Durbin Urges Care in Midway Privatization
Senator says hundreds of millions of dollars in federal taxpayer investment must be protected in any potential airport privatization
[WASHINGTON, D.C.] - In a letter to Transportation Secretary Ray LaHood, U.S. Senator Dick Durbin (D-IL) today urged care in evaluating and approving any existing or future airport privatization agreements. Two airports are currently moving toward privatization through the Federal Aviation Administration (FAA)'s Airport Privatization Pilot Program - Midway International Airport in Chicago, Illinois and Luis Munoz Marin International Airport in San Juan, Puerto Rico.
While Puerto Rico is close to finalizing the privatization of its airport, the City of Chicago is still considering its options and no final decision has been made to lease Midway. Together, the airports have received a total of nearly $559 million in federal Airport Improvement Program funds since 1982. Durbin sent a copy of the letter to Chicago Mayor Rahm Emanuel who he spoke with earlier today.
“The federal government has borrowed heavily to make investments at Midway and other airports across the country. Those federal investments were made in the public interest to keep our country competitive in the global economy and to move air traffic safely and efficiently,” wrote Durbin. “The federal taxpayer should have a seat at the table during privatization negotiations, and I encourage you to look closely at the federal funds these airports have received and make sure these funds are repaid prior to the sale or lease of an airport.”
Midway Airport currently holds the only slot available for a large hub airport to participate in the FAA’s Pilot Privatization Program. On December 28, 2012, the City of Chicago submitted its revised preliminary application to privatize the airport to the FAA. On January 18, 2013 the FAA accepted the application allowing the City of Chicago to select a private operator, negotiate a lease agreement, and submit a final application to complete a privatization of the airport. Earlier this month, Mayor Emanuel announced the creation of an advisory panel to assist in the process of exploring the potential leasing of Midway Airport to a private company.
“The $378 million invested in Midway helped rebuild runways, taxiways and a new terminal. These investments have helped make Midway a major national aviation hub. Midway is now a huge regional economic asset, generating $7 billion in economic activity each year and supporting 90,000 jobs, thanks in large part to the funding received from the federal government,” Durbin wrote.
Durbin has long advocated for increased transparency and public involvement before major transportation projects can be leased or sold. In 2011, he introduced the Protecting Taxpayers in Transportation Asset Transfers Act which would require the Department of Transportation to attach a federal lien on all transportation projects that have received federal funding in excess of $25 million of federal funding and have a value over $500 million. This lien will not be released until federal funds are repaid and the parties agree to take action to increase transparency and public input in the privatization transaction. He plans to reintroduce that legislation in the 113th Congress.
Text of the letter below and attached:
January 29, 2013
The Honorable Ray LaHood
U.S. Department of Transportation
1200 New Jersey Avenue SE
Washington, DC 20590
Dear Secretary LaHood:
I ask that you proceed with care in evaluating and approving any airport concession agreements through the Federal Aviation Administration (FAA) Airport Privatization Pilot Program. Two airports in the Pilot Program are closer to being privatized – Luis Munoz Marin International Airport in San Juan and Midway International Airport in Chicago. While Puerto Rico is close to finalizing the privatization of its airport, the City of Chicago is still considering its options and no final decision has been made to lease Midway. In each case, there are significant federal investments at stake in these airports and any movement toward approving privatization merits a careful and transparent evaluation
Both the City of Chicago and the Department of Transportation (DOT) need to carefully look at pending agreements to ensure the public interest is fully protected. I encourage you to pay particular attention to the role federal funding, increased costs and taxpayer subsidies play in privatization. As you know, I have introduced legislation to mandate increased transparency and a thorough review of any sale or long-term lease of federally funded transportation assets. However, many of the policies in my legislation do not require new statutory authority and should be considered before any final application is approved DOT.
Together, Luis Munoz Marin and Midway have received almost $559 million in federal Airport Improvement (AIP) funds since 1982. The $378 million invested in Midway helped rebuild runways, taxiways and a new terminal. These investments have helped make Midway a major national aviation hub. Midway is now a significant regional economic asset, generating $7 billion in economic activity each year and supporting 90,000 jobs, thanks in large part to the funding received from the federal government.
The federal government has borrowed heavily to make investments at Midway and other airports across the country. Those federal investments were made in the public interest to keep our country competitive in the global economy and to move air traffic safely and efficiently. However, when a city or state sells or leases a federally funded airport, the Pilot Program does not require these federal funds to be repaid. Instead, these funds become part of the negotiations between local governments and private interests, often as a bargaining chip to increase an up-front payment from private companies to the local government. The federal taxpayer should have a seat at the table during negotiations, and I encourage you to look closely at the federal funds these airports have received and make sure these funds are repaid prior to the sale or lease of an airport.
Other airports could benefit from the federal funds invested into privatized airports. For example, the City of Chicago is about to begin negotiations for the final phase of the O’Hare Modernization Program. The new O’Hare runways, taxiways and Western Terminal could benefit greatly from additional FAA funding. However, waiving repayment of past federal grants limits the funds available for these projects.
Repaying federal funds is not the only way to guarantee the original investment we made in Chicago’s infrastructure is not lost in a privatization transaction. You may have additional thoughts on how these funds could continue to build our economy and create jobs in the region, and I am open to these ideas. I have spoken with Mayor Emanuel about these possibilities as well. However, any other use of these funds should be fully disclosed early in the privatization process so the public can make a full and informed decision about the fate of their tax dollars.
A 2008 Senate Finance Hearing brought to light how little information is available on the tax and financing aspects of concessions of publicly owned transportation assets. These tax benefits are important to making these transactions economically attractive to private companies, but the Privatization Pilot program does not require any disclosure or analysis of the benefits available to private companies involved. The tax and financing benefits deserve scrutiny. I encourage you to make all such information publicly available to ensure no hidden tax subsidies are involved in these transactions.
Finally, DOT and the City should make available information related to the changes in fees and workforce at the airports pending privatization. Private companies involved in privatization often can make large up-front payments because they are able to significantly increase costs to users or reduce wages and benefits of workers. These are not inconsequential issues, and there should be a full accounting of the increased costs and savings before any arrangement is approved.
As you and I have discussed previously, I am not opposed to private financing of public infrastructure. However, I have real concerns about the rush into public-private partnerships without proper oversight or public interest protections.
When a unit of government proposes to turn over publicly funded transportation assets to private operators, we need to ask hard questions. The public deserves to know taxpayer dollars are not being handed over to private investors. Public investments should be repaid before private entities assume control of any large infrastructure, and airport privatization is no exception. We can’t guarantee the public interest will come before the private interest without asking tough questions in an environment of complete transparency.
I am confident you will make sure any privatization agreement is in the best interests of the taxpayers before it happens.
Richard J. Durbin
CC: Mayor Rahm Emanuel, City of Chicago
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