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Economic and Fiscal Impacts of a Third Airport

The crucial issue in forecasting economic impacts of a Third Airport is the number of enplaned passengers--people originating or connecting at the airport. The Peat Marwick report assumes a region-wide demand of 65 million enplaned passengers by the year 2020 whether a new airport is built or not. We suggest that attaining this level depends on developing a Third Airport, since the estimate already assumes a doubling of enplanements at O'Hare and Midway to a 50 million level. We also suggest that Peat Marwick does not sufficiently take into account the additional air travel that would be stimulated by a new airport's accessibility to the currently under served population in the south suburbs and northwest Indiana.

With respect to job creation benefits associated with a new airport, we agree with the fundamental conclusion in the Peat Marwick report that a Third Airport's job creation and related economic spin-offs would contribute significantly to economic growth in the south suburbs. We also suggest that a new airport may stimulate additional economic growth in the region.

The Peat Marwick report spells out construction cost estimates for alternative sites. Our review indicates that some costs are alluded to but not quantified, such as those for wetlands replacement and floodplain management. Also, the timing of the construction costs needs to be specified before a more definitive cost-benefit analysis can be completed.

With respect to financing, we highlight the extent to which the Peat Marwick financial package calls for high levels of federal grant support, as well as substantial state general fund commitments. Local government spending related to airport development is not discussed by Peat Marwick, but the level and distribution of such costs should be examined. Tax Increment Financing (TIF) is suggested as an option by Peat Marwick for infrastructure financing; use of TIF by an Airport Authority, rather than a municipality would require special legislation and its potential impact on local revenue-generating capacity needs further analysis.

Third Airport development would clearly impose additional service demands on local government, the costs of which would be to some degree offset by increased revenues associated with greater economic activity. Given the multiplicity of local entities and the uneven distribution of costs and revenues we suggest further study of tax base sharing mechanisms. We also recommend techniques for capturing user fee revenues from the direct beneficiaries of the airport.

The Illinois Development Finance Authority has a variety of programs in place with the potential for facilitating the financing of new business development and infrastructure improvements related to a Third Airport. IDFA also has statutory land acquisition authority which could be activated, pending the creation of a new airport development authority.

The report concludes by recommending additional analysis of costs, benefits, and financing options. However, we acknowledge the limits of any technical analysis in determining a go/no-go decision which is necessarily a political judgement. For the time being, the available evidence points toward taking the next incremental steps towards planning a Third Airport.

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