Chicago Skyway toll...good idea?

Chicago toll sale leads way By Jeremy Grant in Chicago Published: October 17 2004 18:22 | Last updated: October 17 2004 18:22 Chicago has become the first US city to privatise a toll road or bridge in a landmark $1.8bn project involving Spain's Grupo Ferrovial, one of Europe's largest infrastructure groups, and Macquarie Investment Group (MIG), a unit of Australia's Macquarie Bank. The deal, unveiled on Friday, is a sign of the increasing appetite among European toll road operators for projects in the US. Â"Europe has well-capitalised toll road companies that have become more aggressive about looking for new opportunities around the world,Â" said Mark Florian, a managing director in the municipal merger and acquisition group at Goldman Sachs, which acted as financial adviser. The transaction could also serve as a model for further privatisations in the US, where many budget-strapped cities and states are under pressure to raise cash. It involves a 7.8m (12.55km) toll road known as the Chicago Skyway built in 1959 and owned by the city. The road will now be operated under a 99-year contract by a consortium involving Cintra, a toll road operator and construction group jointly owned by Ferrovial and MIG. Cintra is set to be spun off this year. The city of Chicago will receive an immediate payment of $1.82bn, some of which will be used to repay Skyway debt, other city debt and create a Â"long-term reserve fundÂ" for Chicago. Chicago, the third largest city in the US after New York and Los Angeles, has total outstanding debt of $5.4bn and has projected a budget shortfall of $220m for fiscal 2005. City officials this month delayed finalising the city's budget, saying Chicago's financial situation was the most serious in 15 years. In August, credit rating agency Moody's Investors Service revised its outlook for the city to negative from stable. Richard Daley, Chicago's mayor, said: Â"I'm sure that some people will be demanding that we use all of the Skyway proceeds to eliminate the shortfall and maybe even some new spending programmes. I believe it would be fiscally irresponsible to use all of the money at one time.Â" The only other suchtoll road deal in North America was done in 1999 in Toronto, Canada, also involving Cintra. Â"Every US governor is going to be looking to see what assets they can now monetise as a result of this [Chicago deal],Â" said John Schmidt, a lawyer involved in the deal at Mayer, Brown Rose & Mawe.>