The Meter Lease Deal – A Daley Double Part 1
Part one of a seven part series.
GEEK EDITOR’S NOTE: We are very excited to welcome former Administrative Law Officer for the City of Chicago and the author of Stick It To Your Ticket to the pages of The Expired Meter.
Mr. Zeiger, after spending 15 years neck deep in the machinations of parking enforcement for the city, seems like the perfect person to bring perspective to Chicago’s parking meter lease deal. Without further ado, here’s the first installment in Mr. Zeiger’s multi-part analysis.
By Sheldon Zeiger, JD, CFP
What a great Chicago story.
It’s the kind of saga where urban legends are made. The details will make the hair on the back of your neck stand on edge. If this tale wasn’t actually true, there is no way anyone would believe it. What a fantastic moment. We have the unique privilege of watching Chicago folklore in the making.
The business transaction itself is bizarre, truly absurd. A sitting local government, mayor and City Counsel, decide to lease the income stream from the 36,000 parking meters on the streets of Chicago. This isn’t a straight up sale, but a lease agreement for 75 years.
So let me get this straight, the streets of Chicago are like Hong Kong and Morgan Stanley is like the British Empire. As far as anyone who’s alive and over ten years old is concerned, a 75 year lease is for all practical purposes a sale.
This is not like selling the naming rights to a public building or selling a public parking lot. It’s not even like leasing a toll road, where drivers have alternative routes.
A sitting mayor and aldermen actually sold our city streets! The very streets where you I live and have no choice but to park our vehicles everyday. If this doesn’t stretch the outside of the envelope for privatization of public assets, I don’t know what does?
It’s difficult to wrap your mind around how outrageous this transaction really is. Let me help you. Why doesn’t Mayor Daley lease or sell an entire neighborhood? It’s the exact same thing. I’d like to sell Hyde Park. We could even throw in the Museum of Science and Industry and the University of Chicago.
I’m certain that we could entice a large private equity firm or perhaps the Chinese government would entertain my Hyde Park lease proposal. I’d bet that the Chinese would consider Hyde Park’s lake front, real estate potential and the tax revenue from existing businesses. I’m also confident that the Chinese would pay dearly for possession of one of our country’s finer private colleges. Could we entice the Chinese to cough up say $40 billion for this real estate and intellectual capital? If this deal works, the possibilities are endless. We could resolve Mayor Daley’s fiscal budget deficits well into the next decade, which may or may not, cover the remainder of his term in office.
On December 4, 2008, the City Council voted 40-5 to lease the city’s parking meters to Morgan Stanley. The vote was taken two days after the sale was made public and finalized. The lease agreement was disclosed to the full City Council on a Tuesday, with a vote taken on Thursday. How could 40 sitting aldermen, in good conscious, vote for such a complex transaction, without proper review? Mr. Mayor, your not even transparent with your own City Counsel, how can the citizens of Chicago trust that your being honest with them?
Morgan Stanley through their surrogates Chicago Parking Meters, LLC and LAZ Parking took possession of the meters on February 13, 2008. Under the terms of the lease agreement, Mayor Daley and the City Council have allowed Morgan Stanley to raise parking rates every year until 2013.
THE DALEY ADMINISTRATIONS PERSPECTIVE
This lease agreement, almost, makes sense in a “Chicago” sort of way. Here is what happened from the cities perspective.
According to Mayor Daley’s recollection, he had been considering this deal for a couple of years. I believe him. He’s most likely been considering this meter deal since 2005, when he sold the four parking garages, the 9,178 spaces underneath Millennium Park to Morgan Stanley for a cool $563 million. You know the parking lots we built with public funds and had all those annoying construction problems we had to pay for, a few years back. Mayor Daley calls this current meter lease deal a “concession agreement”, I call it an “unconditional surrender”. He argues that the city made an informed financial decision in accepting Morgan Stanley’s bid.
Mayor Daley blames the lease deal on the worst economy since the Great Depression. He maintains that Chicago was in such a desperate financial condition that he had no choice but to lease our streets in order to plug a several hundred million dollar hole in his city’s budget. But/For the lease deal, he would have had no choice but to increase our real estate taxes. In other words, his rational for this monstrosity of a deal is his ever present and continuing city budget deficits. I have a few questions. Hasn’t Mayor Daley been the mayor of Chicago for 20 years? Isn’t it the mayor’s job, even in times of recession, to show fiscal restraint and balance the cities budget?
So just out of curiosity, whose fault is it that the City is broke in the first place? Isn’t the city’s share of the nation’s highest sales tax of 10.25% sufficient to balance your bloated budget? Could anyone please explain to me how selling our meters at a fraction of their value in any way shape or form improves Chicago’s long term financial condition?
I’m convinced that Mayor Daley made a rational business decision to sell the meters in Chicago. Once again when I say “rational” I mean “rational” in a Chicago sort of way. Prior to this lease deal, mayor Daley was well aware that the cities parking meters only generated between $20 – $25 million per year in revenues.
Daley and the aldermen know very well where the “real” money comes from regarding the 1.4 million vehicles registered in Chicago. Parking tickets-$164 million, Red-light cameras-$40 million, City Stickers and Permits-$150 million. Add booting, towing, storage, drivers license suspensions and the revenue from the remaining city owned parking lots-$50 million plus. This comes to a whopping $400 million dollars per year. This is serious money, even for Mayor Daley and the aldermen.
So, what was Mayor Daley thinking? What was his internal dialogue?
I believe that he was saying to himself, if someone wants to pay me $1.157 billion for $20-$25 million in annual meter revenue and I’m not going to be the one who takes the heat for increased meter rates and I get to retain the $400 plus million per year in enforcement and fees. Hum, what should I do?
It took Mayor Daley, Bea Reyna-Hickey at the Department of Revenue and Alderman Ed Burke, the Finance Committee chairman about 2 seconds to make that decision. Daley simply didn’t care about the meter revenue. This would almost be funny if the citizens of Chicago weren’t the schlemiels paying for all this nonsense. I think that Daley violated the law of unintended consequences. Given his hubris, it never occurred to him that there would be such an ugly public back lash regarding this lease.
In late 2005 and early 2006, negotiations were pending between Morgan Stanley and William Daley, Jr. In effect Morgan Stanley had acquired the necessary political clout in its hiring of New York City-based public finance banker William Daley, Jr.
William Daley, Jr. is the son of Mayor’s youngest brother William Daley who happens to be the Midwest chairman of JP Morgan Chase & Co. I realize that this family connection has absolutely nothing to do with why Mayor Daley is so obviously cozy with Morgan Stanley. There is absolutely no proof whatsoever of any direct correlation between selling the Millennium Park Parking Garage – America’s largest underground parking system and the leasing of the streets of Chicago to the same financial services firm. I’ve been informed that any appearance of impropriety and any potential conflict of interest are all entirely coincidental.
The only question I have is for William Daley, Jr. William, I was wondering if “public finance” was your first or second choice as a major, in MBA School?
ABOUT THE AUTHOR:
Sheldon Zeiger is an attorney and certified financial planner practicing in Chicago.
Zeiger worked as an attorney within Chicago’s parking enforcement program since its inception in September,1990. For 15 years he worked as a hearing officer with the Department of Revenue, Parking Enforcement Division and as an Administrative Law Officer with the Department of Administrative Hearings.
During his tenure with the city he adjudicated over 100,000 parking tickets in person and by mail.
He is also the author: Stick it to Your Ticket The Unofficial Guide to Beating Your Parking Ticket in Chicago