In 2008, a cash-strapped city of Chicago leased some 36,000 parking meters to a Morgan Stanley-led entity called Chicago Parking Meters LLC (you likely know it as Park Chicago on your phone) for the absurdly low sum of $1.15 billion. By about a year ago, that entity (other big investors include Allianz Capital Partners and the Abu Dhabi Investment Authority) had earned some $2 billion, mostly from ordinary Chicagoans lining up their vehicles with the public sidewalk.
That’s with another 57 years still left on the deal.
We’ve opined several times on this stunning piece of governmental malpractice and mayors subsequent to Richard M. Daley, whose crew made this monumental mistake for which we now pay a pretty price, have tried to improve the deal. They never have meaningfully succeeded. Mayor Rahm Emanuel managed to swap some things around in 2013, mostly in a revenue-neutral kind of way, adding an evening hour of paid parking to sub for free Sunday parking in some neighborhoods spots, saying at the time that he didn’t want churchgoers and synagogue attendees to have to pay to park. But the bones of this deal from hell have survived one challenge after another.
The parking meter fiasco has been back in the news this week because that original consortium put the deal up for sale and why not? They already have made their pile.
And no doubt attracted to the potential political benefits of excising the devil’s deal, Mayor Brandon Johnson confirmed reports that the city was thinking about buying the meters back. Actually, he did a lot more than muse: we have been given to understand that the city was in fact the highest bidder in the reauctioning of its own meters, but elected not to proceed with the purchase.
We fully understand Johnson’s temptation: aside from the hundreds of millions of dollars in revenue the city is losing every year, the deal also stops the city from doing a variety of desirable civic things (such as holiday markets and other special events) because if Chicago takes away even one of the spots for longer than a few hours, a bill comes due from the meter owners.
Who would not want to be rid of Chicago Parking Meters LLC and any successors?
On the other hand, the very idea of borrowing to give this amoral crew yet more of the taxpayers’ money (well in excess of $3 billion more, we hear) is as annoying as it gets. And, as some aldermen pointed out, there was also a real danger of compounding one loss with another, yet bigger.
Chicago Parking Meters LLC played the city for fools in 2008 and there is no certainty that would not happen again.
By Tuesday, this consideration appeared moot. Johnson said that the deal had been consummated with another private entity. To our minds, the city’s exit from the game (no doubt with private equity players) was the best call. The best part of the orange — your orange, Chicago taxpayers — already has been squeezed for the most juice, likely explaining the sale.
The future brings big revenue risks, not the least of which is the growing number of retail vacancies in some sections of downtown, where it is costliest to park, along with the coming of Waymo and other self-driving vehicles likely to impact parking. For a city on the brink, the price was too much to pay.
But we’ve not heard the last of this. There is a provision in the 2008 contract giving the city the right to approve (or presumably reject) any sale. Given our longtime disdain for this deal, our first impulse would be to suggest City Council simply refuse to play ball: you’ve gotten enough, the august body could say, and all you deserve now is obstruction.
But that of course would lead to litigation and we cannot imagine any court looking favorably on a city’s pique.
But that doesn’t mean the city has no leverage here. At a minimum, some of the egregious true-up costs could be eliminated and better terms negotiated for when the city legitimately needs to take meters out of commission for the benefit of Chicagoans. We’d like to see the absurd 35-cent fee (which came in with the app) for parking for less than two hours go away; that’s pure profiteering at this point and the new owners would have no meaningful technology costs. And we’d like to see some new agreements on unanticipated force majeure events such as the COVID crisis; Chicago Parking Meters did not give the city a meaningful break. Also, the city has some enforcement cost when it comes to parking; the new owners should be swallowing that. We could go on. This might be the last point of leverage for a while.
Of course, what nobody is really talking about is what would happen to this deal if the city should prove unable to meet all of its obligations in the future and the state of Illinois decides to allow some kind of insolvency for its biggest municipality. Perish the thought, especially if you have, or expect to have, a city of Chicago pension.
Based on our several conversations, there are enough variables to make a definitive expectation of what would happen to the parking deal if that were to happen. As a closed loop with its own revenue, the meter arrangement might end up in a lockbox outside of any restructuring. Or, if one sees what has been happening in the courts with Puerto Rico’s long-running restructuring as a precedent, the new owner could find itself fending off other creditors hungry for parking cash.
Suffice at this point to say that the new owners of the meters have a vested interest in keeping Chicago healthy, which should mean negotating some new, fair terms in return for City Council’s approval of the deal. Better to give a little milk now than lose the whole cow.
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