Two parking meter deals are worse than one | Bleader

Friday, May 31, 2013

Two parking meter deals are worse than one

Posted By on 05.31.13 at 07:36 AM

Mayor Rahm Emanuel has worked to lock the parking meter privatization in place
After winning the mayor's office on a promise of reform, Rahm Emanuel vowed to rework or undo the city's parking meter privatization deal, one of the enduring legacies of the insider politics of the Daley era.

"I have people on the transition—and more than a person—working on this," Emanuel said. "I have some ideas and we're exploring them."

Two years later the City Council is scheduled to take up the result of those explorations—a revised meter agreement forged by Emanuel's staff. But far from scotching or significantly retooling the deal, the new agreement would essentially kill the possibility of meaningful changes for the next seven decades.

Instead, the private company that now owns the meters would be further insulated from legal challenges and financial risk, while you, the public, would continue to pay ever-higher rates to enrich investors half a world away.

Emanuel and his aides have made three key claims about their new meter deal. None of them quite holds up.

Claim one: The new agreement will save taxpayers $1 billion over the next 70 years.

That might end up being true—with emphasis on might, because it's not likely, and there's certainly no way of knowing for certain.

As Chicagoans may recall, the City Council rubber-stamped the original meter deal 40-5 even though it included all sorts of hidden costs. In particular, every time the city removes a meter or changes its hours—whether because of construction, free parking for the disabled, a neighborhood festival, or a NATO summit—the city is obligated to compensate Chicago Parking Meters LLC, the private firm that now owns the system. The payments are called "true-ups."

Soon after he took office, Emanuel received a bill, then another and another—amounting to nearly $49 million over two years, more than twice what the city was collecting from the entire meter system before the privatization deal.

The mayor vowed to contest the bills, declaring, "I do not treat the city taxpayers as an ATM." The city went into arbitration with CPM and its attorneys from the powerful law firm Winston & Strawn.

So intense was the battle that last December "the parking meter company reached out and said, 'We want to talk peace,'" according to Steve Patton, the city's corporation counsel.

In subsequent negotiations—held behind closed doors—CPM agreed to drop its claims to about $9 million, or $4.5 million a year. City officials say the arrangement will save taxpayers $20 million a year, or about $1 billion over the life of the deal.

Unfortunately, that's far from a sure thing. Under the new agreement the city still has to pay the company every time spaces are blocked off or hours are changed—something that happens between 6,500 and 10,000 times a year.

And while the city now has access to parking data it was always supposed to have, CPM could always fight the city's true-up calculations at any point over the next 70 years, triggering further costly disputes.

Claim two: The new agreement benefits city neighborhoods by making parking free outside downtown on Sundays.

The city won this concession by agreeing to extend the pay hours every other day of the week—from 9 to 10 PM most places, and from 9 to midnight in River North.

City officials say this is an even trade, based on their analysis of a handful of spaces downtown. But other analysts doubt that assertion. The council's Progressive Caucus estimates that the public will pay CPM an additional $4 million to $9 million a year under the extended hours.

It's also worth noting that CPM and its primary investor, Morgan Stanley, have previously been accurate at predicting revenues, so there's little chance they're going to lose or break even on this exchange. They projected $73 million in 2010 revenues; the actual amount was just under that. The company expected $126.5 million in 2012; the actual figure was even better, $139.5 million. If the city outfoxes the financial analysts from CPM on this round, it will be the first time.

"Where we got into trouble before was with projections, assumptions," said Alderman Brendan Reilly, whose ward, the 42nd, will include most of the meters that have to be fed until midnight. "We later learned that most of that information was bunk."

Claim three: There's absolutely no way to nix the original meter deal, so making a few adjustments is the best the mayor can do.

As the mayor put it himself: "While we cannot turn back the clock and undo the parking meter deal, we have shown we can improve it and can certainly learn from it."

The truth is that city officials never attempted to get rid of the deal. In fact, they fought an effort to do so.

During the time the mayor was generating headlines for his vows to fight Chicago Parking Meters, he had city attorneys defending the meter deal in court alongside the company's attorneys from Winston & Strawn.

In doing so, Emanuel ensured that the meter deal would stay in place. Last November a Cook County judge threw out a lawsuit challenging the the deal, ruling there was no proof it was unconstitutional. The deal may be bad, the judge noted, but it had been approved by a democratically elected City Council, and the city still claimed to be benefiting from it.

"Unlike plaintiffs' current challenge," any suit with a chance of undoing the deal "would be brought by the City through its corporation counsel, who is appointed by the Mayor, approved by the City Council, invested with the authority to conduct all of the City's legal business based on what is the City's best interest, and in consultation with the City's elected officials," the judge ruled.

That means if the City Council ratifies the core of the meter deal again, it will be even more difficult to challenge down the road. "They're locking in a terrible deal that Chicagoans are going to have to cope with for generations," says Clint Krislov, the public-interest attorney who filed the meter suit.

Incidentally, a few weeks after the ruling, while city officials were negotiating the terms of the new agreement with attorneys from Winston & Strawn, the law firm held a fundraiser for Emanuel that netted his campaign at least $22,500, records show.

Some aldermen argue that the city hasn't explored every legal avenue for undoing the deal. Reilly says he's met with experts in municipal finance who believe the city could buy back the meters by issuing bonds and paying them off with parking proceeds.

"There are options," Reilly says. "None of them great, but there are options."

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