Why has the Chicago Infrastructure Trust generated outsized interest? For starters, I can’t think of many mayors beyond Rahm Emanuel who can produce former President Bill Clinton for a local press announcement. Yet there he was on March 1 of last year, lauding his former staffer (and former investment banker) for making his city the first to take its infrastructure destiny into its own hands.
On Wednesday, Clinton and Emanuel joined forces again, this time to launch a new effort from the Clinton Global Initiative and the U. S. Conference of Mayors. Called the Infrastructure Financing for Cities Task Force, it’s meant to bring urban leaders together to learn about attracting private investment to infrastructure necessary for economic growth.
The rules of engagement for this new self-help era are just now being written. Instead of waiting for Congress or a state capital to get around to funding the next slug of maintenance and new capacity for transit, roads, sewers and more, cities and regions need more financing tools within their reach.
In addition to having a crushing backlog of unpaid bills and the largest unfunded pension liability of any state, Illinois has a nasty habit of authorizing five-year transportation packages every 10 years. Chicago needed a strong partner in order to remain a world-class economy and the transportation and supply chain crossroads of America. So, it’s building one for itself.
As a member of the advisory board to the Chicago Infrastructure Trust, I’ve got a seat at that table. And I intend to use it to ask the questions and shape the answers that will ensure that the Trust unlocks job growth and measurable efficiency benefits for the city of Chicago. Starting with Retrofit Chicago, we intend to refine the model of aggregating urgent projects — which would not individually attract private capital — and streamlining procurement and other processes to deliver certainty to both residents and investors.
Of course, this only works if the Trust also meets the profit needs of investors. As Chicago CFOLois Scott detailed at a Next City-run panel earlier this week during the APA National Planning Conference in Chicago, the Trust is a mechanism for determining the right allocation of risk and rewards. Traditional tax-exempt municipal financing remains very attractive to investors. And why not? The public sector assumes all the risk. Sometimes that works out well, but if costs come in higher or if savings are lower than projected, it’s the taxpayer who’s on the hook. There are times when higher transactions costs, paired with transferring a portion of the risk to the private sector, is a smart tradeoff.
Investors are signaling that they agree. Early interest has come not only from expected sources like banks, but from union pension and insurance funds like Ullico. The Lincoln Institute of Land Policy’s Armando Carbonell, who moderated the Next City panel, reminded us that there is no pile of money. Each Chicago Infrastructure Trust transaction will come together and be evaluated on its merits, with full transparency.
The Trust’s Board and new executive director Steve Beitler are cognizant of extremely high expectations, and of the need to restore credibility following the 99-year parking meter lease. There is disagreement as to whether the city received fair compensation. But there is no disagreement that the meter deal was rushed and that the proceeds should never have been used to fill an operating budget gap. We’ve learned from our mistakes.
We’re also learning from our successes and others around the globe. Whether borrowing procurement protocols from Infrastructure Ontario, or communication strategies from Stockholm, Chicago is attempting to blend the best tactics and tools to devise new and pragmatic ways to get needed investments moving.
Chicago, city of big shoulders, maker of no small plans, infrastructure innovator. Sounds like a good fit.
MarySue has been president of the Metropolitan Planning Council since 1996 and is a member of the advisory board to the Chicago Infrastructure Trust. This op-ed originally appeared on Next City.