DALLAS – The Northern Indiana Commuter Transportation District is issuing $89.1 million in tax-exempt limited obligation revenue bonds to fund the installation of a federally mandated positive train control safety system to its existing rail infrastructure.
NICTD plans to use the bond proceeds to purchase equipment and cover other costs associated with the PTC system and pay off $9.9 million in short-term debt issued last December to begin work on the rail upgrades. They mature in March.
Bank of America Merrill Lynch is senior manager. Barnes & Thornburg is bond counsel. The bonds are expected to price on Wednesday.
Standard & Poor's assigned its AA-minus rating to sale.
PTC was mandated by Congress in the rail safety improvement act of 2008. It relies on an automatic braking system that uses a GPS system and wireless signal to track a train's speed and location slowing or stopping trains in danger of a collision or derailment.
In October Congress approved a deadline extension for PTC installation to Dec. 31, 2018, from the original Dec. 31, 2015 deadline. Railroads across the nation had threatened planned to shut down service because they couldn't make the original December 2015 deadline.
NICTD serves four counties in the state of Indiana -- St. Joseph, LaPorte, Porter, and Lake -- and 19 stations along its South Shore line from South Bend, Indiana to Millennium Station in Chicago. The commuter rail line also serves the south side of Chicago and shares part of the track with the Chicago area Metra rail system.
In fiscal 2015, the district carried an estimated 3.6 million passengers who paid an estimated $20.7 million in fares. Its operating expense budget was $44 million for fiscal 2015.
Construction of the PTC will be undertaken by the Parsons Transportation Group, based in Washington, D.C.
NICTD had an additional $18.2 million of outstanding debt as of Jan. 1, 2016 in the form of limited obligation capital grant receipts revenue bonds from a 2007 issue that is due in 2022.
The upcoming issue is secured by commuter rail service and electric rail service funds. The commuter rail service fund is funded by the states' sales and use taxes and distributable property railroad card companies taxes.
"The money in the commuter rail service fund is by state statute appropriated to the district," according to S&P's ratings report. "However, before money is distributed to the district, the governor of the state must approve distribution. To date, the governor has never failed to approve any distribution to the district."
The other source of funding comes from the electric rail service fund, which is a special fund created by Indiana law. The system has no future debt plans at this time that would be secured by the two funds.