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A few days ago, the City Council passed an ordinance to establish the Chicago Infrastructure Trust — a nonprofit that will leverage private, for-profit investment for public infrastructure projects. Much of the recent attention has been on the lack of strong public protections to make the trust transparent and accountable to citizens. But there is a more fundamental question: Do we really need it?
No one will dispute that Chicago's infrastructure is aging, that our state and federal governments face tight operating budgets, or that we need to put people to work. But a strong case was never made for why the city can't use the traditional municipal bond market. It is the cheapest way to raise capital and involves minimum fees for special consultants and lawyers.
Instead of creating projects through the infrastructure trust, the city could create wholly public special-purpose entities, like a toll road or transit agency, with independent bonding power to make use of low-cost public capital and charge lower fees than a private company would. Because they would be special-purpose entities, their borrowing would not affect the credit of or count as debt for the city. And the city would face no additional demands for "compensation" — like the parade of lawsuits we've seen from the parking deal — when public policies indirectly affect the revenue streams of private investors.
So why would doing it through the infrastructure trust be better for taxpayers?
This question was never answered, so the public is left wondering. According to the mayor's office, five investment firms, J.P. Morgan Asset Management Infrastructure Group, Ullico, Citibank N.A., Citi Infrastructure Investors, Macquarie Infrastructure and Real Assets Inc., are interested in investing in more than $1.7 billion worth of projects through the trust.
The mayor's office has stuck to the talking point that the only project that has been looked at is "Retrofit Chicago," a $250 million project to make city buildings more energy-efficient. So, where did the $1.7 billion figure come from? Did these companies really say they were interested in investing such specific amounts of additional money without seeing any of the proposals? And what was promised to these companies that makes them so confident they will get a healthy profit off of Chicagoans' user fees?
Given Chicago's history with private companies buying our public assets at a discount with agreements that lack transparency and curtail public decision-making, Mayor Rahm Emanuel and city aldermen should have been willing to build in basic protections and to make sure that the trust would be better than other forms of financing. Instead, we are left with many unanswered questions, no guarantee that taxpayers will receive a fair value and a mayor who simply asks us to trust him.
This op-ed ran on Crain's Chicago Business: http://www.chicagobusiness.com/article/20120427/NEWS02/120429815/questions-remain-on-infrastructure-trust
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