Chicago plan will use private investors to pay for public projects

The Chicago City Council has approved a plan to tap private investment to help pay for infrastructure improvements. The Chicago Infrastructure Trust is part of Mayor Rahm Emanuel’s $7.2 billion plan to rebuild the city’s aging subways, sewers and schools without tax increases or issuing bonds, according to the Chicago Sun-Times.

The $1.7 billion trust fund will help build what Emanuel called “transformative” infrastructure projects that Chicago cannot afford to build. It will finance projects through taxable or tax-exempt debts, equity investments and other methods.

One project planned is a $225 million energy upgrade of municipal facilities. The projected $20 million in energy savings will be used to pay back private investors, according to the newspaper.

Some major investors have agreed to consider projects. They include Citibank NA, Citi Infrastructure Investors, Macquarie Infrastructure and Real Assets Inc., J.P. Morgan Asset Management Infrastructure Investment Corp., and Ullico.

The trust will operate as a nonprofit organization run by a five-member board appointed by the mayor. Some council members said the trust could be open to corruption. But the council rejected proposals to require greater city oversight of trust projects.

Other opponents raised questions about user fees that would be needed to guarantee investment returns. They said taxpayers could be left on the hook if projects don’t pan out enough to pay off private investors, raising comparisons to an unpopular $1.5 billion deal under former Mayor Richard Daley that privatized the city’s parking meters and led to steep hikes in parking fees.

But supporters of the trust plan said the city’s $7.3 billion debt made it increasingly difficult to sell general obligation bonds to finance infrastructure projects. “We have a tool here that takes some of the pressure off taxpayers,” Emanuel said, according to the Sun-Times. “That’s what we’re doing here. Use somebody else’s money for a change, rather than theirs.”