In their failed attempt to block Bally’s $1.7 billion River West Casino, members of the downtown city council warned that the deal was rushed – like the one that privatized Chicago’s parking meters – and that taxpayers “still… would get worse.
That grim prediction is hard to imagine given the results of accounting giant KPMG’s recent parking meter audit.
It shows Chicago parking meter revenue is almost back to pre-pandemic levels. After falling to $91.6 million in 2020, they rose to $136.2 million last year.
The increase is due to a recovering Chicago economy and hundreds of new metered parking spaces in Montrose Harbor and busy neighborhood streets created under Mayor Lori Lightfoot’s 2021 budget.
With 61 years remaining on the 75-year lease, Chicago Parking Meters LLC has now recouped its entire $1.16 billion investment and an additional $502.5 million.
Abu Dhabi retail investors would have done even better if they hadn’t brought in a new investor and borrowed $22 million at 15% to weather the pandemic. This loan was repaid in full last year.
In addition, four municipal parking garages earned $22 million, up 37.5% from last year’s $16.2 million.
Thanks to increased traffic and a further increase in tolls, the privatized Chicago Skyway generated $114.3 million. That’s a 34.7% increase in revenue and well above Skyway’s annual revenue of $92 million in 2019, the year before the no-door zone was closed.
Not a dime of that revenue relieved Chicago taxpayers, who were absorbing a $76.5 million increase in city property taxes after a $94 million increase in property taxes the year before.
The parking meters, downtown garages, and skyway were all unloaded by then-Mayor Richard M. Daley, who used the money to avoid raising property taxes while city employees’ pension funds sank deeper into the hole.
Of those three deals, the parking meter lease was the biggest political nightmare for the two mayors who inherited it and the council members who approved it with lightning speed.
Initially, there were steep rate increases, including for downtown parking, which went from $3 an hour in 2008 to $6.50 an hour in 2013. Now it’s $7 an hour.
Motorists were so outraged by the rate hikes that they smashed the parking meters and boycotted them, leading to a dramatic drop in on-street parking. Revenue eventually recovered — until the pandemic.
The latest audit proves again how great the deal was for private investors.
Even though Chicago Parking Meters LLC lost a third of its annual revenue in 2020, the system still generated enough money this year to pay out a $13 million distribution to investors.
The total revenue was far greater than the $23.8 million in meter payments in 2008, the year before CPM acquired the system. That’s because the mayor and city council, afraid of risking a political backlash by raising parking meter fees themselves, decided to relieve parking meters rather than directly entrust LAZ Parking with managing a new-technology city system instruct.
Investors recovered an additional $6.7 million through a contract provision that required the city to compensate investors for each acreage taken out of service.
These include temporary road closures for special events, sewer repairs and other construction projects, as well as road closures that have allowed restaurants and bars to serve more customers outdoors when indoor capacity was restricted, if not prohibited.
In 12 full years since the meters were privatized, the city has made $78.8 million in true-up payments.
That’s true even after then-Mayor Rahm Emanuel tweaked the fine print and reduced the city’s liability in 2013 by increasing the hours and days motorists pay for parking.
Taking into account the newly reported figure for 2021, private investors have already raised $2.1 billion from the deal, in part through three refinancings. The most recent $1.2 billion refinancing was completed in 2019.
Now that park revenue has returned to normal, the company should end up making at least six times more than investors invested over the life of the deal.
The results of the most recent audits were provided to the Chicago Sun-Times by attorney Clint Krislov. As director of the IIT Chicago-Kent’s Center for Open Government Law Clinic, Krislov has reviewed dozens of transactions and produces an annual analysis of each year’s results.
“These three deals turned out to be payday loans. You were so short-sighted. They took the quick buck and ignored the fact that they were burdening the city with horribly structured, undervalued deals that would cost the city decades to come,” Krislov said Thursday.
“The city should have just hired a parking lot operator to update the technology and run 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 those three deals combined.”
Scott Burnham, a spokesman for Chicago Parking Meters LLC, declined to comment on the audit.
Although the rental of parking meters is the deal that council members and their constituents tend to hate, Krislov 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 freeway and rising tolls have been handed over to a consortium of three Canadian 1st-year pension plans $1 billion more than the original price.
“Canadian pension funds have 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 operate the skyway,” Krislov said.
Krislov tried to make the meter and garage deals illegal because the city cannot legally sell the public roads.
He further claimed the garage deal both restricted development in the Loop and imposed huge penalties on the city, like the $62 million the city spent to compensate owners of the Millennium Park and Grant Park garages after the City purchased the Aqua building at 225 N Columbus Drive to open a competing garage.
Both lawsuits were dismissed after the Emanuel government defended the deals.
As mayor-elect, Lori Lightfoot promised to revisit the parking meter deal and try to find a way to break the lease, shorten it, or sweeten the sour conditions for taxpayers.
She called it an “under saddle burr” that “rubs and rubs,” but her administration has done nothing to remove it.
“We know they call when the phone doesn’t ring like they say,” Krislov joked, paraphrasing a Randy Travis song.
Krislov got serious and said he would have been more than happy to team up with City Hall to “fight this thing”.
“Would the city council have said: ‘This is not a legal transaction. The city cannot agree to selling right of way to private parties in this type of deal. “We might have managed to get the city out of it,” he said.