Friday, October 3, 2008

Midway Airport privatization - another rip-off of the public

By John Bachtell
Without much public discussion, the Daley Administration is set to privatize Midway Airport for $2.5 billion. The new operators will be Midway Investment and Development Co., a consortium of transnational corporations – Vancouver based YVR Airport Services that operates several large airports, Citi Infrastructure Investors, an arm of Citi Bank and John Hancock Life Insurance. The deal requires the approval of City Council, which meets next week.

Midway will be the first airport privatized in the US under a program initiated by Congress in 1996. About 100 airports are privatized around the world with about 12 global corporations competing for the spoils.

Unless stopped this will be a rip-off of a huge public asset and is an example of cutting off your nose despite your face. It begs the question - should public assets be used for the common good or sold off to then become instruments to maximize profits?

Privatization and gentrification have long been the Daley administration’s answer to economic development. It is a neo-liberal free market economic model applied to local development. Daley has plowed ahead with privatization of public schools, the Chicago Skyway and downtown public parking garages.

The economic pressures on Chicago are immense. Tax revenues are nose-diving in the current deepening economic crisis and are expected to worsen. Chicago, like most states and municipalities are facing immediate and long-term budget crises. The 2009 city budget is $450 million in the red and the city will layoff over 1,000 city workers to close the gap.

In addition the city pension fund is $10 billion under funded. Pension obligations of $475 million are 15% of the city’s operating budget, a situation also shared by states and municipalities across the country. It’s not clear to what extent city finances will be harmed by the meltdown on Wall Street.

Chicago is also burdened by continued airport financing, including general maintenance and upgrade to both Midway and O’Hare airports and public massive outlays that will be needed for the possible Olympics here in 2016.

Daley made the decision to get quick upfront cash to pay down the debt. Unfortunately in doing so he's selling off the future for the present. He is creating the conditions for worse economic problems, for a bigger budgetary hole future administrations will have to deal with.

Mayor Daley boasts the city will receive $2.5 billion for the 99-year lease to Midway Investment. But after covering a $1.3 Midway airport debt, the city will pocket only $1 billion, $450 million of which will go to the city pension fund and $450 million for infrastructure. That leaves $100 million left over.

The private firms who took over the airport will pocket annual airport revenues that topped $130 million in 2006. Over a 99-year span this would amount to $13 trillion in revenues. It is claimed the city doesn’t get anything out of Midway revenues. But if this were true why would a transnational corporation seek the deal?

That’s just for starters. Midway will no longer be a public asset whose main purpose is to provide a service to the public (aside from the private airline corporations that use it). It will now become a private asset whose purpose is to generate maximum corporate profits. To generate maximum profits, Midway Investment will be compelled to raise revenues and or cut costs.

Contrary to the claim that privatizing public assets creates greater efficiency of operation, the experience here and around the world has been the opposite. Privatization has led to rising fees and decline in service. The experience with most airport privatization in Europe hasn’t been pretty. In addition to skyrocketing prices in nearly every airport, the Campaign for Public Ownership in Britain states,

“(The nation’s) privatized airports are a national disgrace, with BAA preferring to fill space with retail outlets instead of providing adequate seating for passengers. At Heathrow’s new Terminal 5, there will be only 700 seats for an average of 80,000 passengers a day when it opens in March 2008.

“In their relentless quest for increased profits, privatized companies have not only consistently raised prices above inflation, but have cut back on their workforce and failed to adequately invest for the future. Short-term profiteering has replaced long-term investment, gravely affecting Britain’s long term economic prospects.”

As the Chicago Sun Times Lewis Lazare notes, “Anyone who has traveled through London’s busy, privatized Heathrow Airport in recent years may have gotten a taste of the future at Midway, if YVRAS and its partners do what they must to make money.
“One can barely turn around in any of Heathrow’s public departure lounges without bumping into one of the vast number of retail spaces – large and small – that have been stuffed into a finite space.”

While the Midway deal includes a cap and freeze on gate charges to airlines for six years, once that period is over those fees will begin to increase. The fees will be passed along to the flying public. In addition the price of everything at Midway – from food to parking fees will increase.

Midway investment will be forced to jam more flights into the airport, increasing congestion and noise, a prospect that troubles the surrounding community. In addition, while the deal includes agreements with the labor unions representing Midway workers, expect efforts to cut the workforce and services to the bone, speed up workers and reduce wages and benefits.

One can also expect pressure from the transnational corporations for additional governmental subsidies in various forms. For example a privatization law that passed the Illinois legislature in 2006 guaranteed property tax exemptions on Midway Airport to the new investors!

To see what privatization may mean for Midway one only has to look at what is projected for the Chicago Skyway, where the city received $1.8 billion from global corporations in return for a 99-year lease. Tolls have risen 50% since 2004. Parking at Millenium Park Garage has risen 31% since it was privatized (to Morgan Stanley) in 2006. Meanwhile city finances continue to decline.

What a sweet deal for the corporations, but it's no answer for the public!

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