"This Way to the Runway - Chicago Suburbs Propose New Airport Authority"

Wednesday, September 17, 2003

This Way to the Runway - Chicago Suburbs Propose New Airport Authority
Bond Buyer - The American Banker


Four Chicago suburbs -- including two that oppose the $6.6 billion expansion
of O'Hare International Airport -- have tentatively agreed to a pact that
would create a new airport authority with bonding powers to assist in the
development and operations of a proposed single-runway airport in the south
suburb of Peotone.

The four have tentatively signed off on an intergovernmental agreement --
subject to the approval of their village and town boards -- that paves the
way for the establishment of the authority, which officials said is
permitted under state law. Once the agency is formally established,
officials plan to launch a request-for-proposals process to select a lead
developer.

The group asserted it can attract a developer and put together a financing
package that relies heavily on private investment and revenue-backed
borrowing without risking public money or the financial wherewithal of the
communities participating in the authority.

U.S. Rep. Jesse Jackson Jr., D-Ill., the self-described "quarterback"for the
"public-private" partnership, said at a news conference this week: "We have
assembled a package that will ensure that the state of Illinois and the
Chicago area will long remain the nation's aviation hub, without public
expense and without public risk. We are presenting the Southland communities
with tens of thousands of new jobs, a stronger tax base, and sound economic
development."

The group released the results of a self-commissioned study that insists the
new airport can be developed through a mix of private investment and bonding
on 4,500 acres with one terminal and one runway and room to expand by 2008.
Though a price tag for the Peotone project was not released, the group said
the feasibility study shows it could be built for substantially less than
the previous estimates of $600 million to $650 million.

The group contends the investment community would be drawn to the project,
although officials provided no financing specifics or names of potential
investors.

"That will all be worked out when we have a developer. We are working on
having one selected by the end of the year," said Craig Johnson, board
president of Elk Grove Village, a northwestern suburb that is among the four
participating in the intergovernmental agreement. The group will launch a
competitive selection process this fall.

The report was compiled at a cost of about $1.2 million by consultants LCOR
Inc., a Pennsylvania-based real estate development, investment, and
asset-management firm that specializes in public-private developments and
worked on a terminal project at New York's John F. Kennedy International
Airport, and SNC-Lavalin Group, a Canadian-based engineering and
construction firm that worked on the Vancouver International Airport. LCOR
is partially owned by Lehman Brothers.

In declining to release specific financing details, officials cited the
proprietary nature of the financial information compiled by the two firms.

"There will be a combination of equity and bonding," said Rick Bryant, a
spokesman for Jackson. "These two companies have a detailed economic and
financial plan, but they will be competing for the development contract and
that information is proprietary."

The group, for now, is made up of the southern suburbs of Park Forest and
University Park, which favor the Peotone project as an economic boon, and
the northwestern and western suburbs of Elk Grove and Bensenville, which
back Peotone as an alternative because they are located near O'Hare and
oppose Chicago's plan to reconfigure and expand that facility. The four are
inviting any southern suburbs interested in the airport development project
to join the proposed authority.

Several market participants in the aviation sector suggested that it would
be difficult to lure investors to the project in the current economic
climate, given the lack of interest among most major airlines in serving the
proposed airport.

In addition to luring a private developer with the ability to come up with
investors, the group must secure a commitment from the state to either lease
or sell land it has purchased in and near the proposed site in the town of
Peotone. The Illinois Department of Transportation must approve the proposed
authority's use of the land. Gov. Rod Blagojevich's office did no return a
call seeking a comment.

The previous governor, George Ryan, was a staunch supporter of the Peotone
project, and his administration supported a privately developed airport and
set aside state money to begin buying land.

Chicago Mayor Richard Daley, once a vocal critic of the airport, backed off
his opposition several years ago when he and Ryan struck an accord that
paved the way for the runway expansion project at O'Hare.

Daley had long contended that O'Hare and Midway Airport could handle the
region's air traffic needs. Jackson and officials from the south suburban
region, meanwhile, have argued that more air capacity is needed and that it
should come from a new airport that would provide an economic stimulus for
their area. Peotone is located about 45 miles southwest of Chicago.


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