CHICAGO -- A new public-private partnership at the airport in Gary, Ind. will feature a $100 million investment in the facility and surrounding property over the next 40 years, the airport announced Monday.
A committee formed to launch a P3 for the Gary/Chicago International Airport presented the terms of the agreement to the full airport board Monday. The board is expected to vote on the deal later this month. If it approves the deal, final contracts could be in place by early next year after public hearings.
It’s part of a fast-track process the airport launched in early summer as a way to revitalize the facility and struggling city of Gary, and position the airport as Chicago’s third regional airport.
The facility is located about 25 miles from downtown Chicago. Unlike other airport P3s, the Gary proposal is looking to take advantage of a swath of vacant land that stretches to Lake Michigan.
In late October the airport said it had tapped a team that includes Guggenheim Securities and Loop Capital as private partners. The team includes Aviation Facilities Company Inc. and AvPorts on the management side. Law firm DLA Piper is also on the team.
“Public ownership and private investment are the cornerstones of these proposed agreements,” Carrie Hightman, chair of the airport’s P3 Ad Hoc Committee, said in a statement. “The airport is a catalyst to uniquely unlock the value of the city of Gary and northwest Indiana. These proposed agreements bring together world class management, creative development and strong capital partners to accelerate investment for job creation and long-term sustainable growth.”
The deal calls for the team to invest $100 million in the airport and the city over the next 40 years. That includes $25 million in the first three years, and a minimum goal of 30% local workers.
The team has to present a master development plan within the first 12 months of the contract date that includes a 10-year proposed investment and plan to achieve a $100 million investment over 40 years. The team also has to invest $25 million in the first 36 months, including $2.5 million the first six months.
The deal calls for the city of Gary to share in 20% of net profits of city property that is contributed, sold or leased for development.
Initial terms call for the agreement to last 10 years, with up to six five-year extensions. The private team will share in 15% of airport profits, and an additional 5% if it meets various hiring provisions.
Guggenheim’s proposal as presented in June would create a new municipal authority to lease the airport from the city. The authority would float tax-exempt airport revenue bonds to finance an upfront cash payment as well as deferred maintenance, fund a capital reserve account for new facilities, a debt service reserve fund and annual payments to the airport authority over time.