CHICAGO - In their failed attempt to block Bally’s $1.7 billion River West casino, downtown City Council members warned the deal was being rushed — just like the one that privatized Chicago parking meters — and that it would end up being "even worse" for taxpayers.
That dire prediction is difficult to imagine, considering results of the latest parking meter audit by accounting giant KPMG.
It shows Chicago parking meter revenues nearly back to pre-pandemic levels. After dipping to $91.6 million in 2020, they climbed to $136.2 million last year.
The increase stems from a rebounding Chicago economy and hundreds of new metered spaces at Montrose Harbor and on busy neighborhood streets created as part of Mayor Lori Lightfoot’s 2021 budget.
With 61 years left on the 75-year lease, Chicago Parking Meters LLC now has recouped its entire $1.16 billion investment and $502.5 million more.
Private investors from as far away as Abu Dhabi would have made out even better if they hadn’t brought in a new investor and borrowed $22 million at 15% to get through the pandemic. That loan was fully repaid last year.
What’s more, four underground city-owned parking garages took in $22 million, up 37.5% from the $16.2 million last year.
Thanks to higher traffic and yet another increase in tolls, the privatized Chicago Skyway generated $114.3 million. That’s a 34.7% increase in revenue and well over the $92 million in annual Skyway revenues in 2019, the year before the stay-at-home shutdown.
Not a penny of those revenues went to ease the burden on Chicago taxpayers, who had to absorb a $76.5 million increase in the city’s property tax levy after a $94 million hike in real estate taxes the year before.
The parking meters, the downtown garages and the Skyway were all unloaded by then-Mayor Richard M. Daley, who used the money to avoid raising property taxes while city employee pension funds sunk deeper in the hole.
Of those three deals, the parking meter lease has been the biggest political nightmare for the two mayors who inherited it and for Council members who gave it lightning-fast approval.
There were steep rate hikes initially, including to park downtown, which went from $3 an hour in 2008 to $6.50 an hour in 2013. It’s now $7 an hour.
Motorists were so incensed by the rate hikes, they vandalized and boycotted meters, leading to a dramatic drop in on-street parking. Revenues eventually recovered —until the pandemic.
The latest audit proves again how great the deal was for the private investors.
Though Chicago Parking Meters LLC lost a third of its annual revenue in 2020, the system still generated enough money that year to spin off a $13 million distribution to investors.
The revenue total was way higher than the $23.8 million in meter payments in 2008, the year before CPM took over the system. That’s because the mayor and City Council, afraid to risk a political backlash by raising parking meters rates themselves, chose to off-load the meters instead of hiring LAZ Parking directly to administer a city-owned system with new technology.
Investors were recouped another $6.7 million through a contract provision requiring the city to reimburse investors for every space taken out of service.
That includes temporary street closures for special events, sewer repairs and other construction projects and street closures that 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 handed over $78.8 million in "true-up" payments, as they are called.
That’s even after then-Mayor Rahm Emanuel tweaked the fine print in 2013, reducing the city’s liability by increasing the hours and days motorists pay for parking.
Factoring in the newly reported figure for 2021, private investors have already extracted $2.1 billion from the deal, in part by refinancing three times. The latest refinancing for $1.2 billion was completed in 2019.
Now that parking revenues have returned to normal, the company should end up making at least six times more than investors put in over the life of the deal.
Results of the latest audits were provided to the Chicago Sun-Times by attorney Clint Krislov. As director of IIT Chicago-Kent’s Center for Open Government Law Clinic, Krislov has reviewed dozens of transactions and provides an annual analysis of each year’s results.
"These three deals turned out to be like payday loans. They were so short-sighted. They took the quick cash, ignoring the fact that they were saddling the city with terribly structured, undervalued deals that will cost the city for decades to come," Krislov said Thursday.
"The city should have just hired a parking operator to update the technology and operate 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 and 4 billion dollars more than it has from these three deals together."
Scott Burnham, a spokesman for Chicago Parking Meters LLC, refused to comment on the audit.
Although the parking meter lease is the deal Council members and their constituents love to hate, Krislov argued yet again it "pales by 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 run the privatized highway and pocket escalating tolls were sold to a consortium of three Canadian pension plan for $1 billion more than the original price.
"Canadian pension funds spent $2 billion to buy the Skyway and it’s working fine. It would have been working fine for the city if the city had just hired an operator to run the Skyway," and collect the escalating tolls for the city, Krislov said.
Krislov tried to get the meter and garage deals declared illegal on grounds 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 after the city allowed the Aqua building, 225 N. Columbus Drive, to open a competing garage.
Both lawsuits were tossed after the Emanuel administration defended the deals.
As mayor-elect, Lori Lightfoot vowed to take a fresh look at the parking meter deal and try to find some way to break the lease, shorten it or sweeten the sour terms for taxpayers.
She called it a "burr under your saddle" that "keeps rubbing and rubbing," but her administration has done nothing to remove it.
"We know it’s them calling when the phone don’t ring, as they say," Krislov joked, paraphrasing a Randy Travis song.
Turning serious, Krislov said he would have been more than happy to join forces with City Hall to "fight this thing."
"If the city administration had said, ‘This is not a legal deal. The city cannot agree to sell the right of way to private parties in this type of deal,’ we might have been successful getting the city out of it," he said.