Before a proposal to create a Chicago Infrastructure Trust passed Tuesday, debate hinged on one question that critics say is still unanswered: whether private investors will benefit at the expense of the public good.
Just before the Chicago City Council approved the trust with a 41-7 vote, Mayor Rahm Emanuel presented it as a win for the city's citizens.
"If you want no taxes, and you don't want crumbling infrastructure, you have to have an idea," he said. "We are taking some of the pressure off of the taxpayers," he added. "Use somebody else's money for a change, rather than theirs."
But despite approval of the trust, questions about just what the fund will do -- and who stands to gain from its projects -- are only beginning.
Emanuel's chief argument is that the infrastructure fund will allow Chicago to rebuild itself without raising taxes. Private investors will be able to partner with the city and its sister agencies like the Chicago Transit Authority on a wide variety "public-private partnerships."
He has specifically mentioned only one project, however, to be pursued by the trust -- an energy retrofitting effort that would cost $225 million -- and aldermen who voted for the trust only seemed to have vague ideas about what else it could accomplish. During the pre-vote debate, they suggested projects including an expansion of the CTA's Red Line, laying fiber optic cable and fixing up the DuSable Museum of African American History.
Any of those projects, if finished, could be a boon for Chicagoans. But because of Emanuel's lack of specificity, "I can't speak to who will benefit -- I have no idea what projects they are looking at," said Emily Miller, the policy and government affairs coordinator at the Better Government Association.
"What are the other projects?" asked Celeste Meiffren, field director for Illinois PIRG, a citizens' advocacy group. "And if we don't know, why can't we just vote on Retrofit Chicago?"
Also unanswered is how much risk will be allocated to private investors if projects fail.
Critics argue that in the absence of further details, the public can expect one thing, at least: that banks and infrastructure investors will come out ahead. "This is the finance industry. The finance industry goes where it looks like there are profits to made," said Donald Cohen, chair of privatization watchdog group In the Public Interest.
"The real question though is: Do we benefit?" Cohen asked. "Do Chicagoans benefit also at a substantial enough level that it's worth paying the price?"
"And so far, given that they're kicking the can down the road on some pretty fundamental decisions, it doesn't look good for the people."
Citibank, Citi Infrastructure Investors, Macquarie Infrastructure, JP Morgan Asset Management Infrastructure Investment Group, and union-backed insurer Ullico all signed letters in support of the fund. These private investors said they could contribute $1.7 billion toward the $7 billion in total Emanuel would like to spend to build a "new Chicago."
"In these days of dwindling federal, and non-existing state and city resources, it's probably the only game in town," said 49th Ward Alderman Joe Moore.
But Cohen said he saw some irony in the fact that many of these firms are also linked, in some fashion, to the banks that contributed to the economic collapse in the first place.
"Before 2007-8 there was a massive amount of money to be made in housing, so they were all there," he said. "They go where the money is -- at least where they think it is."
The infrastructure firms are the "somebody else" Emanuel referred to in his remarks, the groups who presumably will take pressure off the taxpayers. Chicago's debt now stands at $7.3 billion, and city leaders said they are reluctant to add any more to that figure through traditional bonds for infrastructure.
But as Chicago found out with its parking meter deals, less pressure in the form of taxes often comes in the form of more pressure from tolls, charges and user fees. In the parking-meter deal, then-Mayor Richard Daley leased the city's parking meters until 2084 to a private consortium, which expects to make a $9.58 billion profit on the deal via higher parking fees.
At an industry conference in Chicago last November, infrastructure investment professionals were careful to point out that public-private partnerships are no free lunch.
"Certainly you're tapping other sources of capital, you're bringing in equity investors that are willing to take risks," said Raymond DiPrinzio, infrastructure finance team leader at the Sumitomo Mitsui Banking Corporation. "But it's not cheap capital."
A critics of the infrastructure fund echoed that sentiment Tuesday. "The money in the trust is not free. It is borrowed. We must repay it. It must be repaid with interest," said 5th Ward Alderman Leslie Hairston.
"How is that going to come to us?" she asked. "That is going to come to us in user fees, taxes, things that will automatically add to the tax burden that the city of Chicago residents are already paying."
Emanuel said opponents were latching onto the parking-meter deal, inked in just five days of whirlwind legislative action in 2008, "to scare everybody."
The infrastructure fund, by contrast, was debated for two months, passed with 16 amendments, and would not permit the sort of outright asset privatization that the parking meter deal entailed, Emanuel countered.
"Now, everyone has had a chance, everyone has had changes made along the way," he said. "Every one of those changes, we talked about greater transparency. Talked about accountability. Checks and balances."
But for 15th Ward Alderman Toni Foulkes, another critic of Emanuel's plan, the accountability talk was just that: talk. The same Wall Street firms that deceived her neighborhood during the housing bubble, she suggested, were at it again.
"We trusted people to invest when we bought homes, and they let us down," she said. "They pushed us in sub-prime homes because they knew they were going to make more money and the interest rates would be high. I think what terrifies people, which terrifies me, is that the investment, nobody invests money to not get a return. And they expect big returns."