IDOT’s RFI is the Right Initiative to Assure Chicago’s Air Hub Status & Places the Risk in the Private Sector

chicago airport master plan rfi
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Illinois Department of Transportaion’s (IDOT) Request for Information (RFI)

A smart vehicle to test whether an airport is financially feasible
and if airlines are interested.

The Illinois Department of Transportation (IDOT) has got it right. Chicago geographically and commercially is a transportation hub. The RFI will explore whether and how a new airport should be built for Chicago.

Through no fault of anyone, very much like the NY Metropolitan area, the close proximity of O’Hare, Midway, Palwaukee and a major North-South aviation corridor, this Metropolitan Area’s Airspace has limits. Even after the City adds gates at ORD, after it constructs a new runway and after the FAA fully implements NextGen, it has been forecast that the sectors defined by the ATC Towers, the TRACON and the patterns from the En Route Centers to these terminals will reach their limits.

“When” is a matter of forecast and the precision of those numbers are subject to a number of exogenous variables (macro-economic factors, OPEC prices, major security threats, etc.). Recently, it was predicted that the ORD ability to meet demand would reach a limit; however, intervening unexpected influences deferred the forecast congestion date by years.

new chicago airport idot rfiFrom a strategic viewpoint, in order to assure that Chicago remains a dominant air transportation hub, the region needs to reserve another airport. Failing to do so soon will eliminate candidate properties which will be convenient to Chicagoland residents.

IDOT: Six firms interested in South Suburban Airport

Thus, the IDOT announcement and the terms of its RFI got it right.

IDOT secretary Randy Blankenhorn made it clear that the “state is not interested in building an airport with public money and wants to create a public-private partnership.” A P3 is the right vehicle for this venture. There is risk when, maybe if, traffic exceeding the current collective gate/runway/airspace capacity will be exceeded. The assumption of risk is not one of the financial realms in which municipal capital funds should participate.

If the “investment” fails, the voters face the prospect of increased taxes to face that “loss.” Under a P3, the private entity covers that downside liability.

The RFI process, which Mr. Blakenhorn and IDOT have initiated, is a smart vehicle by which to test “whether an airport is financially feasible, and if airlines are interested.” So far, the initial reaction, six firms responded, is positive.

Equally importantly, the IDOT Airport Master Plan has been submitted for FAA review and approval. The AMP lays out the existing conditions, aviation forecasts, facility requirements, evaluation of alternatives and environmental considerations. Again, the good news is that some of these elements have been preliminarily accepted by the FAA.

chicago airport master plan idot rfi

[NOTE: the article does not mention whether the AMP includes a request for AIP funding. Ideally, by relying on 100% private funding, the FAA’s assessment of passenger/cargo forecasts and related aspects is less demanding.]

Under such an agreement, IDOT would be responsible for the environmental and Airport Master Plan work, the work which bears the greatest governmental responsibilities. The developer’s duties would be a feasibility analysis, financing and business plan, all within its expertise.

IDOT use of a P3 is wise for such a structure is well suited to processing the airport concept through a pre-development agreement. The private partner has the commercial and technical expertise to determine feasibility. Once the P3 moves past the predevelopment stage, the risk-bearing entity has the equity and direct access to the debt markets (it does not have to go through the cumbersome governmental bidding requirements) to accelerate the dirt digging/moving, concrete-laying and build phases of implementation.

idot chicago airport rfi

IDOT is doing the right thing and appears to be doing so on a timely basis. If the RFI process is successful, the long-term aviation status of Chicago will be preserved. Moreover, if this P3 appears to be successful, Secretary Chao and President Trump will quickly become massive fans of this Peotone Public Private Partnership (P4?).

 


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