CHICAGO — Public distrust and confusion over public-private partnerships, and a lack of creative thinking on the technology front, are among the constraints Chicago confronts as it looks to address its infrastructure needs.
Not just how to pay for infrastructure but how work is completed poses a challenge, observers said at a forum earlier this month.
"Creativity on the infrastructure front is badly needed," Chicago's chief financial officer, Lois Scott, said during a panel discussion at the forum.
The event, "Going Global — the Future of Chicagoland's Infrastructure," was hosted by Lazard and the Metropolitan Planning Council.
Scott recalled a meeting with an asphalt vendor during which she lamented why new technologies have not been developed that could better seal roads. "I think there's been a shortfall in technological creatively as it's applied to infrastructure that we as a nation are really feeling," Scott said.
While public private partnerships provide an avenue for funding and the city has a series of successful P3s and asset leases under its belt, public distrust and a lack of knowledge about the complex industry terms also pose obstacles.
"We continue to trip all over ourselves over the language" because the public lacks an understanding of financing methods and terminology like "availability payments" and TIFIA, the Transportation Infrastructure Finance Innovation Act, Scott said.
Such concepts "are in desperate need" of a communication effort, she said.
Public distrust, which in Chicago stems from former Mayor Richard Daley's troubled lease of the city's parking meter system, also challenges the city. The 2008 75-year meter lease, for $1.15 billion, was fraught with operational problems during the transfer and some reports have argued the city didn't get a fair price. Provisions in the lease have also cost the city.
"We have constraints in terms of the public acceptance and trust in their government," Scott said. That has forced the city to take extra steps to improve transparency of any privatization process. The city established a special advisory panel to track the Midway Airport lease process in an attempt to calm public concerns over the process. The city last year dropped efforts to lease the airport due to a lack of competition in the bidding.
Scott also noted a "transformation" in thinking on local government infrastructure in the region beyond the three Rs of "Roads, runways, and rails" which have long served as the backbone of the Midwest economy to the "generation of the Bs." They include bikes, buses, broadband, and billboards.
In one smaller P3, Mayor Rahm Emanuel's administration established the Chicago Digital Network which posted 60 billboards along roadways. The city collected $15 million last year and will collect $10 million for the network this year.
Emanuel established the Chicago Infrastructure Trust as an alternative financing vehicle to leverage private investment but its work has been slow going compared to its initial goals. It's closed on a small energy retrofit financing for city projects and is eyeing financing for pool upgrades.
Chicago said the federal government has offered some help in the form of the TIFIA program. It's received two such loans, one for the downtown Chicago Riverwalk and another for a rental car, parking, transportation center at O'Hare International Airport. The Chicago Transit Authority also recently received a loan.
"TIFIA has been a huge boon for the city of Chicago," Scott said.
Collaboration among CFOs nationally has also helped, she said.
Chicago along with the University of Chicago Harris School of Public Policy and the Governing Institute established the Municipal CFO Forum for CFOs to share ideas on meeting governance challenges.
Another member of the panel, Gary, Indiana Mayor Karen Freeman-Wilson, said her administration has benefitted from an "unprecedented working relationship" with other cities in northwest Indiana regardless of political affiliation.
While she's a Democrat and Republicans control the state, the city has also benefitted from a good working relationship with the state that helped the region land $50 million in federal funds for the demolition of abandoned properties.
Freeman-Wilson said the struggling city is trying to "rethink how we deliver government" to generate the submission of creative ideas to promote much needed economic development. That can be accomplished in simple ways, she said, like offering "extra points in a request for proposals if you suggest a new innovation."
Gary is also eyeing additional P3 opportunities after using a P3 model to generate a $100 million investment in its airport facility and surrounding property over the next 40 years. The deal was launched as a way to revitalize the facility and position the airport as Chicago's third regional airport while also generating investment funds.
Political will that worries potential investors remains an ongoing challenge to generating more investor interest in governmental projects in the U.S.
Mark Florian, a former public finance banker and P3 specialist at Goldman Sachs who joined First Reserve in 2008 to lead its energy investment fund, said there hasn't been a consistency in public policy that would provide a stable environment as investors look for a consistent revenue stream where a steady return is assured.
