$2.5B Midway Airport lease deal falls apart

April 20, 2009 (CHICAGO) It was money the city was counting on to fix roads and bridges and shore up city pensions.

The deal would have been the first deal of its kind in the country.

The city says the deal to lease the airport for 99 years fell apart because private investors could not raise the necessary money.

It is known as the crown jewel of airports. Last year, 17 million passengers passed through Midway. The South Side airport employs thousands of people and brought in $7 billion in economic activity.

"Midway is almost the perfect airport to be privatized. The footprint of the airport is fixed. We have an airline base there that is very stable. And we have a mayor that private firms don't mind doing business with. It really was set up to succeed," said Joe Schwieterman, transportation expert.

That is why last October the city cut a deal worth $2.5 billion to privatize the airport. But that deal collapsed after a consortium of private investors called Midco failed to get the financing.

And while it is a big blow to the Daley administration, the city's chief financial officer spun it the best way he could.

"As a result of this, we now have $126 million in the bank that we didn't have before so it wasn't a total loss," said Gene Saffold, Chicago chief financial officer.

As part of the agreement with Midco, the city gets to keep $126 million in earnest money. A portion of that money will be used to balance this year's and next year's budgets. But that's nothing compared to the rest of the money the city is losing from the collapsed deal. More than $900 million was going to be used for infrastructure projects. Some say stimulus money may make up for some of that.

Alderman Bob Fioretti, who voted for the Midway deal, says he is now not so convinced the deal would be good in the long run.

"It comes at a fortuitous time fo re-evaluate our privatization, to re-evaluate how we're approaching what to we need to do for the immediate future and further on down the line," said Alderman Bob Fioretti, 2nd Ward.

The city's chief financial officer made it clear that once the economy picks up the city would like to pursue a privatization deal again.

Transportation experts say the deal with Midco would have meant higher parking and concession prices but not affected ticket prices.

Mayor Daley did not make himself available on this subject on Monday.

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