In
March 2012 Chicago Mayor Rahm Emanuel and former President Bill Clinton sat
together in a press conference at a carpenters union hall and announced
formation of the Chicago Infrastructure Trust, a public/private partnership
designed to find money from the private sector to invest in improvements in
local government buildings and other infrastructure. The city ordinance
creating the Trust was passed at an April City council meeting, and a board of
directors for the Trust was appointed in June 2012. Then it took eight more
months for the board to name venture capitalist Stephen Beitler as executive
director of the new entity.
In
his first eight months on the job, Beitler has invested most of his time in
locating permanent office space for CIT, setting up the Trust’s computer
systems, and reworking the Trust’s public website after it was hacked. The
efforts to find private investors in the Trust has been limited to issuing an
RFQ for registered securities dealers to place CIT investment vehicles, and
three iterations of an RFP for “Placement Agents” to sell $83.1 million in
investment vehicles to fund energy efficiency projects for 214 Chicago Public
School lighting efficiency installations, Department of Water Management
conversion of one pumping station from steam to electric power, and 208 various
energy efficiency projects for Chicago’s Department of Fleet and Facility
Management.
This
first $83.1 million placement, dubbed “Retrofit One,” is intended to produce
$8.8 million in annual electric bill savings to CPS and the City. Although the
proposed terms of the investment instruments to be offered have not been made
public, amortization of $81,3 million over 15 years at the current market rate
for tax free pubic educational institution bonds of 5.25% would mean that 90%
of the expected energy savings would be returned to investors, and only 10% of
predicted savings would be realized by municipal government.
The
financing for Retrofit One was supposed to be closed by summer 2013, but so far
no registered securities dealer or dealers have been selected to place the
investment. Meanwhile, Chicago Public Schools has already spent the $19.5
million allocated from Retrofit One for 241 school building lighting
improvements, and that work has been completed. CPS hopes it won’t have to look
elsewhere for the cash to pay for this work.
Public/private
partnerships have been touted as financing vehicles for infrastructure at the
federal, state and local levels recently. I have been involved in projects
where this sort of investment has been successful, but the Chicago
Infrastructure Trust seems to be struggling mightily to figure out how to find
private sector investors, and how to move projects forward to closure in a
timely manner.
