CHICAGO — The Illinois State Toll Highway Authority will head into its fourth year of a $12 billion, 15-year infrastructure program with record capital spending planned.
The board at its December meeting approved a 2015 budget that provides $311 million for operations and maintenance and $1.63 billion for capital projects. The agency plans to sell as many as $800 million of toll-backed bonds to finance projects.
"Our goal is to deliver the largest capital program in the agency's history while also supporting thousands of jobs and stimulating the local and regional economies," the tollway's executive director, Kristi Lafleur, said in a statement after the Dec. 18 board vote.
The authority anticipates revenues will increase to $1.17 billion from $1.02 billion this year, because truck tolls will rise under a toll structure approved by the board in 2008. About $1.16 billion will come directly from toll collections and evasion recovery, $1 million is from investment income and $9 million is from concessions and miscellaneous revenue.
About $362 million of the agency's revenues will go to cover debt service owed in 2015.
Operating costs will rise by nearly 4% as expected, due to rising personnel costs for health care and retirement contributions, insurance due to growing workers' compensation expenses, increased costs for fuel, as well as fees for maintenance of a growing fiber-optic network and system technologies.
"The tollway board supports this sound financial plan that will allow the agency to deliver the fourth year of our ambitious and aggressive Move Illinois Program," said board chairwoman Paula Wolff. The authority operates 286 miles of interstate tollways in 12 counties in Northern Illinois.
The long-term capital program was approved by the tollway board in 2011 and is aimed at reducing congestion and pollution, expanding the more than 50-year-old system, improving roads, and creating jobs and economic development in the region.
To support the program, the board adopted a one-time 87% increase in passenger tolls that took effect last year and a 60% increase in commercial vehicle tolls that will be phased in and then adjusted annually based on inflation starting in 2018.
Ahead of a recent sale, Moody's Investors Service affirmed the tollway's senior-lien Aa3 rating and stable outlook that applies to about $5 billion of debt. Fitch Ratings and Standard & Poor's affirmed the authority's AA-minus rating and stable outlook.
"The ratings reflect our view of the system's essentiality and strong financial risk profile," said Standard & Poor's analyst Adam Torres.
The ISTHA bonds are secured by toll revenues and the authority's pledges in bond covenants to charge a rate sufficient to repay debt, fund reserves and maintain a targeted debt-service coverage ratio.
The capital program relies on the issuance of around $1.7 billion between 2015 and 2016, and $2 billion tentatively through 2022.
Rating agencies have described the authority's significant addition of debt to support both the capital program and additional debt-service reserve funding as a challenge, along with managing a big capital program and its high floating-rate and swap exposure.
The forecasted traffic growth rate is also higher than historic growth over the last decade, and if projected growth fails to come to fruition, ISTHA's ability to meet projected debt-service coverage ratios could be pressured.
Positive factors include rapid debt amortization, debt-service coverage ratios forecasted over two times including all planned debt, maintenance of strong liquidity levels, and slightly better than forecasted financial results for fiscal 2013, ratings analysts said.
Strong liquidity helps mitigate above-average exposure to variable-rate debt, and that percentage has been falling. All of the authority's floating-rate securities are swapped to a fixed rate under nine swap agreements with seven counterparties.
Changes also could be afoot at the agency after Gov.-elect Bruce Rauner takes office next month. The authority is managed by 11 board directors, including nine appointed by the governor with the consent of the Senate. The governor and secretary of transportation serve as ex-officio members.
No more than five of the governor's appointments may come from the same party affiliation and they serve four years or until a successor is named, with the governor holding sway over appointment of the board chairman, who serves a four year term.
The board picks an executive director, but the governor typically recommends his pick for the position. Lafleur has held the post since 2010, leading Quinn's push for the capital program.
