CHICAGO – The Chicago Transit Authority board Wednesday signed off on a $1.3 billion contract for its rail fleet overhaul that counts on a low-cost federal loan and approved the appointment of city debt manager Jeremy Fine as its chief financial officer.
The Transportation Infrastructure Finance Innovation Act loan request of up to $350 million for the Rail Fleet Renewal Project has long been planned by the CTA and is tentatively scheduled to be finalized in March. It would mark the transit agency’s third TIFIA loan.
The CTA awarded an up to $1.3 billion contract to the Chinese firm CSR Sifang America to build as many as 846 7000 series rail cars for its rapid transit elevated and subway lines.
The firm will build a new rail car assembly facility on Chicago's far south side.
"Providing modern trains and buses is a critical part of having a world-class transit system," CTA President Dorval R. Carter, Jr., said at a news conference after the board meeting with Mayor Rahm Emanuel and union officials. "This rail car purchase—the largest in CTA history—will give CTA one of the newest fleets in the United States and provide our customers with state-of-the-art trains providing comfortable, reliable rides."
CTA will purchase a base order of 400 cars first, with options to purchase the remainder in coming years. The CTA expects the upgrades will result in $7 million in annual savings on maintenance and energy costs.
CTA officials were not immediately available to provide more detail on their TIFIA loan application.
It's already used TIFIA for a $120 million loan last spring for the $400 million renovation of the rapid rail transit Blue Line that serves O'Hare International Airport.
CTA's first $79 million TIFIA loan closed in 2014 for the agency's 95th Street Bus and Rail Project.
The CTA received a AA-minus rating from Kroll Bond Rating Agency and an A-plus rating from Standard & Poor's on the Blue Line loan structure. Loan repayment was secured by all CTA farebox revenues and is considered a secured bond obligation under a master trust indenture. The same features applied to the first loan.
Fine recently moved over to the CTA to take on the role of treasurer and CFO after more than a decade of working with the city's chief financial officer managing Chicago debt issuance. He replaces Ronald DeNard, who joined his boss -- then CTA president Forrest Claypool – when Claypool took the helm of the Chicago Public Schools last year.
At the city, Fine oversaw a $20 billion fixed- and floating-rate debt portfolio that included general obligation and revenue back credits, managed interest rate swap portfolios, commercial paper programs, and bank facilities.
Fine joined the city's comptroller office as an assistant comptroller in 2003 after three years working as a banker at the former LaSalle Capital Markets. He was elevated to deputy comptroller in 2006.
Kelly Flannery, assistant budget director, will replace Fine as Chicago debt manager.
Flannery moved up to assistant budget director in 2012, after serving for nearly four years as a senior fiscal policy analyst for the city. She previously worked for seven years as an analyst at the financial services firm Mergent Inc.
Fine takes over an organization that operates on a roughly nearly $1.5 billion budget. The CTA, formed in 1945, operates the second-largest public transit system in the nation serving Chicago and 35 surrounding suburbs with buses and rail lines. It operates 1,500 rail cars and nearly 1,900 buses and has a weekday ridership of 1.6 million.
It's one of three service boards under financial oversight of the Regional Transportation Authority of Illinois. It receives some bond proceeds from the RTA but also issues its own sales-tax backed and federal grant backed bonds.
Fitch Ratings Kroll and Standard & Poor's all assign the CTA's sales tax bonds AA ratings.
Ahead of a refunding last year, Fitch affirmed CTA's federal-grant-backed bonds at BBB with a stable outlook and Standard & Poor's affirmed its A rating and stable outlook.
The CTA's five-year capital plan totals $2.3 billion with federal funds covering 67.2%. The plan does not anticipate any new state funding. The remaining share comes from additional CTA and RTA borrowing. The CTA faces state funding risks and is strapped for capital funding so it's exploring alternative financings, including public-private partnerships like the one it used last year to finance a 4G cellular network in its subways.