Chicago’s Impending Toll Road Strike And How Outsourcing Government Services Can Be A Bad Bet

Vehicles on the Chicago Skyway in 2000, five years before the toll road operation was sold into private hands. CREDIT: AP PHOTO/TED S. WARREN
Vehicles on the Chicago Skyway in 2000, five years before the toll road operation was sold into private hands. CREDIT: AP PHOTO/TED S. WARREN

The Chicago Skyway is a key conduit for drivers in the Chicago area looking for a weekend getaway. But on this Labor Day weekend, trips to Lake Michigan might be a lot messier than usual.

The men and women who operate the Skyway’s tollbooths are preparing to go on strike if the toll system’s operating company continues to resist their contract demands. The toll operators, most of whom are part-time workers paid $11 an hour with no health insurance according to union officials, have been working without a contract since Monday when the previous deal expired. The 30 workers will hold a vote to authorize a strike Wednesday if the dispute is not resolved. Such a strike could cause “excessive delays” in the city, according to the local ABC News affiliate.

The city used to run the Skyway itself. But in 2005, it accepted a nearly $2 billion bid from an international conglomerate that now manages the public roadway. That firm has raised tolls for drivers significantly since, but labor officials say it hasn’t passed that new revenue on to the workforce.

“The company can either do the right thing and come together to reach a fair agreement, or it can force members out on the picket line to fight for the wages, benefits and working conditions they deserve,” Teamsters Local 727 head John Coli Jr. said in a statement.

The union points to significant bumps in what the Skyway Concession Company charges drivers as evidence the firm can afford to raise its employees out of a poverty-level of earnings. The company has a 99-year lease to operate the property and currently charges “the highest [tolls] per mile in the country,” according to Local 727.

Hours are a sticking point in negotiations. All but five of the 30 union staff on the tollbooths are part-time employees. The union would like Skyway to stop patching holes in its schedule by hiring temps, and instead boost the hours that current employees get assigned. A company spokesperson told the Chicago Sun-Times that a strike is “nothing we are hoping will come about” and said the company has made a good-faith effort to hammer out a deal.

At $11 hourly and no more than 30 hours per week, a tollbooth worker on the Skyway would earn $17,160 in a year — and that’s before payroll taxes are taken out. Even for a single adult with no dependents in the Chicago metro area, the cost of living is over $31,000 annually, according to the Economic Policy Institute’s family budget calculator.

The Skyway is a public toll road operated by a private conglomerate, an arrangement that boomed in popularity around the country even before the financial crisis pinched public works and infrastructure budgets. Chicago sold the operating lease for $1.8 billion in 2005 to the current operators, a Spanish and Australian partnership. Months before the current contract impasse came to a head, the firms told the city they are looking to sell the Skyway lease to someone else and get out of the business.

The same operating firm recently bailed out of a similar public-private partnership just a little ways east, declaring that the Indiana Toll Road they operated is bankrupt. The Australian partner has taken flak for raising toll rates on a Virginia road it manages as well.

The Aussie firm controls so much public infrastructure in the United States that CEO Nicholas Moore is technically the highest-paid road worker in America, according to the Center on Media and Democracy. He made $8.8 million in fiscal year 2013 for heading a company that gets a significant share of its revenue from American drivers on roads originally built with taxpayer money.

When cities and states sell off operating rights to toll roads, parking meters, and other revenue-generating public infrastructure, they are hoping that the one-time infusion of cash will prove to be more valuable than what operating the service themselves would’ve brought in. That sometimes proves to be a bad bet, according to Shar Habibi of the anti-privatization research outfit In The Public Interest.

“The private entity has a lot of control over what rates are gonna be to actually use this asset,” Habibi said in an interview. “If the solution was raising fares or raising toll rates, could the government have done that and pocketed that money themselves? If a private corporation can do it why can’t the government do it?”

If the public underestimates what it should be charging a company for an operating contract, the consequences can be even more dire. Chicago itself recently leased its 36,000 parking meters to Morgan Stanley and other partners for 75 years, in exchange for a billion dollars. But it quickly turned out that a fair price should have been more like $2 billion.

Chicago didn’t just leave a billion dollars on the table and allow private companies to raise parking rates and bank the returns, Habibi said. It also made its fiscal future dimmer.

“They get these up-front payments on this long-term contract, and if the city burns through that money really quickly that can negatively affect their bond rating. That’s what happened in Chicago,” she said. “They burned through that money so quickly from the parking meters that it actually ended up with their bond rating being downgraded. So the cost of their borrowing goes up, and that’s a long-term impact.”