| CHICAGO, Sept 6
CHICAGO, Sept 6 A day after calling an abrupt
halt to a bidding process for privatization of Midway Airport,
Chicago Mayor Rahm Emanuel on Friday sent signals that he still
would like to pursue a deal in the future.
Emanuel late Thursday halted the city's efforts to privatize
operations of Chicago's second-largest airport after one bidding
consortium pulled out, leaving the city with only one
A spokeswoman for the mayor, Sarah Hamilton, held out the
possibility of future negotiations. "If it were to be considered
in the future, it would have to be done with the mayor's same
approach that ensures the long-term interests of taxpayers and
residents are protected."
At an unrelated event on Friday, Emanuel said he called off
discussions because he was not willing to pursue a deal that
would not meet his minimum expectations.
"At the end of the day, those thinking of investing in
Midway just did not clear the bar I set for the city, which I
believe is a high bar," the mayor said.
"If you're coming to the City of Chicago, you have to meet
our high expectations," Emanuel added.
Emanuel, who unveiled his plan for leasing the city's second
airport behind O'Hare International Airport in December 2012,
had called for a lease of 40 years or less with a
revenue-sharing provision. He sought to allow the city to retain
ownership of Midway and receive some money that would be
earmarked for capital projects. He hoped to use initial proceeds
from a deal to pay off the airport's outstanding bonds.
Hamilton said the mayor was not considering leases of other
assets at this time.
Infrastructure leases in Chicago are a politically sensitive
issue, even as the city deals with large budget deficits and is
scrambling to identify new revenue sources. Under Emanuel's
predecessor, Richard M. Daley, Chicago leased the Chicago Skyway
expressway connecting the city's south side to Indiana and its
parking meters--a 75-year deal roundly criticized for causing
parking rates to spike while not optimizing returns to the city.
The two infrastructure investment consortia that entered
into talks with the city about a possible lease of Chicago's
second-largest airport included one combining Macquarie Group
Ltd and Ferrovial SA and the other combining
Industry Funds Management and Manchester Airport Group Plc.
A source close to the IFM/Manchester consortium confirmed on
Thursday the group had dropped out of bidding, citing valuation
issues for the decision.
Southwest Airlines, Midway's biggest carrier, said
it supports the mayor's decision.
"They are doing what they believe is in the best interests
of the city, the airport, and the traveling public," the airline
said in a statement.
Midway had been selected by the Federal Aviation
Administration for a pilot program allowing hub airports to be
leased to private operators. There was no immediate response
from the FAA as to Midway's future in the program.
The death of a Midway deal is a major setback for the
privatization movement, according to Joseph Schwieterman, a
transportation expert at DePaul University in Chicago.
"I think the city is still jittery about privatizations
going wrong and erred on the side of caution, maybe too much
caution," he said, adding the city may have let an opportunity
An attempt during Daley's administration to lease Midway to
private investors fizzled in 2009 as the economic downturn dried
up financing for the proposed $2.52 billion, 99-year deal. The
failure of that deal also cast a pall on privatizations of
government assets, which up until that time mostly involved toll
Hamilton, the mayor's spokesman, said that Emanuel pledged
not to use any proceeds from the deal for operating expenses,
although some of the money could possibly be used for pensions
under Illinois law.
Chicago's large and growing pension liabilities led Moody's
Investors Service last month to slash the city's credit rating
three notches to A3, which is just above the BBB level. The
city's pension payments are expected to top $1 billion starting
in fiscal 2015 from $479.5 million in fiscal 2014, which begins
Schwieterman said the city has few candidates left to
privatize after leasing assets including parking garages and
meters and its Skyway toll bridge.
The city's parking meter lease has continued to cause
headaches for Chicago's mayor. The deal was slammed by the
city's inspector general and some city council members for being
undervalued. Emanuel in April announced a settlement with
Chicago Parking Meters LLC in order to avoid paying $49 million
the company claimed it had lost due to out-of-service meters.