As it prepares to embark on a sweeping overhaul of city streetlights, the infrastructure trust that Mayor Rahm Emanuel once hailed as a model of out-of-the-box thinking to jumpstart public works has proved anything but.

Launched five years ago in March 2012, the Chicago Infrastructure Trust has accomplished little and done so at a snail’s pace. None of the $800 million in financing that Emanuel claimed he had lined up from institutional investors to bankroll city projects ever materialized, with resources so tight that the trust on several occasions has been late by more than a month in paying staff and once by several months.

What’s more, city records reviewed by The Better Government Association show that trust operations and projects have been largely dependent on public financing even though Emanuel sold the idea as an innovative financing scheme to free taxpayers from cost and risk.

Even so, Emanuel used a recent guest column published in Politico to lecture officials in Washington about the folly of promoting infrastructure spending without taxpayer cost.

"Some are looking for a magic bullet that would fund infrastructure investments without spending money, but the truth is you cannot get from here to there without resources,” Emanuel wrote in the article, which made no mention of his own infrastructure trust.

Since its inception, Emanuel’s trust has completed just one infrastructure project — aimed at energy efficiency upgrades to existing city owned buildings — but its scope was dramatically downsized from the original proposal.

The upcoming street light revamp is more ambitious, aiming to transform 270,000 existing lights along public ways from high-pressure sodium to the more energy efficient, durable and brighter LEDs. The project, slated to start this spring, is just now moving beyond the planning stage even though it has been on the trust’s to-do list since 2013.

A street in Los Angeles with traditional high-pressure sodium lighting (left) and new LED lighting (right).

Source: Los Angeles Bureau of Street Lighting

That same year, New York City announced a similarly sized, $75 million street light overhaul that has since been completed in Brooklyn and is well under way in the city’s other boroughs. Taxpayers, not private investors, are financing the project, a route Chicago now seems to have come around to taking.

Records of the trust show that, instead of being bankrolled by institutional investors as Emanuel once envisioned, Chicago’s lighting project is to be underwritten mostly by proceeds from city bonds and other public financing — the traditional way of paying for infrastructure.

All of which raises questions about the purpose of the trust, which Emanuel launched at a 2012 press conference that generated national headlines. The mayor declared the trust a “breakout” strategy for the city, a sentiment echoed by former president Bill Clinton who was standing at Emanuel’s side.

>> Read this story at Crain's Chicago Business

“What you are doing here is the first, in effect, infrastructure bank using private capital that any city in the United States has established,” Clinton said at the time. The funding strategy, Clinton continued, was “the nearest thing we can get to a free lunch.”

The trust’s website prominently featured a photo of Emanuel and Clinton, captioned “Bill and Rahm” in bold letters, but it was removed shortly after this story was published in early March 2017. The image was a reminder of their joint announcement in 2012, but precious little of what they heralded has come to fruition.

The trust, a nonprofit whose board members are handpicked by the mayor, now defines its purpose as to “assist the city in making prudent fiscal and policy decisions to catalyze infrastructure investment.”

In an email response to questions, Leslie Darling, the trust’s executive director, said the trust evaluates various financing options for infrastructure projects and makes recommendations to the city. Those “may or may not include alternative financing mechanisms.”

A spokeswoman for Emanuel said “the mayor has consistently embraced both private and public investments in Chicago infrastructure.” She said the trust was never intended to replace traditional financing for building projects but rather to augment them.

The appeal of alternative financing has been strong for cash-strapped cities like Chicago with poor credit ratings and desperate to avoid tax hikes. Chicago had yet another incentive — the still fresh memory of former Mayor Richard M. Daley’s long-term parking meter lease that devolved into a costly political quagmire over skyrocketing meter rates that generated big profits for private investors.

The meter fiasco presented Chicago’s political leaders with both a teachable moment and a dilemma. They would like to avoid anything remotely resembling the parking meter lease while at the same time luring outside investment to buttress city infrastructure spending.

In the real world, experts say, those desires aren’t compatible. Investors in public projects typically want to put their money behind tangible assets backed by dedicated revenue streams — things like parking meters or toll roads. Fuzzy concepts like owning the rights to energy savings can be a tough sell.

“(Investors) are not going to give the money for free,” said Julie Roin, a professor at the University of Chicago Law School who’s studied the privatization of public assets. “They are always going to want a return on their investment.”

At the Chicago trust, records show, its staff sought without success to push several infrastructure initiatives that relied on unorthodox financing models to get off the ground. Ideas included building homes on vacant lots affordable to residents on modest incomes and rehabbing and reopening the cavernous and long shuttered Uptown Theater.

However, prior to the street lighting project, Emanuel’s administration gave the green light to just one other initiative. It was called Retrofit One, a name suggesting there would be sequels down the road, and launched in the trust’s earliest days.

As initially envisioned, Retrofit One was to be a $200 million energy efficiency upgrade for dozens of city owned buildings. But the scope was quickly downsized to roughly $13 million, and outside investors didn’t flock to underwrite it as Emanuel had promised.

Instead, the trust financed Retrofit One by borrowing the proceeds from Bank of America, with the loan to be paid off over time by leveraging savings from lower utility costs. When aldermen were publicly briefed on the project in 2014, Emanuel’s then Chief Financial Officer Lois Scott said that the arrangement meant “taxpayers are not at risk.”

That was not completely accurate, a point she came to acknowledge after being grilled by one skeptical city council member.

Buried deep in loan documents were details that spelled out how mechanical systems in eight city-owned buildings were to be put up as collateral for the Retrofit One loan. That left open the possibility that, if financing soured, creditors could seize control of parts of the ventilation, heating or cooling systems at City Hall, the Chicago Cultural Center, the Harold Washington Library, the Police Academy and the 11th District police station on the West Side.

The trust maintains that such a worst-case scenario would be extremely unlikely to occur.

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But such complexities are exactly what make critics question the private financing Emanuel once touted for the trust. “I think it is wrong,” said Ald. Scott Waguespack (32nd), who opposed the trust’s creation and pushed for more transparency and City Council oversight.

Waguespack said a more traditional and straightforward approach to financing, such as issuing a bond to pay for projects, would be preferable, especially when city assets are at stake.

By the trust’s own admission, it would have been slightly cheaper to finance Retrofit One through a bond — a debt backed by city revenue — than the way it was done.

With no money flowing from investors, the trust has kept its day to day operations afloat largely through grants from the city. City records obtained through the Freedom of Information Act show taxpayers have backed the trust to the tune of more than $4 million since 2013. Even so, the trust has on more than one occasion lacked the cash to meet payroll.

“I am still climbing out of the hole of inconsistent pay,” said Rhea Coleman, the trust’s former office manager and executive assistant.

As of October, the trust still owed money to some former employees, consultants and contractors, according to its most recent audit report.

Darling, brought on in a 2015 revamp of the trust ordered by Emanuel, said her goal is to gradually reduce reliance on city funding and replace it with state, federal and philanthropic grants. That’s a significant departure from Emanuel’s original vision of corporate investments fueling trust operations and projects.

The twist can be followed through the trust’s project pipeline. The initial round of projects with complex financing models, such as the Uptown Theater revamp, have all been killed off. The long delayed and publically financed street lighting project may be the new model, but the trust does not appear set to launch any infrastructure projects beyond that.

At a recent board meeting of the trust, Darling was vague about future plans. Instead, she launched into hazy business jargon about how her team is always looking to maximize value of “underutilized assets for the city” and is “continuing” to look for opportunities, develop new projects and work on a possible Retrofit Two.