ILLINOIS:Tolling, Detolling, or Just Venting?

The future of the Illinois tollway system seems likely to remain uncertain for some time to come. Thomas Cuculich, the state governor’s new appointee as executive-director of the Illinois State Toll Highway Authority (ISTHA or in Chicago just ‘the Tollway’) completed a report on options late January. It’s a document about an inch thick, he says. He told me in a meeting at his offices that it lays out some 22 different scenarios ranging between immediate abolition of tolls at one extreme, through to maintaining and expanding the toll system at the other. It makes no recommendation, he said, and has no suggestions on financing: “That’s a political decision.”

The report will be released as soon as the governor, George H. Ryan, has been briefed on it, Cuculich said. Weeks have passed and still the Governor has not been briefed, or the report released.

Tolls no longer seem very high on the Ryan’s list of priorities. He is teetering on the edge of a widening corruption scandal from his pre-governor job when he ran the motor registry system in Illinois as secretary of state. Three of Ryan’s subordinates from those days have been indicted on corruption charges and the prosecutor in the case has said he cannot exclude the governor. Those indicted had been doing favors at the motor registry for people making financial contributions to Republican campaign funds that were destined to help elect Ryan governor. Ryan had absolutely no idea what his subordinates and appointees were doing on his behalf, he says, and is shocked by it all. Yeaaah.

Cuculich told me the governor is “a good man” and that “all this will pass.”

That may be more hope on his part than hardheaded expectation. Cuculich is a likeable guy, smart, able, and doing his best to serve his boss, and hopefully his report is a hardheaded catalog of possibilities. But if Gov Ryan thought Cuculich could conjure up some financially viable and politically attractive alternative to the tollway, he was kidding himself. Mission impossible.

“Very objective”

Cuculich says his report “lays out very objectively what’s here, what’s needed, what it could look like in 2017, and how it would work with tolls, with some tolls, and with no tolls.” He said it looks at the impact of different Tollway scenarios on traffic, and above all lays out the costs and the revenues.

Does it address how you make up for the $320m/year in present toll revenues or handle the billion dollars of debt of the tollway, I asked?

“No I don’t deal with that. That is an issue for elected officials. We don’t get into that. The report doesn’t deal with politics.”

But isn’t that the big dilemma?

Cuculich seemed to agree with my suggestion that it was most unlikely the Governor would push for a large enough gas/fuel tax increase to get rid of tolls. If the tollway is currently bringing in $320m/year in tolls vs a state total of $1200m in gas/diesel taxes at 19c/gas tax, then to replace the tolls would require a statewide fuel tax increase of 27% or 5c/gal. If the fuel tax increase were confined to the Chicago area, where the tollway is located, and where gas/diesel tax yields about $800m, then the rise would need to be 40% or 8c/gal.

Gas taxes in the range 24c to 27c/gal compare with Wisconsin next door (25.4c) but that is hardly a comparison an Illinois Republican wants to make, since it conjures up an image of a big-spending/high-taxing liberal state. Connecticut got rid of its turnpike (I-95) in the early 1980s and its gasoline tax went to the highest in the country (32c/gal).

Just last year Ryan did bite a political bullet in steeply raising motorist license fees to raise more money for roads and transit under a program dubbed Illinois First, but he expended a lot of political capital on that, and seems most unlikely to repeat the exercise. Income and sales tax increases are no easier. And the state is already heavily borrowed.

“Finding the money” for any detolling, if they want to go that route, is being left to the governor and legislators.

Normally a new governor gets his way in Illinois but Gov Ryan has by now gotten the reputation for being something of a wild man, who shoots off in all kinds of unpredictable directions. For example, not long ago he made an official visit to Cuba. He has apparently ruled out any privatization of the tollway. It is regarded by many supporters and opponents as a kind of permanent Republican political institution, just as Cook county and the city of Chicago are regarded as Democratic Party property. But if it couldn’t be privatized because it is almost a piece of party political property, then could the Guv be serious about abolishing it through detolling and transferring the assets to the state department of transport? Maybe he was just venting, blowing hot air, steam... and the odd shot of toxic gases?

And given the Governor’s troubles he may have difficulty getting legislative support for any decisions he makes.

Many have said that the Tollway is an especially loathed local institution.

I asked Cuculich why there is such opposition to tolls in Illinois, since surely people know that one way or another they’ll have to pay for the roads. He said that it was partly that it was so irritating having to wait in line at the toll plazas to pay. He remembers it personally since he drove a truck around the tollways himself, earning money to get through college. He added: “But at the core of it is a past promise. People were always told that once they were paid for they’d be free. That anger is then compounded by the congestion at the toll plazas, when people get to think about that.” (Contact Thomas Cuculich 630 241 6800x1000)

Annual Report for 98 just out!

ISTHA has just released its annual report - for 1998! Exec-dir Tom Cuculich says it was all a big mess-up, that it had been ready six months ago, but there was disagreement about whether to produce it in its normal glitzy glossy format, and it just lay around for months until someone said: “What the heck happened to the annual report.”

Anyway it’s glitz-minus, still full of hip ad agency phraseology, but printed in condensed form on uncoated paper. “FAST FORWARD” says the title on the cover, a forlorn cry at a time when morale is in the doldrums and the Governor talks of abolishing the agency. At least the report manages to promote I-PASS strongly. The cover pic has a dedicated I-PASS lane with the 30mph over the top, an aspect of retrofit to existing toll lanes in which ISTHA has been much bolder than the toll agencies of the northeast where the limit is 5mph.

The report is all about selling the virtues of electronic tolling. This year ISTHA is finally due to extend its I-PASS ET to commercial vehicles. The Authority says ET – which constitutes about 23% of toll transactions – is making a “measurable” difference to throughput through the toll plazas. It cites: ETX 2,250 cars/hr, ET-only (30mph) 1,440 cars/hr, automatic coin 650, and manual 300.

Yet ISTHA says ET is “only part of a larger solution to mitigating congestion” that includes improving interchanges and plazas, widening roads plazas, performing high standard maintenance and introducing advanced traffic surveillance to rapidly deal with incidents and warn motorists of delays. At a number of points in the system just pumping vehicles through the toll plazas faster will only have limited benefit by itself because of non-toll chokepoints, such as lane drops, turbulent merges and weaving sections.

1998 saw only a small increase in toll revenues – 1.7% up on the year before to $323m. Concessions and other income amounted to just over $10m for total revenues of $334m, a 3.2% rise. Concessions revenues more than doubled from $4.4m to $9.7m, apparently because of new concession contracts. (The Illinois Tollway has most distinctive service plazas, impossible to miss from the road, since most of them are right over the top of it, on a bridge structure. Only the parking is on terra firma. The bridge buildings must generates valuable signage rights.)

Toll collection and services cost $50.7m, maintenance and engineering $26m, policing and safety $12m, insurance and employee benefits a whopping $34m, and admin $10m, for total operating costs of $133m and an operating surplus of $201m. Depreciation and amortization of capital is $129m, interest expense $55m. After interest income and other items the tollway reports net income (profit) of $44m. Its major liabilities are $867m of outstanding bonds and its total assets are valued at $1,830m – an historic cost valuation since the system would cost 2 to 3 times that to rebuild.

This is very conventional accounting, but in the absence of regularly trading the shares of the enterprise and establishing capital value in the marketplace, it leaves no way of properly valuing the assets and little basis for properly pricing the road. Only every ten or fifteen years when major new capital programs are needed, and new bonds have to be sold, does the light of economic reality shine in. And that can set off a political firestorm!

One of the ironies of the annual report is that it contains a Letter from the Governor, George Ryan, the man who since then has since threatened to take down the Tollway, which includes this tribute: “The Authority plays an essential role in the growth of the regional economy and the entire state. It provides a safe, well-maintained and convenient system of roads that link our citizens to the rest of the country. As we look to the future, I know the Authority will continue to construct and operate Illinois’ tollroads to keep pace with the continually increasing traffic volume. The progress the Authority has made in implementing the I-PASS system is merely one example of how the Tollway sets the standard in applying technology to better serve its customers.”