CHICAGO — Chicago would use the $126 million in earnest money, which it received from a private consortium after it failed to raise the financing needed to complete the $2.52 billion lease of Midway Airport, to help balance the budget and repay debt for neighborhood infrastructure, under a plan proposed by Mayor Richard Daley this week.
“Even though our privatization efforts on Midway will not move forward at this time, the city still comes out ahead,” Daley said. “Because we negotiated a solid agreement, the city has received the full $126 million in earnest money.”
Chicago will use $40 million from the funds — posted as collateral after the City Council approved the lease transaction last fall — for the 2009 budget. Those funds will replace the $40 million the city anticipated using in the current budget from lease proceeds from the deal.
Another $40 million will go into a short-term reserve to help balance the 2010 and 2011 budgets, and another $33 million will go to repay debt that will be issued to finance neighborhood infrastructure projects as planned. The remaining $13 million is earmarked for transaction fees to financial and legal advisers and to the airlines that operate at Midway that were required to sign off on the lease deal.
If the deal had gone through, the city would have used about $1 billion to retire Midway debt with another $1 billion required to go to fund pensions or for infrastructure under state legislation that paved the way for the deal. About $100 million of the deal was to be unrestricted.
The groundbreaking privatization of the airport was terminated last month by the city after the Citi-led consortium known as Midway Investment and Development Co. failed to raise the financing to make the up-front lease payment.
The consortium includes YVR Airport Services Ltd. of Vancouver, Citi Infrastructure Investors of New York, and John Hancock Life Insurance Co. of Boston. The city and private group blamed the worsening credit situation that has escalated since last fall when the deal was announced.
The plan was introduced to the council on Thursday and still must be approved. Chicago chief financial officer Gene Saffold has warned of a growing deficit that could hit $200 million to $300 million in the $6 billion budget by the end of the year due to faltering revenue collections.
Daley last week announced that 3,500 non-union city employees will be required to take 14 unpaid furlough days to save $10 million. He previously had ordered unpaid furlough days for the day after Thanksgiving, Christmas Eve, and New Year’s Eve in 2008 and 2009 to save money. The city is negotiating with unions seeking concessions to avoid layoffs.
In other action, the council approved the issuance of up to $80 million of general obligation tender notes to help the Chicago Public Library smooth out cash flow. Loop Capital Markets LLC is senior manager and Samuel A Ramirez & Co. is co-manager.
Chicago’s $6 billion of GO bonds are rated AA by Fitch Ratings, Aa3 by Moody’s Investors Service, and AA-minus by Standard & Poor’s.
