CHICAGO – Chicago will forgo a private financing arrangement and instead reach into its own pockets to finance a $160 million overhaul of its streetlight system.
The project is being led by city's Department of Transportation and the Chicago Infrastructure Trust, which was established by Mayor Rahm Emanuel in 2013 to leverage private investment in "transformative" city infrastructure projects without burdening the city's balance sheet and tax base.
"The Chicago Infrastructure Trust reviewed all options for this project and found it was most advantageous to the city for it to pay for the project by leveraging the significant cost savings it will generate," city finance department finance spokeswoman Molly Poppe said in a statement. "Investors were interested, but the city determined that private financing structures didn't provide most value for taxpayers."
The Emanuel administration submitted for City Council review Wednesday the proposed contract with Massachusetts-based Ameresco Inc. The firm was chosen to serve as the lead vendor after a competitive selection process conducted by the infrastructure trust. It will lead the project that calls for replacing 270,000 light fixtures along streets, alleys, and viaducts over the next four years.
Once the contract has council approval, installation of LED lights will begin this summer on the city's south and west sides. Areas with public safety concerns are being prioritized.
The Chicago Smart Lighting Project also calls for installation of a wireless lighting management system that provides real time outage updates to reduce replacement times and remotely control lighting levels. Targeted repairs of existing poles and wires will also be made.
"Under this proposed project we will be delivering modern, reliable and high-quality lighting that will improve quality of life in every Chicago neighborhood," Emanuel said in a statement.
The more efficient lights are expected to consume 50% to75% less electricity than existing high pressure sodium lights. In 2015, the city's electricity bill for outdoor lighting was approximately $18.5 million. That's expected to be cut in half by the time the streetlight conversion is fully implemented, offsetting the cost of the project, the city said.
"The contract is structured so that anticipated future reductions in the price of LED technology will be passed on to the city to offset the cost of the Smart Lighting Project," Poppe added.
"The city expects the costs of the project will primarily be paid for with energy savings. The remainder of the costs will be built into the city's regular capital budget, which includes TIF, bond proceeds, operating dollars, among other funding sources," Poppe added.
The CIT launched a request for information process in September 2015 and began soliciting for private partners with a request for qualifications process last spring. It led to a final request for proposals late last year. The trust launched the vendor procurement ahead of a financing procurement. It initially explored leveraging the savings to craft a financing and also considered leveraging new revenue sources which were not disclosed. The CIT's use of private financing has fallen far short of the grand plans associated with its launch in 2013. The trust was so slow going that Emanuel in 2015 overhauled trust leadership. While the agency before and after the changes had a hand in series in projects, it use of private financing has been limited.
The trust in 2014 closed on a $13 million private placement, off the city's balance sheet, to fund energy retrofits for 60 city buildings. The trust was forced to scale back the deal's size by more than half and alter other terms to reduce investors' risks. The trust first talked about doing $200 million in retrofit projects in various stages.
While city officials said no city dollars or assets were at risk under the energy upgrade financing, a recent report from an investigative organization known as Project Six cited documents showing portions of city-owned buildings were put on lien to a private bank.
The trust also brokered a $32.5 million deal with four telecommunications companies to finance the upgrade of wireless phone service in the Chicago Transit Authority's subway system to a 4G network.
