Chicago Mayor Rahm Emanuel is proposing a bold new plan to rebuild the city's aging infrastructure. He has lined up financing giants including Citibank NA, Citi Infrastructure Investors, Macquarie Infrastructure and Real Assets Inc. and JPMorgan Asset Management Infrastructure Group willing to invest $1.7 billion in Public Private Partnerships with the city.
The city council is balking because Chicago knows from experience how partnerships can sour. Former Mayor Richard Daley's sale of the city's parking meters is now widely recognized as a poorly negotiated partnership that locked the city into a bad deal (for the city, not the investor partners) for 75 years. And now the ink is dry and Chicagoans have to live with it -- a deal's a deal.
Dozens of websites and tons of business literature warn about the perils of partnerships. They all say: pay attention to the details now or pay the price later in litigation over ambiguities, poorly drafted language or the unanticipated and unpredictable future; make sure you really trust your new partner shares your interests and vision; and above all don't rush into it until you are absolutely certain.
Emanuel's Infrastructure Trust proposal, if done right, could be a new model for rebuilding urban infrastructure across the country. Done wrong, it'll be just another hand off of public assets to private control that shuts out the public and subverts the public interest.
The Daley administration's parking meter deal is a case study in what not to do. Daley rushed the City Council to vote, giving them only a few days to understand the complex deal. The public was shut out entirely.
The Morgan Stanley-led parking consortium negotiated circles around the Daley administration. According to the city's Inspector General -- that analyzed the deal after it was done -- the city sold nearly a billion dollars too cheaply.
The city also made promises to the consortium that hurt the city -- for 75 years. They promised to pay the parking consortium when the city needed its streets for street fairs or traffic management. They have to pay for lost revenue from drivers who use disability license plates and placards to park for free in metered spots. And they promised it wouldn't allow any parking facilities to open nearby.
Now, Chicago is battling a $200 million dispute over demands for compensation to privatized garages because it allowed new parking to be built in other nearby buildings. Chicago is also fighting a $13 million charge by the private parking operator that it has been too lenient in dispensing disabled parking permits (which allow free parking in metered spots).
Emanuel claims he won't modify the current proposal and is offering to write several executive orders -- that don't have the legal force of a city ordinance -- to fix some of the current flaws. That's a warning sign that the deal is another rush job that Chicago will regret. It's better to get it right now with a few simple fixes.
First, make sure every deal is analyzed by the Inspectors General long before the ink is dry. Had the IG looked at the parking meter deal before it was finalized, the city would have been in a much stronger negotiating position, and might not have entered into the agreement at all.
Second, don't give up public control of public assets. The city council needs to evaluate -- in open public session -- and ultimately decide if a specific deal advances, or hurts, the public interest over the long run.
Finally, public actions and decisions should be transparent to the public with rigorous open meetings and freedom of information rules.
The parking meter deal was the "fool me once" moment. The Mayor and City Council should make sure this proposal isn't a "fool me twice" decision.
Donald Cohen is the founder and Chair of In the Public Interest, a national non-profit resource center on privatization and responsible contracting.