In conjunction with this week’s American Planning Association conference, which brought 5,000 urban planners to Chicago, last night the Chicago Architecture Foundation hosted the roundtable “No Small Plans: The Chicago Infrastructure Trust.” Approved by City Council in April 2012, the trust is a nonprofit organization whose mission is to raise capital from private investors for large-scale public works projects that might be too expensive to be paid for by public funds. It has a five-member board of directors appointed by Mayor Rahm Emanuel.
A handout for the seminar billed the trust as “a groundbreaking public-private partnership that will inject money and drive attention towards Chicago’s infrastructure, transportation and sustainability plans.” However, in a city that has been burned by the parking meter privatization deal in the past, this strategy has been controversial. Aldermen and citizens have expressed concerns about oversight and transparency, and journalists like the Chicago Reader’s Mick Dumke have argued that the plan will privatize the decision-making and funding process for public projects.
“The trust is our attempt to say to the world our hand is in the air and we are not going to rest on the old ways of doing business, that we’re going to keep open-minded,” said Lois Scott, the city’s chief financial officer, during the panel discussion. She promised that, despite the trust being a separate entity than the city government, its activities would be transparent. “We’re going to bring together all the accountability that the public has demanded. … The trust still complies with [the Freedom of Information Act], still complies with Open Meetings [laws that require that the government decision-making process be transparent].”
MarySue Barrett, president of the Metropolitan Planning Council, said the trust is still in its formative stage. “But it’s gotten a lot of attention [internationally] because of its potential to aggregate projects of a variety of types and find that balance of risk and rewards based on the whole continuum of what you could have a private entity provide: design it, build it, maintain it, operate it, finance it. You could draw from that menu of options and say, ‘I want this piece and I want that piece.’”
She acknowledged the public’s anxiety about privatization due the disastrous parking deal. “In Chicago, all of us are familiar with some early projects that were viewed as groundbreaking, like the Chicago Skyway [privatization] deal. And then an article that was published yesterday in Next City [one of the co-hosts of the roundtable] has a great analogy of ‘the shadow overhanging in the shape of a parking meter.’ I love that visual. And that’s exactly what it feels like. We literally cannot have a discussion [of the infrastructure trust] without thinking of the parking meter deal. We know that we have an obligation here in Chicago to set a new prototype. That’s a very sobering expectation.”
Roy Kienitz, president of an eponymous infrastructure investment consulting firm, said that while private investors who finance Chicago public works projects will be looking to make money overall, not every item funded via the trust needs to be profitable. “There are lots of infrastructure projects out there which we love and which benefit us which do not generate enough money to pay for themselves. The CTA is a wonderful system. Last time I checked it runs a bit of a deficit, as with every other transit system in the world, except for Hong Kong, I believe, where the transit system actually makes money.”
He acknowledged that investors tend to have an edge in negotiations with city governments, which was certainly the case with the parking deal, which has lost money for the city but has been lucrative for Chicago Parking Meters LLC, the concessionaire. “It’s almost universally true that for every private sector infrastructure project you’re trying to do, the people … from the private sector are experts [at making investment deals]. … The people from the public sector have never done this before. They are smart people but they are learning as they go.”
He said that as public-private partnerships, known as P3s, become more common, it will be key to educate public sector leaders about what they should expect from infrastructure deals. “A lot of them come in wanting something for nothing. But the private sector is pretty good at saying no. The private sector is very good at saying, ‘Something for something. I will take on a certain amount of risk, I will help control construction costs, I will be ruthless with the number of hours my employees are spending on this … But in return for that, I’m not in this for God and country. We’re in this to make money.’”
Rita Athas, president of World Business Chicago, which promotes the city as a business destination, argued that robust infrastructure is key for attracting corporations to Chicago. She listed airport connectivity, plus recreational opportunities like the Lakefront Trail and Millennium Park, as some of the city’s major draws for businesses that would settle here. “That’s why I want this infrastructure trust to work,” she said.
Good public transit is key to attracting a talented workforce, especially 25-to-34-year-olds she added. “That age group is different from my age group, in that 50 percent of them don’t own cars. They want a [public] transportation system. Even though the CTA has its challenges, we are one of the few major global cities with a transportation system like the one we have, with 1.7 million passengers a day, bigger than the entire city of Philadelphia.”
The trust has been progressing slowly since it was approved last year, but the nonprofit is now moving forward with the fairly uncontroversial Retrofit Chicago initiative, a roughly $200 million effort. Scott explained that this program would make improvements to public facilities like schools, police stations, and firehouses, such as upgrading light bulbs, windows and roofs, as well as water pumping stations. “The savings and energy costs associated with putting these improvement in place will actually pay for the cost,” she promised. The trust recently sent out a request for qualifications from investors for the project, which received 14 responses from several different types of potential funders.
The infrastructure trust has potential as a creative way to fund big public works plans, including innovative transportation projects, that would be difficult to find money for under the current cash-strapped, dysfunctional federal and state governments. But Barrett underscored the need to proceed with caution. “I think we would all agree that we’re not looking for the trust to do the projects that the financial bidders are interested in. They’re the projects that are going to have the greatest economic value to the city.”