Chicago’s multibillion-dollar lease of Midway Airport has collapsed.
City officials announced in late April the $2.5 billion deal to privatize the airport fell through after the winning bidder could not arrange financing to complete the transaction. The City Council approved the deal last October about one week after Mayor Richard M. Daley presented the proposal.
After paying off airport debt, the city would have netted about $900 million from the lease. State legislation allowing the lease required that 90 percent of the net proceeds go toward shoring up pension funds and city infrastructure repairs.
Instead, the city is left with only a $126 million down payment made by a consortium of investors called the Midway Investment and Development Company (MIDco). Investors included Citi Infrastructure Investors, YVR Airport Services Limited of Vancouver, and John Hancock Life Insurance.
Hurt by Credit Crisis
“Obviously, $900 million we had been counting on won’t come in this year,” said Lisa Schrader, Daley’s deputy chief of staff. “The bids were submitted last September, and the credit markets have gotten a lot tougher since then. They just couldn’t swing the financing.”
Though the city had not spelled out how it would have used the money, Schrader said about $450 million of it probably would have gone toward pensions and most of the rest to infrastructure improvements.
Schrader said the city plans to use $40 million of the $126 million down payment to balance the city’s budget. The city had planned to use that much for budget-balancing if the lease had gone through.
The city plans to use the remainder of the down payment for a neighborhood capital improvement program.
Schrader declined to speculate on what the city might do, if anything, to cover the $776 million shortfall in net revenue.
Demands for More Review
Two days after the announcement of the demise of the Midway deal, Chicago aldermen introduced an ordinance that would give them at least 30 days to consider sales or leases of city assets of $100 million or more. The Midway lease, and leases of thousands of city parking meters and the eight-mile-long Chicago Skyway highway, all went through the City Council with almost no time for review.
“When we do something on a large scale—selling Midway, the Skyway, parking meters—we’re given 30 minutes, not 30 days, to consider the documentation,” Transportation Committee Chairman Tom Allen (D-38th Ward) told the Chicago Sun-Times. “These are monumental, once-in-a-lifetime decisions. We shouldn’t do it in the dark. We shouldn’t hide the ball. And we shouldn’t do it in a way where the general public is left out in the cold.”
The City Council could get another shot at a Midway lease.
“We still retain the right to competitively offer the Midway transaction again, down the road, when financial market conditions improve,” said Chicago Chief Financial Officer Gene Saffold.
Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.