CHICAGO — The Illinois State Toll Highway Authority board has adopted a $609 million budget for 2012 that anticipates $200 million in toll-backed borrowing as the agency embarks on its $12 billion, 15-year capital program to maintain and expand the 286-mile system.
The authority approved the capital program and a steep increase in passenger tolls in August. The additional toll revenue will go to repay $4.8 billion in borrowing to support the program. “Our budget currently anticipates the sale of $200 million of bonds in mid-2012,” said ISTHA spokeswoman Wendy Abrams. “If market conditions are favorable, we may consider a larger issuance.”
The agency plans to conduct a request-for-proposals process to establish new qualified pools of underwriters and financial advisors ahead of any new issuance to finance the program known as Move Illinois.
The 2012 budget allocates $267.5 million for maintenance and operations. Toll revenues are expected to rise to $973 million next year, from $680 million in 2011, primarily due to the 87.5 % toll increase that takes effect Jan. 1. Debt service has a priority claim on system revenues after operations are funded.
“This balanced budget enables us to prepare for the challenge of undertaking the largest capital program in this agency’s history,” executive director Kristi Lafleur said in a statement. The tollway has promoted the new construction program as a means to create 120,000 jobs while improving mobility and relieving congestion and pollution. Officials estimate the program will generate $21 billion in economic activity.
Facing an end-of-the-year legislative deadline, the agency worked over the last year and a half to craft an encore to its $6.1 billion program launched seven years ago that relied on $3.6 billion of bonding. The tollway wrapped up debt for that program in 2009, and 85% of projects are complete. The congestion-relief capital plan that introduced electronic tolling to Illinois relied on an increase in tolls paid by cash users and commercial traffic.
The agency has exhausted its borrowing capacity under the current toll structure based on its policy of maintaining a two-times debt-service coverage ratio considered critical to its double-A level ratings. The new program funds construction of new toll roads and projects aimed at keeping the 52-year-old system’s existing roadways in a state of good repair through 2026. The program provides $8 billion for improvements to existing roads and $4 billion for new and expanded roadways.
New borrowing would be repaid with revenue from the toll hike for all passenger vehicles and a previously approved commercial vehicle increase that takes effect in 2015. Additional revenue would also come from tolls collected on new toll roads. A taxpayer group in September filed a lawsuit challenging the legality of the toll hike.
Authority documents show that ISTHA is looking at the issuance of 25-year bonds with much of the principal backloaded until existing bonds are retired. An analysis conducted by Columbia Capital Management LLC concluded that the authority has capacity within its current bond indenture to support between $4.5 billion and $5 billion of senior-lien debt based on projected revenue growth from the toll increases.
The average toll plaza rate would rise to 75 cents from 40 cents for passenger vehicles, with the cost of the average car trip on the system rising to $1.18 from 63 cents. Cash payers would continue to pay double the rate of electronic transponder users, who make up about 75% of the 1.4 million daily users of the system. Commercial rate hikes approved in 2008 that will lift rates by 60% between 2015 and 2017 would go unchanged.
The major projects include the reconstruction of the Jane Addams Memorial Tollway, the reconstruction of a portion of Interstate 294, and a new Elgin O’Hare West Bypass. The program also funds planning studies on the extension of Route 53 and the Illiana Expressway, and funding for road and bridge maintenance.
Moody’s Investors Service rates the authority Aa3. Fitch Ratings and Standard & Poor’s rate the tollway’s $4 billion of debt double-A minus. Fitch assigns a negative outlook. Analysts said the rating reflects the tollway’s status as a key part of the Chicago area’s transportation network, a history of strong debt-service coverage and operating reserve levels, on-budget and on-schedule capital plan implementation, and increased revenue concentration in commercial traffic.