The City’s capital improvement program (CIP) funds the improvement or replacement and construction City-owned infrastructure and facilities. Capital projects involve improvements with long useful lives, such as roads, sewer and water mains, buildings, street lighting, and sidewalks.
Capital Improvement Revenue Sources
The City’s Capital Improvement Program funds the physical improvement or replacement of City-owned infrastructure and facilities. Continued investment in these assets is critical to support and enhance neighborhoods, stimulate the economy, and improve services. The CIP is primarily funded through the following sources:
General obligation bonds, which are backed by property tax revenue and are used for a variety of City infrastructure and facility projects.
Motor fuel tax (MFT) revenue bonds, which are backed by taxes on fuel and are used for the construction of road-related improvements such as streets, lighting, and traffic signals.
Sales tax revenue bonds, which are backed by sales tax revenue.
Water and sewer revenue bonds, which are backed by water and sewer user fees, respectively, and are used for the construction and repair of water and sewer mains and related facilities. The City also uses available operating funds to maintain and rebuild the systems on a pay-as-you-go (paygo) source.
O’Hare and Midway revenue bonds, which are backed by airline revenues and other airport revenue are used to fund airfield and terminal improvements and related facilities. The City also uses other available airport revenues (i.e. passenger facility charges and customer facility charges) to fund capital improvements at both O’Hare International Airport and Midway Airport.
Tax Increment Financing (TIF), which is used to fund infrastructure such as roads, lighting, libraries, bridges, schools, and CTA stations. The uses of TIF are discussed in the TIF section.
Planning for capital improvements is an ongoing process and the CIP is updated regularly to reflect the changing needs of the City. The below reflects previous and current capital improvement programs along with anticipated programming for future projects.
Uses of Local Bond Proceeds
The City utilizes proceeds from the issuance of general obligation (GO) bonds, sales tax bonds, and MFT revenue bonds (together, local bonds) along with TIF and federal and state grants to fund a wide variety of capital projects throughout Chicago’s neighborhoods and central business district. The uses of local bond proceeds are discussed below.
Local bond proceeds primarily support critical infrastructure projects, such as construction and resurfacing of streets, viaducts, alleys, lighting, ramps, sidewalks, bridge improvements, traffic signals, bike lanes, streetscapes, and shoreline reconstruction work. Local bond proceeds also are spent on facility improvements and construction of police and fire stations, senior centers, libraries and other City facilities. While certain work related to the greening of Chicago, primarily the maintenance and repair of medians throughout Chicago, is paid with bond proceeds, in recent years the City stopped funding most of the work associated with medians with long-term borrowing and now uses operating revenue to pay for these improvements. This is part of the City’s overall plan to transition working capital from long-term borrowing to operating revenue.
Local bond proceeds are also used to fund capital improvements through the annual Aldermanic Menu program, which is in its 22nd year. Through aldermanic menu, each member of City Council is allotted $1.32 million of bond funding to be spent at their discretion on a menu of capital improvements in their respective wards. These funds have been used for sidewalks, residential street resurfacing, street lighting, and curb and gutter replacement. In recent years, the City worked collaboratively with aldermanic offices to ensure capital improvements funded by the menu program are better coordinated with other infrastructure work in the ward and focused on the most pressing capital needs.
As detailed in the chart above, the City has worked to reduce the issuance of local bonds, and continues to look for opportunities to reduce borrowing and utilize available operating revenue, TIF, grants, and other funding sources for its capital improvement program. This effort will reduce future debt service obligations.
Water and Sewer Capital Investments
In 2012, the City launched a ten-year capital improvement program to modernize and rebuild the City’s aging water and sewer system. This initiative will replace 880 miles of century-old water pipes, reline or rebuild more than 750 miles of sewer lines, reline 14,000 sewer structures, and upgrade four of the original steam-power pumping stations.
Water and sewer capital projects include water main replacement, meter installations for Chicago’s Meter Save program, rehabilitation and construction of sewer pipes, and facility upgrades like modernizing pumping stations from steam to efficient electric power.
The water and sewer capital improvement programs are primarily funded by bond proceeds, grants and loans which are all backed by revenue from each system charges for service and other revenue. The majority of projects are partially funded from bond proceeds, grants and loans. The City has applied for and received funding from the IEPA State Revolving Loan Funds program. This program provides simple interest loans and in most instances a shorter repayment schedule.
Aviation Capital Investments
The operation and maintenance of both airports requires capital investments to repair and replace aging facilities and infrastructure. The capital improvement programs of O’Hare International Airport and Midway International Airport include projects that improve runways, taxiways and aprons, terminal buildings, access roadways, and parking lots.
Aviation capital is presented separately from other capital funds to provide a clear picture of funding sources and distribution of funding. Aviation capital funding is used exclusively for projects at the City’s airports, and is typically funded through bond proceeds backed by revenue from passenger facility charges and customer facility charges. Both airports also utilize available federal grant funding and operating revenues, including concession and parking revenue, to fund capital improvements.
In 2016, the City announced a multi-billion dollar capital program at O’Hare Airport, known as O’Hare 21, to expand and redevelop terminals including the creation of new gate spaces. The 2016 O’Hare bond issuance is funding construction of Runway 9C-27C, a centralized de-icing pad, and cross-field taxiways. Construction on Runway 9C-27C began in August 2016 and is scheduled to open in 2020. The centralized de-icing pad will allow aircraft to be de-iced away from the gate, and the new cross-field taxiways replace and update two older taxiways, accommodating a new terminal expansion.
The O’Hare Series 2017 bonds will fully finance the International Terminal 5 Expansion Project, which increases the number of international gates from 19 to 28. These are the first gate additions since the terminal was built in 1993.
Midway modernization program is focused on ongoing repair, capital maintenance, and demand-driven expansion and upgrades. The projects funded by the 2016 bond issuance include expansions to both passenger security checkpoint areas, a terminal parking garage, and a complete renovation and expansion of Midway’s concessions.
Capital Investments Going Forward
The City’s CIP includes a total of $7.6 billion in planned capital improvements from 2017 through 2021. The charts below present the anticipated sources of capital funding and proposed uses of capital funding for this five year period. Details regarding the allocation, funding source, timing, and scope of each planned capital improvement project are available on the City’s website. Click here for more information on the City’s Capital Investments.