Chicago Dept. of Transportation
The Jetty, one of five themed areas, allows users to interact more with the Chicago River.
If you’ve been in and around downtown Chicago lately, you may have noticed the raised State Street Bridge and the riverfront-turned-construction-site between State and Lake streets. And if you missed the heart of this year’s downtown construction frenzy, the construction along the river has been thoroughly documented here.
All the work is part of the Chicago Riverwalk build out, which will eventually create one continuous walkway through the heart of the city. Not only is this an opportunity to turn an underused public asset into a destination, the project is also seeking out funding in unconventional places.
In August, the City of Chicago announced a request for proposal to seek a private partner to “develop, promote and operate the Chicago Riverwalk.” Together with the selected commercial development partner, the City’s goal is to create “a publicly accessible and financially self-sustaining linear park” with sufficient revenues to eventually service the outstanding project loans from the United States Dept. of Transportation. Proposals will be due on Tuesday, Sept. 30, 2014.
“The Chicago River and surrounding land have the potential to be a top entertainment and recreation destination for residents and tourists alike,” Chicago Mayor Rahm Emanuel said in a World Business Chicago press release. “We look forward to seeing proposals that will optimize the Chicago River area and, ideally, showcase Chicago businesses.”
The Metropolitan Planning Council (MPC) has worked with many different neighborhoods to activate vacant or underused spaces, and we are particularly excited to see this prime space in the center of Chicago’s Downtown become a world-class destination.
The Chicago Riverwalk has been a concept in development for many years. The first phase of the project was completed in 2009 with a Vietnam Veterans Memorial Plaza and a shorter walkway off Michigan Avenue. In 2012, an artist’s renditions of Phase II and III imagined a promenade with “themed” blocks that included a variety of Placemaking activities, including a swimming hole for kids and a cove featuring kayak rentals. With the $98 million loan from the U.S. Dept. of Transportation’s Transportation Infrastructure Finance Innovation Act, construction for the last two phases kicked off in full force last year. The entire project is slated to be largely finished by 2016.
The loan has been essential in moving the project forward and has set the scene for the City to seek a private project partner. The Transportation Infrastructure Finance Innovation Act is a unique federal resource to provide low-interest loans that leverage public and private investments in transportation-related projects (Learn more about the Act here). For the Riverwalk, this means that the project will be financed with a 35-year loan at a fixed rate of 3.34 percent, just above the historic rate of inflation, and will have the ability to solicit private partners to share in project costs and risks.
Recent media coverage and analysis has noted that the project costs and the associated risks can seem high. Neil Steinberg from the Sun-Times worries, “Ten grand a day in fees is a big nut to crack. It would be a shame to go through all the paperwork and trouble to build a sidewalk jutting into the Chicago River and then not have anyone show up.”
Context around the figures may sooth some fears. The project’s loans will cost around $3 million in annual payments in the early years. Right now, the Riverwalk is already generating around $1 million in annual revenues from the Phase I development. The completed Riverwalk should significantly increase the revenue potential with over 100,000 square feet of developable space. The investment memos also estimate that the project has potential to drive $3 billion in new spending to the broader Chicago economy over the next 35 years.
However, Steinberg is correct in that the future is, well, often unpredictable. It is precisely the unpredictability of large-scale projects like the Riverwalk which makes for an attractive public-private partnership. Through its request for proposals, the City is soliciting ideas and engaging a private development partner to share in the project risks—both the costs and the rewards.
The City’s request for proposal offers respondents flexibility in developing solutions to meet the broader goals and the economic potential laid out in the document, with the goal being to reach a range of potential partners. The focus is on setting a clear baseline and leaving the rest up to the ingenuity of respondents. Because the City is engaging private partners during the project design process, projects may see significant savings—an investor estimated public-private partnership projects can experience savings of up to 20 percent at a Lazard/MPC public-private partnership forum in June 2014.
The Chicago Riverwalk is an exciting opportunity to put to use a valuable public asset using a public-private partnership model. The innovative use of funding sources is a relevant example of how public infrastructure can be delivered. I am already looking forward to strolling down the Chicago Riverwalk next summer.
The request for proposals process is open. Proposals are due by 4 p.m. on Tuesday, Sept. 30, 2014. For more information about the Riverwalk opportunity please see the Solicitation Document and the World Business Chicago press release.