ANNOUNCER: This is Need to Know with …Jeff Greenfield…Maria Hinojosa …Scott Simon … and this week… Ray Suarez.
RAY SUAREZ: On this edition, a bold move to fix Chicago’s infrastructure without raising taxes.
MAYOR RAHM EMANUEL: Doing it the old way, nobody can do that anymore. That model is out.
RAY SUAREZ: Also, are partnerships with private companies the key to saving America’s financially strapped cities?
ED RENDELL: If you’re going to continue to grow economically, if you’re going to create well-paying jobs, you’ve got to move right now.
RAY SUAREZ: And from American Voices…
GARRETT EBLING: The hardest part about all of this is knowing that this tragedy was completely preventable.
RAY SUAREZ: Next on Need to Know.
RAY SUAREZ: Welcome to Need to Know. Thanks for joining us. With the presidential election now only three months away, the debate rages on how best to stimulate the economy and create jobs. The government announced this morning that the nation’s unemployment rate increased last month. The mayor of Chicago thinks he knows how to generate work. Rahm Emanuel, the former congressman, banker and White House Advisor, has announced a massive plan to update much of the infrastructure of the nation’s third largest city. But what might be even more noteworthy is how he plans to finance part of the project. The public-private partnership he’s devised has some critics complaining. Others say it could be a model for the rest of the nation. Here’s Need to Know’s Eliza Griswold.
ELIZA GRISWOLD [narration]: FROM AFAR, CHICAGO BOASTS ONE OF THE MOST MAJESTIC SKYLINES IN THE NATION. THE WAVES OF LAKE MICHIGAN GLITTER OFF OF THE OFFICE AND RESIDENTIAL TOWERS LINING THE WATERFRONT.
BUT TRAVEL JUST A FEW BLOCKS INLAND FROM LAKESHORE DRIVE, AND YOU’LL DISCOVER THAT THE CITY’S BIG SHOULDERS ARE SAGGING.
HERE YOU’LL FIND CRUMBLING STREETS, DECAYING CENTURY-OLD WATER PIPES, AND A SUBWAY SYSTEM DATING TO 1908 – WHEN TEDDY ROOSEVELT WAS STILL PRESIDENT AND THE CUBS LAST WON THE WORLD SERIES.
MAYOR RAHM EMANUEL: By neglecting to invest in our own infrastructure for nearly four decades, we have allowed Chicago’s foundations to decay and our strengths to decline.
ELIZA GRISWOLD [narration]: MAYOR RAHM EMANUEL SAYS CHICAGO’S TWO AND A HALF MILLION RESIDENTS ARE NOW PAYING A STEEP PRICE FOR THAT INFRASTRUCTURE NEGLECT — COSTLY ENERGY INEFFICIENCIES, A DECLINING POPULATION AND SLOWER ECONOMIC GROWTH. AND THEN THERE ARE EVENTS LIKE THIS.
NEWS REPORT: The size of the sinkhole was hard to gauge until you saw the SUV that was being pulled out from inside.
ELIZA GRISWOLD [narration]: SO EARLIER THIS YEAR, WITH FORMER PRESIDENT CLINTON AT HIS SIDE, EMANUEL UNVEILED A MASSIVE PLAN TO REMAKE CHICAGO’S INFRASTRUCTURE — AND TO DO IT WITHOUT RAISING TAXES. INSTEAD, HE DECIDED TO UNDERWRITE PART OF THE PROJECT THROUGH A PUBLIC-PRIVATE PARTNERSHIP.
MAYOR RAHM EMANUEL: We have a number of banks and financial institutions who all have agreed to about 800 million dollars of financing for these projects.
ELIZA GRISWOLD: To what degree is what you’re doing here in Chicago innovative and really different from what other cities have done?
MAYOR RAHM EMANUEL: It allows the city of Chicago to bring in private capital for public facilities, and they will stay publicly owned facilities, but to finance their modernization.
ELIZA GRISWOLD: When did infrastructure become such a key issue for you? Could you tell us a little bit about your vision?
MAYOR RAHM EMANUEL: I believe you cannot have a 21st century economy sitting on a 20th century foundation. It’s fundamental. And we don’t operate at optimum speed and efficiency, productivity at that level. So that’s really where it came from. That’s essential to our own economic self-interest.
ELIZA GRISWOLD [narration]: THE MAYOR’S 3-YEAR,7-BILLION DOLLAR CAPITAL PROJECT INCLUDES PLANS TO REPLACE 750 MILES OF CENTURY-OLD WATER PIPES, TO MAKE REPAIRS TO THE MASS TRANSIT SYSTEM, TO UPGRADE THE SEWER SYSTEM, TO REPAVE THOUSANDS OF MILES OF ROADWAYS, AND TO REFURBISH PARKS THROUGHOUT THE CITY. ALL THESE, HE INSISTS, WILL CREATE JOBS AND SPUR GROWTH.
MAYOR RAHM EMANUEL: Basically in the 50s and 60s, when we were investing about 4 percent of our GDP in infrastructure, we grew it about 4 percent. When we in the ‘80s, downshifted to about 2 percent, our economy grew at about 2 percent. Now, it’s not exactly “A” equals “A,” but it’s close to that.
MAYOR RAHM EMANUEL: I laid out a plan to build a new Chicago, putting 30,000 people to work in the next 3 years,
ELIZA GRISWOLD [narration]: BUT THE CHALLENGE REMAINED: HOW TO RAISE HUGE SUMS OF MONEY WITHOUT RELYING ON FUNDING FROM STATE OR FEDERAL LAWMAKERS WHO ARE LESS AND LESS DISPOSED TO PROVIDE IT AND WHO, HE SAYS, OFTEN SEEM STUCK IN A STATE OF POLITICAL PARALYSIS ANYWAY.
MAYOR RAHM EMANUEL: When I announced Chicago’s capital projects, the United States Congress, on that very same day, passed their ninth extension of the 2005 transportation bill for 90 days. Now, who would tie their city to that dysfunction? And I just can’t allow the city of Chicago to be basically held hostage to either Washington figuring it out or Springfield figuring it out. And I’m not going to hold my breath. Not when the city’s economic future today and tomorrow depends on taking action today.
ELIZA GRISWOLD [narration]: SO THE MAYOR LAUNCHED A THREE-PRONGED APPROACH. THE CITY PLANS TO RAISE MOST OF THE 7 BILLION DOLLARS FOR THE INFRASTRUCTURE OVERHAUL BY TRADITIONAL MEANS: THROUGH A MUNICIPAL BOND OFFERING AND BY RAISING WATER AND SEWER FEES.
BUT EMANUEL ALSO BORROWED AN IDEA THAT HAS BEEN TRIED THROUGHOUT EUROPE, ASIA AND LATIN AMERICA … ONE THAT COULD BECOME A MODEL FOR REBUILDING CITIES IN THIS COUNTRY. EMANUEL CALLS IT AN INFRASTRUCTURE TRUST.
THE IDEA IS TO FORGET ABOUT FEDERAL OR STATE FUNDING AND TO ENCOURAGE BIG PRIVATE INVESTORS TO BACK PROJECTS – BUT WITHOUT SURRENDERING CONTROL TO THEM.
MAYOR RAHM EMANUEL: So I have to come up with my own ways to modernize. So the trust is another model to finance the work today that you have to get done and bringing financing to bear that you can’t get any other way.
ELIZA GRISWOLD [narration]: THE PLAN HAS ALREADY ATTRACTED STRONG SUPPORT FROM ORGANIZED LABOR.
JORGE RAMIREZ IS PRESIDENT OF THE CHICAGO FEDERATION OF LABOR. HE SAYS THE VERY FIRST PROJECT ENVISIONED UNDER THE PLAN WILL GENERATE TWO THOUSAND CONSTRUCTION JOBS.
JORGE RAMIREZ: I think labor is more familiar with this because we’ve been somewhat of a de facto infrastructure bank for years, meaning that we’ve used pension fund money to invest in projects to put people to work. It’s called the double bottom line approach. You’re getting a return on your investment and you’re putting people to work
ELIZA GRISWOLD [narration]: BUT THERE ARE DETRACTORS TOO, LIKE NEWSPAPER REPORTER MICK DUMKE.
ELIZA GRISWOLD: There’s a lot of positive talk from the Mayor and his people about the fact that Chicago is the innovator. This is the first city infrastructure bank, that it will be a model for other places.
MICK DUMKE: I really don’t think that Chicagoans are that interested in being guinea pigs and being first timers in this. They want something that works. They want to be able to drive their cars down the street and not have the muffler fall off every time they go over potholes. They want to be able to send their kids to schools that aren’t falling apart. They would like to be able to go exercise at a park facility where, you know, the gym isn’t slanted. They’re not interested in trying something new. They’re interested in results.
ELIZA GRISWOLD [narration]: CHICAGO‘S INFRASTRUCTURE TRUST IS EXPECTED TO WORK THIS WAY:
THE CITY WOULD BORROW MONEY FROM FIVE PRIVATE PARTNERS, INCLUDING CITIBANK, JP MORGAN AND ULLICO, A COMPANY THAT MANAGES LABOR UNION PENSION FUNDS.
THE CITY WOULD EVENTUALLY REPAY THAT MONEY – PLUS INTEREST – USING SAVINGS ACHIEVED FROM THE WORK ITSELF.
SO FOR INSTANCE, THE VERY FIRST INFRASTRUCTURE TRUST PROJECT WOULD BE CONVERTING ALL CITY BUILDINGS AND STREET LIGHTS TO
THAT WOULD LIKELY LOWER THE CITY’S ELECTRICAL BILLS AND THE SAVINGS ON THE ELECTRICAL BILLS WOULD BE USED TO PAY DOWN THE LOANS.
OVERALL, THE BANKS ARE EXPECTED TO EARN A HIGHER-THAN-AVERAGE RATE OF RETURN.
LOIS SCOTT: The historic conventional way that we have financed infrastructure in Chicago is really with two different sources: federal grants and taxes and bonds. All of the risks of those projects really fall on the back of us as taxpayers.
LOIS SCOTT, A FORMER BANKER, IS THE CITY’S CHIEF FINANCIAL OFFICER AND A TOP AIDE TO THE MAYOR.
ELIZA GRISWOLD: If I were a private investor, how would you pitch this to me?
LOIS SCOTT: The trust is the parent organization and then each individual project the city chooses to pursue is individual finance project so investors who are interested will make an investment in that project. And the cash flows and the revenues and savings associated with that project are the revenues that reimburse those investors. What the trust does is enables us as government officials to balance the risk between the private sector and the public sector.
ELIZA GRISWOLD [narration]: THE THINKING IS BY RAISING MONEY UPFRONT FROM PRIVATE SOURCES, THE CITY WOULD BE SHIELDED FROM PAYING HUGE COST OVERRUNS IF, AS SO OFTEN HAPPENS, THE WORK TAKES MUCH LONGER THAN EXPECTED.
THINK THE “BIG DIG” IN BOSTON, WHICH ENDED UP COSTING NEARLY 15 BILLION DOLLARS, ALMOST 5 TIMES HIGHER THAN ITS ORIGINAL THREE BILLION DOLLAR BUDGET.
SCOTT SAYS THE PROJECTS WOULD ONLY MOVE AHEAD ONCE THE LENDERS CONTRACTUALLY AGREE TO COVER ANY COST OVERRUNS. SHE SAYS EACH PROJECT THAT’S FUNDED BY THE INFRASTRUCTURE TRUST WOULD BE REVIEWED BY A PANEL OF FIVE EXPERTS APPOINTED BY THE MAJOR.
LOIS SCOTT: Each of those projects must have a detailed analysis of the job impact, the economic impact, the rate of return and the other cost elements and the risks that are being transferred. All that goes into a report to the public before it gets undertaken.
MICK DUMKE: What you are talking about is a non-profit entity, a quasi-public, quasi-private entity that the mayor has created that will be filled with mayoral appointees with the charge of vetting projects that the mayor wants done.
ELIZA GRISWOLD [narration]: MICK DUMKE SAYS CHICAGO RESIDENTS HAVE GOOD REASON TO DOUBT THAT THEIR INTERESTS WILL BE WELL SERVED.
ELIZA GRISWOLD: What this is being billed as by the Emanuel Administration is free money that the key of this is passing the risk of an investment on to the private sector and that is going to somehow help safeguard the taxpayer.
MICK DUMKE: Pardon me for being skeptical, it’s no fault of these banks or potential investors, they’re in this game to make money.
DUMKE NOTES THAT, BEFORE EMANUEL CAME TO OFFICE, THE CITY SOLD ITS PARKING METERS FOR ONE BILLION DOLLARS. THE COMPANY THAT BOUGHT THEM IS NOW EXPECTED TO EARN AS MUCH AS 10 TIMES THAT.
UNDER EMANUEL’S PREDECCESSOR, LONG STANDING CHICAGO MAYOR RICHARD DALEY, THE CITY ALSO LEASED ALMOST 8 MILES OF A TOLLROAD KNOWN AS THE CHICAGO SKYWAY. IT ALSO LEASED ITS UNDERGROUND PARKING GARAGES FOR BETWEEN 75 AND 99 YEARS – SUCH LONG TERMS THAT THEY EFFECTIVELY AMOUNT TO SALES.
NONE OF THOSE ARE CONSIDERED GOOD DEALS FOR THE CITY NOW.
DUMKE’S NOT CONVINCED THE INFRASTRUCTURE TRUST WILL WORK OUT WELL FOR TAXPAYERS EITHER.
MICK DUMKE: Essentially we’re talking about public money still being transferred to a private entity, so maybe there’s not going to be the exchange of a physical asset, but we’re still talking about giving money over to a private company in return for borrowing some money from them upfront. In that way, I think it’s actually very similar to the parking meter deal.
MAYOR RAHM EMANUEL: I’m not selling anything. I’m financing the work but I’m not selling anything, to anybody. That’s number one. Two, we’re all dealing with oversight and transparency. We’re going to follow all of the rules of the state and all the rules of the city. I have to. It’s an idea I brought. I want people’s confidence in it.
ELIZA GRISWOLD [narration]: IN FACT, EMANUEL SAYS HE’S SPOKEN TO MAYORS ACROSS THE NATION WHO HAVE EXPRESSED GREAT INTEREST IN REPLICATING CHICAGO’S INFRASTRUCTURE TRUST.
MAYOR RAHM EMANUEL: Everybody is in the same position in one version or another that I’m in. I’ve sat with the mayors of Philadelphia, Atlanta, San Diego, New Orleans. All have asked, ‘can you tell me what you are doing? So everybody’s got a variation on the same theme. Their economy is being held back and not growing at the speed it needs to grow at because of poor investment over 30years, 40 years of infrastructure.
ELIZA GRISWOLD [narration]: THE MAYOR ACKNOWLEDGES HE’S NOT ABSOLUTELY CERTAIN THAT HIS PLAN WILL PRODUCE RESULTS, BUT HAS NO DOUBT ABOUT THE WISDOM OF GIVING IT A TRY.
MAYOR RAHM EMANUEL: It’s a good idea. I think it’s the right thing to do. But I know this: doing it the old way, nobody can do that anymore. That model is out. Whether this is the right model, I believe it is. We’ll see.
RAY SUAREZ: As you’ve heard, Mayor Emanuel’s plan is innovative to some, controversial to others. No matter how you look at it, it’s a start. But will the Chicago example be an inspiration to the rest of the country? Joining us from Washington DC is Ed Rendell. The former Governor of Pennsylvania, Mr. Rendell is a founder and co-chair of Building America’s Future, a bipartisan coalition of elected officials working to bring about new investment in America’s infrastructure.
RAY SUAREZ: This week online take part in our weekly poll. The topic: governments in financial crisis turning to private industry for help. Let us know what you think and why. Visit PBS.org/Need to Know.
RAY SUAREZ: Whether it’s a plan like Rahm Emanuel’s in Chicago, or a national infrastructure bank, or something else entirely, there is virtually no debating that something has to be done to fix the nation’s aging infrastructure. Nobody knows that better than Garrett Ebling. Five years ago this week, Ebling was on the i 35 bridge in Minneapolis when it collapsed. His car nosedived a hundred feet into the Mississippi river. Thirteen people died that day, 145 were injured. Garrett Ebling’s fight to survive and recover are nothing short of miraculous. But that’s not what he thinks should be getting all of the attention.
GARRETT EBLING: Life before the bridge collapse was a very exciting time. I had just gotten engaged four days before that. It was a special day at work because we were going to have an outing with our department. So after the — after the zoo — we went to a restaurant and had drinks and hors d’oeuvres. So it was at that point where we all went our separate ways.
Crossing the 35W Bridge was not a normal route for me. I had probably crossed that bridge maybe three or four times in my life prior to that. The point where I really noticed that something had gone awry was when all of the cars in front of me flashed their brake lights at the same time. And then, the next second, all those cars just dropped — dropped into an abyss. And that next second, I started feeling weightlessness in my car as the bridge was breaking up underneath me. My car fell about 110 feet.
After I arrived at the hospital and the first surgery began, they put me in a medically induced coma. I was in that coma from August 1st until August 19th. During that time, I had about a half dozen surgeries to help correct a litany of things that went wrong.
The hardest part about all of this is knowing that this tragedy was completely preventable. And for whatever reason, reasons we may never know, the state decided to not do anything.
I think infrastructure needs to be a priority because safety has to be a priority. While this was a very rare event here in the United States, we should never want to have to get to the point where something collapses and people have to die for us to go, oh, maybe this needs to be a priority. We can’t fix everything at one time. We know we are a nation of incredible debt right now. I think we need to be — get creative in how we fund infrastructure because the resources are limited.
But I think for politicians to really make a dent in infrastructure improvements starts with cities and counties looking at their roads and their bridges and their railways and making determinations on what can be done to improve the safety of those things. So I think if you go from sort of a bottom-up approach to it, I think that improving the infrastructure is a real possibility in this country.
RAY SUAREZ: That’s it for this edition of Need to Know. For more – including our weekly poll, please join us online at PBS.org/need to know. And for continuing election coverage from our colleagues at other pbs programs, please visit PBS.org/election 2012. I’m Ray Suarez. We’ll see you next week.