CHICAGO — The Chicago City Council overwhelmingly approved Mayor Rahm Emanuel’s controversial plan to establish an infrastructure trust to tap private investment in public projects after rejecting several measures aimed at tightening oversight of the new nonprofit.

“Working together we have a tool here that takes some of the pressure off of our taxpayers,” Emanuel told council members just before the 41-7 vote in favor of the ordinance setting up the Chicago Infrastructure Trust. “This tool helps us repair our economic foundation.”

Emanuel touted his willingness to make 16 revisions to the original ordinance — first introduced in mid-March — to address council concerns on oversight, accountability and transparency of the trust’s future deals. The mayor also submitted an executive order Tuesday allowing for an outside review of trust deals.

The administration has billed the trust as an innovative alternative to traditional municipal financing to parlay private investment and jumpstart projects that create jobs and spur economic development. It was modeled after various state and foreign public banks and trusts.

The administration contends it’s needed to offset dwindling state and federal funds. It would be subject to city ethics rules and Illinois’ freedom of information and open meetings rules, though critics worry over the ability to enforce the rules.

Chicago and its sister agencies — which have announced $7 billion of infrastructure projects in the works — would use the trust for “ambitious and transformative” projects that offer a defined revenue stream such as savings or user fees to complement traditional financing models. It would allow the city to preserve its strained general obligation and revenue-backed bonding capacity for routine projects and maintenance, said CFO Lois Scott.

Officials have identified $200 million of energy-efficiency projects at city facilities and schools to be funded through the trust, with anticipated savings of $20 million being leveraged to repay private investors. Chicago has nonbinding agreements from Citibank NA, Citi Infrastructure Investors, Macquarie Infrastructure and Real Assets Inc., JPMorgan Asset Management Infrastructure Group and Ullico to consider investing up to $1.7 billion in projects.

Some aldermen who originally voiced worries over city risk, and their ability to monitor the trust’s actions and to determine the value of financings, said the changes sufficiently addressed their concerns. For others who support the concept of the trust, the additions still fell short.

Alderman Bob Fioretti said questions remain over “who will be on the hook if returns fall short…these are fundamental questions that have yet to be answered.” The ordinance spells out that the trust can not put the city’s full faith and honor pledge behind a financing, but some aldermen believe the city is still at risk because it may be called upon to rescue a project or risk damaging its perception in the municipal market.

One central issue that some aldermen contend remains unresolved to their liking is oversight. Trust-funded projects involving city assets, land or grant funds would come before the council for a vote, but those involving the sister agencies would not. Those agencies, like the Chicago Board of Education, the Chicago Transit Authority and the Chicago Park District, are governed by non-elected boards appointed by the mayor.

The administration has stressed that at least city deals undertaken by the trust would come under the purview of Chicago inspector general Joe Ferguson. In a letter to aldermen, Ferguson raised his own concerns over accountability, saying the trust “would operate under significantly less scrutiny and transparency than city departments” because of its structure.

Critics of the ordinance extend to several community and watchdog groups. Several aldermen worked with the Illinois Public Interest Research Group and the Better Government Association to craft a substitute ordinance that would have allowed the City Council to hire an independent advisor to review trust deals on a quarterly basis, given the council oversight of trust projects for sister agencies, and fully empower the inspector general’s oversight. City officials countered that the latter move would violate existing laws. Emanuel’s allies succeeded in tabling the substitute and another attempt to amend Emanuel’s ordinance.

Emanuel sought to cast the infrastructure trust as an innovative approach to fund infrastructure amid the dwindling availability of state and federal funds. One aldermen questioned the rush to adopt the ordinance, saying that the city is not falling into Lake Michigan in its current state. Emanuel in his address agreed, but quipped that “Cars are falling into the street,” citing a sinkhole incident.

Emanuel addressed the skepticism that undercuts any talk of P3s in Chicago due to public and council angst over the handling of the city’s $1.15 billion lease of its parking meter system in 2009, which the council approved three days after receiving it. Most consider the deal a fiasco given rates have skyrocketed and former Mayor Richard Daley exhausted most of the proceeds to balance recent budgets.

“At every level, process and substance is different,” Emanuel said, citing the longer period of time during which the council had to review the ordinance and his administration’s compromises. The administration has also stressed that, unlike the city’s past string of deals leasing its assets, the trust would fund construction of new or improved assets.

A series of council members stood in to praise the trust as an alternative financing vehicle. “Our city is drowning in debt” making it more difficult to issue bonds without raising taxes, said Alderman Joe Moore. The plan originally was to be voted on last week, but Emanuel delayed consideration by one week.

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