CHICAGO - The Chicago City Council overwhelmingly approved a 75-year lease of the city's parking meter system to a private group for $1.157 billion, just two days after Mayor Richard Daley unveiled the winning bid and his plans for the proceeds.
The city opened the bids on Monday, and on Tuesday Daley announced the winning submission from Chicago Parking Meters LLC, an investment group made up of Morgan Stanley Infrastructure Partners A Sub LP, Morgan Stanley Infrastructure Partners LP, and LAZ Parking, which will manage the 36,000-meter system.
Members of the City Council's Finance Committee spent several hours discussing the plan on Wednesday before advancing it to the full council for a vote at a special meeting yesterday. Council members debated the contract for more than an hour, with many aldermen voicing concerns over the impact of steep rate increases that will begin next year and on the lack of time to review the plan.
Chicago will put $400 million in a reserve fund, with the investment earnings of roughly $20 million annually going to replace the revenue currently generated by the parking meters. Another $325 million will go to help balance city budgets through 2012, including $150 million to help close a combined $469 million deficit in the 2008 and 2009 budgets. Another $100 million is earmarked for human services programs and $324 million will go into a budget stabilization fund that the city could tap until the economy improves.
The establishment of a second reserve - to complement the $500 million account set up with funds from the $1.8 billion lease of the Chicago Skyway toll bridge - and the use of earnings to replace current parking meter revenues are considered positive credit factors. The use of the remaining funds for operations, though generally viewed negatively by analysts and fiscal conservatives, was softened by the city's move to stretch their use out over the next five years.
Comments yesterday from council members who approved the deal in a 40-to-5 vote were mixed. Most were relieved that Chicago had another source to turn to over raising property taxes to balance the budget. Some also said the expected increases in the neighborhoods would help their commercial businesses by promoting parking turnover.
"Even if the economy wasn't in the toilet, this would be a good idea," said Alderwoman Mary Ann Smith.
"This money is not going to be spent like a drunken sailor ... It's going to be set aside so we can meet our obligations not just for the current budget but for future budgets," said Alderman Bernard Stone.
Although he voted for the deal, Finance Committee chairman Edward Burke said his misgivings stemmed from the involvement in the deal of a Wall Street firm, given the disclosures of excessive executive compensation at top firms amid their reporting of losses.
"I don't know that I would trust this company to make good on its obligation," he said, while noting that the bidder must make the full payment upon the deal's expected closing next month. He also argued that the financial advisory team made up of local firms - William Blair & Co., Gardner Rich & Co., and Samuel A. Ramirez & Co. - could be trusted.
Alderman Billy Ocasio voted against the lease, saying working-class residents are being nickel and dimed by fee and fine increases. "There are too many people living pay check to pay check," he said.
Councilwoman Toni Preckwinkle said she would vote against the lease because it marks the third such deal that the council has been asked to speed through the approval process. "We ought to take more time to review and analyze and reflect" on the lease, she said.
The city privatized the Skyway for $1.82 billion in 2005, four downtown parking garages for $563 million in 2006, and is awaiting federal approval for its proposed 99-year lease of Midway Airport to a private group for $2.5 billion.