Arterial Obstruction: The Challenge of Designing & Funding Statewide Capital Plan Gets Harder

May 1, 2008

Traffic often backs up over a Fox River bridge that ends at a congested intersection in downtown Algonquin, located in McHenry County.
Credit Randy Carson
McHenry County drivers can sit in waves of traffic that stretch nearly two miles to cross the Fox River in Algonquin. The bridge at Illinois Route 62 intersects with Route 31, creating daily traffic congestion. 

"We're approaching 40,000 vehicles a day," says Algonquin's village president, John Schmitt. "It's just an astronomical amount, and when you have it on a traffic light, it just doubles the amount of time that it takes to get through there." 

The county northwest of Chicago is booming in population along with neighboring counties. It is outgrowing the infrastructure and the limited number of bridges over the river. 

McHenry County officials agree that part of a solution is to create a bypass around the Algonquin intersection. Nearby Kane County also plans to build two new bridges as another part of the regional approach. 

But Kane and McHenry county officials have been fighting for state funding since the 1990s. They're still lobbying at the Statehouse this spring, competing with a growing list of infrastructure needs across the state. The longer the region waits, the more expensive the work gets. The state originally committed $24 million to the Algonquin bypass, but the unfunded portion of the project now reaches $70 million, according to the Illinois Department of Transportation. 

The fight has come full circle for former U.S. House Speaker J. Dennis Hastert. In 1990, he formed a task force to study Kane County traffic solutions. Nearly two decades later, he's been recruited by Gov. Rod Blagojevich, as has Southern Illinois University President Glenn Poshard, a former state legislator and congressman, to help lobby for a major capital plan that would fund the very projects Hastert's task force helped create. 

Hastert and the state's congressional delegation sent repeated letters to state lawmakers imploring them to break a political stalemate that's choked a capital plan. Without an agreement, Illinois risks losing more than $9 billion in federal funds earmarked for highway and transit projects across the state. 

The federal money will still probably be there, but there's no guarantee, says Mike Daly, spokesman for U.S. Sen. Richard Durbin of Springfield. And delaying a state match to those federal funds means more bad things could happen. "There are more variables brought into play that could work against us. I don't want to overstate this. It isn't that, 'If you don't pass a capital bill this year, the money will not be there.' But it's puzzling to us as to why we would want to gamble like that." 

The political stalemate in Springfield collides with an election year and a slowing economy. The timing also affects state government's ability to sell capital bonds, repay the debt and win voters' confidence that new state spending is justified when Illinoisans already feel pinched by more expensive gas prices and groceries. 

Nationwide, infrastructure funding is bad enough for the U.S. Government Accountability Office to place the federal transportation financing system on its so-called "high risk" list. The report designates inefficient or unsustainable government programs that could fail and drain billions of dollars in the process. 

The National Chamber Foundation of the U.S. Chamber of Commerce predicts the shortfall — the amount spent versus the amount needed to maintain and improve the system — will exceed $1 trillion by 2015. 

Illinois' transportation financing system got a poor review of its own in a comparison report by the Pew Center on the States. The state earned a "C" grade for infrastructure planning. Capital planning and maintenance were listed as "weaknesses." 

The state transportation department says the absence of a capital plan has delayed countless projects. 

"While diligent work on planning these projects has been performed, the funding is simply not there to complete many of them," department spokesman Brian Williamsen said in an e-mail. "It is our opinion that the passage of a capital bill would have made a significant positive impact on these ratings." 

A capital plan also would allow the department to "halt the cycle of capital deficiencies" and allow more than just maintenance projects to be done. 

When the department proposed a five-year plan to improve the state highway system through fiscal year 2013, half of the projects, worth $3.8 billion, would maintain the existing system. Nearly a quarter of them would repair or build bridges, and an additional 20 percent would help ease congestion. 

Even more projects are listed in the plan as "unfunded," which means they're waiting for the state to enact a new capital plan to match federal and local funds already committed. For instance, a Chicago project to improve traffic and safety on Central Avenue would build a new crossing at the rail yards. Currently in the engineering stages, the rest of the project is estimated to cost more than $350 million. That doesn't include the cost of environmental cleanup, according to Williamsen. 

In southwestern Illinois, the governor formed an agreement with Missouri's Gov. Matt Blunt to build a new Mississippi River bridge, including a new connection to the existing interstate interchange. Blagojevich agreed to contribute $313 million in state funds, but $49 million depends on a new capital bill. 

Blagojevich has proposed a program called Illinois Works, a $25 billion plan for roads, bridges, schools, airports and mass transit. The administration says it would support 700,000 jobs and stimulate the economy. Through a series of controversial revenue ideas, including the sale or lease of state assets, the state would contribute $11 billion. It would borrow $3.8 billion. 

That's about $1 billion less than legislators agreed to borrow nine years ago for the state's last major capital plan. 

Then-Gov. George Ryan created Illinois FIRST as part of his first budget. It relied on $4.8 billion in bonding and was a five-year, $12 billion plan largely paid for by increased vehicle registration fees and liquor taxes (see Illinois Issues, November 1999, page 8). 

The economy and the political makeup of the General Assembly, however, were much different then. Ryan's capital budget benefited from higher-than-expected revenues, the opposite of what Blagojevich faces this year. Ryan, a Republican, also sat down and worked out differences between the GOP-majority Senate and the Democrat-controlled House, which still is led by Speaker Michael Madigan. 

Ironing out differences hasn't been a strength of the current leaders, even though they are all Chicago Democrats. The strained relationships, particularly between Madigan and Blagojevich, create a bottleneck for a capital plan. 

People whose jobs depend on the construction industry pay the price. Bill Grams, executive director of the Illinois Road and Transportation Builders Association based in Itasca in DuPage County, says just like infrastructure, asphalt programs go dormant, start to decay and dry up without a constant level of funding. 

Previously, when construction was slow, he says asphalt companies would supplement with private sector work, building parking lots, sewer systems or water systems in new neighborhoods. But the housing slump wiped the private sector jobs off the books, too. 

"Those days are gone," he says. "They can't keep that company going when they still have outflow because every month, they have to pay the bank for the heavy equipment that they have." 

When his members are out of work, it's hard to find a silver lining. 

"My members have unemployed workers, and yet, 70 percent of the money that would get them going working again is sitting in Washington because the Illinois General Assembly can't come up with a viable capital program," Grams says. "That's a travesty." 

So far, the state has used just 5 percent of the $9.3 billion in federal funds earmarked for hundreds of road, rail and transit projects approved five years ago, according to a letter signed by Illinois' congressional delegation and sent to state lawmakers in late March. 

Jim Farrell, executive director of the Illinois Chamber of Commerce's Infrastructure Council, says without a capital plan in Illinois, states that are competing for the same federal dollars will move ahead. The funds are "earmarked under the condition that we're ready to use them," he says. 

The added challenge for the state is that a tight economy makes it harder to justify paying for debt. 

"It's not just the threat of an economic recession which is putting a crimp on the state authorizing new debt and addressing its infrastructure needs," says John Kenward, senior bond analyst in the Chicago office of Standard & Poor's, an independent bond rating agency. "Even on a good year, you're only going to make so much money. And you only have so much to spare for debt. 

"So unless you have some quantum leap in revenue raising — because you're not going to get a quantum leap in the economy — you're looking at limited resources to pay for growing infrastructure needs." 

The revenue ideas suggested at the state level so far, however, are controversial and are expected to draw out the legislative session into the summer. 

The governor proposes leasing 80 percent of the Illinois Lottery to collect an estimated $7 billion. No state has actually sold its lottery, although a handful are considering the idea. 

Blagojevich proposed a full-scale sale last year, but the plan stalled amid numerous questions about the long-term effect of selling a state asset designed to generate money for public education. 

Beverly Bunch, associate professor in the Department of Public Administration in the Center for State Policy and Leadership at the University of Illinois at Springfield, says selling any state asset deserves caution because it uses a one-time revenue source for a long-term obligation. It also brings in a lot of money up front but prevents the state from collecting Lottery revenue over time. A bond issue, similarly, brings in a lot of money quickly but requires the state to continue to repay the debt with interest. 

"In both cases, the end result is a bunch of money now and less money in the future," Bunch says. 

One alternative would be to change the state income tax to a graduated rate, as opposed to the state's existing flat rate applied to all income levels. But the governor has repeatedly vowed to reject any plan that would increase state income or sales taxes, and legislators are unlikely to vote for a tax increase during an election year. 

"Once you take taxes off the table, then people get in boxes and get creative," Bunch says. 

That's led legislators of both parties to propose an expansion of gambling. The state potentially could garner more than $1 billion a year by allowing new casinos or riverboats to open, and existing gaming facilities could expand. One proposal also would allow slot machines at racetracks. 

A complex mix of gaming and political interests often bogs down negotiations in Springfield, particularly as discussions focus on ways to divvy up the new casino revenues. 

The Metropolitan Planning Council, a group of business and civic leaders in Chicago, sent a letter to Hastert and Poshard to say the business community and the public will not tolerate more "inadequate, piecemeal" efforts to maintain the state's infrastructure. 

The group advocates increasing so-called user fees or taxes related to transportation, including license-plate fees and gas taxes. 

Winning the public's trust and support of any revenue idea, however, could be the biggest challenge. 

Residents in Cicero just west of Chicago are skeptical of new government spending, says Dan Proft, the town's spokesman. And that's despite having to veer around "potholes that swallow up a car" in the highly congested areas of Roosevelt Road and Cicero Avenue. 

Cicero collects about $220,000 in motor fuel tax revenues, but that's far less than the $2.4 million minimum estimated to be needed for repaving and maintaining heavily trafficked routes this fiscal year. 

Cook County drivers already pay some of the nation's highest gasoline prices, according to AAA, with multiple layers of taxation. County residents also pay among the nation's highest sales tax in Chicago at a rate of 10.25 percent. And anyone living in a municipality that gets water from Lake Michigan is paying 15 percent more this year. 

"It's fees and fees and fees upon tax increases and tax increases, and frankly, we're a working-class community," Proft says. "We're a community that's got a large senior population that lives on fixed incomes, largely. So no, the problem is that we cannot go back and extract any more blood from this town." 

Others, including Grams of the Illinois Road and Transportation Builders Association, are more optimistic about the public's willingness to pitch in if it means fewer vehicle realignments and flat tires.

"We're in a competitive world and can't continue to fund these things on higher casino taxes and what I think a lot of people feel are gimmicks," he says. "You have to go to the public, and I think that's the issue we're seeing right now. People are saying, 'Tell us what it costs, and if we think it's worth it, we'll pay for it.'"

 

Ironing out differences hasn't been a strength of the current leaders, even though they are all Chicago Democrats. The strained relationships, particularly between Madigan and Blagojevich, create a bottleneck for a capital plan.

Alternate routes 

Federal studies advocate such traditional revenue sources as gasoline taxes, vehicle taxes, tolls, transit fares and public parking fees because they're directly related and solely dedicated to transportation. 

On the other hand, the revenue from those so-called user fees fails to keep pace with inflation and the cost of capital needs. 

As Congress continues to draw down the federal Highway Trust Fund at a fast pace, states take on a larger share of the cost of capital projects. As a result, they're trying numerous alternatives to fund various transportation needs. 

A federal pilot program is allowing participating states to collect tolls on interstate highways as a way to pay for construction projects, according to the Denver-based National Conference of State Legislatures in its May 2006 report, "Surface Transportation Funding Options for States." 

Many states are experimenting with ways to contract with private construction and design firms to build highways and tollways. Georgia lawmakers considered a truck-only toll lane, according to the report. The number of states using bond proceeds to pay for construction projects also is increasing, but so is the cost of retiring the bonds. The amounts also have to be repaid with interest. 

Oregon is trying something entirely different, taxing drivers for the number of miles driven instead of the amount of gasoline purchased. A pilot program started in spring 2006 and ended a year later. Participating vehicles used global positioning systems to track miles driven in state and out of state, and drivers paid the "user fee" instead of a gas tax. 

The mileage tax would evenly apply to cars regardless of fuel efficiency, and it wouldn't be linked to inflation. Opponents fear privacy breaches and lost incentives to buy fuel-efficient vehicles. 

The Oregon Department of Transportation reported in November 2007 that the mileage-based tax test run proved feasible as an alternative to the gas tax to fund roadwork. Oregon's lawmakers are expected to consider model legislation next year.

Illinois Issues, May 2008