PI Original Matthew Blake Wednesday April 11th, 2012, 3:08pm

Cloud Of Skepticism Surrounds Chicago Infrastructure Trust

There are worries that Chicago Mayor Rahm Emanuel’s proposed “Infrastructure Trust” will not be accountable to the public and City Council. However, the trust is still largely undefined, raising another, more basic question: What projects will it finance?

There are worries that Chicago Mayor Rahm Emanuel’s proposed “Infrastructure Trust” – where a non-profit would be created, and a board would oversee the private financing of public infrastructure projects – will not be accountable to the public and City Council.

However, the trust is still largely undefined, raising another, more basic question: What projects will it finance?

Infrastructure finance experts agree that for such a partnership to succeed it must have two elements: Clear benefits for the public, and clear incentives for private investors. On arguably neither of these counts has the city defined its plan, meaning the trust could prove to be anywhere from a triumphant innovation to a much-hyped flop that could lead to privatization projects that make the parking meter debacle look like a good deal.

What The Trust Is

While it is rare among American city governments, state governments increasingly use public-private partnerships in response to decreased federal funds for infrastructure projects, and also a dwindling local tax base.

With the trust, “the city can control its own destiny and not be reliant on Washington, D.C., Springfield, and anybody else,” says Emanuel spokesman Tom Alexander.

Typically, such partnerships are developed for specific projects that feature a dedicated revenue stream for private investors. For example, the Indiana toll way – or the almost universally panned Chicago parking meter lease.

But the Infrastructure Trust, instead, has an overall vision of private financing, not a focus on specific projects.

The Trust ordinance Emanuel introduced last month – and the City Council is expected to vote on April 18 – proposes an initial leader of the non-government, not-profit partnership’s board – Boeing executive vice president James Bell.

And the ordinance identifies five investment companies that said they would collectively contribute more than $1 billion to the partnership -- Citibank N.A.; Citi Infrastructure Investors; Macquarie Infrastructure and Real Assets Inc.; J.P. Morgan Asset Management Infrastructure Investment Group; and Ullico.

Under the cordinance, the Trust would propose projects and the City Council would have to sign off on them.

What The Projects Might Be

The ordinance did not specify what projects Emanuel, Bell, and these investors want beyond an already announced plan to make city buildings more energy efficient. “We really have one idea that we have presented for the Trust,” Alexander says.

Joshua Schank, president of the Washington, D.C. non-profit Eno Center for Transportation and former transportation adviser for Hillary Clinton when she was a New York senator, contends that Emanuel has it backwards – picking the projects should come before picking the financiers.

“He started with creating the financing pool, which implies he was looking first at ways that investors could get their money back,” Schank says. “If you want the public to buy in, the best way is to tell the public what projects they are going to get – say ‘Here is a list of projects.’ Then look at how it is funded.”

Emanuel did unveil a Building a New Chicago plan two weeks ago that lays out infrastructure goals. But the Trust was not identified as a concrete funding source for any of these projects.

Jonathan Peters, a professor of finance at the City University of New York and expert on public-private partnerships, argued this might be because the city and private investors are struggling to find mutually beneficial projects.

“These are not charity organizations,” Peters says of the private investors. “You have to give them a dedicated revenue stream.”

Schank and Peters listed a number of infrastructure projects – parks, non-toll city roads, even extending mass transit lines – that do not really make sense, because there’s no lucrative revenue stream.

The infrastructure board might invent ways to make projects work, Peters acknowledged. For example, maybe an investor could finance a beach park rehabilitation, and then get a plum tax deal on a beach side restaurant.

Indeed, the novelty of the trust means there’s a chance it could be a policy breakthrough. “Chicago could become a model for other metropolitan areas,” says Jennifer Thompson, a senior researcher at the Washington, D.C. Brookings Institution metropolitan policy program.

Accountability Concerns

But it is this newness that also raises concerns the mayor will set up a non-profit not accountable in a way that an elected body or typical city agency – like the city Department for Housing and Economic Development, for instance – might be.

Woods Bowman, a professor at the DePaul University school of public service and an expert on government finance, lists a number of ways he would like the Trust to be more accountable: Statements of economic interest from board members, assurance the Trust is compliant with Illinois open meetings and Freedom of Information Act, or FOIA, laws, and public hearings in advance of finance decisions.

“It needs a lot of changes,” Bowman says.

Ald. Pat Dowell (3rd) and Ald. Ameya Pawar (47th) wrote an op-ed in the Chicago Tribune Monday that called for an appointment of aldermen to the infrastructure board, and also called for similar transparency measures.

Alexander said that the mayor is considering the aldermen’s suggestions. The mayor has not decided if he would permit aldermen on the infrastructure board.

“Any project undertaken by the Trust must have City Council approval, anyway,” Alexander pointed out.


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