In January 2005, after a competitive bidding process, the City of Chicago and a private consortium reached financial close on a $1.8 billion concession to operate and maintain the Chicago Skyway. The Chicago Skyway is a 7.8 mile toll road connecting the Dan Ryan Expressway on the South Side of Chicago with the Indiana Toll Road. The private consortium is made up of Cintra Concesiones de Infraestructuras de Transporte S.A., a Spanish toll road developer ("Cintra"), and Macquarie Infrastructure Group, an Australian toll road developer and operator ("Macquarie"). The Chicago Skyway PPP was the first long-term concession of an existing toll road in the United States.
The concessionaire paid the City of Chicago the full $1.8 billion upfront and will operate and maintain the toll road for 99 years. In exchange, the concessionaire was granted the right to collect all toll revenue during the 99-year term. The concessionaire will use the toll revenue to pay for operations and maintenance, to repay the debt that financed the $1.8 billion upfront payment, and to provide a reasonable return on its members' contribution of equity. The concessionaire assumed the risk that toll revenues will be insufficient for these purposes. Annual toll rate increases are fixed through 2017 and are capped thereafter at the greater of (i) 2 percent, (ii) the consumer price index, or (iii) per capita gross domestic product.
The City of Chicago used the $1.8 billion concession payment for a variety of purposes. It used $465 million to redeem outstanding indebtedness on the Skyway, $390 million to redeem other City of Chicago debt, $500 million to fund a long-term reserve account, $375 million to fund a mid-term annuity account, and $100 million to fund various City of Chicago programs, such as home heating assistance and assistance for the disabled to make home modifications. According to Mayor Richard M. Daley, transferring the responsibilities and risks of operating and maintaining the Chicago Skyway was a great benefit to the City because "running a toll road is not a core function of City government."
The large upfront payment made by the private consortium highlights the significant amount of private capital available for investment in U.S. transportation infrastructure. The deal also demonstrates that by permitting the private sector to leverage existing and potentially underperforming public assets, public authorities may be able to realize significant returns.