Chicago Infrastructure Trust: Stimulus for the Building Industry

A Laurie & Brennan article featured in the Construction Law Corner Summer 2012 eNewsletter.

by Daniel Brennan and Joanne Krol

In April 2012, the Chicago City Council overwhelmingly approved and established the Chicago Infrastructure Trust (the “Trust”), an innovative approach proposed by Mayor Rahm Emanuel to leverage private investment to fund construction projects that would rebuild the City’s aging infrastructure. The Mayor announced in a speech to Carpenter Union trainees at the Chicagoland Laborers’ Training and Apprentice Center that he estimates the Trust will provide $7.2 billion for construction projects to improve Chicago’s infrastructure as well as add 30,000 jobs over the next three years.¹ Private investors will have strong direction and oversight over which projects to fund and these investors will likely demand the best selection, design and construction management.

The Trust aims to open investment opportunities for new sources that would otherwise be unable to invest in the City’s infrastructure, including charitable organizations, foundations, unions and pension funds. The Trust will provide advantaged financing, enabling each project to customize a financing structure using taxable or tax-exempt debt, equity investments and other forms of support. Each project will be coordinated with the City of Chicago and its sister agencies’ long-term plans for transformational infrastructure investments.

The $7 billion plan is intended to improve city streets, water systems and schools, and provide money for major renovations of Chicago Transit Authority stations. It would provide $1.4 billion for O’Hare International Airport’s expansion program, $1 billion for the Chicago Transit Authority (CTA) to renovate 100 train stations and eliminate slow zones, $1.4 billion for replacing or relining 900 miles of pipe and 750 miles of sewer lines, and $300 million for purchasing new parkland and construction of recreational facilities.²

The Trust will be established as a not-for-profit corporation under Illinois law and would be governed by a Board of Directors consisting of five voting members appointed by the Mayor and approved by the City Council.³ One Alderman will serve as one of the five voting members. In addition, the Mayor will appoint three non-voting members consisting of commissioners, officials or employees of the City or its sister agencies (which include the Public Building Commission of Chicago, Chicago Transit Authority, Chicago Board of Education, City Colleges of Chicago, Chicago Park District and the Chicago Housing Authority) who will serve as advisory members.

The Trust will act as an administrative body managing all projects and contracts. Each project will be independently engaged and financed through a grant agreement approved by the City Council or related governmental units. The Trust will act in accordance with the Illinois Open Meetings Act and the Illinois Freedom of Information Act (FOIA), and must comply with City procurement rules including the Minority-Owned and Women-Owned Business Enterprise Procurement Program.⁴ The ordinance states that prior approval of the City Council is required for any transaction that uses or anticipates using City funds or assets.⁵ The Trust will also be required to submit to the Mayor and City Council annual reports detailing the activities of the prior year including investments, projects financed or supported by the Trust, articles of incorporation and by-laws and the annual financial statements.⁶

Prior to the vote on April 24^th, in response to the concerns of several aldermen, Mayor Emanuel issued an executive order regarding the Infrastructure Trust (the “Order”).⁷ The Order establishes an independent financial advisor to represent the interests of the public. The advisor will provide written risk and cost and benefit analyses for all transactions to be delivered to the Mayor and City Council ten days prior to any vote on the matter. In addition, the Order mandates the Trust to commission an independent third party to analyze the impact of the Trust overall and the projects it has undertaken on an annual basis.

The first series of investments made by the Trust will be energy efficient work in a new project called RetroFit Chicago, pending approval by the City Council.⁸ It will aim to centralize energy efficiency projects across the City and its sister agencies. RetroFit Chicago will spend $200-$225 million to reduce energy consumption by 20 percent, cutting energy costs by more than $20 million off the City’s $170 million annual spending on energy consumption.⁹ The Mayor also estimates the project will create approximately 2,000 construction jobs.¹⁰ The cost savings will be shared with the investors in the project so they can recoup their investment. The Chicago Infrastructure Trust will therefore provide funding in an innovative approach for several necessary construction projects to improve Chicago’s infrastructure which would otherwise lack funding or greatly cost taxpayers.

¹Press Release, Office of the Mayor, Mayor Emanuel Announces $7 Billion Building A New Chicago Program (Mar. 29, 2012).

²Press Release, Office of the Mayor, Mayor Emanuel Announces $7 Billion Building A New Chicago Program (Mar. 29, 2012).

³Ordinance Establishing infrastructure trust and providing for certain related matters, Chicago, Illinois, Municipal Code SO2012-1366 Section 1 and 2 (2012).

⁴Ordinance, Section 5(e), 5(f) and 5(i).

⁵Ordinance, Section 6.

⁶Ordinance, Section 5(h) (2012).

⁷Chicago Metropolitan Agency for Planning, City Council Approves Chicago Infrastructure Trust, Apr. 25, 2012 at http://www.cmap.illinois.gov/policy-updates/-/blogs/city-council-approves-chicago-infrastructure-trust.

⁸Press Release, Office of the Mayor, City Council Passes Chicago Infrastructure Trust (Apr. 24, 2012).

⁹Press Release, Office of the Mayor, Mayor Rahm Emanuel Announces Chicago Infrastructure Trust to Invest in Transformative Projects (Mar. 1, 2012).

¹⁰Mayor Rahm Emanuel Announces Chicago Infrastructure Trust to Invest in Transformative Projects (Mar. 1, 2012).