Chicago Skyway Concession and Lease Agreement: Key Elements

1
Chicago Skyway Concession and Lease Agreement
Key Elements

• Joseph Seliga
• Mayer, Brown, Rowe Maw LLP

2
The Result of an Interactive Process Between the
City and Qualified Bidders

• Draft Agreement Provided to Qualified
  Bidders for Comments
• Process for Obtaining and Responding to Comments
• Single Document Produced and Provided to All
  Bidders for Final Bids

3
Concessionaire Pays Upfront Rent to City for
Right to Collect Tolls on Skyway for 99 Years

• Upfront Rent
• Single Payment
• Maximizes Upfront Benefit to City
• Right to Collect Tolls
• Concessionaire Retains All Toll Revenue
• Subject to Certain Toll Limits
• Concessionaire also has Right to Restaurant
  Revenues but All Other Revenue Rights Remain with
  City
• 99-Year Term
• Tax Ownership Issue
• Effect on Value

4
Compliance with City Laws and Policies

• City Requirements Incorporated into Agreement
• MBE/WBE
• City Residency Requirements
• Living Wage
• Prevailing Wage
• Expansive View on Applicability
• Non-negotiable

5
Electronic Tolling

• No Electronic Tolling Currently on Skyway
• Different Ways of Providing Electronic Tolling
• Concessionaire has Right to Implement
• City to Cooperate

6
Capital Improvement Requirements

• City to Complete Its Capital Improvement Program
• Specific Capital Improvements Mandated in
  Agreement
• General Ongoing Capital Improvements Required
  Under Operating Standards

7
Operating Standards

• Compliance Required but Flexibility Provided
• Concessionaire Can Propose Alternatives
• City Can Modify Operating Standards

8
Employee Issues

• Labor Contracts Not Assigned
• Concessionaire Required to Interview
  Any Skyway Employees Who Apply for
  Employment, but No Obligation to Offer Employment

9
Skyway Contracts

• Skyway-Specific Contracts Assigned (e.g., Toll
  Collection System, McDonalds Lease, Warranties
  for Capital Improvement Program)
• City-Wide Contracts Not Assigned

10
Liability and Insurance

• City Retains Liability for Pre-Closing Conditions
  of Land
• Concessionaire Assumes All Other Ongoing
  Liabilities
• Concessionaire Required to Comply with Specific
  Insurance Requirements

11
Inspection and Reporting Requirements

• City Retains Right to Inspect
• City Retains Right to Repair in Event of Default
  or to Address Emergency, Danger and Actions
  Impairing Continuous Operation
• Concessionaire Required to Provide Various
  Reports Financial, Traffic, Accident,
  Environmental, etc.
• Concessionaire Reimbursement of City Monitoring
  Costs

12
Representations and Warranties, Closing
Conditions, Mortgage Financing

• Minimal Representations and Warranties and
  Closing Conditions
• Mortgage Financing Provisions Recognize Rights
  and Remedies of Lenders
• Intended to be a Done Deal at Signing
• Smooth Closing

13
Defaults and Remedies

• Concessionaire Default Could Lead to City
  Termination In Certain Circumstances
• Failure to Comply with Material Obligation
• Extensive Cure Periods
• Mediation, Arbitration, Technical Arbitration
• Adverse Governmental Actions Could Lead to
  Concessionaire Compensation or Termination

14
A Careful Balance Between the Interests of the
City and the Concessionaire

• Value Comes into Play on Both Sides
• City Driven by Policy Objectives Intended to
  Protect the Interests of its Citizens
• Concessionaire Focused on an Agreement that is
  Fair and that it Can Take to Market
• An Agreement for a Long-Term Working Relationship