The Chicago Transit Board today approved the issuance of revenue bonds to fund $250 million in capital improvement projects. The Chicago Transit Authority's five-year Capital Improvement Program has identified $5 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 $3 billion with $2 billion worth of projects still unfunded.
The Board's approval means the CTA will issue up to $250 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.
"This bond issue will help CTA increase and accelerate our capital investment in the neighborhoods and communities we serve," said Chicago Transit Board Chairman Carole Brown. "Thanks to the strong, bipartisan support of Illinois' congressional delegation, CTA's capital investment program is improving the quality and safety of our service while also reducing operating costs with more efficient infrastructure and equipment."
?CTA has created an ambitious and worthwhile capital investment program and is moving forward on bringing these projects to fruition," said CTA President Frank Kruesi. ?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."
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.
CTA's financial advisors for the revenue bond issuance are First Albany Capital, A.C. Advisory and Scott Balice Strategies. The bonds will be paid back with funds expected from receipt of FTA Section 5307 Funds over the next 10 years. The annual apportionment of Section 5307 Funds to the region has grown consistently including the amount received by the CTA.
The Board authorized the new debt as part of CTA's 2004 Budget Ordinance approved on November 10, 2003 and the RTA Board authorized the debt as part of RTA's 2004 Budget Ordinance approved on December 12, 2003.
The Five-Year Capital Improvement Program invests a majority of its construction projects to neighborhoods. Of those projects designated as either downtown or neighborhood investments, 86 percent are earmarked for neighborhoods.
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 the Cermak (Douglas) branch of the Blue Line. In addition, tax-exempt building revenue bonds, issued by the Public Buildings Commission are helping to finance the CTA's new headquarters currently under construction. This capital investment will save the CTA an average of $7.7 million in annual operating expenses.
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