Chicago Begins a Privatization Debate
Just a potential windfall, or a sign of things to come? -
You have to give ‘Da Mayor’ of Chicago credit for looking outside the box on this one. While some - as in this space — have questioned his O’Hare Modernization Plan and steadfast refusal to embrace the proposed new airport in nearby Peotone, his consideration of the privatization of Midway Airport may have merit. The concept of leasing airports to private entities is well accepted in international circles, but is an idea that has been rejected by most U.S. airport interests to date. There are exceptions: Stewart International Airport north of New York City is under a 99-year lease with British-owned National Express Group and JFK’s Terminal 4 was built and is operated by a private consortium.
The Midway proposal comes on the heels of last year’s leasing by the city of the Chicago Skyway toll road to Australian-based Macquarie, which also has interests in international airports. In that deal, Chicago received $1.83 billion, which injected much-needed cash into the city’s coffers.
Central to the Midway move is maintaining its property tax-exempt status, which the Illinois Senate this week approved.
At a time when the Bush Administration is proposing cutting more than $700 million from the Airport Improvement Program and FAA is calling for new funding mechanisms to finance the aviation system in this country, Mayor Daley’s proposal could turn out to be leading edge. The Chicago Tribune this week quoted the mayor as saying, in light of state and federal budget proposed cuts, “you sit there … or you look for revenue.” He may be right on this one.
Thanks for reading.
Thank God for Daley, without him this 40 yr old BS of a political nightmare would already exist in our backyards.
Walt
I hope Chicago will take a very close look at the results at Stewart International Airport (SWF), our country’s first and to date only ‘privatized’ airport. It has been a far cry from the success many envisioned when, in March 2001, the keys were turned over to a British-based conglomerate under a 99-year lease with the New York State Dept. of Transportation. Passengers declined 23% in 2005, to less than half what they were before the takeover. And they haven’t yet attracted any major new airlines (in fact, Delta pulled out). Fares are high, flights limited. So what is the British-based operator doing? They want to change the name of the airport (when all else fails, blame the name?). They want to drop ‘Stewart’ from the title - the very same patriotic family that donated the land, in 1930, to build the airport in the first place. And they are sticking to that, in spite of public opposition. The name ‘Stewart’ is to us what I imagine ‘O’Hare’ is to Chicago. It’s part of our heritage.
And remember - ‘privatization’ doesn’t mean no more taxpayer money. Under the FAA Airport Improvement Program, eligible projects can receive up to 90% federal funds. The lessee gets to privatize all the profits while socializing the costs. Is this what you want?
One reason ‘privatization’ hasn’t taken hold in the U.S.A. is that we have great access to capital that simply isn’t there in other parts of the world. Are we giving too much away just for some short-term benefits? I think so.