Illinois railway company proposes building toll road.

CHICAGO -- A railway company in Illinois has proposed using its land for a private consortium to build and operate a toll road that would cost an estimated $1.2 billion.

John D. Kramer, president and chief executive officer of John D. Krmaer & Associates Inc., the railway's consultant for the project, said that under the proposal, public and private funds -- including the possible use of almost $590 million of tax-exempt revenue bonds -- would be tapped to fund a six-lane, 34-mile toll road. That toll road would be built alongside the E. J. & E. Railway's rail line, using its 100-foot-wide right-of-way and other contiguous land.

However, he pointed out that to build a private toll road in the state, legislation currently pending before the Illinois General Assembly would be needed.

Mr. Kramer said under the bill, which was passed by the Illinois Senate this spring, the state would be able to charter a private entity to develop, build, finance, and operate a toll road through a consortium arrangement, while the state would retain ownership of the roadway.

"That would be a key point for tax exemption," he said, referring to the ownership provision. "The other key point would be that the tollway would be a public purpose."

He added that while issuing tax-exempt debt was proposal's aim, the railway did not have an opinion from any bond counsel.

"We would do our best to structure these to meet [Internal Revenue Service] and other guidelines" in order to obtain tax-exempt status for the bonds, he explained.

In such states as California and Minnesota, financing for proposed private toll rroads that do not rely on any infusion of public funds would involve almost exclusively taxable debt.

Mr. Kramer, a former Illinois secretary of transportation, said the $590 million of bonds would be backed by toll revenues, as well as revenues from concession operations along the roadway and from adjacent land development.

Public revenues for the $1.2 billion project would come from federal, state, and local grants. However, the use of federal funds could depend on getting a bill passed by Congress that would allow states to use up to 35% of their federal highway funds in public-private ventures.

As for the Illinois legislation, State Sen. Richard Luft, D-Pekin, the bill's sponsor, said he hoped to bring the measure up before the legislature this fall. While the bill passed the Senate in June, it was stalled in the House when the legislature began its summer break in July.

"With declining revenue sources for building transportation systems with public dollars, I think the opportunity should be there to build [systems] with private money or a combination of private-public money," he explained. "To do that, we need to set forth in the statutes a way to reach those goals."

Mr. Luft pointed out the bill was not tied to any specific project and that a provision to privatize airports in addition to tol roads and high-speed rail systems may be added.

Steve Brown, a spokesman for House Speaker Michael Madigan, D-Chicago, said the speaker had not yet taken a position on the bill.

A spokesman for Gov. Jim Edgar did not return phone calls.

E. J. & E.'s toll road proposal grew out of a study Mr. Kramer said he conducted for the railway to determine "the highest and best use" of the railway's 57-mile rail line that stretches through Chicago's western suburbs. That study settled on a mixed-use plan that would involve continued freight operations on the line, a new commuter rail service, public utility uses, and a toll road.

He said that in addition to getting legislation passed, the realization of the railway's toll road proposal would depend on the results of an Illinois Department of Transportation planning and environmental highway study currently under way.

In the meantime, Mr. Kramer said several U.S. investment banks and contractors have been approached about participating in a consortium. He added that the response has been "very positive."

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