Illinois spending $31bn to boost infrastructure

Governor Pat Quinn signed into law the state’s first major construction plan in 10 years, which will pump billions into state and local transportation agencies but is unlikely to meet projected spending shortfalls. Some are looking to PPPs to fill the remaining gap.

Vowing to “prime the pump” on the economy and put every able-bodied person in the state to work, Illinois Governor Pat Quinn on Monday signed legislation that aims to create over 400,000 jobs through the investment of $31 billion in state infrastructure projects.

Quinn: signing on the
dotted line for job creation

The bill, titled “Illinois Jobs Now!”, will set aside $14.3 billion in funding for road and bridge repair and construction. Another $7 billion will go toward upgrading and developing airport and rail transportation networks, including high-speed rail. And a further $3.6 billion would go toward funding preschool through 12th grade school construction, maintenance and educational programs and resources.

The remaining $6.1 billion will be divided up among a mixture of higher education, environmental and community and economic development projects.

These local funds will also enable Illinois to access up to $3.7 billion in matching federal funds from the American Recovery and Reinvestment Act, which will help support over 439,000 jobs during the bill’s six-year investment horizon, according to a statement issued by Quinn.

The state’s unemployment stood at 9.9 percent in May, placing it slightly above the most recent US-wide unemployment rate of 9.7 percent, according to the Bureau of Labor Statistics.

At a signing ceremony in Chicago, Quinn praised the legislation as “a special bill that took a lot of time to do”. Since the state’s last major construction plan in 1999, Illinois’ demand for new investment in public transportation and infrastructure has far outstripped its ability to fund it. As a result, much of the money authorised by the bill will go toward maintaining and fixing existing infrastructure rather than new construction.

For example, Chicago’s Regional Transportation Authority, the municipal corporation in charge of the city’s regional subway, bus and commuter rail services, will receive $2.7 billion under the bill. But little of the money is likely to go toward about 10 new projects under assessment.

“We believe here at the RTA that if we got anything less than $3 billion, most of that would have to just go toward upgrading the existing system,” said Steve Schlickman, executive director of the RTA. A 2007 strategic review identified a $10 billion shortfall in the authority’s funding, so “the $2.7 billion helps reduce the shortfall, but as you can tell, there’s a lot left to be addressed”, he added.

The RTA is examining the use of public-private partnerships (PPPs) as one tool to cover the rest of that funding shortfall, and has retained Chicago-based financial advisor Scott Balice Strategies and accounting firm KPMG to assess projects for potential PPPs, Schlickman said.

Other allocations in the bill are likely to spur new construction, which could present opportunities for private contractors and developers. Of the $14.3 billion dedicated to roads and bridges, $4 billion is slated to go toward new projects. And $400 million of the $7 billion for rail and airport transportation networks will be dedicated to developing Illinois’ high-speed rail corridor, which would link Chicago with other Midwestern cities such as St. Louis and Detroit. The rail project could access up to $2 billion in federal stimulus funds earmarked for such developments.

“We want to get Cubs fans to St. Louis real fast on a fast train and we want Cardinals fans up here to see Chicago and spend money in Chicago. We have to have high-speed rail,” Quinn told supporters at the signing ceremony.

Illinois will fund its $13 billion share of the bill’s total price tag by issuing 20-year bonds backed by fee and tax increases and an expansion in legalised gambling. Drivers’ license fees, for example, will be doubled and sales taxes on candy, coffee, grooming and hygiene products, wine, spirits and certain beer products will all increase. The implementation of a video gambling scheme is expected to contribute $300 million toward the bond issue.

Local and federal matching funds will contribute the rest of the $31 billion price tag.