By Karen Pierog

CHICAGO (Reuters) - The Illinois Tollway board approved on Thursday a $12 billion bond-financed capital plan that raises toll rates by 87.5 percent for most cars.

The tollway, which operates 286 miles of interstate highway in 12 northern Illinois counties, proposed the 15-year capital plan last month as a way to relieve congestion and boost the state's economy.

The plan, which allocates $8.32 billion for tollway improvements and $3.83 billion for new projects, will be funded by a toll increase that would typically raise car tolls to 75 cents from 40 cents effective January 1.

Tollway Director Bill Morris had proposed an alternative 15-cent increase in the basic 40-cent toll rate, arguing that the bigger hike would lead to a more than doubling of the authority's debt service, which he said could impair the tollway's AA-minus bond ratings.

"We are confident that the vast majority of customers and communities we serve stand behind us in support of this 15-year investment in the Illinois Tollway's future," said Tollway Executive Director Kristi Lafleur in a statement released after the authority's 7-1 vote in favor of the plan.

The tollway said it will issue bonds backed by the new toll rate increase on cars and by a previously approved toll hike on commercial vehicles that takes effect in 2015.