Private money for public works

Posted: October 15, 2012

By Reese Palley

Philadelphia officials should consider emulating a Chicago program that is using private-sector financing to improve infrastructure, create thousands of jobs, and save millions of dollars - all without raising taxes or issuing bonds.

This is different from selling or leasing existing infrastructure to private firms to generate income, which Chicago and other cities have done. Such privatization of parking garages, bridges, toll roads, and other facilities can bring city governments cash, but that's all. It doesn't tend to generate jobs or improve infrastructure.

But the so-called Infrastructure Trust championed by Chicago Mayor Rahm Emanuel, with the support of the City Council, is another kind of privatization. The city is identifying crumbling roads, energy-inefficient buildings, and other infrastructure that is costing millions to maintain. Then it's raising private capital to fund construction or renovation, repaying investors with the savings generated.

This is not pie in the sky. Projects such as these are already under way in Chicago, pointing the way for Philadelphia and other cities to improve their quality of life and save resources without raising taxes or issuing bonds, the interest costs for which are rising as cities' credit ratings are reduced.

Take, for example, Philadelphia City Hall's consumption of energy for climate control and lighting. Many of the building's systems go back decades and are ripe for replacement with new, energy-saving technology. A survey of the building might, for example, reveal that state-of-the-art systems could save tens of millions of dollars in annual operating costs given a one-time investment of hundreds of millions of dollars in upgrades. This creates an opportunity for private investors who might find it advantageous to spend the money up front for the income stream that would emerge.

This is a practical program that could have multiple benefits for Philadelphia. Jobs would be created, infrastructure would be built or refurbished, energy use would decline, and taxpayers wouldn't have to bear the burden.


Reese Palley is Philadelphia writer. He can be reached at reesepalley@aol.com.

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