The day after announcing his 10-point economic plan for the Chicago region, Mayor Rahm Emanuel joined former President Bill Clinton at a Bridgeport carpenters union to lay out a vision for revitalizing Chicago’s aging infrastructure.
Starting with more than $200 million in energy efficiency retrofits, the city will stoke public and private investment for infrastructure projects through a trust—the first of its kind in the nation—that city hall said could enable projects like a rapid-transit bus system or an extension of the CTA Red Line.
“Our needs are bigger than what Washington or Springfield can do anymore. We all know their money is declining. Our opportunities and our needs are growing,” Emanuel said during the event.
Pending approval by City Council, the plan would create the not-for-profit “Chicago Infrastructure Trust” that Emanuel said could garner $1.7 billion in initial investments from the likes of Citibank N.A.; Citi Infrastructure Investors; J.P. Morgan Asset Management Infrastructure Investment Group and the Union Labor Life Insurance Co.
“It’s not new money. It’s shifting the cost in time,” said Northwestern University engineering professor Joseph Schofer, who directs Northwestern’s Infrastructure Technology Institute. Unlike state and municipal governments gone bust, private investors have capital to invest in large projects in the short-term. In return, they get some assurance from the government that their investments pay off over time.
Those returns could be in the form of direct revenue, as with fares from rapid bus transit, or a direct subsidy from the government. “The questions comes down to, what does it really cost to do that, and is it worthwhile to incur what’s probably going to be the extra cost of borrowing,” Schofer said, “to get that piece of infrastructure sooner.”
The largest portion of private funding — perhaps as much as $1 billion — would come from Macquarie Infrastructure and Real Assets Inc. That international business group leased the Chicago Skyway for 99 years to the tune of $1.83 billion.
Chicago’s parking meter deal somewhat soured public perception of private investment in city infrastructure. Further, not-for-profits are not subject to public transparency measures like the Freedom of Information Act. That’s had some in the public questioning the proposed Trust’s trustworthiness.
But beyond the $225 “Retrofit Chicago” initiative to cut energy costs in 127 government buildings, the city is mum on project details for now. Even the investment projections are based on letters of support and “preliminary nonbinding interest.”
During his remarks, the mayor recalled the “lost decade” theme he had laid out in announcing the city’s economic plan. In terms of infrastructure, Chicago’s problems are indicative of a nationwide slump. Five years ago, U.S. infrastructure still ranked in the top ten. Now it ranks 24th, according to a report by the World Economic Forum.
And it isn’t just the recession. In Poland, private funding helped the government pave more than 170 kilometers of highway last year, boosting economic activity even under tight E.U. controls on state spending.
“This is a huge deal,” Clinton said at the project’s unveiling. “And if you can do it, then every other city in this country of any size can do the same thing.”