Caution: Transparency needed in Midway privatization deal

by Brian Costin The city of Chicago is currently considering bids to select a private management company for the operation of Midway Airport for the next 40 years. The proceeds of the deal will be primarily used to pay off Midway’s $1.4 billion in outstanding debt and additional capital needs. As an advocate for limited...

by Brian Costin

The city of Chicago is currently considering bids to select a private management company for the operation of Midway Airport for the next 40 years. The proceeds of the deal will be primarily used to pay off Midway’s $1.4 billion in outstanding debt and additional capital needs.

As an advocate for limited government and the free enterprise system, privatization of government services is a golden opportunity to shrink government, reduce taxes and improve the quality of services provided in the marketplace.

But not all privatizations are created equal. Good privatizations lead to smaller government, lower taxes and a more robust free enterprise system that rewards merit. Bad privatizations result from when the government works with favored private contractors to bilk taxpayers and restrict market competition.

For example, the Chicago parking meter privatization deal was rushed, lacked transparency and resulted in much higher parking costs for residents and visitors to Chicago by granting a single company a near monopoly over parking. The revenues from the deal didn’t result in any type of savings for Chicago taxpayers

From the perspective of limited government and the free enterprise system, the Chicago parking meter privatization deal failed.

The best and most preferable form of privatization is where a government agency entirely divests itself of engaging in a specific activity that is not a core government service.

The Heartland Institute’s 10-Principles of Privatization it describes divestiture as “Local governments routinely sell off aging or underutilized land, buildings, and equipment, returning them to private commerce where they may be more productively used.”

That’s exactly what should be done in the case of Midway and O’Hare airports.

If Chicago’s airports were sold to a private owner and the properties were added to the property tax rolls, it would provide meaningful property tax relief for Chicago and Cook County residents.

By paying off outstanding debt and eliminating all public subsidies to the airports it would give the city of Chicago an opportunity to significantly reduce travel taxes and promote tourism to the city. Chicago’s airports ranked as the highest taxed in the country according to USA Today in 2009.

However, the city isn’t considering a sale of the Midway Airport, which means no potential property tax relief. Also, there’s no talk of using the 40-year lease of the property to reduce the taxes and fees charged to users of the airport or Chicago’s taxpayers at large.

In circumstances like these it’s easy for the public to be skeptical of privatization plans, especially considering Chicago’s history with half-baked privatization deals.

Groups such as the Better Government Association are calling for more transparency, public hearings and for a cost and benefit analysis to be done before a lease deal is brokered for Midway Airport.

The proposal by the Better Government Association makes a lot of sense considering Chicago’s privatization failures in the past and the unclear savings to taxpayers under current proposals.