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Midway Airport’s privatization prospects still unclear, despite new contract award

Midway Airport  |  File photo

Midway Airport | File photo

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Updated: August 15, 2012 6:07AM

Mayor Rahm Emanuel’s administration has awarded a new five-year, $53.6 million contract to the joint-venture hired in 2008 to manage Midway Airport, raising questions about the future of the Midway privatization deal that collapsed for lack of financing.

Four years ago, then-Mayor Richard M. Daley signed a two-year, $21.2 million contract with Skyline Management Group that was supposed to tide the city over until the Southwest Side airport was privatized.

The 99-year, $2.5 billion Midway deal subsequently fell apart, prompting the city to extend Skyline’s Midway management contract for another two years.

Emanuel has promised to make a decision on whether to revive the Midway privatization deal by Dec. 31 after asking the Federal Aviation Administration for a series of extensions.

Is privatization off the table, now that City Hall has signed a new, five-year contract with Skyline Management Group that expires in 2017?

Not necessarily.

“It’s not reasonable to infer that this is a de-facto statement that privatization is on or off. It has nothing to do with it,” said mayoral spokesman Tom Alexander.

“This contract would be addressed in any [privatization] RFP that would be issued. Going forward with this contract doesn’t have any relation to those other conversations.”

Skyline is a joint-venture that includes three equal partners: Chicago-based Diverse Facility Solutions; Florida-based AvAir Professional Services and Texas-based ABM Facility Services.

It replaced a clout-heavy partnership that held the Midway contract since 2001 and included former Illinois Gaming Board Chairman Elzie Higginbottom, Daley’s chief fund-raiser in the black community.

The Chicago Sun-Times reported last month that Skyline had been awarded a five-year, $41 million contract to manage the $598 million international terminal.

Now, Skyline has long-term management contracts at both Chicago airports. That’s even though Emanuel has sought to rebid a host of lucrative airport concession contracts and spread the wealth beyond a clout-heavy few.

Skyline was one of four respondents to the city’s “request-for-proposals” (RFP). They were chosen by an Aviation Department selection committee after technical advisors graded each proposal on price, professional qualifications, minority participation, experience, approach and oral presentation.

Determined to avoid the political furor that followed Daley’s decision to privatize Chicago parking meters, Emanuel campaigned on a promise to permanently ground the Midway deal.

But, the city’s decision to seek a pair of extensions from the FAA — the latest until Dec. 31 — has raised suspicions.

So has the background of two key members of Emanuel’s financial team.

Chief Financial Officer Lois Scott co-founded a firm that advised state and local governments on privatization. As a private attorney, Budget Director Alex Holt advised the group that was poised to acquire Midway before the deal fell apart.

The 2009 collapse of the Midway deal left Chicago taxpayers with a $126 million down payment but no apparent way to shore up underfunded city pensions that threaten to become a financial albatross for future generations of property owners.

The 99-year lease would have allowed Midway Investment and Development Company LLC to pocket airport revenues that topped $130 million in 2006, including parking, concessions, and passenger facility charges.

An estimated $1.15 billion of the city’s proceeds would have been used to pay off Midway Airport debt. The deal also included: $225 million for police and fire protection; $126 million for soundproofing and Midway capital projects already underway and $19 million for transaction fees and legal expenses.

State law required 90 percent of the $1 billion profit to be used to bankroll city infrastructure projects and shore up under-funded city employee pension funds.

That left $100 million to be spent at the city’s discretion.

When the City Council’s Finance Committee signed off on Emanuel’s plan to refinance $1.5 billion in Midway Airport debt on May 7, Scott sent strong signals that the deal may yet be cleared for take-off.

“We don’t want to turn off anything that could potentially produce a benefit for our taxpayers,” she said then.

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