Chicago Banking on $7 Billion to Fix Crumbling Infrastructure Without Washington

Mar 30, 2012 2:16pm
gty rahm emanuel dm 110531 wmain Chicago Banking on $7 Billion to Fix Crumbling Infrastructure Without Washington

                                                                (Image Credit: Scott Olson/Getty Images)

CHICAGO – Gridlock and dysfunction in Washington, coupled with the aftereffects of U.S. economic malaise, have spurred cities like Chicago to take matters into their own hands when it comes to rebuilding crumbling infrastructure.

Chicago Mayor Rahm Emanuel, who knows a thing or two about Washington’s incompetence after working in Congress and the White House for more than a decade, this week unveiled a new $7 billion infrastructure plan that he believes will create 30,000 jobs in the next three years.

“Whether it’s renewing our parks or repairing our pipes, repaving our roads or rebuilding our rails, retrofitting our buildings or revitalizing our bridges, we must restore Chicago’s core,” Emanuel said Thursday in unveiling the plan, called “Building a new Chicago.”

The project is an ambitious one, designed to address flaws underground, on land and in the skies above the city: renovate, repair or rebuild more than 100 bus and train stations; create the first 16 miles of a rapid transit bus route; open two new runways at the city’s O’Hare airport; acquire 180 new acres of parklands; build 20 new playgrounds and 12 new parks; replace 900 miles of water pipes; modernize public schools and colleges; and retrofit city buildings to reduce their energy consumption.

That all sounds well and good. But how can America’s third-largest city embark on such a sprawling plan without receiving federal help or raising taxes? The answer lies in the private sector.

“Nobody is looking to Washington to be a savior anymore,” Joseph Schwieterman, a transportation specialist at DePaul University in Chicago, said. “During the recession, the federal government was seen as an important financier, but the stimulus is over and it’s obvious the federal government isn’t going to be able to provide as much as it once did. So now the mayor wants to bring private firms to the table in Chicago to run the city more like a business …

“He’s not using the word ‘privatization’, but there’s an element that’s similar to that, where a firm may, for instance, manage City Hall for a fee and in the process lower the electric bill and custodial costs. It’s exciting, but we all know the devil is in the details.”

Under the new arrangement, a non-profit fund known as the Chicago Infrastructure Trust – unveiled last month with former President Bill Clinton in attendance – will employ the resources and experience of the private sector to address Chicago’s public infrastructure problems.

“This model of private financing for public infrastructure is happening all over the world, but not here in America,” Emanuel noted.

Robert Puentes, director of the metropolitan infrastructure initiative at the Brookings Institution, praised Chicago’s aggressive approach.

“People understand that the city’s infrastructure needs to be fixed, especially when compared to other countries and their modern airports,” Puentes said. “People also understand that on a national level the federal government is not promising a lot of money to rain down on cities and states and metropolitan areas, so cities like Chicago are now starting to devise their own plans for how they’re going to make these big broad investments in infrastructure.

“A lot of folks have big plans and broad ambitions, but what’s unique about the Chicago project is that it’s both tied to their economic plan for the future and new interesting ways to fund that infrastructure…

“In recent years the U.S. has really fallen behind in attracting private investors to domestic infrastructure. Other countries are far out ahead and we’ve learned a lot from them,” he continued. “This is a uniquely American approach. It’s not going to just turn over U.S. infrastructure to private partners for them to run and operate unencumbered. What we’re really talking about is a partnership among levels of government, the private sector, philanthropy to conceive what we need to invest in and what risks and rewards can be shared. ”

From the city’s congested roads to its decaying trains, from its polluted river to its overcrowded airport, there is plenty of work to be done in the City of Broad Shoulders. But this is a city that knows how to rebuild: A little more than two decades after the city was destroyed by the Great Chicago Fire, it hosted the world’s fair in 1893.

With states and cities across the country slashing their budgets and scrapping essential services in a desperate effort to merely stay afloat, Chicago’s project stands out as especially impressive. Emanuel made it clear that he has no intention of waiting around for help from the federal or state government.

“We can’t allow dysfunction, whether in Washington or [state capital] Springfield, to delay our economic development,” he stated.

Analysts such as Puentes and Schwieterman predict that it won’t be long before other cities follow Chicago’s lead, assuming the project here goes well.

“The frustration for cities comes from the fact that Washington doesn’t do anything – they get in the way and they’re not being supportive. There’s a recognition of that,” Puentes said. “Many other metropolitan areas are watching what’s going on in Chicago and their successes and failures are really going to resound in the rest of the country. Chicago is first out of the box, but they won’t be the last.”

Schwieterman agreed. “I think other cities have no choice but to follow suit,”  he said. “We can’t rely on government to dig us out of the hole – we’ve got to find new sources of revenue. It’s a new reality.”

But that is not to say there are not risks involved in Chicago’s plan. In the past, the city has suffered from public-private partnership projects gone wrong, such as the fiasco that has resulted from a 2008 deal that leased Chicago’s parking meters for 75 years to a private company. It now costs Chicago drivers a whopping $5.75 an hour to park downtown during peak hours.

“With our parking meter situation, people are upset, but the government is locked into a contract,” Schwieterman said. “If people notice higher fees from this, that sure can create a firestorm real quick.”

Puentes said, “The public is right to wonder if this sounds too good to be true.  We could certainly do more with less, like realizing some savings through reforms, but private investors are profit-driven – that’s why they’re in this game – so in order to do this you have to figure out a way to pay them back with interest or figure out how they benefit from certain investments.

“The danger is falling into the trap that it’s free money,” he said. “It’s certainly not.”

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