Investors take in about $266M from parking meters, other city assets last year

on May7
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2019-05-07 18:28:33

Mayor Rahm Emanuel once bragged he’d made “lemonade out of a big lemon,” and would save taxpayers $1 billion over 71 years, when he settled reimbursement claims from the company leasing Chicago’s parking meters.

But the retiring mayor may want to revise that statement after seeing results of the latest annual audit of the deal Chicagoans love to hate.

Chicago’s parking meter system raked in another $132.7 million in 2018, allowing private investors to more than recoup their entire $1.16 billion investment with 65 years to go on the 75-year lease.

Four underground city-owned parking garages took in $34.1 million in 2018, while the privatized Chicago Skyway generated just under $99 million in cash, separate audits of those assets show.

Not a penny of those revenues, once a mainstay for city government, went to ease the $2 billion avalanche of tax increases imposed by Emanuel to solve the city’s pension crisis.

That’s because all three assets were unloaded by former Mayor Richard M. Daley, who used the money to avoid raising property taxes while city employee pension funds sunk deeper in the hole.

Of the three deals, the 2008 parking meter deal has been the biggest political nightmare for Emanuel, who inherited it, and for Chicago aldermen who granted that deal lightning-fast approval.

Steep rate increases would have been bad enough. Rates downtown, for example, increased from $3 an hour in 2008 to $6.50 an hour in 2013.

But broken and frozen pay-and-display boxes and overstuffed and improperly calibrated meters that overcharged motorists made it even worse.

Motorists were initially so incensed by the rate hikes, they vandalized and boycotted meters, leading to a dramatic drop in on-street parking. Parking meter revenues have since recovered nicely.

The latest financial report by KPMG provides even more proof of what a great bit of business that deal was for the private investors, who hail from as far away as Abu Dhabi.

Chicago Parking Meters LLC revenues dropped just slightly last year — by $1.5 million — to $132.7 million, the audit shows.

The city had been collecting only about $23.8 million in annual meter revenue in 2008, the last year before CPM took over the system.

Factoring in the newly reported figure for 2018, private investors have already extracted $1.2 billion from the deal, in part by refinancing twice.

That’s more than enough to recoup their entire investment. They are expected to continue to rake in an average of $60 million in annual parking meter revenues for the next 65 years.

The latest refinancing — for $900 million — was completed Jan. 30.

The distribution to parking meter investors was $49.5 million — even after the far-flung consortium spent $11.8 million to buy their way out of “derivative swaps” after rolling the dice that interest rates would continue to rise.

Buried in the contract: Daley also agreed the city would reimburse investors for every space that became temporarily unavailable — whatever the reason.

In 2012, those “true-up payments” added nearly $27 million to the parking meter company’s bottom line.

Emanuel was able to tweak that fine print in 2013, leading to a big decrease in true-up payments: $6.5 million in 2014 and $8.6 million in 2015.

But the audit shows true-up revenues that surged by 38 percent in 2017 remained relatively high last year, at $17.3 million.

Budget and Management spokesperson Kristen Cabanban had no immediate comment about the latest audit. Scott Burnham, a spokesman for Chicago Parking Meters LLC, had no immediate comment. Representatives of the entities leasing the garages and the Skyway could not immediately be reached.

When Emanuel renegotiated the parking meter deal, some aldermen claimed the mayor made the lemon more sour by swapping three extra hours of paid parking in River North and one extra hour elsewhere for free neighborhood parking on Sundays.

Results of the latest audits were provided to the Chicago Sun-Times by attorney Clint Krislov.

As the Director of IIT Chicago-Kent’s Center for Open Government law clinic, Krislov has reviewed over 50 such transactions to date, and provides an annual analysis of each year’s results.

Krislov tried to get the parking meter and garage deals declared illegal on grounds that the city can’t legally sell the public way.

He further claimed the garage deal both restricted development in the Loop and subjected the city to giant penalty payments, like the $62 million the city spent to compensate the owners of the Millennium Park and Grant Park garages for allowing the Aqua building, 225 N. Columbus, to open a competing garage.

Both lawsuits were thrown out after the Emanuel administration defended the deals.

“This is like payday borrowing against the city’s future obligations,” Krislov said.

“If the city had just hired LAZ Parking directly to do the pay-and-display system, the city would probably have $2 billion-to-$4 billion more over the course of the deal above the merely $1.16 billion it got up-front.”

Although the parking meter deal has been a political piñata, Krislov said the Skyway deal is an even more egregious example of a bad deal getting worse.

In 2015, the Skyway was re-sold to Canadian pension funds for $1 billion more than the city had received for its 99-year lease a decade before. The only silver lining for Chicago taxpayers was a $21 million fee to record the title transfer.

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