Amid talk of global instability, bank bailouts and consumer uncertainty, one development I have been following closely is the City of Chicago budget mess. While not unlike the money woes facing many city governments across the U.S., this one hits particularly close to home in light of my love affair with Chicago–an affinity developed from having been a resident there for many years.

Enter Richard Daley, the long time mayor of Chicago, who despite cries of autocratic influence, machine politics and corruption from his critics, runs a well oiled city. Struggling to correct, by his own admission, the worst budget shortfall during his long tenure, Mayor Daley put one of Chicago’s prized assets on the table in an attempt to close the fiscal gap. The asset: Midway Airport; The prize: $2.5 billion in spoils.

If you are familiar with Chicago, you know that Midway is one of two airports in the city. It has five runways and handled over 300,000 flights for 19 million passengers in 2007–a significant volume yet a blip on the radar screen compared toO’Hare International flight numbers, which are approaching nearly 1 million a year.

Midway, which is located about 10 miles southwest of downtown Chicago, was my airport of choice when I lived in the Windy City. Prior to a massive renovation completed in 2004, Midway had fallen into disrepair, an indoor shantytown of sorts, featuring a incongruous collection of half-baked newsstands, shoddy restaurants, and less than desirable waiting areas. Today Midway is a first class airport featuring classy eateries, Internet access, and a larger parking facility to support growing passenger demand. Southwest Airlines as the major carrier continues to bring superior service as well as reasonable prices to this premier travel destination.

I am of the opinion that Mayor Richard Daley made a smart move in capitalizing on this prized asset to boost Chicago’s dwindling revenue base. In short, privatization, the strategy that Daley is using, involves the transfer of assets from a government entity to the private sector. The “Midway Privatization Project” ,as some have coined it, took shape on October 8th when the Chicago City Council approved a $2.5 billion lease of Midway Airport to private investors. As a part of a program enacted by the Federal Aviation Administration to privatize up to five airports nationwide, Midway would be the first U.S. airport to reach such status under this initiative spearheaded by Congress in 1986. City officials hope to complete the deal on this 99-year lease by the end of 2008.

This isn’t the first time that Daley has invoked the privatization mantra to shore up City of Chicago finances. In 2005, the city struck a deal with a private operator to run the Chicago Skyway , a major transportation thoroughfare linking the city with major regional markets to the east. More recently, there has also been a great deal of chatter regarding privatizing city parking meters to provide another much needed infusion of city dollars.

So what does this mean in terms of Chicago’s current fiscal mess? According to recent estimates, the city stands to clear more than $1 billion in net proceeds once the deal has been finalized, with most of the monies likely targeted towards budgets for infrastructure and pension funds (Illinois law requires 90% of the proceeds to be used for infrastructure improvements). And the remaining funds? Yes, you guessed it, these funds will be used to shore up a city budget that is estimated to be nearly $450 million in the red. In the end, the city will have free rein to take money out of Midway for the first time and spend it elsewhere–a nice windfall of cash without lost revenues.

Consumers of Midway Airport may not fare as well in terms of their pocketbooks. Prices at the concessions for food, gift items as well as other amenities are likely to rise, as will parking. But passenger airfares are likely be spared for some time as there is a provision in the lease agreement stipulating that fees passed on to airlines renting space at Midway will be frozen for six years as well as capped over the lifetime of the agreement. It is also stipulated that the private operator chosen must maintain or enhance the current level of cleanliness, safety and service at Midway.

Only time will tell whether this dose of pragmatism is an elixir to some of Chicago’s fiscal problems. But tough economic days require bold moves and Daley’s new venture shows why he is one of the most highly respected city leaders, both in the U.S. and globally.