s exposure to increasing fiscal pressures due to the state's, Chicago's, and other local governments' pension woes.
The RTA carries ratings of AA from Fitch Ratings and S&P Global Ratings. Both assign a stable outlook.
The CTA received a boost to a stable outlook from negative on its $3.3 billion of sales tax revenue bonds and $64 million of lease debt that is rated at A3 and Baa1, respectively. Both ratings were also affirmed.
“The stable outlook reflects the recently stabilized credit positions of key related governments, Illinois and Chicago,” Moody’s wrote in both reports. “Moreover, the importance of transit to the area served by RTA operating units should limit adverse actions by Illinois and Chicago, despite the long-term liability pressures that these governments face.”
Moody’s added that with solid economic trends in Chicago and suburban area, pledged regional sales tax collections are expected to increase, supporting both the RTA and CTA’s credit profiles for the next one to two years.
The CTA carries ratings in the single A category to double-A on its sales tax bonds from other rating agencies and from the BBB to single A category on its capital grant-backed bonds.