Daley's $2.5 billion plan to privatize Midway Airport grounded
Mayor Daley’s $2.5 billion plan to privatize Midway Airport collapsed today for lack of financing, leaving taxpayers with a $126 million down payment, but no apparent way to shore up city pensions and rebuild Chicago’s aging infrastructure.
The Daley administration had initially planned to work out a six-month extension to give the worldwide credit crunch a chance to ease and Midway Investment and Development Company LLC every opportunity to salvage the deal by lining up more equity investors or bank financing.
But, over the weekend, MidCo informed the city that it would be unable to raise the money. Instead, the consortium comprised of New York’s Citi Infrastructure Investors, YVR Airport Services Limited of Vancouver and Boston-based John Hancock Life Insurance walked away from the $126 million in earnest money it pledged.
The Southwest Side airport will now remain in the city’s hands, 190 Midway employees will continue to draw their paychecks from the city and Chicago will be forced to find some other way to finance the infrastructure projects Daley holds dear.
With the Midway deal, Chief Financial Officer Gene Saffold said, “We had a pool of $900 million that could [have been] used for capital. Now, we have to come up with alternative means of addressing future capital requirements” or postpone many projects.
Still, Saffold held out hope that the Southwest Side airport-in-a-neighborhood could be put out for bid once again when the worldwide credit crisis ends.
“Stock markets, real estate markets, infrastructure asset markets go up and down over time. We’ve tried to complete this transaction at a time where values had declined somewhat,” he said.
“With a global recovery in the economy and improving liquidity in credit market conditions, there’s no reason to believe we won’t get back to a point where this makes sense in the future.”
In exchange for the massive up-front fee, MidCo would have pocketed airport revenues that topped $130 million in 2006, including parking, concessions, and passenger facility charges.
In early October, the City Council gave lightening-fast approval to the 99-year Midway lease amid aldermanic complaints that the deal was “shoved down our throats.”
Aldermen were livid that they were given less than a week to review the deal. They questioned the mayor’s decision to sell during a credit crunch that limited the number of bidders and his decision to assume the $10 million-a-year cost of police and fire protection at the airport. They complained that Daley was mortgaging Chicago’s future.
Daley responded by crowing about his ability to pull another financial rabbit out of the hat in spite of the credit crunch. His words rang hollow on Monday.
“Everybody thought ... the deal was dead a month ago. There were rumors running around City Hall and every place. You heard it: ‘The deal is dead. Nothing’s gonna happen,’” a triumphant Daley said Sept. 30.
“We’re on the cutting edge. If you’re not creative in an economic crisis for your city, where are you gonna get the infrastructure money to compete?”