Mayor Emanuel grounds Midway privatization plan: sources
BY FRAN SPIELMAN City Hall Reporter September 5, 2013 5:19PM
Jets take off and land at Midway Airport on the city's Southwest Side in 2012. | Rich Hein~Sun-Times
Updated: October 7, 2013 1:25PM
Mayor Rahm Emanuel has grounded the privatization of Midway Airport after one of only two remaining bidders dropped out of the high-stakes competition, City Hall sources said Thursday.
Emanuel was facing mounting opposition from a City Council still suffering from the political after-effects of the widely-despised, 75-year deal that privatized Chicago parking meters.
But, a City Hall source familiar with the negotiations said that’s not what grounded the Midway deal.
With only two bidders remaining on the runway, one of the competitors “dropped out” this week, convinced the joint-venture would not be able to meet the mayor’s demands. Another source familiar with the negotiations identified the bidder that walked away as the team that includes Industry Funds Management of Australia and Manchester Airports Group.
That would have left the city with only one bidder for a transaction estimated at $2 billion. Emanuel was simply not willing to forge ahead under those circumstances.
The source refused to identify which of the joint ventures had dropped out of the competition a few weeks before formal bids were due.
Bloomberg news has identified the two bidding groups as Great Lakes Airport Alliance, a partnership between Spain’s Ferrovial and Macquarie Group that leased the Chicago Skyway for 99 years, and a team that includes Industry Funds Management of Australia and Manchester Airports Group.
“We said all along it had to be a competitive process. The mayor is just not going to take one bidder,” said a source familiar with the negotiations.
“It was not in the in the best interests of taxpayers to move forward. One of the bidders put their pencils down and said, `We can’t get there.’ That left one bidder,” the source said.
The source could not explain why one of the two rival groups would drop out before bids were due.
But, the source said, “The companies fell short of what city taxpayers deserve to be investors in Midway. We set a high bar to meet and nobody got there. The mayor was briefed on the value of what these companies would invest and said it was not what the taxpayers deserve and he said, `no.’ He always said if it was not going to be the best arrangement for the taxpayers, he would walk away.”
City records show that the lobbyist for the two companies that formed the Great Lakes Airport Alliance bid was William Filan — who employs Mark Fary, the husband of city Aviation Commissioner Rosemarie Andolino.
Filan registered as the lobbyist for both Ferrovial and Macquarie in the second quarter of this year, according to the city’s ethics board. During the same period, Fary, who is a former alderman, listed William Filan Ltd. among his City Hall lobbying clients.
Sarah Hamilton, the mayor’s communications director, said Filan’s role as a lobbyist for the Ferrovial-Macquarie team played no role in Emanuel’s decision to kill the deal.
The City Hall source insisted that Emanuel’s decision had nothing to do with the fact that Chief Financial Officer Lois Scott, who would have been the mayor’s point-person in selling the Midway deal to the City Council, has been damaged by the fact that she recommended and had business dealings with indicted former City Comptroller Amer Ahmad.
Emanuel’s decision not to revive a $2.5 billion deal by former Mayor Richard M. Daley that collapsed in 2009 for lack of financing comes just a few weeks after an influential alderman raised red flags about the privatization of Midway Airport.
Aviation Committee Chairman Michael Zalewski (23rd), whose ward includes Midway, said he was concerned that a private contractor would attempt to shoe-horn more late-night flights into the land-locked airport, making life miserable for Southwest Side residents, whose homes did not qualify for city sound-proofing.
Contacted Thursday, Zalewski was relieved, but not surprised, that Emanuel had grounded the Midway deal.
“He gave it an honest look and decided, in the best interest of the city, that it just wasn’t the right thing to do. I give him credit for exploring the option. But, it just wasn’t meant to be,” Zalewski said.
“We’re still dealing with some of our previous privatization efforts. This would have been the grand prize. It would have been a tough call. I give him credit for pulling the rug out from under the deal. The mayor can pass anything he wants in the City Council This would have been a tougher sell. But, with Midway in my ward, it’s probably good for me that he decided not to do it.”
Zalewski has said he was also concerned about the fate of hundreds of Midway concession employees. State legislation pushed through by Illlinois House Speaker Michael Madigan (D-Chicago) includes job guarantees, but only for roughly 100 city employees at Midway.
The job concerns were exacerbated by the fact that one of two finalists for the Midway lease — Spain’s Ferrioval — has been accused of “union busting and blacklisting,” Zalewski has said.
The union in Europe has since issued a joint statement saying that Ferrovial did not engage in union blacklisting, sources said.
Zalewski’s reservations may have been a turning point for a Midway deal that fell apart four years ago, leaving Chicago taxpayers with a $126 million down payment but no apparent way to shore up underfunded city pensions.
Peter Skosey of the Metropolitan Planning Council spent the last nine months reviewing the Midway deal as chairman of a mayoral commission that included Zalewski. The commission was scheduled to meet again Friday.
Skosey was surprised to learn Thursday that Emanuel had pulled the plug. He was not aware that one of the two remaining bidders had walked away.
“If that’s the case, it would be difficult to have a fair and competitive process without more than one bidder,” Skosey said.
Skosey was asked whether he was disappointed about the collapse of a deal that would have helped solve Chicago’s pension crisis and rebuild the city’s neighborhoods.
“If it’s not the right deal and it’s not the right time, then it’s not the right decision to go forward. It’s not about being disappointed. It’s about making the right decision,” he said.
“It would have been a good thing it if was a good deal for taxpayers and passengers were protected. If one of those fell short, then it’s not the right time to move forward.”
Well aware of the parking meter hangover, Emanuel had vowed to structure his Midway deal differently than Daley did.
Instead of 99 years, the lease would have been no more than 40 years long. Instead of obligating the city to pay for police and fire protection, the private operator would have assumed that $17 million-a-year cost for prices escalating over time.
There would also have been a Travelers Bill of Rights to prevent the private operator from gouging consumers for food, retail and parking and 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. LLC to pocket revenues from parking, concessions, and passenger ticket taxes in exchange for the massive up-front fee.
Emanuel was 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 have given aldermen 30 days to review the deal.
Last month, Scott offered a lengthy explanation of the benefits that could be derived by privatizing Midway that strongly suggested Emanuel would give it a try.
Scott argued that under federal law, the bonanza of revenue generated at Midway must remain at the airport unless the airport is privatized.
“If we put our head in the sand and say . . . 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 city, I don’t think that’s a responsible way of proceeding,” she said.