CHICAGO - Following Chicago's lead, Milwaukee County Executive Scott Walker is advancing plans to pursue the privatization of Mitchell International Airport, including $500,000 in his proposed $1.4 billion 2009 budget to hire a consultant to help put together a lease deal.
The consultant would "help with the legal, financial, and operational components of putting together a request for proposals" to privatize the airport, said budget director Steven Kreklow.
Walker wants to use the proceeds of any transaction to fund transit improvements, offsetting the need for a sales tax increase that over his objection will appear on the November ballot.
"If successful, contracting out operations would provide a steady revenue stream to the county. These funds should then be used to support and improve transit in our county - and throughout our region - for years to come. And we can do it without raising another tax," Walker said in his budget address late last week.
Walker called the county-managed airport well-run and noted that it has experienced its 16th consecutive month of growth, factors that would boost its appeal to potential investors interested in operating the facility. Walker has said he would hope to raise at least $1 billion over the next five decades under a lease.
The county is following the lead of its southern neighbor Chicago, which launched the wave of privatizing existing assets with its $1.8 billion lease of the Chicago Skyway toll bridge in 2005. The city is currently is in the process of accepting bids from a handful of pre-qualified teams interested in operating its Midway Airport.
While market participants originally believed that deal could draw as much as $3 billion, with $1.2 billion earmarked to pay off Midway's debt, those numbers have shrunk to estimates closer to $2 billion given the market credit crunch.
"We should move forward with a plan to see if it can work in Milwaukee, too," Walker said. Mitchell carries about $125 million of debt.
With the county struggling to keep its books balanced, the proposal to use the funds faces a good deal of skepticism from some county board members. In a statement, board chairman Lee Holloway and several board members said: "We believe the $500,000 proposed for an airport lease study can be better spent elsewhere."
"A private operator ... would keep profits and could put additional cost burdens on both passengers and airlines, which cannot sustain additional financial obligations in the current environment of a challenging economy and high fuel costs," the statement said.
They attributed the airport's growth to its affordability and said they were concerned a private operator would drive up parking and other airport costs to raise their profit margins.
The board earlier this month overrode Walker's veto of an advisory ballot question asking whether the sales tax should be raised by one cent to fund transit projects and park improvements and provide property tax relief. The county currently collects a 0.5% sales tax. The proposed increase would boost current collections of $65 million to nearly $195 million. Approval from Wisconsin Gov. Jim Doyle and the state Legislature would also be needed.
If Milwaukee County were to pursue a lease of its airport, it would first have to reserve a spot with the Federal Aviation Administration under a pilot program and then meet the terms of that program, which require a majority of airlines operating at the facility to sign off on any deal - a task that proved difficult for Chicago.
The new budget comes as Walker recently announced a partial hiring freeze and other cuts to help wipe out a projected $6 million deficit in the current fiscal spending plan. The county's unfunded pension liability of about $400 million is contributing to its fiscal pressure due to rapidly growing annual payments, including a projected $48 million payment in 2009.
Walker hopes to win board approval for a pension bond issue to fully fund the liability. If the bonds are not issued, the payments in 2009 would be $57 million.