Analysis: Bad Skips Worse, Goes Directly To Disaster When It Comes To Parking Meter Lease Deal
City Will Repay Meter Company Entire $1.16 Billion By Lease End
When the Chicago parking meter lease deal was being jammed through the Chicago City Council in just over 36 hours in December, 2008 The Expired Meter warned how bad the deal was.
Certain provisions within the nearly one inch thick parking meter lease contract leaped out at people who actually read the document–provisions that could and would spell trouble down the road.
Alderman Scott Waguespack (32nd) knew about this stuff too. As one of the few (if not only), city council members who actually read the lease agreement and took the time to understand it, he foresaw what would happen.
“This is right on par with what we knew would happen,” said Waguespack initially in an interview this past Friday. “Any alderman (who voted for the meter lease deal) that still says they didn’t know that this was going to happen is ignoring reality.”
But when pressed, even Ald. Waguespack admits the meter lease deal is worse than even he predicted.
“Yes,” he simply said when asked if the deal has exceeded even his expectations of failure.
City Will Give Back Entire $1.16 Billion By Lease End
With the Sun-Times report that Chicago Parking Meters, LLC has billed Chicago $14 million for contractually obligated revenue just for 2011, bad has skipped worse and jumped directly to financial nightmare.
Because if you do the calculations based on this figure, by the end of the 75 year lease term, Chicago looks to pay CPM more than the original $1.16 billion lump sum payment it received in 2008 for the rights to operate Chicago’s metered parking system.
In other words, over the length of the contract, CPM will get their entire initial investment of $1.16 billion back through givebacks while reaping many billions of dollars in profits from Chicago drivers who pay the highest meter rates in the entire nation.
It’s simple math really.
Even if you take the 2011 figure of $14 million and simply multiply it by 73 years you get just over$1 billion. That’s billion with a B.
While this compensation revenue billed by CPM was under $6000 for 2009 and $2.1 million for 2010, realize that as meter rates go up over time, the bill for closures will rise as well.
$14 million in 2011 will inevitably grow each year and certainly be a larger number by 2084 when the meter lease deal mercifully ends.
Closures or True-Up Revenue is the main problem. True-Up Revenue is essentially any time a street with metered parking is closed or metered parking spots were unusable or metered spots were removed, the city would have to pay.
This could be for an assortment of things including street repair, utility work, private construction or even street festivals. Any time this would happen, the new lease holder, Chicago Parking Meters, LLC could bill the city for the entire day of lost revenue at those unusable metered parking spots.
It didn’t matter if the metered spots, under normal use were occupied with cars only a fraction of the day, if a spot was closed the city had to pay for 100% of the revenue for that day for as long as the parking spot was closed.
In addition, even though it looks like free parking for the majority of disabled drivers will go away soon via a bill pending in the Illinois State Senate, bills for this provision in the contract won’t go away completely either.
In other words, Chicago will end up repaying CPM the entire $1.16 billion and more it got for signing away the city’s meters for 75 years–a net loss for the city.
Alderman, Contract, Facts: Chicago Will Have To Pay Meter Company Bill
Despite Mayor Rahm Emanuel’s laughable pronouncement he won’t pay these bills, don’t believe for a second that CPM won’t get their moola.
CPM’s documentation of closures using photographs, copies of dated no parking signs, and even the city’s public database of closures will prevail in the end.
“The problem is we signed off on the document that outlined how True-Up Revenue was calculated,” says an exasperated Waguespack. “The city signed the contract and unless he (Mayor Emanuel) breaks the contract and says he’s not going to do it, it will go to arbitration. No arbitrator is going to say the city is right in this case–there’s no way.”
Waguespack says the city has been intimately involved with the process documenting True-Up revenue from the very beginning.
“If you looked how involved the Department of Revenue has been in this process–there’s no way we can’t pay,” Waguespack explains. “It’s the Department of Revenue that calculates the True-Up costs.”
But it even goes deeper than this Waguespack says.
According to Waguespack, the same city attorneys who signed off on the meter lease deal contract four years ago are still consulting Mayor Emanuel on the contract today.
“It’s the same people who reviewed the contract for the city in the first place,” says Waguespack. “Did they suddenly have an epiphany? I don’t think he (Emanuel) realized what kind of nightmare this was.”
Even though Chicago will be paying out the nose every year for the privilege of having a company reap billions of dollars off the backs of motorists, drivers will still have the honor of paying the nation’s highest parking meter rates and bask warmly in the realization that Mayor Daley screwed them over for 75 years.
originally posted @ http://theexpiredmeter.com/...
FAIL: The Reader's Parking Meter Investigation
Ben Joravsky and Mick Dumke's report on the privatization of Chicago's parking meters, how the deal went down, and its fallout
The Reader's three-part investigative series
FAIL, Part One: Chicago's Parking Meter Lease Deal
How Daley and his crew hid their process from the public, ignored their own rules, railroaded the City Council, and screwed the taxpayers on the parking meter lease deal
By Ben Joravsky and Mick Dumke (April 09, 2009)
FAIL, Part Two: One BILLION Dollars!
New evidence suggests Chicago leased out its parking meters for a fraction of what they’re worth.
By Ben Joravsky and Mick Dumke (May 21, 2009)
FAIL, Part Three: The Insiders
Who benefited from the parking meter fiasco
By Ben Joravsky and Mick Dumke (June 18, 2009)
More coverage from our blogs and archives:
Parking Meters: The Easy Version
The parking meter deal that my aldermanic caller and his City Council colleagues voted for last December - at Mayor Daley's insistence - sucks. It sucked then. It sucks now. It will suck even more in the future.
By Ben Joravsky (May 18, 2009)
Aldermen duel over TIFs, parking meters, spending, and the brainwashing powers of the media
As has become customary, aldermen bitched and moaned about Mayor Daley’s $6.1 billion budget before they passed it today. Nobody claimed to like it, though 38 aldermen voted in favor of it. But that number is smaller than it has been for most of Daley's reign.
By Mick Dumke (December 2, 2009)
It's All My Fault
For the next seventy-something years, every nickel you pay to those dreaded parking meters will be going into the coffers of some conglomerate headed by Morgan Stanley. And all the money Morgan Stanley gave Chicago will have been squandered so the mayor can say, "I didn't raise your taxes—in 2010." By Ben Joravsky (December 2, 2009)
Wait, We Sold That Off Too?
As if there weren’t enough unanswered questions about the implications of the parking meter deal, a new report raises still more, such as: How can the city manage parking and traffic policy if it’s handed off control of the meter system for the next 75 years?
By Mick Dumke (June 23, 2009)
IG: Taxpayers hosed on the parking meter lease deal
In a damning 45-page report issued this afternoon, city inspector general David Hoffman said the Daley administration's "hasty" consummation of the parking meter privatization deal--as well as the absence of deliberation in the City Council--cost taxpayers at least $1 billion.
By Mick Dumke (June 2, 2009)
Aldermen Call for Hearings on the Parking Meter Deal
Citing the Reader’s recent cover story on the parking meter lease deal, alderman Joe Moore and four of his City Council colleagues are planning to introduce a resolution this week calling for additional hearings into how the agreement was struck.
By Mick Dumke (April 20, 2009)
Rahm's latest verdict: we're stuck with the meter deal Rahm Emanuel has benefited from the parking meter deal since he began campaigning for mayor last year. He knows Chicagoans hate it, so even though he’s generally open to privatization, whenever the meter agreement comes up he seizes the opportunity to contrast the budgetary “smoke and mirrors” of the past with the new era of “tough choices” and transparency. By Mick Dumke (December 2011)
One way the City could use to get rid of the Meter Deal would be to LOWER the fine for parking in a metered spot to , let's say $5 in the Loop and $3.00 outside the Loop At that point it would be cheaper to get a ticket and pay the ticket than it would be to pay the LAZ meters. Revenue to LAZ would drop immediately and they might be willing to renegotiate . I would suggest the following terms : The City would take back the meters and the revenue from the meters . the City would agree to pay back the $1.15 billion over the next 72+ years at an interest rate of .25% which is the current Fed rate. In other words the $1.15 billion would be a loan from Morgan Stanley to the City as MS' way of saying thank you for their bailout. As to the improvements to the meter system. let's just call that a gift from Morgan Stanley to the people of Chicago. If LAZ/MS doesn't like the deal , leave the parking fines at the new low rate and let them go BK. Of course there may be provisions in the agreement that preclude this course of action but I wish the Mayor would adopt an attitude like this.
Why Does Abu Dhabi Own All of Chicago's Parking Meters?
Within two months of selling its parking meters to a coalition of U.S. and Western investors led by Morgan Stanley, Chicago's parking meters came under new, foreign ownership.
So basically Morgan Stanley found a bunch of investors, including themselves, to put up over a billion dollars in December 2008; a big chunk of those investors then bailed out to make way in February 2009 for this Deeside Investments, which was 49.9 percent owned by Abu Dhabi and 50.1 percent owned by a company called Redoma SARL, about which nothing was known except that it had an address in Luxembourg.
Taibbi calls this a "bait and switch" pulled by Morgan Stanley on Chicago. He explains why this is about more than just parking meters. Now if city officials want to do anything that might disrupt parking meter revenue -- let's say close down parking for a street festival or parade -- they need to get the approval of those meters' shadowy, foreign owners. They also need approval to change parking hours or fees. The new ownership has already made unwelcome changes, ending the previous policy of allowing free parking on holidays. But not only did Chicago cede the operation of an entire segment of the city to mysterious private investors -- Taibbi says they could have gotten four times as much money for it, up to $5 billion.
http://www.theatlanticwire.com/...
Morgan Stanley Group’s $11 Billion Makes Chicago Taxpayers Cry
Morgan Stanley, Abu Dhabi Investment Authority and Allianz Capital Partners may earn a profit of $9.58 billion before interest, taxes and depreciation, according to documents for a $500 million private note sale by their Chicago Parking Meters LLC venture. That is equivalent to 80 cents per dollar of projected revenue. Standard Parking Corp., which runs 30,000 spaces at the city’s O’Hare and Midway airports, earned 4.84 cents on that basis last year, data compiled by Bloomberg show.
The deal illustrates how Wall Street banks, recipients of more than $300 billion in taxpayer bailouts in the worst credit collapse since the Great Depression, are profiting from helping states and cities close record recession-induced deficits by selling bonds and leasing public properties. Chicago gave up billions of dollars in revenue when it announced in 2008 that it leased Morgan Stanley its 36,000 parking meters, the third- largest U.S. system, for $1.15 billion to balance its budget, said Alderman Scott Waguespack.
While Chicago has the right to “repossess and assume operational control” of the meters if the Morgan Stanley partners default on their obligations, the bond document says, the contract doesn’t expire until 2084.
http://www.bloomberg.com/...