In December 2008, then-Mayor Richard M. Daley urged the Chicago City Council to approve — right now! — a parking meter deal that many aldermen didn’t fully comprehend. Yet they complied, sheeplike, in a 40-5 landslide. Not until June 2009, when then-Inspector General David Hoffman exposed that deal’s drawbacks in a devastating report, did the chumped aldermen realize how thoroughly they had swindled themselves.
Recurring nightmares of that bad bargain for taxpayers leave some aldermen dubious of Mayor Rahm Emanuel’s current proposal for a “Chicago Infrastructure Trust.” Given the deadline dash in which his plan is coming together, Emanuel should do everyone a favor and delay next week’s scheduled Council votes on the proposed financing tool. And if the mayor doesn’t offer that delay, the aldermen should demand it. If this is a terrific idea in April, it’ll be a terrific idea in May or June, when aldermen might understand it well enough to evaluate its taxpayer protections.
Part of the context here is unarguable: Chicago needs to modernize its infrastructure — the roads that carry its traffic, the tracks that transport its commuters, the schools that (too often inadequately) educate its children. Emanuel’s problem is that he didn’t inherit only a crumbling city. He inherited a city whose politicians already had created a heavy burden of debt, an enormous pension shortfall, and the prospect of annual budget shortfalls for as far as a taxpayer’s eye can see.
From this collision of City Hall wants and City Hall impoverishment comes Emanuel’s proposal for a rich new source of capital: private investment in public projects. A newly created entity, governed by a board of five mayoral appointees, would help various arms of city government recruit private investors — banks, pension funds, foundations — to supply money for, say, the building of a new airport runway or reconstruction of a dilapidated Chicago Transit Authority line. The city would agree to repay the investors, over time, from its revenues and its savings from lower maintenance costs.
Emanuel’s financial team describes this as a useful new tool — separate from selling bonds, or hustling federal grants, or waiting until the city has enough money to build on a pay-as-you-go basis. Investors would accept risks — of cost overruns, for example — that taxpayers now absorb in traditional bond financing. To accept more risk, of course, the investors will want to extract more lavish paybacks than bond buyers would get.
The notion is clever, and holds both tremendous promise and tremendous risk for Chicago: The trust likely would give City Hall access to vast new pools of capital. But it also would create similarly vast new obligations to repay private investors. So as all of us evaluate the Infrastructure Trust and the wealth of shiny new construction it could deliver, we cannot lose sight of this essential truth:
The Infrastructure Trust would be a new way for city government to spend money that it does not have. That by itself is neither good nor bad; everyone who secures a home mortgage essentially does the same. But in the mortgage example, both the lender and the homeowner are supposed to focus keenly on the homeowner’s ability to repay.
It’s this point, not the involvement of private financing, that concerns us. With so many arms of city government frantic to build this or that improvement, who makes sure that Chicago doesn’t commit itself to more repayments than it will be able to afford in future years?
In the past, the people who ran City Hall — like those who run the state of Illinois and many local governments — did a miserable job of safely calibrating those future burdens. As a result, taxpayers are stuck with crushing debts and even more crushing unfunded obligations.
To avoid more such disasters from once again spending tomorrow’s dollars today, the aldermen need to make absolutely sure that no public-private project ever proceeds without approval from public officials who are answerable to taxpayers. Meeting on Wednesday with Emanuel’s finance team, our editorial board tried to be certain that the City Council would have final say on any borrowing that the Infrastructure Trust would enable.
The answer wasn’t encouraging: Emanuel’s people told us that, in response to many suggestions from aldermen, his administration is hurriedly rewriting and expanding its initially skimpy ordinance. One crucial area: As a nonprofit, will — or won’t — the trust and its operations be subject to the very same open meetings, open records and Freedom of Information Act provisions as a government body would be?
As Emanuel’s team struggled with some of this, we were told that a final version of the ordinance would be available before the aldermen vote.
That’s nowhere near good enough. Too many aldermen still are confiding too many concerns about details — and too many different versions of how they think the trust would function.
Mr. Mayor, we understand that you think you have the votes and want to move forward. What’s the rush? Chicago needs time to study the final version of your plan.
Aldermen, do this right. Make sure every assurance is memorialized in black and white. Show Chicagoans that you’re capable of being better stewards than you were when you caved to Daley on the parking meter deal.
