Two lawmakers in Minnesota are pushing forward with a proposal to lease its Minneapolis-Saint Paul (MSP) Airport and the Minnesota State Lottery in an effort to raise upwards of $5 billion for the cash-strapped state.
MSP Airport: for sale?
Republican State Senator Geoff Michel and Republican Representative Laura Brod are authoring a bill in their respective chambers that would put those two assets in private hands and create a catalogue of other state-owned assets so that lawmakers can determine what else can be monetised.
“We’ve been talking about this for a little while and as we watch the progress with Midway and the direction which our state is heading, it’s a good jumping off point to consider it more seriously,” Brod said.
Last year the City of Chicago signed an agreement with a Citi Infrastructure Investors-led consortium to lease its Midway Airport for $2.5 billion. Brod believes MSP Airport could be even more valuable.
“We have almost twice the landed passenger weight of Midway, so we were looking at something like $5 billion,” Brod said.
In 2007, 35.1 million passengers moved through MSP Airport, according to the airport’s website. That same year, 9.1 million passengers moved through Midway, according to the Federal Aviation Administration (FAA).
Using a similar approach, Brod estimates that the state could earn $500 million from leasing its lottery programme since it has half the sales of Indiana’s Hoosier Lottery, which Indiana Gov. Mitch Daniels proposed leasing for $1 billion.
Eight other states, including California, Illinois, Texas and Florida, are considering long-term leases of their lottery assets.
Brod declined to specify which firm the lawmakers have chosen as their financial advisor.
The proposal comes just as the Midwest state of 5.1 million people is preparing to find ways to plug a budget shortfall of about $5 billion dollars in its fiscal year 2009 budget of $35 billion.
Brod insists, though, that the money should be used for long-term investment, not short-term budget fixes. She hopes the state would use part of the proceeds from the asset leases to fund a 21st Century Education Trust Fund that would provide Minnesota students with high school and college scholarship aid.
“One of worst things we can do from a government budgeting standpoint is to fill a short-term problem with long-term dollars,” Brod said.
The proposal faces a tough road ahead. It will first have to get through the state senate’s Transportation Budget and Policy Division, where it faces strong opposition from Democratic chairman Steve Murphy. If the proposal makes it out of committee, additional skepticism will likely come from other members of Minnesota’s house of representatives and senate, which are both heavily controlled by Democrats.
And even if the state were to enact a bill allowing for the airport to be leased, it cannot do so without the permission of the FAA. The MSP Airport is not one of the five airports on the FAA’s pilot privatisation programme, which came into effect in 1997 and to date has only resulted in two long-term airport leases.
One of those airports was Midway. The other – New York’s Stewart International Airport – was leased to UK transport provider National Express Group for 99 years in 2000. But six years after the transaction, the concessionaire put the 99-year lease on sale and eventually the state repurchased it for $78.5 million.
Despite these obstacles, Brod remains optimistic.
“We do have our work cut out for us, but we think it is one of those ideas that will resonate with people,” she said.