Rahm Emanuel and former President Bill Clinton made a media splash in 2012 when they announced the formation of the Chicago Infrastructure Trust. The CIT would channel significant amounts of private capital into upgrading Chicago’s infrastructure, starting with a $200 million green energy retrofit project for city and school buildings.
“What you are doing here is the first, in effect, infrastructure bank using private capital that any city in the United States has established,” Clinton said at the time. The funding strategy, Clinton continued, was “the nearest thing we can get to a free lunch.” [via Better Government Association]
Fast forward, and, as the Sun-Times put it last month, the Trust is a bust:
The Uptown Theatre could have been the signature achievement of the grand plans Emanuel announced five years ago, with former President Bill Clinton’s endorsement, to persuade private investors to bankroll billions of dollars in public works projects across the city.
The bold idea was that private financing could be found for much-needed, big-ticket improvements for the city, making it possible to get more of them done sooner and sparing taxpayers from having to foot the bills. City Hall says that still can happen.
But the infrastructure trust has fallen short of the expectations the mayor laid out. It has yet to raise a dime in private financing for a single public works project, records show. At the same time, it has cost Chicago taxpayers more than $5.1 million to pay for its handful of employees, offices on Wacker Drive, consulting fees and other expenses.
I classify the CIT as an idea worth exploring that simply didn’t pan out. I think we actually want politicians who will try something new. In this case, $5.1 million isn’t chicken feed, but in the grand scheme of a city like Chicago, it’s hardly a large government outlay. Things certainly could have been vastly worse (e.g., the parking meter lease, the $200 million shell of an underground high speed rail station, etc). If $5.1 million is that max burn, it was probably a good idea to give the CIT a go. The major downsides are political, which is why the incentives often militate against politicians trying anything with the least risk of failure. (Rahm did himself no favors here by overhyping the CIT before it had actually done anything).
To his credit, Rahm has actually walked away from doing some bad deals with private money. He didn’t force the CIT to do something when it just wasn’t going to work out. (Apparently they did do something with energy efficiency, but it was tiny). He also walked away from an attempt to privatize Midway Airport, which is exactly the kind of facility you’d expect private investors to be salivating over.
The lesson I take away from this is that, in an American context at least, successfully using private funds to do infrastructure investment is a whole lot harder than many people seem to think.