No Deal Is a Big Deal for Chicago

Last week, Rahm Emanuel announced the city was putting a halt to the long-running negotiations to privatize Midway Airport. The long-term lease had long been trumpeted as an opportunity to modernize the airport and help stabilize city finances but the mayor decided the deal just wasn't good enough.
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Last week, Chicago Mayor Rahm Emanuel made a stunning announcement -- the city was putting a halt to the long-running negotiations to privatize Midway Airport. The long-term lease had long been trumpeted as an opportunity to modernize the airport and help stabilize city finances but the mayor decided the deal just wasn't good enough.

The announcement was stunning because the mayor has been one of the nation's leading advocates for using these kinds of public-private partnerships to solve the fiscal crises and urgent infrastructure needs facing American cities. Emanuel's op-ed in the Chicago Tribune about why he put the deal on hold demonstrated that prudent and reasoned policy-making can help distinguish good deals from bad deals.

Chicago knows bad deals. Former Chicago mayor Richard Daley's parking meter fiasco is a well-known case study in the kind of deals cities should never do. Daley rushed the City Council to vote on a $1.1 billion, 75-year sale of the city's 36,000 parking meters, giving them only a few days to understand the complex deal. The public was shut out entirely and the city ended up with a $1 billion in lost revenue, skyrocketing meter rates and fine-print contract clauses that put the city in a straightjacket for decades.

I've written before that the parking meter deal was the "fool me once" moment, urging the new mayor to avoid the mistakes of the Daley deal. It seems that Mayor Emanuel has learned the right lessons.

When he first proposed his plan for rebuilding the city infrastructure Mayor Emanuel made clear that funding could come from privatizing existing assets, like Midway Airport. I argued that every deal should first be analyzed by the Inspector 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. This time, the mayor appointed a Midway Advisory Panel made up of labor, business and former elected leaders. The panel hired financial advisers with expertise in these complex transactions to review the proposals from various bidders with freedom to ask tough questions and look into every nook and cranny of the contracts. The mayor asked the advisory panel to ensure the deal implemented a "Travelers' Bill of Rights" and protections for Midway Airport workers.

Second, I urged cities to keep public control of public assets. With this proposal, instead of a 75-year deal that would last well beyond the lives of almost everyone in the city, the Midway proposals were capped at 40 years. The city also required profit-sharing so that a windfall from the airport would be shared by the city. Too often we find after the fact that how things were written directs any windfall conveniently into the pockets of only the private investors.

Finally, I argued that public actions and decisions should be made transparent to the public with rigorous open meetings and freedom of information rules. Compared to the completely opaque parking meter deal, the city's project website contained all the project specifications and requests for proposals -- a solid step in the right direction.

Mayor Emanuel wrote that he had learned five key steps to guide any similar negotiations in the future:

"First, a group of outside experts should be impaneled at the start of the process to monitor each step; second, there must be a minimum 30-day review by the City Council before the project is voted upon; third, there should be a clear set of standards so the public can judge a potential partnership when it is presented; fourth, the funds should be invested in infrastructure rather than used as a plug for short-term budget holes; fifth, a true public-private partnership requires that taxpayers maintain control of the asset and share in management decisions and financial profit."

The mayor did the right thing, so credit where credit is due, but the taxpayers can't rely on his actions alone every time the city considers selling off public assets. The public needs to know that transparency and accountability are the law of the land, regardless of Mayor Emanuel's -- or any future mayor's -- change of heart, political calculations or individual judgments.

A group of Chicago alderman led by Roderick Sawyer is proposing the Privatization Transparency and Accountability Ordinance (PTAO) to ensure these principles are applied fully in every proposal to outsource public assets and services. The proposal would ensure that these deals are fully evaluated in public -to decide if a specific deal advances, or hurts, the city's public interest over the long run.

The ordinance mandates a City Council committee hearing on any proposed public-private partnership, to conduct a cost effectiveness study before the deal is final, to demonstrate real cost savings, and to weigh the benefits to determine whether the deal advances - or hurts public interest in the long run.

If the mayor and the City Council commit to adopting these steps as standard operating procedure by passing the PTAO, then Chicago really will become a model for the nation's cities struggling to maintain growth, rebuild urban infrastructure and provide important public services.

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