The recently approved Chicago Infrastructure Trust won’t replace long-term debt financing, but will allow the city to avoid the controversial act of privatizing public infrastructure, Mayor Rahm Emanuel told guests at a Washington, D.C., think tank on Friday.

Speaking to a group at the Center for American Progress, Emanuel stressed that traditional financing methods like tax-exempt debt won’t become obsolete as a result of his plan to leverage private dollars for a $7 billion package of projects.

However, he said the trust could serve as the antidote to an increasingly popular method of paying for infrastructure: long-term leases of public assets.

“The trust is another tool,” Emanuel said. “It brings in, also, in fact, financial institutions. They take the risk, we own the asset. It’s a direct rejection of what I think is of, in my view is the wrong model, which is privatization.”

Long-term leases to private concerns have become more and more common, especially at the state level, as governments seek to offset shrinking federal aid without raising taxes.

Virginia is in the process of offering nearly two dozen opportunities for private companies to lease, operate and profit from public infrastructure, while neighboring Maryland is also in the act with a long-term lease of the Seagirt Marine Terminal in Baltimore.

In 2006, Indiana Gov. Mitch Daniels engineered a $3.8 billion lease of the Indiana Toll Road, and East Chicago, Ind., put together a deal earlier this year to create a privately owned toll bridge.

“We still own it,” Emanuel said of assets to receive trust money. “We just finance it a different way.”

The privatization craze has created some political backlash, as some have questioned whether taxpayers are adequately protected under the model.

Sen. Jeff Bingaman, D-N.M., attempted to add language to the transportation legislation that would cut some federal funding to states that lease private roads, although the provision didn’t survive to become law.

A Chicago City Council panel approved the infrastructure trust concept back in April, amid lingering concerns stemming from an unpopular deal to privatize the city’s parking meters four years ago.

Emanuel has said that the trust, which has an initial commitment of up to $1.7 billion from a group of private banks and investors, will be used only for “transformative” projects that couldn’t be paid for with other methods.

He has announced that the first trust project will be a $200 million energy infrastructure overhaul, but has not released many details or publicly put other projects forward for trust financing.

Market participants have generally been skeptical about the prospects of using infrastructure trust or bank fund financing, because the model doesn’t give private investors the same clear-cut method of seeing a financial return that other public-private partnership models do.

Under the Chicago plan, investors will be paid back with savings gleaned from increased efficiency.

The mayor’s plan got the enthusiastic support of U.S. Transportation Secretary Ray LaHood Friday, who introduced the mayor and called the infrastructure trust concept “good policy to transform the city.”

While the Windy City’s chief elected official said any city has to follow its own plan based on what makes economic sense for it, he predicted that more states and localities would look at similar models.

“It’s going to be something people look at,” the mayor said.

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