City’s defense of privatizing Midway suggests deal likely soon
BY FRAN SPIELMAN City Hall Reporter firstname.lastname@example.org August 1, 2013 3:23PM
Chicago's Chief Financial Officer Lois Scott met with the Sun-Times Editorial Board Thursday. | Rich Hein~Sun-Times
Updated: September 5, 2013 10:10PM
With two bidders still on the runway, a top mayoral aide on Thursday appeared to lay the groundwork for privatizing Midway Airport to help solve Chicago’s pension crisis and rebuild the city’s neighborhoods.
In a meeting with the Chicago Sun-Times editorial board to discuss the city’s financial crisis, Chief Financial Officer Lois Scott refused to discuss specifics of the competition or the potential for a $2 billion windfall. Nor would she say when final bids are due or even confirm that only two bid teams remain.
But her lengthy explanation of the benefits that could be derived by privatizing Midway strongly suggested the project would soon be cleared for takeoff by Mayor Rahm Emanuel.
The only question is whether a reluctant City Council would go along with the idea.
“What is lost — and what keeps getting missed in the story on Midway — is that, under the way federal laws work, any of the financial benefits generated at Midway must remain at Midway. . . . If governments want to take money out of their airports, the only way to do it is using this [privatization] program,” Scott said.
“If we put our head in the sand and say, ‘Whatever the number is, we’d rather just let that ride at Midway . . . so that money goes back to the airlines . . . as opposed to putting it into the infrastructure needs of our neighborhoods and the infrastructure needs of our city.’ I don’t think that’s a responsible way of proceeding.”
She added, “When you have the financial challenges of a city like ours, it’s incumbent upon us as an administration to look at all options to make sure we have done the best we can for our taxpayers,” she said.
Ald. Pat O’Connor (40th), the mayor’s City Council floor leader, acknowledged that reviving a Midway privatization deal that collapsed in 2009 for lack of financing would be a “very tough sell” with Chicago aldermen.
That’s even though Emanuel plans to limit the lease to 40 years, demand profit-sharing for Chicago taxpayers and build in safeguards against consumer price-gouging.
“Any time one talks about privatizing a municipal asset, immediately the next words out of their mouth is, ‘parking meters,’ ” O’Connor said. “Privatization takes place in major cities all over the world. When done correctly, they’re good things. When they’re done the wrong way or you get the wrong end of the deal, it lingers and gives everybody a bad taste.”
But with a $338.7 million gap in next year’s budget — that balloons to $1 billion without pension reform — O’Connor predicted that aldermen could be persuaded to put aside their concerns.
State law requires that 90 percent of the profits generated by privatizing Midway be used to bankroll city infrastructure projects and shore up underfunded city employee pension funds.
“You’ve got pension issues, labor contracts, education needs — all sorts of things we don’t have the money to address now,” O’Connor said.
“Midway doesn’t solve all of them and, frankly, probably doesn’t solve any of them by itself,” he said. “But given where the pension problem is, things like Midway are contemplated as part of a more universal solution to a number of our bigger financial problems, and, to the extent it can, I do think City Council would give it consideration.”
Last week, Bloomberg reported that the Midway sweepstakes was down to two bidding groups and that a contract could be awarded as soon as this fall.
The rivals were identified as Great Lakes Airport Alliance — a partnership between Spain’s Ferrovial and Macquarie Group, which leased the Chicago Skyway for 99 years — and a team that includes Industry Funds Management of Australia and Manchester Airports Group.
The collapse of the Midway deal left Chicago taxpayers with a $126 million down payment but no apparent way to shore up underfunded city pensions.
Well-aware of the parking meter hangover, Emanuel has vowed to structure his Midway deal differently than former Mayor Richard M. Daley did.
Instead of 99 years, the lease would last no more than 40 years. Instead of obligating the city to pay for police and fire protection, the private operator would assume that $17 million-a-year cost for prices escalating over time.
There also would be a Travelers Bill of Rights to prevent the private operator from gouging consumers for food, retail and parking and to force the company to maintain safety, terminal and restroom cleanliness and swift baggage claim for arriving flights.
Daley would have allowed Midway Investment and Development Co. to pocket revenues from parking, concessions and passenger ticket taxes in exchange for the massive upfront fee.
Emanuel is insisting on a management agreement and land lease that gives Chicago taxpayers a sliding scale of revenues and a bigger share of the profits when Midway is flying high.
Daley rushed his Midway deal through the City Council — so fast that aldermen beefed that it was “jammed down our throats.”
Emanuel would give them 30 days to review the deal. He has appointed Aviation Committee Chairman Michael Zalewski (23rd) to a blue-ribbon committee that’s reviewing the terms with its own independent adviser.