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Still Much To Be Learned About Mayor’s Ambitious Infrastructure Trust Plan, And What If Any Impact It will Have On Construction
Over the Summer, the Builders Association’s magazine Building Chicago featured an in depth article on Public-Private Partnerships from FMI. Author Colin Myer speculated that, while such partnerships for major construction projects had greatly been limited to other parts of the world before this decade, legislation
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and the need for new structures and revenue streams would lead to the increasing use of PPPs in the United States. Not long after that article ran, the Chicago area became an example of the national leaning toward partnerships, as Mayor Rahm Emanuel announced the formation of the Chicago Infrastructure Trust, designed to leverage private investment funds for city renewal through infrastructure projects. Public-Private Partnerships aren’t new to the Chicago area, but have received a mountain of backlash as deals to sell ownership of parking meters and the Chicago Skyway were both widely criticized. Be that as it may, their use for public construction in this area is largely untested, and the potential benefits outweigh the risks for the City, according to the Mayor. “Nothing is more crucial to our long-term competitiveness and job creation than infrastructure,” Mayor Emanuel said through a City of Chicago Press Release. “The Chicago Infrastructure Trust will bring additional resources to stimulate public and private investment in our infrastructure, create thousands of jobs for Chicagoans, and ensure that our residents have a world-class quality of life.” The Retrofit Chicago program will be among the first items tackled by the trust. Through the program, the City Council hopes to restart stalled energy efficiency projects and create new ones. Five major financing organizations agreed to consider funding projects on the Trust’s list. Through the Trust, the City believes advantaged financing, equity investments and other tools will help jumpstart public construction projects in what the Mayor hopes will serve as a model program for other metropolitan areas. “Chicago has, for many years, been at the leading edge of encouraging and attracting capital for infrastructure investment and renewal,” stated Jason Zibarras, Chief Investment Officer of J.P. Morgan Asset Management through the same release. “The creativity and willingness to consider new forms of investment structures, drawing on the strengths of all stakeholders, is to be commended.” And then there’s...well, the other side of the coin. While lenders and local labor leaders voiced support for the plan and its desired ends, those lenders fell short of promising funds beyond the initial seed money, with many saying only that they’d “consider” backing projects, depending on what they were.
Government Among those pointing at flaws in the ambitious plan are community watchdog groups as well as financial journalists from some of the largest newspapers in the country. By some analysts, the approach is seen as just another form of borrowing, only at a worse rate than the city borrows now. Without strong oversight and extremely well-written contracts, the possibility that the city gets fleeced by a group of veteran investors - one of many knocks against the parking meter deal - is a very real possibility. Such partnerships may be few and far between in the United States, but around half the states have broad, enabling legislation that could be used to facilitate them. According to Myer, Virginia has a number of road projects and over 30 school buildings that were PPP projects. Private real estate development firms have worked with city and county school systems to greatly upgrade facilities, computer labs, gyms and libraries for students, and in many cases the funding for these projects was egged along by allowing private interests to use those public facilities for commercial activity. Former Boeing executive James Bell has been tapped as the Chairman of the Trust, leading a five-person board whose nominations were approved by the City Council. Before getting going on any projects, however, some details and transparency issues had to be ironed out. The Trust’s bylaws are now available on the City’s website.
The Skyway is one of the few examples of public-private partnerships in the Midwest, but those putting the Infrastructure Trust in place envision many more ventures. As Travelers Construction Surety COO Bob Raney pointed out at the Builders Association’s Fall Meeting, municipalities across the country are having an uncommon amount of difficulty financing even badlyneeded public projects in the wake of the recession. For that and many other reasons, states and counties with those needs who remain in financial turmoil will be paying close attention to what happens with the
Trust. Has the Mayor created something for metropolitan areas around the nation to duplicate, or something for them to avoid like the plague? For the time being, the answer to that question - as well as many of the program’s details - remain up in the air. View future publications of the Builders Association as we continue to follow the Trust’s progress.
Two Words That Aren’t Normally Together... “Legislative” and “Easy” aren’t often in close proximity to one another, especially when it comes to politics and especially in Illinois. The Builders Association’s Government Relations Committee has teamed with BIPAC - a national firm helping businesses in political issues since 1963 - to update the Legislative Updates page on www.bldrs.org. Through this new feature, you can view which legislative issues are important to the construction industry at the local and national level. • This system allows users to: • Search for their legislator • Send legislators a direct email on a topic • Peruse sample letters to use when contacting
lawmakers • Browse and view the state of issues and bills View the Leigslative Updates section of www.bldrs. org to see what you’ve been missing out on, and contact Al Leitschuh at aleitschuh@bldrs.org for more on Government Relations issues.
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