Chicago turns to Goldman for PPP advice

The Chicago Transit Authority has some $5bn of rail projects in mind and has voted to hire advisors to guide the city through potential public-private partnerships. Goldman Sachs, along with two co-advisors, is being retained for the advisory mandate.

The Chicago Transit Authority’s (CTAs) board has agreed to engage third-party advisors to guide the agency through the possible use of public-private partnerships (PPPs) to help deliver some $5 billion of rail projects. 

Goldman Sachs is positioned to serve as the lead financial advisor alongside a pair of co-advisors including local firm Loop Capital Markets and Estrada Hinojosa & Company. The CTA approved a professional services agreement at a Wednesday board meeting and the advisors were selected based on PPP experience and financing abilities.

“Traditional federal, state and local funding sources are uncertain and may be insufficient to meet our needs within the next several years,” noted CTA president Forrest Claypool in a press release. “This agreement will allow the CTA to pursue innovative ideas and possible new funding sources to complete some of the important projects we have planned,” he added.

Goldman Sachs and the co-advisors will forego payment in the maiden year of the advisory work. Their mandate is to undergo a vetting process to determine how PPPs could add value or provide a cost benefit to the CTA. After the initial year, the advisors can begin earning monthly fees in addition to a percentage from any successful deals. 

A CTA spokesperson told Infrastructure Investor:  “CTA can terminate the agreements before starting to incur fees if we don’t think there are viable PPP opportunities to pursue further. Only if CTA decides to proceed past the first year of work will retainer fees be paid.” 

The CTA has a pipeline of $5 billion in projects envisioned for certain rail corridors dubbed the Red Line and Purple Line – projects that include upgrades and expansions. Public officials are considering alternative financing, including PPPs, to ease the burden on traditional public funding sources. 

Last year, Chicago’s Democratic mayor, Rahm Emanuel, appointed Lois Scott, co-founder of Scott Balice Strategies, an advisory firm specialising in PPPs, to be the city’s chief financial officer. He also hired infrastructure privatisation lawyer Alexandra Holt to be the city’s budget director.