CHICAGO - A federal court judge last week ordered tolls on the Chicago-Calumet Skyway to be increased to $2 per trip from $1.75.
Bondholders petitioned for the increase last September. They hope that greater revenues will allow the skyway to pay off the remaining $90.2 million of debt that it defaulted on in 1963.
In his ruling, Chief Judge James Moran of the U.S. District Court for the Northern District of Illinois ordered Chicago to raise the toll but did not say when the increase will go into effect. He said that the road has not had a toll increase since 1988.
Chicago had fought the latest toll increase petition, arguing that a higher toll would cut down traffic by 10% and raise revenues only by 3%, or about $400,000. A traffic engineer hired by bondholders has estimated that the higher toll would increase revenues by 8.8%. or $1.2 million a year.
Ken Purcell, an attorney at Winston & Strawn, which is representing bondholders, said they were pleased with the ruling.
He said the bondholders will now turn their attention to a petition before the court to hire an independent inspector at the city's expense to examine the structural needs of the skyway. Bondholders also have legal action pending that charges Chicago with breaching its fiduciary duty to manage the skyway and pay off bondholders.
Andrea Brands, a spokeswoman for Chicago's Law Department, said the city has not ruled out an appeal of the decision to increase, the skyway toll. She said the city will argue that all revenues are needed to repair the 7.8-mile ton road that connects the southeast side of Chicago with the northwest corner of Indiana. She estimated repairs at $65 million.
While the skyway is current on its interest payments to bondholders, no money has been deposited in the bond sinking fund since 1991. At that time, $10.8 million was placed in the fund and was used to redeem $10.8 million of the $101 million of outstanding bonds through a tender offer.
That left a $90.2 million balance of bonds that remain payable from the sinking fund account. Those bonds are scheduled to mature Jan. 1, 1995.
Moran's ruling comes a few months after settlement discussions between Chicago and bondholders ended without an agreement. Purcell has said the talks broke off in April because the city did not offer anything that bondholders would view as acceptable. The discussions began earlier in the year at Moran's direction.
Meanwhile, a group of investors is waiting to talk to city officials about privatizing the skyway.
Henry Mendoza, president of Gaean Capital Inc., a minority-owned investment banking firm that belongs to the investment group, said yesterday that the group hopes to hear from city finance officials about when it can present its plan for buying the skyway.
"We think we have a viable proposal." he said. "But we can't move forward unless there's a seller."
Noelle Gaffney, a spokeswoman for Chicago Comptroller Walter Knorr, said that talks with the group had been postponed pending the toll ruling.
"At some point, we'll probably talk to them and take a look at the proposal," she said.
There apparently is no chance that Illinois will take over the skyway.
The Illinois General Assembly last week approved a resolution authorizing a $2.4 billion bond-financed expansion of two highways after House Speaker Michael Madigan. D-Chicago, dropped his usual demand that the Illinois State Toll Highway Authority assume responsibility for the skyway in exchange for toll road expansion in north-eastern Illinois.