CHICAGO – The Chicago City Council ratified revisions Wednesday to the city’s much-maligned 75-year lease of its parking meters.
Mayor Rahm Emanuel said the revisions would cut the city’s long-term penalties to the private meter operators for lost parking revenue by up to $1 billion.
The 39-11 vote came after council members aired lingering grievances over the original lease struck under former Mayor Richard Daley for $1.15 billion in 2009. The council approved the lease in a 40-5 vote after less than three days of review.
Emanuel was among the vocal critics of the deal that handed over 36,000 metered parking spots to private operators. The private operators were overwhelmed initially in implementing a new system of pay boxes, resulting in operational troubles. Skyrocketing rates allowed under the lease terms also fueled anger, along with the council’s swift review of the deal. Daley then went on to exhaust most of the proceeds to balance his last few budgets.
Emanuel’s administration unveiled the revisions to the $1.15 billion lease late in April as part of a settlement and amended contract with the private operators, Chicago Parking Meters LLC. It resolved a legal dispute over how much the city owed the group for meters taken out of service for various events and disabled parking.
Under the settlement, the city will pay CPM $64 million to compensate it for lost revenue. That includes $8.9 million for parking meters taken out of service for various events. The company had submitted claims for $50 million to cover a two-year period up to March, so the city saves on $40 million on a potential liability.
The city will also pay $55 million to cover losses tied to handicapped parking including $12 million already awarded by an arbitration panel.
City officials contend that the modifications in how lost revenues are calculated going forward will save as much as $1 billion in present value costs over the remaining 70 years of the lease by trimming at least $20 million off potential annual charges.
Emanuel has portrayed the modifications as a way to make a “little lemonade out of a big lemon” making the lease a little more palatable to the public and city coffers. “I know this tested everybody’s patience. This deal tests the patience of our residents every day,” Emanuel said after the vote, saying the lease remains “a bad deal.”
“It’s wrong from a legal perspective, it is wrong form a governance perspective….some lemons shouldn’t be made into lemonade,” said Alderman Bob Fioretti, who voted against the amendments. “Some lemons should be returned to the store for a refund.”
Some skeptical council members questioned the administration’s savings projections and whether the true financial impact could be discerned, while others raised concerns that the private operators stood to reap too much benefit from other changes in the agreement. Others agreed with Emanuel that the new terms represent a positive.
Motorists will no longer have to feed meters on Sundays and a pay-by-phone system will be launched. CPM stands to benefit financially because hours will be extended in some areas of the city when motorists must pay to park and CPM could reap $2 million annually when pay-by-phone is implemented.
The vote Wednesday followed a series of meetings during which council members grilled Chicago’s chief financial officer Lois Scott and corporation counsel Stephen Patton about the impact of the new terms.
Council member still stung by the original lease vote praised the administration for painstakingly answering their questions during the hearings and providing data to support their savings calculations. Still, some questioned the city’s methodology that considered the difference between what the company claimed was owed for out-of-service meters and the settlement amount.
Chicago Parking Meters includes Morgan Stanley Infrastructure Partners A Sub LP with a majority ownership interest. LAZ Parking runs the system. Morgan Stanley does other business with the city, including underwriting bonds, providing a strong incentive to negotiate with Emanuel’s administration.
A group of Chicago taxpayers have filed a lawsuit challenging the legality of the lease. The lease marked a first of its kind involving a big city’s parking system. Political leaders have said it provides a cautionary roadmap for future deals, suggesting a tougher eye on lease terms, contract length, and provisions for revenue sharing.
While critics have called the original deal a windfall for the investors, some market participants cite the investment made by the private investors to install new pay boxes to replace aging meters and noted that the city would have faced political challenges enacting steep rate hikes to raise more revenues. The city’s parking system generated revenues of about $23 million in 2007. CPM collected $139 million in parking revenues last year.
One alderman has proposed that the city consider issuing bonds backed possibly by parking meter revenues to get out of the lease. The city has not ruled out that option out entirely but in recent testimony officials said the lease terms do not give the city a direct buyout option and given the current market any buyout would command a high price and is not currently economically feasible.