CHICAGO — Illinois announced yesterday plans to competitively sell $400 million of new-money general obligation bonds on Sept. 16, the first leg of borrowing to finance shovel-ready road and bridge projects that are part of a $31 billion capital program.
Many of the projects were approved in a mini, so-called Jump Start capital budget lawmakers adopted and Gov. Pat Quinn signed into law in the spring. It was later folded into an overall $31 billion capital works program dubbed Illinois Jobs Now that Quinn signed into law in July.
“Thanks to the Jump Start capital program, the state of Illinois is investing in more than 240 road and bridge projects that are under construction right now,” Quinn said in a statement yesterday. “Today, 858 miles of Illinois roadways are being made smoother and safer, and thousands of Illinois men and women are bringing home paychecks.”
Officials said recent litigation filed by the liquor industry challenging the tax and fee increases that lawmakers adopted to raise the revenue needed to help support the state’s share of the $31 billion package does not directly impact the upcoming sale aside from being a disclosure issue.
That’s because Illinois’ repayment plan for the new issue does not rely on the taxes and fees being challenged. The revenue needed to repay about $300 million of Jump Start road and bridge projects to be funded with bond proceeds will come directly from the state’s road fund. The other $100 million worth of projects will to be funded with bond proceeds approved prior to passage of the new capital program and are being repaid with previously authorized general funds.
The state’s share of the capital budget — $13 billion — will be raised from bonding and pay-as-you-go funding from the road fund. The bills that make up the capital budget package authorize $3.6 billion of new GO and sales-tax backed bonding. That authority is intended to fund the first two years, with additional authorization needed in future years.
The state would repay borrowing with $150 million annually taken from the road fund, $122 million generated from a hike in the motor vehicle title fees, and $180 million from an increase in licenses plate fees. Another $300 million would come from expanded gaming, including the installation of video poker machines at restaurants and bars, $109 million from a liquor tax hike, and $53 million from increased taxes on candy, sweet tea, coffee, and personal hygiene items.
The complaint filed late last month by Rocky Wirtz, who operates a major liquor distribution enterprise, argues that pieces of the revenue package violate state and federal law. He wants to restrain and enjoin the disbursement of public funds for the programs created by the challenged legislation.
The litigation attacks the adoption of the liquor tax increase as a violation of the state’s Uniformity Clause because it raises the tax on hard liquor by 90% but on beer by only 22%. The litigation also contends the establishment of video poker violates federal laws because, although the state will regulate the gaming enterprise, it won’t operate it or own the terminals.
The upcoming deal marks the second in a series of financings planned this year for cash-flow purposes, to raise new money, to restructure existing debt, and to fund a portion of the state’s fiscal 2010 pension payment. Illinois recently sold $1.25 billion of cash-flow certificates to raise money to relieve a backlog of overdue bills.
The state’s GOs are rated AA-minus with a negative outlook by Standard & Poor’s, A by Fitch Ratings, and A1 by Moody’s Investors Service. Standard & Poor’s downgraded the state to AA-minus from AA in March and recently changed its outlook to negative. Fitch in July downgraded the state’s GO rating two notches to A. Moody’s in April lowered the rating to its current level and in July placed the credit on negative watch.