Monday, October 28, 2013

Chicago Infrastructure Trust Off To Slow Start

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.
blog comments powered by Disqus