CHICAGO — Chicago officials believe a lawsuit filed this week by a Chicago-area citizens group seeking to void the city's controversial $1.12 billion, 75-year lease of its parking meter system is without merit.

The Independent Voters of Illinois-Independent Precinct Organization filed the lawsuit in Cook County Circuit Court on Wednesday. The group is being represented by Clint Krislov, of Krislov & Associates Ltd., which pursued a series of yield-burning lawsuits against investment banks in Chicago over Illinois deals.

The complaint alleges that the city's lease agreement with a consortium known as Chicago Parking Meters LLC "unconstitutionally obligates the city to expend public funds in order to police, enforce, and maintain the privately held and privately controlled parking meter system."

The group contends the city is violating state law that requires that public funds, property, or credit be used solely for public purposes. The lawsuit also argues that the lease is illegal because the meters are located on the public way, which under law is not transferable, and that the term is excessive and illegally curtails future City Council powers to regulate the parking meter system.

The lawsuit names city Comptroller Steve Lux, Illinois Secretary of State Jesse White, and Illinois Comptroller Daniel Hynes as defendants challenging their "expenditures of public monies relating to the city of Chicago's illegally and unconstitutionally privatized parking system."

Chicago Law Department spokeswoman Jennifer Hoyle countered that city attorneys believe after initially reviewing the allegations that they are "wholly without merit, both factually and legally."

Chicago early this year closed on the transaction and has spent a chunk of the funds to help balance its 2008 and 2009 budgets amid warnings that a $520 million deficit looms in next year's $6.2 billion budget. Chicago will drain the $325 million fund of its remaining $50 million to help whittle down what would otherwise have been a looming $570 million deficit next year. The city put about $400 million into a reserve with the interest earnings earmarked to replace previously revenues annually generated by the system.

In exchange for the up-front payment, the consortium holds the right to operate the 36,000 meter system for 75 years. The consortium includes Morgan Stanley Infrastructure Partners A Sub LP, Morgan Stanley Infrastructure Partners LP, and several other entities. LAZ Parking runs the system.

The meter lease has come under intense fire from the public and City Council members, who rushed through approval of the lease at Mayor Richard Daley's urging, as the new operators were overwhelmed initially in managing the system and faced complaints of broken meters, overstuffed meters, and confusing pricing information.

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