Parking meter deal gets even worse for Chicago ratepayers, annual audit says
In their failed bid to blockade Bally’s $1.7 billion River West casino, downtown city council members warned the deal was rushed — just like the one that privatized Chicago’s parking meters — and that it would end up being “even worse” for taxpayers.
This dire prediction is hard to imagine, given the results of the latest parking meter audit by accounting giant KPMG.
It shows Chicago’s parking meter revenue is nearly back to pre-pandemic levels. After dropping to $91.6 million in 2020, they jumped to $136.2 million last year.
The increase stems from a booming economy in Chicago and hundreds of new metered spaces in Montrose Harbor and on busy neighborhood streets created as part of Mayor Lori Lightfoot’s 2021 budget.
With 61 years remaining on the 75-year lease, Chicago Parking Meters LLC has now recovered its entire $1.16 billion investment and $502.5 million more.
Private investors as far away as Abu Dhabi would have done even better had they not brought in a new investor and borrowed $22 million at 15% to weather the pandemic. This loan was fully repaid last year.
Additionally, four city-owned underground parking garages brought in $22 million, up 37.5% from $16.2 million last year.
Thanks to higher traffic and a further increase in tolls, the privatized Chicago Skyway generated $114.3 million. This represents a 34.7% increase in revenue and far more than Skyway’s $92 million in annual revenue in 2019, the year before the lockdown closed.
Not a penny of that revenue eased the burden on Chicago taxpayers, who had to absorb a $76.5 million increase in the city’s property tax after a $94 million property tax hike the last year.
Parking meters, downtown garages and the Skyway were all dumped by then-Mayor Richard M. Daley, who used the money to avoid raising property taxes while the pension funds of city employees sank deeper into the hole.
Of these three agreements, the parking meter lease was the biggest political nightmare for the two mayors who inherited it and for the members of Council who approved it with lightning speed.
There have been steep increases in outgoing rates, including parking downtown, from $3 per hour in 2008 to $6.50 per hour in 2013. It is now $7 per hour.
Motorists were so infuriated by the rate hikes that they vandalized and boycotted meters, leading to a dramatic drop in street parking. Revenues eventually recovered — until the pandemic.
The latest audit once again proves how attractive the deal was for private investors.
Although Chicago Parking Meters LLC lost a third of its annual revenue in 2020, the system still generated enough money that year to distribute a $13 million distribution to investors.
Total revenue was well above the $23.8 million in meter payments in 2008, the year before CPM took over the system. Indeed, the mayor and city council, fearful of risking a political backlash by raising parking meter rates themselves, opted to offload the meters instead of directly hiring LAZ Parking to administer a city-owned system with a new technology.
Investors recouped an additional $6.7 million through a contractual provision requiring the city to reimburse investors for each space taken out of service.
This includes temporary street closures for special events, sewer repairs and other construction projects and street closures that have allowed restaurants and bars to serve more customers outdoors when indoor capacity was restricted or even prohibited.
In the full 12 years since the meters were privatized, the city has paid out $78.8 million in “regularization” payments, as they are called.
That’s even after then-Mayor Rahm Emanuel changed the fine print in 2013, reducing the city’s liability by increasing the hours and days motorists pay for parking.
Taking into account the recently announced figure for 2021, private investors have already extracted $2.1 billion from the deal, in part by refinancing three times. The last $1.2 billion refinancing was completed in 2019.
Now that parking revenue is back to normal, the company should end up earning at least six times more than what investors put in over the life of the deal.
The results of the latest audits were provided to the Chicago Sun-Times by attorney Clint Krislov. As director of the Center for Open Government Law Clinic at IIT Chicago-Kent, Krislov has reviewed dozens of transactions and provides an annual analysis of each year’s results.
“Those three deals turned out to be like payday loans. They were so myopic. They took the cash quickly, ignoring the fact that they were burdening the city with horribly structured, underpriced deals that will cost the city for decades to come,” Krislov said Thursday.
“The city should have hired a parking operator to update the technology and operate the system for the city. If they had done that and gotten a better price for all three assets, Chicago today would have between $3 billion and $4 billion more than it has from those three deals together.
Scott Burnham, a spokesman for Chicago Parking Meters LLC, declined to comment on the audit.
Although the parking meter lease is the deal Council members and their constituents love to hate, Krislov once again argued that it “pales in comparison” to the Skyway deal.
A decade after investors gave the city more than $1.83 billion to lease the Skyway for 99 years, the rights to operate the privatized highway and escalating tolls have been sold to a consortium of three regimes. Canadian pensions for $1 billion more than the original price.
“Canadian pension funds spent $2 billion to buy the Skyway and it’s doing well. It would have worked well for the city if the city had just hired an operator to run the Skyway,” and collect the growing tolls for the city, Krislov said.
Krislov tried to have the meter and garage offerings declared illegal on the grounds that the city cannot legally sell on public roads.
He further claimed that the garage deal both limits development in the Loop and subjects the city to giant penalties, such as the $62 million the city spent to compensate the owners of the Millennium Park and Grant garages. Park after the city cleared the Aqua Building, 225 N Columbus Drive, to open a competing garage.
Both lawsuits were dropped after the Emanuel administration defended the deals.
As mayor-elect Lori Lightfoot has promised to take a fresh look at the parking meter deal and try to find a way to break the lease, shorten it or sweeten the sour terms for taxpayers.
She called it a “smudge under your saddle” that “keeps rubbing and rubbing,” but her administration did nothing to remove it.
“We know they’re the ones who call when the phone doesn’t ring, as they say,” Krislov joked, paraphrasing a Randy Travis song.
Getting serious, Krislov said he would have been more than happy to team up with mayor to “fight this thing”.
“If the city administration had said, ‘This is not a legal matter. The city cannot agree to sell the right of way to private parties in this type of deal, “we might have gotten the city out of it,” he said.