By Karen Pierog and Greg Roumeliotis
CHICAGO (Reuters) – Chicago Mayor Rahm Emanuel on Thursday put the brakes on a deal to lease the city’s Midway Airport because one of the two bidders dropped out, a spokeswoman for the mayor said.
The two infrastructure investment consortia that entered talks with the city about a possible lease of Chicago’s second-largest airport included one combining Macquarie Group Ltd and Ferrovial SA and the other combining Industry Funds Management and Manchester Airport Group Plc.
A source close to the IFM/Manchester consortium confirmed the group had dropped out of bidding, citing valuation issues for the decision.
The consortium “looked at the revenues, looked at the costs, and it wasn’t working,” the source said, leaving the Macquarie/Ferrovial group as the sole remaining bidder.
A Macquarie spokesman declined to comment late Thursday. Ferrovial, IFM and Manchester Airport could not be reached for comment.
Sarah Hamilton, the mayor’s spokeswoman, said Chicago had set a “high bar” for taxpayer protection in the deal, including a short lease term and revenue sharing. The bidding companies could not make an offer “that would meet what taxpayers deserve.”
“The main point is this: The city has a bottom line and they did not meet it,” Hamilton said.
Infrastructure leases in Chicago are a politically sensitive issue, even as the city deals with large budget deficits and is scrambling to identify new revenue sources. Emanuel’s predecessor, Richard Daley, was roundly criticized for a lease of Chicago’s parking meters that led to an immediate quadrupling of parking rates in much of the city even as Chicago quickly spent much of the $1.15 billion proceeds from the 75-year deal.
Emanuel unveiled his plan for leasing the city’s second airport behind O’Hare International Airport, in December 2012. A previous attempt to lease Midway to private investors fizzled in 2009 under Daley as the economic downturn dried up financing for the proposed $2.52 billion, 99-year deal.
Emanuel’s plan called for an airport lease of 40 years or less with a revenue-sharing provision allowing the city to retain ownership of Midway and receive some money that would be earmarked for capital projects. Initial proceeds from a deal would have been used to pay off the airport’s outstanding bonds.
The city’s parking meter lease has continued to cause headaches for Chicago’s mayor. The deal was slammed by the city’s inspector general and some city council members for being undervalued. Emanuel renegotiated part of the deal with Chicago Parking Meters LLC in order to avoid paying as much as $100 million the company claimed it had lost due to out-of-service meters.