Valuable toll roads

What’s the difference between $1 billion and $24 billion? A lot, considering Gov. Rod Blagojevich wants to put that cash into public education and other services if he wins re-election.

The governor proposed to raise that cash by leasing part or all of the Illinois Tollway system to private investors. The estimated value of such a lease was presented at a public hearing Tuesday.

The state’s bipartisan legislative Commission on Government Forecasting and Accountability paid Credit Suisse investment banking firm $30,000 to analyze the value of the state tollway system and how the state could maximize that value.

Sen. Jeff Schoenberg, an Evanston Democrat and co-chairman of the commission, said last week that the decision to lease the tollway “should not be decided by a handful of investment bankers in Armani suits.”

That’s partially why Credit Suisse’s analysis, presented to the commission in Glen Ellyn, was broadcast live on the Internet Tuesday (I hope to create a link if the commission posts it on its Web site soon).

“Don’t think of it as Geraldo Rivera,” Schoenberg joked in the Capitol last week (at one of seven Senate committee hearings on public-private partnerships). “We have decided to weigh in on the side of greater transparency.”

The Credit Suisse estimate counts Illinois’ four toll highways — 274 miles’ worth — as well as the fiber optic network beneath it and the buildings on it.

But the estimate depends on many factors, some the state can control and some it cannot. One of the most volatile is the interest rate on borrowing by potential investors. “Time begins to matter here,” said Steve Doll, director of Credit Suisse. “If interest rates continue to rise, the value of the system could deteriorate with time.”

Other factors were not detailed in the estimate. Among them were possible labor agreements between the state and a private investor that could impact the investor’s confidence in the deal.

Interested companies might also come up with different numbers based on their own assumptions, such as how much traffic will increase over the next 75 years. Credit Suisse calculated that if traffic grows 1.5 percent annually, “the range of difference goes from a system value of $8.3 billion to $15.4 billion,” Doll said.

The potential value could also drastically change depending on the length of the agreement. Twenty-five years is too short for investors to realize a profit, while 75-year leases are more appealing to investors, Doll said.

In short, the tiniest change in any lease agreement could mean billions for the state.

Rep. Terry Parke, a Hoffman Estates Republican and co-chairman of the commission, said the numbers presented Tuesday sounded great, but they start to dwindle when the state considers requests from special interest groups.

Schoenberg got an earful a week ago from AFSCME Illinois Council 31, Business Leaders for Transportation in the Chicago area, the Mid-West Truckers Association, the Transportation for Illinois Coalition, and the Laborers International Union of North America Midwest Region. Each offered wish lists for safeguarding wages, benefits, retirement and training of current tollway employees. They also urged caution in deciding how the extra state revenue would be spent.

Schoenberg voiced his own wish list for any extra revenue. He said it should be set aside as a cushion for taxpayers if toll rates increase, with the rest spent on transportation and paying down the state’s unfunded pension liabilities for public employees.

But the governor and the General Assembly first have to decide whether leasing the tollway system would be good public policy for the people who drive on it. We could see as soon as this fall’s legislative session whether they’ll crack under pressure to get that big influx of cash before interest rates rise.

NOTE I’m officially back! We’ve taken a month-long blogging break. Summer has been busy, but fruitful.