Chicago CFO touts Skyway privatization benefits

Privatization of the Skyway was "a boon for this city," writes the City of Chicago chief financial officer, Dana Levenson in the Wall Street Journal (2005-12-29). It upped the city's credit ratings, lowered its debt and allowed it to establish three important funds, which he describes:

(1) a long-term reserve with $500m that will generate about $25m in interest income in perpetuity;

(2) a medium-term reserve with $375m that is invested but will be drawn down in full over the course of eight years and used to provide budgetary relief and mitigate the need to raise taxes; and

(3) a $100m Neighborhood, Human, and Business Infrastructure Fund to be drawn down over five years.

He says the last fund supplements 20 city programs, including creating and retaining affordable housing for low-income families, building centers and serving meals for seniors, funding after-school programs and back-to-work programs for ex-offenders.

"Of even greater consequence than our initiating this first-of-its-kind transaction is what we did with the proceeds: We saw to it that the needs of the city of Chicago's residents were being met."

The Skyway toll business is now operated by a joint venture of international tollsters Cintra (Madrid, Spain-based) and Macquarie (Sydney, Australia-based), who paid $1,830m for a 99 year concession in January 2005. They are obliged to make improvements to the elevated roadway and pay all the operating costs in return for the right to levy tolls.

On taking over they immediately cut toll collection costs drastically by hiring labor at market rates ($12 to $15/hr) rather than bloated costs paid by the union-controlled city ($20/hr+). Also within months they introduced electronic tolling.

Privatization is being actively pursued for the Indiana Toll Road, and the Harris County, Houston toll roads. TOLLROADSnews 2005-12-29