Commentary

Midway Airport Lease Could Inspire Austin, Milwaukee and New Orleans

Just a week after the City of Chicago selected the winning bid of $2.5 billion for a 99-year lease of Midway Airport, the City Council voted unanimously to approve the deal. It now goes to the FAA as the city’s final application under the Airport Privatization Pilot Program, with approval expected to take 60 days or so. That would permit a financial closing by year-end. Financial people I’ve talked to expect the portion of the $2.5 billion accounted for by debt (typically two-thirds or more) to be much smaller than usual, given the turmoil in the debt markets. Once that settles down, the winning consortium would very likely refinance. I have previously noted expressions of interest in doing likewise from public officials in Austin and Milwaukee. That interest still exists, though neither one has a political consensus in favor of privatization at this point. A third possible contender, New Orleans Louis Armstrong International, surfaced in recent weeks. All three airports are classified by the FAA as medium hubs, which is relevant because the Pilot Program allows only one of its five slots to be taken by a large hub, which Midway is. (One slot is reserved for a general aviation airport.) With city, county, and state governments heading into deep fiscal waters, more airports might be put into play in the coming months, competing for the three remaining commercial airport slots. With respect to Austin, insiders I’ve talked with tell me discussions between public officials and private sector parties have continued this year, after the big flurry of public discussion in the first half of 2007. The only news item I could find via a Google search was that the Austin Airport Advisory Commission has a briefing on airport privatization on May 13, 2008. Other than that, mum’s the word on the continuing discussions. The Milwaukee airport privatization idea favored by County Executive Scott Walker has become a political issue. On Oct.9, 2008 a County Board committee voted down Walker’s proposal for a $500,000 consultant study on the issue. Committee members asked “What’s the rush?” to which Walker replied that there might be more airports seeking slots than there were FAA slots available. And Budget Director Steven Kreklow said the study was needed because of the legal and financial complexities of leasing the airport, and the county’s desire not to have to depend only on information provided by prospective bidders. The issue has also been caught up in squabbles over where to get the funding to bail out the county’s ailing bus transit system. In the case of New Orleans, the push is coming from the business community, along with Mayor Ray Nagin. The city and the airport are still recovering from 2005’s Hurricane Katrina, and the idea that a long-term lease could generate hundreds of millions of dollars to help redevelop key areas of the city is attractive. Prior to privatization coming onto the radar screen, the idea of the state acquiring Louis Armstrong International Airport (and paying handsomely for the privilege) was under consideration, and a Regional Airport Authority has just been created to explore that approach. But in early October the city’s Aviation Board began developing a request for qualifications for consultants to estimate the airport’s value if leased. Several city council members have spoken out in favor of considering privatization, especially if that would let the city retain ownership, rather than having the airport transferred to a state-designated airport authority. As of now, my guess is that New Orleans will be the first of the three to file a preliminary application with the FAA. Once the state and municipal fiscal crunch really sinks in, I expect there will be others.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.