Increase private investments in infrastructure projects by organising public-private partnerships

Context

• In 2012, the Chicago Infrastructure Trust (CIT) was created via executive order and a Chicago City Council resolution.
• CIT was set up to provide focus and leadership to build a pipeline of executable PPP projects to meet Chicago’s infrastructure needs, drive economic development, and create jobs.

Problem

• State and federal infrastructure funding had become inconsistent and unpredictable. This limited Chicago’s ability to fund substantial infrastructure projects with taxpayer money.
• The city was looking for alternative, innovative financing and project delivery options for transformative infrastructure projects.

Stakeholders involved

• Chicago Infrastructure Trust
• City of Chicago
• Chicago Public Schools
• Chicago Department of Transportation
• Department of Innovation and Technology

Innovation

• The USD7 billion trust aimed to facilitate private sector investment from institutional investors such as pension funds, insurers, endowments, sovereigns, and private equity.
• CIT was targeted to provide advantaged financing, enabling each project to customise a financing structure using taxable or tax-exempt debt, equity investments, and other forms of support.

Timeline

Results and impact

• The trust completed two infrastructure projects.
• ‘Retrofit One’ was estimated to bring in more than USD200 million in private funding on more than 1,000 city-owned buildings. Instead, the trust installed less than USD10 million worth of upgrades in 60 buildings due to a lack of interest from investors. CIT was the financing vehicle used to secure private capital.
• ‘CTA 4G’ – the USD32.5 million 4G wireless design and installation was provided at no cost to CTA (Chicago Transit Authority) and its customers. CIT brokered the project, which was fully financed by four major wireless providers.
• CIT handled the procurement and management work that would otherwise be handled by city departments. For example, CIT assisted the project procurement for ‘Street Lights’ project, which was primarily funded through the traditional funding model.

Key lessons learnt

• Governance: Transparency, accountability, and oversight measures were required, for example, placing an alderman (elected official) on the trust’s board, guaranteeing a City Council vote on any projects involving city resources.
• Planning: A clear overarching goal and a coordinated approach to the types of projects being pursued were integral to set forth a long-term plan for transformational infrastructure investments.
• Governance: The closure of the trust was mainly due to a lack of city consensus and investor interest. The City Council passed the ordinance to create the trust with little consultation, and some aldermen remained highly critical of the program on grounds of transparency and protections for taxpayers. The private investment was not well-screened and utilised, which affected investors’ confidence. (It was revealed that Chicago Public Schools spent more than USD0.5 million installing energy-efficient lighting in schools that would be closed. The trust had been seeking investors to reimburse the school system for the work.)