- The Washington Times - Monday, April 20, 2009

CHICAGO (AP) - A $2.5 billion first-of-its-kind deal to privatize a major U.S. airport has collapsed amid the global credit crunch, city officials said Monday.

Chicago officials said the deal to lease Midway Airport for 99 years fell apart because private investors could not raise the necessary money.

A major domestic hub, Midway would have been the first major airport to go private under a federal pilot program.

“I’m disappointed it did not go through,” Chicago’s chief financial officer, Gene Saffold, said Monday. “But it’s not that all hope is gone.”

Saffold said he believed a plan to lease Midway to private investors could be resurrected in the future but conceded it likely would have to wait until capital markets fully recover. He said other cities should not be dissuaded by the difficulties in sealing the Midway deal, calling the current plan’s collapse “a little speed bump.”

The city of Chicago still will keep $126 million in “earnest” money already paid by investors as part of the agreement, Saffold said in a statement.

Saffold downplayed the impact on the city’s long-term finances, though, without providing details, he conceded some infrastructure projects may have to be scaled back.

City officials said last month they were willing to give investors more time. Officials agreed to a two-week extension on an April 6 closing date to give investors from New York, Boston and Canada six more months to secure financing.

Some Chicago aldermen had long expressed concern about passengers having to pay more to park and shop at Midway if it fell under private control. But those worries seemed to trump the promise of new money for thinning city coffers. Last year, aldermen voted 49-0 to sign off on the lease agreement.

Had the deal gone through, the investor group would have paid the $2.5 billion in upfront rent. The city expected to clear more than $1 billion in net proceeds with most of that money going toward infrastructure improvements and pension funds.

Chicago has leased assets before as a way to raise money, including parking meters and garages and a nearly $2 billion deal to lease the Chicago Skyway to a private operator.

More and more government entities have looked to their public assets as cash cows, but consumers can wind up paying more after those roads and other assets are turned over to private entities.

Chicago applied two years ago to be part of the FAA’s program to privatize up to five U.S. airports.

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