Thursday, October 14, 2010

Chicago Style "Infrastruction"

CNBC interviewed Dana Levenson, Chicago's former Chief Financial Officer and now with RBS North America Infrastructure.  They discussed President Obama's infrastructure initiative.  I offer the following summary of his remarks:

America's infrastructure needs are great.  It will take an estimated $2 trillion to upgrade the country's infrastructure from "D" to "B" grade.

Government is a critical player, but it doesn't have the resources to do the job alone.  Private capital is needed.  

The $50 billion must be levered to have an impact.  $50 billion in direct spending will fall far short.  

Public facility bonds are good, but it will take more than this program to solve the problem.

There are 45-50 projects that are accretive to the economy.  The list includes new roads and funding for these projects is $200 billion. 

The press release on Levenson's RBS hiring stated:

Levenson led the $1.83 billion sale of the Chicago Skyway and the $563 million sale of the Chicago Downtown Parking System to private investors. These landmark transactions, to monetise municipally-owned toll road and parking assets, represent the first of their kind in the United States.
Chicago leased its parking meter concession for $1.15 billion in 2009.  What happened to the money?  Much of it has been spent.  SunTimes reported:

The city will have just $76 million left from the 75-year, $1.15 billion deal that privatized Chicago parking meters. There will be $500 million remaining from the $1.83 billion deal that privatized the skyway for 99 years.

Chicago will have spent nearly $3 billion of the total $3.5 billion in infrastructure proceeds or 85% of  75-99 year money.  That's front-loaded infrastructure spending.

Chicago's next Mayor will need to sell more public assets.

Asked what his successor should do with reserves largely depleted, Daley talked about reviving the $2.5 billion deal to privatize Midway Airport that collapsed in April, 2009 for lack of financing.

“You have the Midway Airfield deal very close, could be closed …. That’s a big asset, infrastructure [funding] coming into the city. ... It’s very close. That’s what we think the next mayor should do,” he said.
Rahm Emanuel is the perfect hawker for the job.

Update:  WSJ did a piece on public infrastructure sales.