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Annual Privatization Report 2013

Mayor Rahm Emanuel Establishes Chicago Infrastructure Trust

Subsection of Annual Privatization Report 2013: Local Government Privatization

Harris Kenny
May 6, 2013

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Mayor Rahm Emanuel Establishes Chicago Infrastructure Trust

Chicago Mayor, and former Obama administration Chief of Staff, Rahm Emanuel continues to implement one of the most wide-sweeping reform agendas across the U.S. In March 2012 Emanuel announced the Chicago Infrastructure Trust (CIT), which is a form of public infrastructure bank that would raise capital from the private sector that would then be deployed by the public sector for public projects. The city would leverage that capital through partnerships with private investors to develop the city’s infrastructure. The key is that private financing is being used for public infrastructure, and directed by the public sector. The private partners that invest capital would be repaid through user fees, or some comparable way of recouping their investment.

CIT is the highlight of Emanuel’s tenure in Chicago so far, and it is widely considered one of the most ambitious local government initiatives in the U.S. Emanuel contextualized the CIT, saying:

By neglecting to invest in our infrastructure for nearly four decades, we have allowed Chicago’s foundations to decay and our strengths to decline. We know that as long as our city rests on a 20th century foundation, we won’t be able to compete in a 21st century economy. If we don’t take action, Chicago will face another lost decade.1

Emanuel is expected to raise $8 billion from private investors for CIT to improve city streets, parks, water and wastewater, schools, commuter rail and much more.2 Operating CIT will cost the city $2.5 million per year. CIT has received interest from Macquarie Infrastructure and Real Assets, Ullico, Citibank and JPMorgan. This first project is being called Retrofit Chicago, but it’s only a glimpse into what Emanuel could do with private sector capital and expertise to reimagine the Windy City.

According to The Economist:

The first project is an investment of $225m to make city buildings more energy-efficient. This is expected to reduce annual energy costs by $20m, and the savings will then be used to pay back the investors. The CIT will provide some capital, bond financing and grants. It will also offer tax-exempt debt to entice investors. Returns on investment could vary from 3% on tax-exempt bonds to 8% for equity partners.3

In February 2013 city officials announced a request for qualifications (RFQ) calling on potential financial partners to lay out the terms and conditions they would require to finance Retrofit Chicago.4

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Endnotes

1 C. Hayes, “Emanuel unveils $7 billion infrastructure trust,” Hartford Courant, March 29, 2012. http://www.courant.com/topic/wgntv-emanuel-infrastructure-project-march29,0,3109458.story

2 “A question of trust,” The Economist, May 12, 2012. http://www.economist.com/node/21554579

3 Ibid.

4 Greg Hinz, “Emanuel’s infrastructure trust finally makes a move,” Crain’s Chicago Business, January 31, 2013. http://www.chicagobusiness.com/article/20130131/blogs02/130139963/emanuels-infrastructure-trust-finally-makes-a-move


Harris Kenny is Policy Analyst


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