By on August 12, 2010

In December 2008, the city of Chicago, Illinois leased for 75 years its 36,000-space parking meter system to Chicago Parking Meters LLC. This firm, which is owned primarily by Morgan Stanley Infrastructure Partners, made a one-time, $1.16 billion up-front payment for the right to collect meter revenue for the life of the deal. By next year, Mayor Richard M. Daley will have spent the entire payment shoring up the budgets for 2010 and 2011.

As different studies and analyses of the much debated lease deal were released and brought to the notice of the public over the past eighteen months, the Daley administration scoffed at them, if it did not belittle them outright. Each time a major study made news, Chicago’s chief financial officer, Gene Saffold was trotted out to extol the benefits and reiterate what a great deal the city got with that $1.16 billion payment.

Chicago’s Inspector General report, Alderman Scott Waguespack’s analysis, DePaul Professor H. Woods Bowman’s figures, Illinois Public Interest Research Group’s study, news analysis from the Chicago Reader’s Mick Dumke and Ben Jorvasky, and of course The Expired Meter, all came to the same conclusion: the city of Chicago drastically undervalued its parking meters.

Now even the new lessees of Chicago’s parking meters, Chicago Parking Meters LLC agrees they really got over on Mayor Daley and the city according to a report by Bloomberg News. Looking over memorandum from Chicago Parking Meter’s recent attempt to secure a $500 million bond, Bloomberg found that the company estimates, at a minimum, it will bring in $11.6 billion in meter revenues — and over $9 billion in profits — over the 75-year life of the lease.

That is over ten times what Chicago Parking Meters paid the city back in December of 2008 when it cut a check to the city for $1.16 billion. Oddly, up to now every other independent valuation of the deal has been off by at least 50 percent. Waguespack’s crew, which generated the highest value estimate, figured it at as much as $5 billion.

But what does the city say now? It trots out CFO Saffold to defend the deal once again. Detailed coverage of Chicago motoring issues can be found at The Expired Meter.

[Courtesy: Thenewspaper.com]

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29 Comments on “Chicago, Illinois Ripped Off By Parking Meter Lease...”


  • avatar
    mdub523

    Are those future numbers based on today’s dollars? Even if they are not, MS is still taking a 75 year bet, who knows what the parking/transportation situation will even be thirty years from now in Chicago?

    This actually makes me glad, at least some of that money will find its way back to, you know, an actual investor who might spend it on something worthwhile.

    • 0 avatar
      Advance_92

      I don’t think any of that money’s ‘coming back’ in any recognizable form other than landscaping downtown. It’s not lowering taxes, it’s not stopping Stroger from appointing his friends to jobs that pay $150,000 a year, and it’s not had an affect on real estate taxes.

      What it has done is remove all the parking meters in town and replaced them with hundreds of little kiosks that accept credit cards and spit out a ticket you put in your window, so finding a meter with time on it is a thing of the past.

      Luckily it’s still pretty easy to get around on the train, on a bike, or even a bus at certain times of the day.

    • 0 avatar
      nonce

      It’s pretty dumb to call getting $11.6B in 75 years after paying $1.6B now “$9B in profit.”

      Future payments are not worth as much as current payments. Goldman bought a $1.6 billion annuity and will get (presumably, diving the $11.6B by 75) $154 million every year for 75 years.

      At about a 10% interest rate, that’s a fair deal for both sides. And while my first reaction is that 10% is a little on the high side, it’s not that far off, because there are significant risks at play here.

      Remember when TTAC had excellent economic analysis of GM’s balance sheets. Ahhh, those were the days! But then Robert Farago would delete you for making a comment like this one.

    • 0 avatar
      darian

      Advance 92,

      It’s not lowering taxes – well it’s not SUPPOSED to lower taxes

      It’s not stopping Stroger from appointing his friends to jobs that pay $150,000 a year – Stroger runs the county of Cook, which has nothing at all to do with City of Chicago parking meters in any way, shape, or form –

      and it’s not had an affect on real estate taxes. – And, well, they never will –

      What it has done is remove all the parking meters in town and replaced them with hundreds of little kiosks that accept credit cards and spit out a ticket you put in your window, so finding a meter with time on it is a thing of the past – Of course, you do know – don’t you – that when you get a receipt for, say, 2 hours, you can take it with you and use it anywhere else you park during those 2 hours?

      AS someone who drives in the most congested non-downtown areas of the city and pays for parking 6 to 7 days a week, it has not been this easy to find parking in almost every area I drive in in at least 20 years. Joravsky, Wauguspack, et.al. can complain about discount rates and future this or that all they want, the unspoken truth is that it was a losing proposition for the City they turned into actual cash, today, when – in the midst of the greatest financial crisis in 80 years – they really, really need it.

  • avatar

    I think the parking meter company got the short end of that stick. If they had just put that Billion dollars in an interest bearing account (at only 4%!), they would have had 17 Billion dollars after 75 years.

    Compound interest is a powerful thing.

  • avatar
    Jerome10

    Ha funny, got on the net, opened TTAC and TheExpiredMeters (love the site) and I get double the coverage!

    Have to be careful not to get on a huge rant here, but this deal is AWFUL. You can get more info elsewhere but here are the juicy details

    1) The above. One-time payment that Da Mare has already spent, and he didn’t get paid enough for it.

    2) Our awesome aldermen rubber stamped this deal in something like 2 hours. Daley presented it to them, and they all bowed down to Da King and said yes. It was urgent they were told. Only 5 of the 50 alderman voted against this. Thanks for looking out for those of us you represent, A-Holes.

    3) Rates have gone up astronomically. Some neighborhoods saw a 4x in the rate per hour. By 2013, neighborhood rates will have gone from $0.25-$0.75 in 2008 to $2.00 per hour. Loop will have gone from $3.00/hour to $6.50. I stopped visiting my aunt as frequently when her neighborhood went from $1 to $2/hour. Going to dinner, a couple bucks now costs me about $5 minimum. You should hear what similar outrage has done to businesses who depend on customers….

    4) The times expanded drastically. Before it was roughly 9am-6pm in most zones. Now it is 8am-9pm, and the Loop is 24 hours. Oh, and now you have to pay 7 days a week…Sundays and holidays used to be free, and 24 hours of expensive rates in a loop area that is mostly empty on evenings and weekends. Great idea. Couple BAD side effects here….first being rates go up, and time you must feed goes up, making the additional cost much greater than just the 4x rate increase. Even worse, many Chicagoans previously would leave before 9am, come home after 6, and park free overnight. Now, since they have to pay till 9pm, the free spots in surrounding areas are even more impossible to come by, wasting time, angering neighbors who can’t park near their homes, etc. This results in more requests for residential parking permit zones to keep non-residents out, thus further restricting the parking options for people. In my eye, this 9pm is really one of the worst aspects about this whole thing. Horrible for those who must drive to work and do not have the option/money to buy a private parking space. But hey, more tickets issued, and more residential permits issues = more city money…great right?

    5) City has lost the ability to balance parking needs (meters, residential, free) as they need since ANY modification to the agreement requires them paying back Chicago Parking Meters LLC for the lost revenue. Get rid of a space, cut hours, etc and they have to pay….which of course they can’t do since they are more than broke and have already spent the billion bucks on top of that.

    I’m probably forgetting something, I’m sure I am. But combine all this with the fact that parking enforcement is DRACONIAN here (bumper across the line into the tow-zone, bam…there’s a ticket for you…I’ve had 4 tickets in 2 years and I took the time to fight and all got overturned, but they bank on people just paying) and it is just awful. It is straight up another tax, another way to rape the citizens, and that’s it. And people are furious. Thing is, next year, Daley is up for re-election, and while I think he has done great for the city, he’s starting to lose his grip and it seems his mind. But I’m sure the opposing party will somehow end up with a real boner on the ballot (its always a Democrat vs a boner in Chicago) and he’ll be reelected again to continue this raping of the citizenry.

    I love Chicago, I really do. It is truly one of the best cities in the world, but taxes and political leadership are the absolute worst. I’m willing to put up with some of it if I see some benefits, but now this is bordering extreme, draconian, and all simply to see money flushed down the toilet in bad deals, deals with friends, patronage hiring and all the rest. Unfortunately I don’t think the political system will allow much of a decent challenger to ever even get on the ballot, and even if they did, there is such a propensity to mark “D” I’m not sure it’d matter. Not saying the republicans would be any better, but I at least wish we would somehow have a real actual choice instead of just a less-than-mediocre democratic one and a bunch of other even worse choices.

    They need to end this game NOW. Enough people are getting fed up, they will leave, and they’ll take all their tax revenue with them. Even I’m getting very fed up, and I think my tolerance is higher than most. Getting nickel-and-dimed on every last everything (hotel, food, sales tax is highest in the country, parking, soda, liquor, etc) gets old REAL fast, and they’re all getting worse. It MUST end. I hope there are enough of us who love their city enough to make it happen. Stroger will soon be out (but not his leftovers), maybe there is hope after all.

  • avatar
    buzz phillips

    Chicago democrats have never been any good at math or financial management!

  • avatar
    Robstar

    Why to live in Chicago
    1) Nice lakefront.
    2) Not too bad property taxes.
    3) People are nice most of the time.
    4) bulls/cubs/sox/bears (they all usually suck at the same time but the games are still fun)

    Why NOT to live in Chicago
    1) High crime
    2) Stupid gun laws
    3) High (non property-tax) taxes
    4) High traffic
    5) Crappy public transportation (It’s taken me 2 hours to go 7 miles before)
    6) Overpopulation
    7) High property prices ($300k+ anywhere worth living for a tiny place or condo)
    8) High rent prices (last place was 1200 ft^2 4b 2 bath & I got a deal at $1400/mo…not even anywhere near downtown !!!)
    9) Almost no bike paths
    10) Parking meter fiasco
    11) Homeless people everywhere begging for money
    12) Zillions of red light cameras everywhere
    13) Really crowded beaches at/during summer

    It’s ok to visit if you don’t mind paying a lot to do, basically, anything but other than that there are MUCH better places to live.

    • 0 avatar
      jkross22

      Robstar,

      You left another big reason why people leave Chicago – the weather.

    • 0 avatar
      Robstar

      I actually LIKE the weather, personally…..
      I love driving in snow :-)

    • 0 avatar
      darian

      Rob, WRONG –

      1) High crime – no better or worse than most other big cities
      2) Stupid gun laws – we could argue this, but why bother?
      3) High (non property-tax) taxes – the city’s share of this is Quite small
      4) High traffic – ever drive in NYC? DC Area? SF Bay? LA? All pretty bad too.
      5) Crappy public transportation (It’s taken me 2 hours to go 7 miles before) – Crappy in the burbs and for reverse commute, if it REALLY took you two hours to get 7 miles, I;d suggest walking – seriously.
      6) Overpopulation – WEll, dude, it’s a friggin’ BIG CITY – you want open pastures and open gun carry, Wyoming awaits, MOVE!
      7) High property prices ($300k+ anywhere worth living for a tiny place or condo) – Cheaper than any east coast or west coast big city (Yeah, I’m not moving to Atlant or Houston either…)
      8) High rent prices (last place was 1200 ft^2 4b 2 bath & I got a deal at $1400/mo…not even anywhere near downtown !!!) – if that’s the best you could do, buddy, you got ripped off, get out of the trendy areas and you can rent a lot more for the same money
      9) Almost no bike paths – uhm, again – not really, it’s probably one of the most bike-friendly commuter cities around
      10) Parking meter fiasco – not this shit again…
      11) Homeless people everywhere begging for money – 98 percent of the homeless people begging for money are doing so in the 2 percent of the nicest areas of the city – get north of Division street every once in a while and you’ll see
      12) Zillions of red light cameras everywhere – stop running red lights and suddenly, these are not a problem
      13) Really crowded beaches at/during summer – what other American city has beaches as nice as ours? NYC?LA?SF? All affordable places with no traffic, low real estate prices, no taxes – er, um sorry…

    • 0 avatar
      bryanska

      I do take issue with the assertion that Chicago’s beaches are up there with LA or SF… Highly doubt that… and the Minneapolis metro probably has three times Chicago’s 28 miles of beach. And all of Minneapolis’ beach abuts inland lakes, which are much more usable for personal watercraft.

  • avatar
    Contrarian

    As others pointed out, not including 75 years of interest makes this a rather specious argument. And if you willingly sell something away at whatever price, especially if you are in a position of trust with public funds, you are not being ripped off. You are merely a fool.

    Sadly these are the types running the country right now.

    • 0 avatar
      ott

      +1. They weren’t ripped off, they were duped. I don’t think we’ve heard the last of this yet… What kind of city council gives up control of any part of their city? I’m surprised people aren’t rioting in the streets!

  • avatar
    dwford

    Why is it so hard to estimate future parking meter revenues? I am sure the city has decades of past revenue figures to look at. Stupid.

    Just because the city spent all of its profit on the deal doesn’t mean the company has recouped all of the money. It is not the companies fault that the city is so bad financially.

  • avatar
    bryanska

    I moved to Minneapolis about eight years ago from the Chicago metro. When I mention that to Minnesotans, they’re a little confused.

    Why would I move from Chicago? Lots of Minnesotans see Chicago as a great place! They honeymoon there, take long weekends there, fantasize what it’s like to live there…

    Every time I tell them. The Chicago metro sucks. It takes forever to get anywhere beyond your surrounding towns. Your best friends move across the metro for new jobs and you never see them again. Most of the first tier burbs are overcrowded and unable to accommodate the traffic. If you’re a busy person in Chicago, the density becomes a barrier. You don’t measure your world in distance, you measure it in time. The world beyond 45 minutes is something you might visit a few times a year.

    The metro has no green space of real consequence. No hiking, camping, etc. Nowhere to get lost. A bike path in a city park is as rugged as it gets. Getting “out to the country” is going into Wisconsin.

    All the prairie means old farms. Nice flat, square, easily divisible parcels of dry land. These are being snapped up by developers and turned into 1000+ home developments. This growing third/fourth tier of suburbs is hell. Nobody walks anywhere. No sidewalks lead anywhere. When you’re out shopping you can’t get to another store within sight on foot. There are no crosswalks. You have to drive the 500 feet.

    The Twin Cities, in contrast, is about 1/3rd the size. It’s full of enough hippie whiners to make it a nice place to live. They fight for green space; there are several hiking parks and boating lakes within the city limits. We’re the #1 biking city in the US despite our weather. Traffic is 1/3 the hassle. Thoughtfully-planned highways criss-cross the metro. You rarely have to drive any distance without a limited-access freeway to zip you along.

    I grew up there for 22 years and there was ALWAYS a corruption/budget shortfall scandal going on. When I got to Minneapolis I laughed at the quaint news stories devoid of sleazy politicians and police chiefs.

    Sure, we don’t have the entertainment and the institutions, but we have a great quality of life. The people aren’t nearly as fun as Chicagoans, and that’s what I truly miss: the camaraderie. But if living in a crappy overdeveloped metro is required for the shared misery that develops camaraderie, count me out.

  • avatar

    I wonder how much of the change in valuation is a result of using different discount rates – the interest rate environment has changed a lot since mid-2008 (I’m assuming that the deal was struck before the crisis and not the weeks before signing in December 2008).

  • avatar
    findude

    Anyone really interested in city parking meters needs to read Donald Shoup’s “The High Cost of Free Parking”. Hard to believe that a 752 page book on parking would be riveting reading, but I spent a couple long evenings on my couch going through the whole thing.

    Bottom line: street parking is going to get much closer to its true value over the next few years–way, way more expensive than it has been recently.

    I’m betting the folks who duped the city of Chicago read Shoup’s book and that the mayor/aldermen did not.

    • 0 avatar
      Robstar

      The fact that you have to pay for parking at all is ridiculous. In my (small) city, parking is free everywhere.

    • 0 avatar
      jkross22

      Robstar,

      You think parking is ‘free’ if you don’t put a coin in a meter? You paid for it through car registration fees/sales tax/property tax/income tax/cell phone service fees or taxes/taxes collected on gas/electric/heating oil/garbage fees/gasoline taxes/hazardous waste disposal taxes and on and on and on….

      And here in CA, if you’re rich (meaning your household makes at least 100k) you get a letter from the state asking you to ‘self report’ internet purchases so that they can tax something that isn’t supposed to be taxed.

  • avatar
    gslippy

    Ask France and Russia how they feel about the sale of the Louisiana Territory and Alaska to the US. I think the US got the better deals.

  • avatar
    joeveto3

    I recently moved from Cleveland to a far NW suburb of Chicago. To put it in perspective, I’m a stone’s throw away from the Wisconsin border.

    I tell folks back home, I moved to Chicago, becaue it gives them more of a geographic reference point, than trying to describe where exactly I live. Blank stares.

    Then they say “Chicago, how awesome…”

    Yes and no. It’s cool but hardly accessible. Train ride into the city? 1.5 hours. Cost to do anything in the city? High. But hey, the liquor flows. You can even drink on the train. Property taxes…holy cow. Back home they were $1200 a year. Here? $10500. Post crash, property values have come down quite a bit…but the taxes have stayed.

    Travel time through Chicago to get back to Cleveland? It’s anyone’s guess. Could be an hour, could be 3. Just depends. Take a blade of grass, throw it into the wind, hope for the best.

    Oh, and not only the parking meters were sold. The Powers That Be also sold the tollways and the Skyway bridge. Both of those concepts left me slack jawed. Really? We’re going to trust our tollways and our bridge to a private company? They can raise tolls at will…Really?

    Someone else pointed out the beauty of Minneapolis. I’ll point out the beauty of Milwaukee. Compared to Chicago, it’s very accessible. I at least have a consistent travel time there, as opposed to the crap shoot that is Chicago traffic (Vegas odds are better). Chicago folks are cool, but so are the Milwaukee bretheren. And they too like their beer. Heck, it may not be Wrigley Field, but Miller park is a great place to catch a game, regardless of the weather. Summerfest is a two week music blast. And if you travel a bit further, you get to experience The Frozen Tundra of Lambeu Field…and Brats. And Cheese!…Good stuff.

    I’d love to live in Chicago, but it’s just not practical. When you take everything into consideration, there are much better choices.

  • avatar
    bevo

    Two tangental thoughts. One, other reports have similarly blasted at government-negotiated stadium deals. In essence, the government agrees to a really bad lease at almost every turn.

    Two, if governor Mitch Daniels had his way, then Indiana would sell every last public road. Given the meter and stadium reports, I can only imagine how badly W’s former budget director will negotiate a deal.

    Of course, the money would be gone within two years with nothing to show for it.

    Here’s a clue. Democrats: you will have to cut service. Republicans: you will have to raise taxes.

  • avatar

    welcome to privatized American government.

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