Paying for the global city
For any city aspiring to play in the global league, infrastructure is where it’s at. Such cities are out to court both the people and the businesses who can afford to live anywhere. These global citizens go to cities that not only have clean streets and good schools, but first-rate airports, good public transportation, space-age communications, and green economies.
The question is how to pay for all this. Running a global city is expensive. Granted, the global citizens and corporations are willing to pay for what they get, so are seldom put off by higher rates and taxes or by user fees. But how do you woo these global high fliers with their deep pockets without pricing everybody else — the much-battered middle and working classes — out of the city?
This issue — urban financing — may be the number one civic issue of the future, an under-studied problem that is only now beginning to get the academic and political attention it deserves.
This is why a new experiment in Chicago merits study. It’s called the Chicago Infrastructure Trust and is a public-private partnership (or P3 for short) using private money to deliver public services, while keeping the ownership of these services in public hands. The magazine Next City recently had this good article on the Trust.
As Next City says, the Trust differs from old-style funding of civic projects through municipal bonds or relatively new-style funding through the sale or long-term leasing of public facilities. Rather, it asks private investors to pay for the projects in return for the profits — say, a share of public transit fees or the savings from an energy retrofit. The first project calls for retrofitting public buildings for energy efficiency to cut energy costs by 20 per cent, and the city says investors will share in this saving. The public gets the benefit of a better train line or more efficient power station and, once the investors get their return, the public also gets the profits.
Dire circumstances drive this new approach. Chicago knows it’s unlikely to get much new money from a sequestered federal government or a deeply indebted state government. Its own city budget is in debt, and raising taxes or fees to pay for these projects could send the middle class residents fleeing for the suburbs.
The Trust started last year and only announced its first projects in March of this year, so it’s too early to judge its operation. In Chicago, enthusiasm is muted and skepticism is high, because of its most recent experience with P3.
That experience was the infamous parking meter deal, a misbegotten project rammed through an inattentive City Council by former Mayor Richard M. Daley which turned management of and profits from the city’s parking meters over to a private company for 75 years for a $1.16 billion payment up front. It turns out that the city should have been paid at least twice as much. In addition, meter rates have soared and, most egregiously, City Hall has to pay the company for lost income every time the city closes a street for, say, repairs or a street fair, which takes meters out of operation. The new mayor, Rahm Emanuel, has been trying to get out of some or all of this contract — so far without success.
An earlier P3 deal by Daley, which turned the Chicago Skyway over to a private company, seems more solid. But the parking meter deal has given privatization here a bad name. Emanuel’s administration promises it will do what Daley didn’t, which is to read the fine print, and to give not only the city government but the City Council, the Trust board and the city’s inspector general a chance to vet any project.
Chicagoans remain wary, but the Trust is moving forward. If it works, it could be a template for civic financing in the 21st century.
This post was originally published at The Midwesterner