Chicago has stopped plans to lease its Midway International Airport to private investors. A spokesperson for Rahm Emmanuel, the mayor of Chicago, said that the deal had fallen through because of the inability of investors to offer an amount that represented a fair deal to the city’s taxpayers.
The Wall Street Journal quoted Emmanuel’s spokesperson Sarah Hamilton, saying, “The mayor has decided not to move forward with the Midway leasing agreement. We set a high bar that required a new level of taxpayer protection.” According to Hamilton, “The companies did not meet that bar and could not make an offer that would meet what taxpayers deserve.”
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Chicago’s municipal privatization
Problems with public debt and difficulties meeting city obligations have sent many of America’s cities on a splurge of privatization in recent years. The most famous example is, of course, Detroit, which is considering selling everything and anything to investors in a plan to remove the city from bankruptcy.
The Midway International Airport deal would have been the first to remove control of a major city airport from public control and put it in the hands of private investors. That would have been a milestone for the current wave of privatization. Critics of privatization programs will feel some of their criticism of the deal has been listened to after today’s cancellation.
There are many outspoken critics of privatization, and almost as many different ideas about why the programs are wrong. Some analyses, and today’s cancellation, focus on the sacrifice of long-term revenue gain for short-term budget relief. Other criticisms include the effect on jobs, and moves by private companies against the public interest.
Midway International Airport deal
The last group of investors involved in talks to take control of Midway International Airport included Macquarie Group Ltd (ASX:MQG) (OTCMKTS:MQBKY) and Ferrovial SA (MCE:FER) (OTCMKTS:FRRVY), an Australian investment bank and a Spanish transport investor respectively. The deal for control of the transport hub was expected to be worth about $2 billion to the city.
A $2.5 billion deal to lease the airport for 99 years was reached in 2009, with Citigroup Inc. (NYSE:C) among the investors who won the bid. The 2008 financial crisis got in the way of that deal, however, and it fell through when the investors failed to secure funding from credit markets.