The Illiana Expressway is eligible for a federal loan to allow the states to wrest a better deal from private investors and reduce the overall financing cost of the $1.5 billion project.
Indiana and Illinois are able to apply for a Transportation Infrastructure Finance and Innovation Act loan program that can lend money at a low fixed rate for up to one-third of the cost of the project.
“The Illiana Corridor project is creditworthy and a good candidate for TIFIA because it improves interstate commerce,” Indiana Public Finance Director Kendra York said Monday. “Today’s formal invitation is an important step in securing the lowest cost financing that will result in lower pricing from the private developer teams for both states.”
Each state has selected four investment teams to bid on designing, building and operating their respective portions of the Illiana Expressway. Construction is slated to start in 2015.
The Illiana Expressway would run 47 miles from Interstate 65 just northeast of Lowell to Interstate 55, near Wilmington, Ill., and will operate as a toll road.
Indiana has forecast it will spend $80 million to $110 million upfront to get the road built. Illinois' upfront costs are expected to be between $450 million and $500 million.
The federal loan is important because it is money investors can draw on for their share of the cost. The interest rate on the federal loan is tied to U.S. Treasuries, which means it will carry a lower interest rate than can be secured on the private market.
Investors hope to recoup their money from a "milestone" payment from the states once the project reaches a certain point, as well as from annual "availability payments" the states will fork over once traffic is whizzing up and down the expressway.
The Indiana Department of Transportation and the Illinois Department of Transportation are wrapping up a final environmental impact statement for the expressway. The states are hoping for approval in the spring.