Emily Tapia Lopez
A new decade, a new Mayor-Elect, and a new host of possibilities for the Chicago region. Rahm Emanuel has promised that his administration will tackle mounting regional challenges that include a budget shortfall, crumbling infrastructure, and industry sectors still reeling from the worst recession in recent memory, all while re-positioning Chicago in the global economy.
On his campaign website, Mayor-Elect Emanuel stresses the importance of a multi-modal transportation network, suggesting the use of nontraditional revenue sources:
Rahm will task the incoming transportation leadership team to think creatively about funding opportunities to get [Chicago Transit Authority (CTA)] stations built and service expanded. He will work with the CTA to use more effective strategies like ground leases, air rights, co-development of transit stations, public-private partnerships on new [Bus Rapid Transit] BRT routes, naming rights and increased advertising to attract outside investment.
Transformative investments that have put Chicago on the map, such as rail links to both O’Hare International Airport and Midway are daunting to replicate, given budget crises at every level of government. Even when we secure federal dollars for needed infrastructure investments, we need substantial local funds to meet the required match. It’s the “new normal”: only through innovative financing tools such as public-private partnerships (PPPs) will new projects come to fruition.
PPPs are binding agreements between public and private parties that allow a private entity to assume significant control of, and risk for, multiple elements of an infrastructure project. While at least 23 states, including Indiana, have passed legislation enabling PPPs for designated projects, Illinois does not have enabling legislation. (Mayor Daley has been able to pursue PPPs under home rule authority, but the Illinois Department of Transportation (IDOT) and Illinois State Toll Highway Authority (ISTHA) today could not.)
MPC is particularly bullish on the potential to use PPPs and value capture instruments for new public assets, such as an O’Hare Western bypass/access road and enhanced transit. It’s all about keeping Illinois competitive: PPPs can offer considerable cost savings and shortened delivery time, while responsibly transferring risk to the private sector. Illinois House Bill 1091 (sponsored by Rep. Elaine Nekritz, which crossed a committee vote hurdle a couple days ago) and Senate Bill 146 (sponsored by Sen. Heather Steans) would enable state transportation agencies to join a growing number of states who have the option of using PPPs to finance new infrastructure. With our economy struggling to generate new jobs, PPPs can jumpstart viable transportation projects that put people to work.
On the national stage, the urgency for new transportation financing options is gaining bipartisan support. An unlikely pair, the AFL-CIO and the U.S. Chamber of Commerce, recently released a short joint statement following the State of the Union address, stressing the importance of the surface transportation reauthorization bill. It would bring a renewed focus to transformative infrastructure investments, as well as open the door to new funding mechanisms.
The U.S. Conference of Mayors just passed a resolution to support the use of public-private financing mechanisms for projects that require a commitment of significant non-federal sources. The nation’s mayors embraced an expanded Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program, which provides credit assistance for projects of national and regional significance, as well as tax credit for Qualified Transportation Improvement Bonds.
The New York/New Jersey Port Authority has announced it will join forces with a private company to build a new bridge, linking Staten Island to New Jersey. The company is pledging 10% of the project’s price tag up front, with the rest of the money coming from federal transportation bonds. The bonds will be paid back over 30 years by the Port Authority, allowing it to maintain ownership and protecting it as a public asset. If this venture proves successful, it could “pave the way” for future PPPs.