Here’s a hint: the answer is no.
In a certain place and time—Chicago City Hall, 2008—a billion bucks may have seemed like a lot of dough for a few thousand antiquated parking meters.
Then Chicagoans realized that the city had also hocked its ability to control street traffic, granted police powers to a private entity, and committed to parking fee and fine increases for the next several decades.
City officials assured us that it was still a great deal because, while the city got a stack of cash up front, the long-term financial risk would be borne by the private investors.
“There are some very real risks associated with the metered parking system,” former city CFO Gene Saffold said in 2009. “The City has shifted those risks, however, from the taxpayers to the concessionaire.”
That’s right—the city outmaneuvered Morgan Stanley and the government of Abu Dhabi.
Or maybe, just maybe, the big-finance guys who plopped down all that money actually knew what was in the contract.
Which brings me to today’s Sun-Times, in which investigative reporter Chris Fusco reports on one of the many ways that the fine print helps the investors return risk to the city. That is, to us, the taxpayers.
Chicago Parking Meters, the firm created to run the parking system for the money guys, has asked the city for $13.5 million to cover the annual cost of disabled people who don't have to feed the meters.
Some of the disabled parkers are frauds, the Sun-Times notes—but most are not. And the real issue is that the contract was written so the city is on the hook in either case.
“The formula calls for Chicago Parking Meters to absorb some of that cost, based on a percentage of its annual revenues,” writes Fusco. “But, for 2010-2011, the formula capped the level of free disability parking that the company had to provide at $4.4 million—with the city’s taxpayers left to pick up the $13.5 million difference, according to documents obtained by the Sun-Times.”
To put that $13.5 million in perspective, it’s roughly $13.44 million more than the average teacher (or news reporter) earns in a year.
More to the point at hand, it’s about two-thirds of the amount—$20 million—the city was annually collecting from the meter system before the deal.
Hate to break the news, but that’s not the only risk-protection language in the meter agreement. The deal also guarantees ever-increasing revenues for CPM.
For example, if for any reason the city decreases the number or hours of meters, “then the existing system revenue will be less ... and the city will have to make up the difference in a quarterly cash payment,” according to a 2010 analysis by Standard and Poor’s.
On the other hand, if the city decides to raise rates or increase the hours or number of meters, “the concessionaire does not have to make any cash payment"—and CPM gets to keep the extra money.
The investors in this deal appear to have done their homework. They anticipated hauling in a bit more than $73 million in 2010—and the actual amount was just under $73 million, according to documents posted on the city’s website. Again, that's $50 million more than the city was able to wring out of the meters.
The company estimates that rate hikes in the coming years will boost its revenues fourfold by 2039, to $299 million annually.
Aides to Mayor Rahm Emanuel are quick to remind us—as if we’ve possibly forgotten—that former Mayor Richard M. Daley blessed us with this meter mess. Daley has since gone to work for Katten Muchin Rosenman, the law firm that the city paid $662,760 to draw up the porous meter contract. That basically means that taxpayers made a down payment on Daley’s private-sector salary.
But the door has revolved the other way too. The Sun-Times notes that CPM spokeswoman Avis Lavelle declined to comment on the disabled parking bill. That's okay—anyone with follow-up questions can catch her at the next meeting of the Chicago Park District board, to which Emanuel appointed her this spring.
The Sun-Times reports that Emanuel is fighting the disabled parking bill. Let’s hope he has better success than the rest of us when we get parking tickets.
And let’s hope he sticks with it. Earlier this year he vowed to pressure Morgan Stanley to renegotiate the meter deal. Then he backed down and said we were stuck with it.
Then he again promised he was looking into retooling it. “Know that I have people on the transition—and more than a person—working on this,” he said in April.
Then he backed down from backing down about backing down. “We are stuck with the contract,” he said in August.
Three months ago I asked the city for the results of Emanuel’s investigation into retooling the meter deal. As a government committed to transparency, they said they'd get back to me.
City Hall insiders tell me there's good reason for wanting such questions to go away: even the mighty Rahm Emanuel can't rework the deal without refunding more money to the meter investors. And most of that cash is already gone.