By SHRUTI DATÉ SINGH City officials on Friday said they awarded a privately held toll-road operator rights to run the Chicago Skyway for the next 99 years. Cintra-Macquarie Consortium, a partnership of two Australian and Spanish companies, agreed to pay the city $1.82 billion to lease the tollway from the city. Chicago would use the funds to pay Skyway debt, create a long-term reserve and generally improve financial conditions.
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“Through good management, a road that lost money for many years has been turned into a valuable asset for the city,” Mayor Richard M. Daley said in a statement. “Running a toll road is not a core function of city government,” he added.
Chicago officials are still struggling to craft a balanced budget for 2005, delaying its release earlier this month in part because of a $220-million shortfall. The Skyway lease provides some funding to bridge that gap.
“I’m sure that some people will be demanding that we use all of the Skyway proceeds to eliminate the shortfall, and maybe even begin some new spending programs. So, I want to make it very clear that, once the deal is concluded, we will act responsibly and prudently with these funds,” the mayor said.
The mayor’s financial team will consult rating agencies to help it determine how to spend the Skyway lease money. New York-based Goldman, Sachs & Co., and Loop Capital Markets of Chicago will serve as financial advisors.
City officials say the lease marks the first time a private company would operate a U.S. toll road or toll bridge.
Cintra-Macquarie Consortium was one of five qualified groups that bid for the lease. The consortium includes Cintra Concessiones de Infraestructuras de Transporte and S.A. of Spain and Macquarie Investment Holdings Inc., a unit of an Australian investment bank.
The companies have experience operating more than 30 toll roads spanning over 1,000 miles in Toronto and Sydney and around Europe.
The 7.8-mile-long Skyway, which opened in 1959, has been a financial loser for most of its life, with motorists avoiding its tolls in favor of the Dan Ryan Expressway and other free highways. But lately, motorists increasingly have decided it's better to pay a $2 toll than sit in a traffic jam on the often-congested Dan Ryan.
What is Chicago Skyway? The Chicago Skyway is a 12.6km 2x3-lane direct route eastward out of Chicago and links the south side of Chicago at the Dan Ryan Expressway (I-90/94) on its western end with the Indiana Toll Road (I-90) to the east. Entirely elevated, about half the road is on an embankment with the other half on a bridge structure. On 1 Mar 04 the Chicago city requested bids to maintain, develop and operate the Skyway for a period of at least 50 years. The Skyway has been operated by the City since its opening in 1958. The toll has been US$2.00 for cars for a decade. The Skyway is in the fifth year of a six year US$250m refurbishment program involving replacement of weakened structural members, new ramps, new signage and improvements to the toll system. The Skyway competes with the un-tolled Bishop Ford and Borman Expressways (I-94 and I-90) though it is a few kms more direct and less congested. Traffic has grown from 27,000 AADT in 1995 to 51,000 in 2002. (We would estimate maximum capacity at c.150,000 AADT; ie: 2100 vehicles per lane/hour x 6 lanes x 12 hours/day). Traffic dropped slightly in 2003 to 48,000, due in part to construction work, lane closures and detours. The vehicle mix is about 90% passenger cars, 10% commercial vehicles. Key points to note are: ■ Toll revenues have grown from c.US$9m in 1980 to c.US$39.1m in 2000, a CAGR of 7.6% per annum. NB: Revenue growth has accelerated more recently in line with traffic growth (see below). ■ Transaction growth continues to grow; ie: CAGR from 1980 to 2000 was 3.5%, from 1990 to 2000 was 7.6% and from 1995 to 2000 was 9.0%. One could assume the competing free roads have hit capacity and any growth in the corridor continues to come on to the Skyway. ■ No direct competitive route and estimated time savings are between of 20 to 45 minutes. ■ Strong growth in revenues for the past 20 years – CAGR of 8% per annum ■ Toll road in good order following major refurbishment/rebuild, requiring little capital expenditure ■ 9m population catchment, 3rd largest US metropolitan area
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