Parking Meter Firm Bills City Another $2.1 Million

Documents Show Hidden Cost Of Lease Deal To Taxpayers

An LAZ employee documents a closure along Irving Park Road at California Ave. for Chicago Parking Meters, LLC


While Chicago’s infamous parking meter lease deal quietly celebrated its third anniversary the first week of December, the city was releasing documents chronicling more evidence the privatization of the city’s more than 36,000 parking meters turned out to be more costly for taxpayers than originally imagined.

Financial statements, released by the Chicago Inspector General’s office via their Open Chicago government transparency initiative, reveals what many critics of the lease deal had feared–the city would end up owing or paying Chicago Parking Meters, LLC millions of dollars in compensation when any sort of change or activity by the city impacts parking meter revenue for the company.

Financial statements for the company show that CPM has billed the city an additional $2,191,326 in “True-up Revenue” through the end of 2010.

As the notes from the independent auditor’s report by accounting firm KPMG LLP to the financial statements explains:

“The Company has an agreement with the City, whereby, the Company receives compensation from the City in accordance with the Agreements in the event that the City implements changes to the System, which reduces the Company’s revenues (True-up Revenue).”

These same notes reveal the city owed CPM $533,290 in True-up Revenue for 2009 and $1,658,036 for 2010.

After reviewing the documents, Alderman Scott Waguespack (32nd) who had led the fight in the City Council against the meter lease deal, is not surprised by the revelations.

“Three years later and we’re still finding costs that were more than we originally realized,” says Waugespack. “Don’t let anyone say it (the meter lease) doesn’t affect them because this (money owed to CPM) becomes part of the budget. We knew it was coming and we knew it was part of the contract but didn’t do anything to prevent it.”

Based on the company’s statement of operations, CPM is supplementing the normal revenue it derives from drivers feeding parking meter pay boxes with True-up Revenue from the City of Chicago to the tune of  2.25% of the company’s total revenue for 2010.

Waguespack puts some of the blame on the speed in which the deal got passed by the City Council back in December, 2008. Aldermen were given less than 72 hours to read, review, debate and pass the bill. That was not enough time, in Ald. Waguespack’s mind, to give the 75 year deal for $1.16 billion the proper scrutiny it needed.

“Aldermen didn’t know what ‘True-up’ meant,” said Waguespack. ”It’s taken this long for the effects of the intricate details of the contract to begin to appear.”

The city has thus far not released any information regarding this type of revenue for 2011 thus far.

It’s All In The Contract

According to the over 500 pages of contract with CPM, these events could include any situation which would require the city to remove a metered space from the system (installing a loading zone, moving a bus stop, etc.), or if a tax on metered parking is imposed by the city, or when metered parking is temporarily out of commission during a closure.

While removing a metered space is usually handled by adding another space or spaces elsewhere in the city to compensate CPM, the most likely culprit for this over $2 million is street closures.

Closure is defined as anytime metered parking is taken out of commission for a prolonged period of time due to any street work, be it to replace a broken water main, for street repairs or resurfacing or even for a street festival.

Under the terms of the lease, any time this occurs above an annual allowance, CPM can file a claim for the loss of potential revenue due to street closure.

Under the contract, the city is given an 8% annual allowance for required meter closures in the Central Business District, and a 4% allowance everywhere else. After the annual allowance is exceeded, any metered space(s) closed for more than six hours in a day or for six total hours over three consecutive days, the city must pay the meter company for the lost revenue from that metered space(s) for that entire day.

In other words, if the metered space is closed for six hours, the city is on the hook for the estimated revenue for the total number of hours the meter is in operation. Most meters are in operation no less than 13 hours a day.

CPM has teams of employees armed with cameras, clipboards and measuring wheels to document closures wherever and whenever metered spaces are involved. In fact, the company spent $273,454 in documenting and administering closure last year.

Report Confirms Meters Generating Millions In Revenue

While previous different news stories had pegged CPM’s 2010 revenues as somewhere between $65 to $75 million, the company’s own books showing a tidy sum of nearly $73 million in gross income, and $30 million in net profit–a stunning 41% profit margin.

Meter revenues generated when the city controlled the meter system typically hovered around $20 million per year.

Meter Company Spent Nearly $1 Million In Enforcement

One of the more contentious portions of the meter lease deal was the ability of CPM to hire their own parking meter enforcement staff to write parking tickets for expired meter violations.

While the fines from the tickets only enhance the city’s coffers, the meter company’s motivation for increased enforcement is to frighten drivers to always feed the meters lest risk an expensive $50 ticket.

Obviously, the company takes ticket writing seriously spending $957,701 on enforcement in 2010.

More Bad News To Come?

Since closures and other compensation events will continue to occur over the life of the 75 years of the lease, city government will be on the hook to pay CPM more money every year.

Are there more surprises from the meter lease deal still to come?

Ald. Waguespack believes so.

“This (meter contract) is a hidden cost to taxpayers,” says Waguespack. “We continue to realize additional costs or issues (due to the meter lease) that are bubbling up to the surface.”

Spokespeople for Chicago Parking Meters, LLC declined to comment for this story.

42 Responses to Parking Meter Firm Bills City Another $2.1 Million

  1. ejhickey says:

    good story. One question: I thought writing parking tickets was a function solely reserved to the City and its employees and could not be delegated to a private company. Why does CPM have the authority to issue tickets for violation of a municipal ordinance?

  2. DoR Employee says:

    One could ask that question pertaining to Ser Co contractors.

    No non-City Employee should be authorized to write Municipal Citations…Ever.

  3. Pete says:

    Imagine how many other goodies are buried in the 500+ page contract that was hastily approved by Daley’s council of rubber stamps.

  4. Bob Foster says:

    What’s the annual payment on a 1.57 Billion dollar loan with a 75 year term come to? I don’t think that the net profit figure reported is correct.

  5. glg says:

    @Bob – There is no loan to be paid back. CPM is owned by its investors (a Morgan Stanley fund of some sort). So, it would show net profits after expenses. Those net profits then become the return on investment to the investors.

  6. David says:

    How is it calculated? For example, all of the spaces on blocks of Lincoln Avenue are never used. If the City closes “five” spaces on Lincoln to fix the sewer do they have to “pay” for those five spaces? What is the relative percentage of paymnet? If the meter is “in use” for 13 hours does the City pay 13 times the hourly rate per day? The actual “lost” revenue is zero as the parkers use the already open spaces on the street.

    Here’s an idea, impose a city tax of 50% of gross revenue on any organization that charges for parking at a rate of more than free and less than $2.00 per hour or perhaps a tax of 50% for any entity that collects parking fees on individual spaces as opposed to parking lots or a tax of 50% on anyone who charges for parking outside of fenced parking lots. That doesn’t solve “all” of the problems, but it takes care of “some” of the revenue problems with the meter deal and I don’t think that the City could be “billed” for this.

  7. Anonymous says:

    Here’s a thought….

    The Leases on the City Parking Lots have paid the Organization that leased them their money back at this time.

    Revoke the concession and put Revenue back in charge of those lots.

  8. glg says:

    Hey Geek – in case you didn’t know already, Alderman Waguespack cited you in his Ward email sent on Friday in an item about this and the $13.5M bill for handicapped parking.

  9. The Parking Ticket Geek says:

    Thanks GLG!

    I didn’t know that. Thanks for the heads up.

  10. The Parking Ticket Geek says:

    EJ,

    The contract and corresponding municipal code allow CPM to hire people to do meter enforcement.

    And there is precedent. The city already has a contract with a company called SERCO to do parking enforcement. In general, SERCO people are working later hours (when DOR employees are off shift) and they also work for the City Clerk’s office enforcing city stickers.

  11. DoR Employee says:

    Mike….Ser Co is the reason why DoR are off shift after 7pm and never on duty on the weekends.

    :(

  12. unruly1 says:

    What if the city said “screw you” and charged $.001 in fines for each expired parking violation? Does anything in the contract dictate what the fine must be?

  13. jim says:

    How long is this contract? What is the annual payment to CPM? Did anyone have the time to read and understand the entire contract? Or did King Richard concoct this contract in the back room with Burke and Mell?

  14. Kathy says:

    Has Mayor Emanuel carefully reviewed everything about the parking meter deal? I’m skeptical about the Mayor’s “reaction” to the huge bill(s).

  15. DoR Employee says:

    You might have something there Unruly…

    I don’t know if there is language in the lease contract that stipulates the fine
    ” must be ” xxx$ or not.

    I’d set the fine at 5.00…. And let CPM run ragged trying to get around to all the boxes.

  16. David says:

    Precedent of a sort exists for the City not collecting a fine. I grew up in Honolulu and the State (its a State Library System) insisted that ALL fines went into the State General Fund and not the Library. So the Library stopped collecting ALL fines and did so for a number of years.

    Let’s do that in Chicago. Let’s make a meter violation say 1$. Need to park for a period less than a dollar, pay the meter box or take the chance, longer than the $1.00 and the City gets the revenue. Heck the city could even set up a “fine box” next to each parking space in which someone could place coins and turn a lever showing that they had paid the fine…

  17. patg says:

    Can’t we negate the contract as it was signed by incompetents? Maybe we should sue the city council for agreeing in the first place. If the aldermen themselves don’t know what is in the contract, they shouldn’t have signed off on it. There must be some headline seeking attorney who will take the case.

  18. DoR Employee says:

    Patg….it is really simple.

    Rahm can tear up the Lease at any time he feels like it.

    The City just has to pay back the 1.115 billion….and there is probably an Early Termination penalty fee the city would have to pay out as well.

  19. frank moran says:

    lol what do you expect when its politicians in a contract with a wall street firm,ill bet on the wall street people thankyou very much,these guys in city council cant tie there shoes let alone compete with the brain power of morgan stanley quants

  20. frank moran says:

    its really hilarious that the city is so stupid,isnt it ?

  21. frank moran says:

    i want in the parking meter privitization biz !!!!!!!

  22. SallyinChicago says:

    The lawyers need to look into the lease agreement and see if there’s an “opt out”…everybody above has asked good questions. Just shows how dumb & lazy our aldermen are.

  23. daleyFallout says:

    My concern as a resident of Cook County is, if the City can somehow pull in the larger county or State, not just city taxpayers, to pay for this nonsense. (Recently an article said that Springfield passed a bill to help bail out the CTA! That is, the entire State is paying!) The whole thing is disgrace, contract should be annulled if there was any justice; clearly the attorneys “representing” the city were not straight.

  24. Joe says:

    Is there a spot online where one could download the 500 page contract? It’d be great to see a list of what the city can and cannot do so creative and concerned citizens could work together to come up with a solution.

    It’d be great to minimize the value so much that the company sold it back to us cheaper than we bought it. For instance, decrease the need for the parking spots by building more City owned parking lots & garages from existing brownfields, vacant buildings — nothing huge and expensive, just lots of little small spaces.

    http://www.ctarealestate.com/opportunities_land.html

    http://www.cityofchicago.org/city/en/depts/bldgs.html

    http://www.cityofchicago.org/city/en/depts/bldgs/provdrs/inspect/svcs/check_status_of_vacantproperty.html

  25. David says:

    Joe says:

    It’d be great to minimize the value so much that the company sold it back to us cheaper than we bought it. For instance, decrease the need for the parking spots by building more City owned parking lots & garages from existing brownfields, vacant buildings — nothing huge and expensive, just lots of little small spaces

    My comment:

    I wonder whether, in fact, this would be a violation of the lease or whether the City would have to turn these over to Laz as well. The surface meter lots also were turned over (given, sold, leased…) to Laz at the time of the “agreement”.

    The best “solution” to minimize the cost is to change the amount of a ticket for an expired meter to $1 or $2. This would provide the city direct revenue and would dis-incentivise people from paying Laz or impose a tax on anyone who charges for parking without a “fenced” lot. This would, admittedly, take out some Wrigley Field parking operations as well and would not cover all of the Laz facilities, but it would get a lot of them. Or perhaps a tax on any parking space that does not have an attendant for at least 4 hours per day….

  26. Mark says:

    How much do you want to bet that parking meter fees go up in 2012 just so they can prove their point?

  27. sean says:

    daley and co. are scum bastards!

  28. Steve says:

    Mark -
    Rate increases are built into the “agreement”. If everyone would just look at the agreement they would see all these things for themselves:
    Table 1 – Parking Meter Fees by Type of Meter
    Parking meter classification
    2008 (existing) 2009 2010 2011 2012 2013
    Neighborhood
    meters
    $.25 thru $.75 $1.00 $1.25 $1.50 $1.75 $2.00
    Central Business
    District
    $1.00 $2.00 $2.50 $3.00 $3.50 $4.00
    Loop meters
    $3.00 $3.50 $4.25 $5.00 $5.75 $6.50

    Source: Chicago Metered Parking System Concession Agreement – Exhibit A Metered Parking System Ordinance

  29. [...] (click here to continue reading Parking Meter Firm Bills City Another $2.1 Million | theexpiredmeter.com.) [...]

  30. Privatized enforcement of parking and traffic laws, including the use of ticket cameras, is a virtual guarantee of improper enforcement and predatory behavior regarding contracts — to maximize revenue.
    The companies that get the contracts don’t give a tinker’s you-know-what about fairness, justice, safety, or ANY other consideration beyond $$$$$$$$$$$$$$$$$$.
    James C. Walker, National Motorists Association, http://www.motorists.org, Ann Arbor, MI

  31. Steve says:

    Where can I find a copy of this contract with LAZ? I have been looking online for a while now, and when I went to my Alderman’s office they only wanted to know why I wanted it.

  32. The Parking Ticket Geek says:

    Steve,

    I will post a link to the contract shortly. I’m out of town, so give me some time and I will dig it up and post it.

  33. DoR Employee says:

    Next time you go to your aldermans office…Remind them they are not allowed to ask that question…but by City Policy they are required to provide you the information you inquire about.

    And then file a Complaint with 3-1-1 While you are in the office against the Aldermans Staff and require a Reference # for the complaint from the 3-1-1 agent.

  34. [...] of a million dollars to some contractor (I can’t find this source anymore, but here‘s some good criticism of the parking meter [...]

  35. [...] How does this deal impact the city’s cycling community and its long-term infrastructure development? The answer is not immediately apparent, but there are hints in a report by the Active Transportation Alliance (formerly the Chicago Bicycle Federation), an advocacy organization striving for better biking, walking, and transit in Chicago. They note that the deal struck between the City of Chicago and the operating company, (CPM) prevents the city from affecting CPM’s percentage of the overall system. In short, if the City of Chicago wants to remove meters in one area for infrastructure improvements they must first compensate CPM by either adding additional meters elsewhere or financially compensating CPM with the potential revenue that the parking space(s) would generate over the course of the 75-year lease. Just last month, CPM billed the city for $2.1 million in compensation for displacing a number of metered …. [...]

  36. A. Castro says:

    Oh man, every time I read on something having to do with the parking meter deal, I get angrier and angrier still at the imcompetence of the aldermen who voted yes on the deal. Three years after the deal was passed, I’m still in shock as to the stupidity of the City Council. Why are taxes going up for everything in Chicago? Simple. It all helps to fund some private company instead of fixing 1 ft. deep potholes…

  37. Saucexx says:

    Some thoughts….

    The city is not going to lower parking fines, they calculated that that revenue stream was more lucrative than the meters. If only they actually read the contract………………

    The city was taking in $25 million when they sold the meters before the hourly increases and extra days and time. With all the proceeds essentially gone, the budget now has a $25 million dollar hole in it. CPM/LAZ on the other hand is indicating that by 2020 they’ll be collecting $162 million from the meters. That 1.2 billion will be paid off pretty quick, possibly as little as 15 years. The rest is all gravy, maybe as much as $8 billion in gravy.

    The city can end the lease and use the proceeds from the higher rates to pay off CPM. Somebaody should ask why the city isn’t exploring this scenario.

    I wonder how Dick “It’s only fineprint” Mell fells about this now? Can we send him the bill?

    If we got screwed this bad on the parking meters, what’s Rahm’s “Trust” going to do to us?

  38. [...] LAZ, might need to be compensated for, as they are when streets are closed down for street fests. [SOURCE: The Expired Meter, "Meter Firm Bills the City Another $2.1 million." [...]

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