In an era of declining tax receipts, urban planners the world over are grappling with the challenge of securing financing for needed infrastructure improvements. As early as 2007, Senators Chris Dodd and Chuck Hagel floated the idea of a National Infrastructure Bank, an entity that would be able to leverage private investment dollars to fund public infrastructure projects. In 2010, President Obama re-iterated the call for the creation of such a platform; but as with most ambitious and innovative legislation at the Federal level, the proposal was lost in partisan gridlock. As part of a larger trend in American governance, municipalities refuse to wait for state or federal agencies to act, and in March 2012, Mayor Rahm Emanuel created the Chicago Infrastructure Trust.
The Trust hopes to attract large institutional investors with quick paybacks and bundled projects. In traditional public-private partnerships, investors have purchased long-term control of infrastructure, such as a toll road; but with this new model, the city would hope to pay back investors on a much faster timeline, i.e. ten years instead of ninety. This is a lesson learned from a controversial deal Mayor Daley made with an investment group headed by Morgan Stanley, in which the right to collect from downtown parking meters for seventy-five years was sold at a vastly undervalued price. Additionally, the Trust would maintain that any projects it funds would remain under city control. In terms of bundling projects, the Trust can also reduce costs; for example, by grouping hundreds of energy retrofits into one transaction.
One year after the Trust’s creation, the first project to retrofit city buildings to improve energy efficiency is already behind schedule. There are challenges in creating an organization like the Trust, which is without precedent in the United States. Chicago Public Schools paid upfront for a lighting retrofit, hoping to be reimbursed by the Trust, but securing private investment has taken longer than expected. Hopefully once the concept can be proven to investors, cities will have a new tool to combat the contemporary challenge of deteriorating infrastructure.
What are some examples of successful public-private partnerships?
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