May 12--With Milwaukee County's finances worsening, supervisors have quietly started to discuss a previously unthinkable idea: Leasing -- or even selling -- Mitchell International Airport to raise money.
A resolution to study the concept of leasing the airport to a private operator could reach a County Board committee next month, Supervisor Richard D. Nyklewicz Jr. said.
At first glance, it looks like an abrupt turnaround for the same public officials who vigorously -- and successfully, for now -- battled an Assembly bill that would have created a regional airport authority.
But among supervisors' criticisms of the legislation was that the county would have received little or no compensation for one of its most valuable assets, a public facility that supports itself largely through user fees without drawing on property taxes. A lease or sale would be a cash transaction, not a giveaway, said Nyklewicz and Supervisor Roger Quindel.
Such a deal could bring in hundreds of millions of dollars to cover the rising cost of health care and pensions, said Quindel and Supervisor Ryan McCue.
The idea faces significant legal and political hurdles, but little-used federal legislation provides an opening for local governments to experiment with airport privatization, County Auditor Jerome Heer said.
Chicago is providing a major inspiration for supporters of privately run transportation. The Windy City drew national attention last year with the $1.8 billion lease of the Chicago Skyway, a toll bridge on the city's south side, to a Spanish-Australian consortium. It was the first time any local government in the United States had handed a public toll road over to private management.
Now Chicago Mayor Richard Daley is considering a similar deal for city-owned Midway Airport. On Tuesday, Illinois Gov. Rod Blagojevich signed legislation that would allow a property tax exemption for the south side airport if the city leased it to a private operator. Earlier legislation had allowed such an exemption only for the Skyway.
Ordinarily, the Federal Aviation Administration blocks or hampers transfers of public airports that receive federal aid, Heer said. But in 1996, Congress approved a pilot program for up to five airports to win exemptions from rules that require airport revenue to be used for airport purposes and that would force local governments to repay federal airport aid if they sell an airport.
Companies taking over airports must promise to upgrade airport facilities, honor labor contracts and not raise airlines' user fees faster than the rate of inflation unless most airlines agree, the law says.
McCue, who represents a district near the airport, said the county likely would retain some say in airport activities, particularly runway expansion and noise mitigation. He and Nyklewicz, whose district includes the airport, led opposition to the airport authority legislation and objected to giving the proposed authority the power to condemn nearby homes and businesses for airport expansion.
To date, only one airport has received such an exemption: Stewart International Airport in Newburgh, N.Y., now run by a British company under a 99-year lease with New York's Department of Transportation. Four other airports applied, but three withdrew their applications in 2001, leaving only New Orleans' small Lakefront Airport under consideration for the pilot program. Midway would be the largest airport to seriously consider the concept.
This type of airport privatization is more common overseas, Heer noted. In this country, privatization is usually limited to hiring a private company to manage an airport, he said.
In 1994, a Wisconsin Policy Research Institute report suggested that privatizing Mitchell could cut airport operating and maintenance costs by 10% and bring in $8 million a year in lease payments. At the time, no county officials agreed with the recommendations by Robert Poole, founder of the Los Angeles-based Reason Foundation.
But County Executive Scott Walker wouldn't rule out the idea, said his spokesman, Rod McWilliams. Although Walker has not heard of supervisors' proposed airport study, McWilliams said, "the county executive is happy to look at any proposal that would be in the long-term best interests of the county. He certainly wouldn't dismiss it out of hand."
The idea took the airport's largest tenant by surprise. Carol Skornicka, senior vice president of Midwest Airlines, said she was not familiar with the concept.
One question that the study would need to answer: How to disconnect the airport from the rest of the county's financial structure. Financial concerns led Walker to oppose the failed legislation that would have transferred Mitchell to an airport authority, although he previously had spoken in favor of the business-backed concept.
Other county agencies charge the airport for services ranging from security to engineering. Sheriff David A. Clarke Jr. has said that ending his department's role in airport security would require him to either lay off 57 deputies or seek another $6.5 million in property tax revenue for their pay, now covered by federal aid.
Cash flow is also a concern. Airport Director C. Barry Bateman's notes of a Jan. 19 meeting, obtained through open records requests, show fears that if the county couldn't use airport revenue to cover cash flow gaps, it would "accelerate our decline into bankruptcy."
Bateman's notes don't say who that quote came from. In an interview later, he said he didn't remember who said it, but he noted county budget chief Steve Agostini was doing most of the talking.
Agostini said, "I don't think I said 'bankruptcy,' but we were already at a very significant precipice, and that would push us over the edge."
Without the airport fund to cover general-fund shortfalls, the county could be forced into short-term borrowing that could lower its bond rating, he said.
Yet Milwaukee County has not used airport revenue for cash-flow purposes since late 2001, when an $18 million airport surplus helped partially plug a $32 million hole in the general fund, County Controller Scott Manske conceded. A week or two later, after property tax revenue arrived to bolster the general fund, the airport fund was replenished with interest, he said.
In recent years, Manske said, "we really haven't needed it," because the county has rescheduled bill payments and collections. "I don't anticipate (the move would be needed again), but I don't know what the future will bring."