CHICAGO (AP) -- The City of Chicago has reached a $1.8 billion deal to lease the rights to operate its toll road to a private consortium, a move expected to reduce city maintenance costs and raise money for future uses.
Mayor Richard M. Daley said Friday the city received the winning bid from Cintra-Macquarie Consortium for the right to operate the Chicago Skyway for the next 99 years. The consortium, which beat out four other bidders, would be allowed to double the toll to $4 over the next decade, and continue to raise it after that.
Daley said the lease receipts would be used to pay off existing Skyway debt, about $400 million, and other city debt and to create a long-term reserve fund. How much would go into the reserve fund has yet to be determined, officials said.
"If we use the funds wisely, we can protect our taxpayers and our city's financial situation for both the short term and the long term," Daley said in making the announcement prior to departing on a trade and Sister Cities mission to China and Japan.
Formally known as the Chicago Skyway Toll Bridge System, the nearly eight miles of elevated roadway over South Side streets links the Indiana Toll Road with the Dan Ryan Expressway, Interstate 90/94, into the Loop business district.
The Skyway opened in 1959 and was a money loser until the 1990s, when it became a convenient route into the city from points east, according to city officials.
Last year, the Skyway served 17.4 million vehicles and generated $39.7 million in toll revenue, compared to 9.5 million vehicles and $21.5 million in 1993.
Daley said the toll road, currently undergoing renovation, had become a valuable asset, "however, running a toll road is not a core function of city government."
Cintra-Macquarie Consortium is a joint venture of Cintra Concesiones de Infraestructuras de Transporte SA of Madrid, Spain, and Macquarie Investment Holdings of Sydney, a wholly owned subsidiary of Macquarie Bank Limited, Australia's largest investment bank.
While Cintra-Macquarie must operate and maintain the toll road according to state and federal standards, the Chicago Police Department will continue to patrol the road, according to terms of the lease.
Tolls for passenger autos on the Skyway are limited under the agreement to no more than $2.50 until 2008, $3 until 2011, $3.50 until 2013, $4 until 2015, $4.50 until 2017, and $5 starting in 2017. Later toll adjustment can be equal to the greater of 2 percent per year or the annual increase in inflation.
Mark Florian of Goldman Sachs, which advised the city, said the deal allows the city to transfer the risk to a private entity.
While toll road privatizations are common in other countries, the Skyway is the first in the United States, Florian said. He pointed out that the city has spent about $300 million refurbishing the road, leaving maintenance costs minimal in the short-term for the consortium and making the purchase a good deal.
The city has sold and leased other assets in the past.
Last year, it sold its 911 emergency-call system to Sumitomo Mitsui Banking and FleetBoston Financial for $140 million and is now leasing the system back from the company. The city put most of the sale proceeds into a trust to guarantee the lease payments. The Chicago Transit Authority made a similar deal in 1995 involving some of its rail cars.