The Chicago Transit Board today approved the issuance of revenue bonds to fund $275 million in capital improvement projects. The Chicago Transit Authority's five-year Capital Improvement Program has identified $8 billion worth of projects necessary to reach and maintain a state of good repair. The issuance of revenue bonds will bring the amount of secured funding of the program to $2.7 billion, with $5.8 billion worth of projects still unfunded.
In addition, the Board also approved restructuring of tax-exempt building revenue bonds issued by the Public Building Commission in March 2003 to finance the construction of CTA's current headquarters at 567 W. Lake Street. The capital investment made in the building is helping CTA to save an average of $7.7 million in annual operating expenses. As a result of current market interest rates, CTA will restructure the annual lease payments made to the Public Building Commission, which is expected to save the agency money in the long term.
The Board's approval of the bond issuance means the CTA will issue up to $275 million in tax-exempt Capital Grant Receipts Revenue Bonds backed by the pledge of Federal Transit Administration Section 5307 Funds. Section 5307 Funds are made available on a yearly basis to urbanized areas to finance capital and planning assistance for mass transportation.
With insurance, the bond issuance is expected to be rated AAA.
"CTA needs $8 billion over the next five years to bring its infrastructure to a state of good repair and this bond issue will help CTA increase and accelerate capital investment in the bus and rail system," said Chicago Transit Board Chairman Carole Brown. "The right capital investments can decrease operating costs, increase reliability and improve overall service quality. Without reaching and maintaining a state of good repair, CTA would have difficulty in providing quality transit services to customers."
?The magnitude of this program and our ability to advance capital projects demonstrates the commitment we have to rebuilding and improving the infrastructure for our
customers," said CTA President Frank Kruesi. ?We run a 24/7 operation with a heavy and growing daily demand. Timely maintenance and replacement of aging assets is necessary to keep trains and buses running, to keep our facilities safe and efficient, to incorporate technologies that will improve service for our customers, and to control future costs."
Issuing longer-term debt for these projects is similar to using a mortgage to pay for a long-term capital project up-front and paying off the debt over time.
The funds will be used to support a range of projects already underway such as the purchase of new rail cars and new buses, rehabilitation of the Howard and Wilson stations on the Red Line, mid- and quarter-life rehabilitation of rail cars, track and signal upgrades, and fiber optic installation to improve communication and security.
CTA's financial advisors for the revenue bond issuance are A.C. Advisory and Gardner, Underwood & Bacon, LLC. The bonds will be paid back with funds expected from receipt of FTA Section 5307 Funds over the next 15 years. The annual apportionment of Section 5307 Funds to the region has grown consistently including the amount received by the CTA.
The Board authorized this bond issuance as part of CTA's 2005 Budget Ordinance approved on November 8, 2004, and the RTA Board authorized the debt as part of RTA's 2005 Budget Ordinance approved on December 16, 2004.
The new bond issuance will not be the first venture into the market for the CTA. On March 5, 2003, the Chicago Transit Board authorized the CTA to leverage CTA's Full Funding Grant Agreement with FTA to accelerate funding for reconstruction of 54th/Cermak branch of the Blue Line. The project was completed and the bonds were redeemed on June 1, 2006. On August 14, 2004, the Chicago Transit Board authorized the issuance of $250 million in Capital Grant Receipts Revenue Bonds secured by the pledge of Section 5307 Funds to address CTA's unfunded capital needs. These bonds will be redeemed through 2016.# # #