CHICAGO -- The Chicago Infrastructure Trust is conducting an open bidding process for proposals to finance energy upgrades to pools operated by the Chicago Park District and Chicago Public Schools.
The deadline is May 2 to submit proposals for the program, which would mark the trust's second endeavor. "All interested parties are encouraged to apply and to clearly state their scope of work, capabilities and qualifications for participating in such a transaction," the trust said.
The trust previously received an unsolicited proposal on the possible project to upgrade aquatic centers. If other parties submit proposals during the open bidding process, the trust said it would "select the best candidate."
Contractor proposals must include at least one financial partner capable of financing the transaction, preferably in an off-credit and off-balance sheet structure such as the Energy Services Agreement used on the trust's first transaction.
As with its first financing, the trust would leverage savings expected from the financed work to repay private investors.
The trust has not put a dollar amount on the possible financing or said how many of the 141 pools operated by the school system and park district might be covered. The final number depends on the investor/contractor proposals. The trust believes the financing could complete work on a "significant number of pools," said the trust's chief executive officer Stephen Beitler.
The trust hopes to select a vendor and financial partner in June, leading to public hearings and votes by the various governmental bodies involved. The aim is for work to begin later in the summer.
At their first meeting since closing on its first transaction, trust board members also reflected on lessons learned and how to apply them to future transactions.
The trust closed in April on a $13 million private placement to fund energy retrofits for 60 city Department of Fleet and Facility Management 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 received $50,000 in fees, a figure far short of the amount of time invested by trust staff in crafting the deal.
"This was a highly subsidized" transaction, said trust energy director Claire Tramm.
Mayor Rahm Emanuel proposed the trust as an alternative financing vehicle for the city that he said could raise $200 million for energy retrofit upgrades in a series of financings.
Over the last year, the size and shape of its first financing shifted as the timetable for closing on a first tranche was pushed back. The trust originally solicited investors on a $27.5 million loan with a potentially longer term at 4.7% or lower. It had few takers as investors were worried about the risk without city backing, according to sources familiar with the bidding process.
In the end, the city settled on a 15-year loan at 4.95% with Bank of America Merrill Lynch. Piper Jaffray Inc. was placement agent.
The city did accomplish its goal of borrowing for energy efficiency projects with a tax-exempt financing that keeps the loan off its balance sheet and does not put taxpayers on the hook for repayment.
The trust's first deal marked only the second tax-exempt ESA transaction to date. Legal advisors believe the tax exemption is permitted because the trust is designated as the on-behalf issuer for the city and serves as the ESA project sponsor or owner and issues tax-exempt debt on behalf of the city. If the savings are not achieved, energy contractors managing the projects must cover the gap.
The model has some similarities to a revenue bond in that creditors' claims are based on the pledged revenues, but energy contractors guarantee the savings and the funds flow through the trust.
The energy upgrades under the first deal are expected to generate at least $1.4 million of annual savings.
City and trust officials have defended the time it took to do its first transaction, saying it reflects a painstaking process to establish a first-of-its kind local governmental agency which then had to weigh various structures to accomplish the city's goals.