Analysis: Bad Skips Worse, Goes Directly To Disaster When It Comes To Parking Meter Lease Deal

City Will Repay Meter Company Entire $1.16 Billion By Lease End

Told ya so.

When the Chicago parking meter lease deal was being jammed through the Chicago City Council in just over 36 hours in December, 2008 The Expired Meter warned how bad the deal was.

Certain provisions within the nearly one inch thick parking meter lease contract leaped out at people who actually read the document–provisions that could and would spell trouble down the road.

Alderman Scott Waguespack (32nd)  knew about this stuff too. As one of the few (if not only), city council members who actually read the lease agreement and took the time to understand it, he foresaw what would happen.

“This is right on par with what we knew would happen,” said Waguespack initially in an interview this past Friday. “Any alderman (who voted for the meter lease deal) that still says they didn’t know that this was going to happen is ignoring reality.”

But when pressed, even Ald. Waguespack admits the meter lease deal is worse than even he predicted.

“Yes,” he simply said when asked if the deal has exceeded even his expectations of failure.

City Will Give Back Entire $1.16 Billion By Lease End

With the Sun-Times report that Chicago Parking Meters, LLC has billed Chicago $14 million for contractually obligated revenue just for 2011, bad has skipped worse and jumped directly to financial nightmare.

Because if you do the calculations based on this figure, by the end of the 75 year lease term, Chicago looks to pay CPM more than the original $1.16 billion lump sum payment it received in 2008 for the rights to operate Chicago’s metered parking system.

In other words, over the length of the contract, CPM will get their entire initial investment of $1.16 billion back through givebacks  while reaping many billions of dollars in profits from Chicago drivers who pay the highest meter rates in the entire nation.

It’s simple math really.

Even if you take the 2011 figure of $14 million and simply multiply it by 73 years you get just over$1 billion. That’s billion with a B.

While this compensation revenue billed by CPM was under $6000 for 2009 and $2.1 million for 2010, realize that as meter rates go up over time, the bill for closures will rise as well.

$14 million in 2011 will inevitably grow each year and certainly be a larger number by 2084 when the meter lease deal mercifully ends.

Closures or True-Up Revenue is the main problem. True-Up Revenue is essentially any time a street with metered parking is closed or metered parking spots were unusable or metered spots were removed, the city would have to pay.

This could be for an assortment of things including street repair, utility work, private construction or even street festivals. Any time this would happen, the new lease holder, Chicago Parking Meters, LLC could bill the city for the entire day of lost revenue at those unusable metered parking spots.

It didn’t matter if the metered spots, under normal use were occupied with cars only a fraction of the day, if a spot was closed the city had to pay for 100% of the revenue for that day for as long as the parking spot was closed.

In addition, even though it looks like free parking for the majority of disabled drivers will go away soon via a bill pending in the Illinois State Senate, bills for this provision in the contract won’t go away completely either.

In other words, Chicago will end up repaying CPM the entire $1.16 billion and more it got for signing away the city’s meters for 75 years–a net loss for the city.

Alderman, Contract, Facts: Chicago Will Have To Pay Meter Company Bill

Despite Mayor Rahm Emanuel’s laughable pronouncement he won’t pay these bills, don’t believe for a second that CPM won’t get their moola.

CPM’s documentation of closures using photographs, copies of dated no parking signs, and even the city’s public database of closures will prevail in the end.

“The problem is we signed off on the document that outlined how True-Up Revenue was calculated,” says an exasperated Waguespack. “The city signed the contract and unless he (Mayor Emanuel) breaks the contract and says he’s not going to do it,  it will go to arbitration. No arbitrator is going to say the city is right in this case–there’s no way.”

Waguespack says the city has been intimately involved with the process documenting True-Up revenue from the very beginning.

“If you looked how involved the Department of Revenue has been in this process–there’s no way we can’t pay,” Waguespack explains. “It’s the Department of Revenue that calculates the True-Up costs.”

But it even goes deeper than this Waguespack says.

According to Waguespack, the same city attorneys who signed off on the meter lease deal contract four years ago are still consulting Mayor Emanuel on the contract today.

“It’s the same people who reviewed the contract for the city in the first place,” says Waguespack. “Did they suddenly have an epiphany? I don’t think he (Emanuel) realized what kind of nightmare this was.”

Even though Chicago will be paying out the nose every year for the privilege of having a company reap billions of dollars off the backs of motorists, drivers will still have the honor of paying the nation’s highest parking meter rates and bask warmly in the realization that Mayor Daley screwed them over for 75 years.

35 Responses to Analysis: Bad Skips Worse, Goes Directly To Disaster When It Comes To Parking Meter Lease Deal

  1. .Q says:

    In the immortal words of Barbie, “Math is hard.”

  2. Maybe the projected revenue losses from the parking meter fiasco are one reason that the Mayor pushed so hard to get more predatory speed cameras installed — to make up some of the losses.

  3. scott johnson says:

    Just pass a new law which essentially rescinds all parking meter fee requirements, by making meter non-payment no longer a ticketable offense. Either that or encourage the meter readers to stop reading meters. Either way, problem solved!

  4. Fredhead says:

    What I’d like to know is how much is CPM going bill the city for all those prime meters not getting fed during the Emperor Rahm’s little NATO Soiree?

  5. DoR Employee says:

    Daley screwed the city. That’s his legacy.

    And he now has a job working for CPM via a connected law firm as I believe.

  6. Dane K says:

    honestly, this is nobody’s fault but the people running this city. the “true up” fee whereby the city has to pay to permanently reclaim spots that were metered, or temporarily closed off, was blatantly spelled out in the parking meter deal. Even I, Joe Citizen, knew of it before the vote. Actually, I didn’t read anything remotely close to 1″ thick, given that we were only given 24-48 hours notice before they approved it, yet I knew, so that point must have also been blatantly pointed out in the cliff’s note version too. If you were an alderman in this town there’s no excuse if you are surprised by it, it wasn’t hidden anywhere it was right there in black and white. I’ve never understood the backlash against LAZ/Morgan Stanley, you can’t fault them for taking on the meter deal. If it wasn’t them it would’ve been someone else, the others just offered LESS $ to the city.

    To compensate for this fee, I suggested on Rahm’s citizen-idea site a way to reclaim parking spaces mid-block by moving things around and creating additional spots for metered spaces. Essentially taking spaces tit for tat, and nobody took any interest, I think the idea actually received a negative total votes. For example, there’s no reason a fire hydrant has to be in the middle of a block, which eats away 3 parking spaces, when it could be adjacent to a corner or be overlapping with say a bus stop… move the hydrant and you’ve created 3 potential metered spots by shifting everything down a bit. And yes moving fire hydrants would cost $, but this is a 75 year deal and it could be done as construction takes place for other items; if not it’s very obvious it will cost MORE than we got for it if they don’t do something *now* about the problem.

  7. Elizabeth says:

    Deeeeeeeeeelighted I moved out of Chicago years ago!

  8. Jeff Fearon says:

    I think the state of Illinois is actually helping make CPM money.

    If I recall my basic civics lesson, you can not, by contract, make someone do something illegal. Since, until recently, anyone with a handicap placard did not have to pay to park at a meter, so CPM had no right, per the state of Illinois to bill for handicap parking at a meter. But now, the smart guys running this stat recently changed that law.

    As far as closing a street for utility work, maybe the ICC can come to the rescue, along with Illinois version of OSHA. Utilities have contracted right of ways, and have the right by agreement to maintain those utilities. OSHA regs would not allow the public and their cars to enter a work zone to park. Again, something a contract can not over ride.
    Rahm, get rid of the old lawyers who agreed to this thing, let them go to work for Daley at his new employers, the law firm that represented CPM, now, befor they give youmore bad advice.

  9. Kelly says:

    Just one more reason I’m glad I don’t own a car…

  10. Robert Horwitz says:

    As Cool Hand Luke said. “What we’ve got here is a failure to communicate”

  11. Mike says:

    Here’s the real question..will Rahm get us out of the meter (Daley’s) deal? Even if Rahm won’t say it, Daley screwed us and does Rahm have the balls to undo it or at least try to. Let’s not just hear Rahm say it, as a campaign promise, but let’s see some action. I got my fingers crossed but I doubt it.

    Rahm got his speed cameras against a large uproar so if he wanted out of this deal, he could do it.

  12. Saucexx says:

    Anybody know what would happen if the city just refused to pay and refused arbitration? These aren’t bonds so conceivably the city wouldn’t get hit with a lowered credit rating. What would happen if the city just kicked CPM out?

    I still think the city should just cancel the deal and use the new parking meter rates to pay off CPM. Why we’re even messing around with this is beyond me.

  13. Pete says:

    The problem is, elected officials (the ones who actually have power) don’t WANT to get rid of the CPM deal. They are making money hand over fist on this raping of the taxpayers. What they say in public is one thing, but privately they want to keep this deal in place for eternity.

  14. Juvenal says:

    The Solution here is obvious. Katten Muchen Zavis probably billed the city a million or more bucks to review and “scrooten” that deal. In allowing it to go forward the firm almost certainly committed LEGAL MALPRACTICE and, while the firm’s malpractice insurance probably only has $50 million or $100 million in coverage, the partners of that firm are personally liable and their net worths probably exceed $1.16 billion. So…The easiest way for Rahm to get the money back is to sue Mara Georges, Richie Daley and their new law partners….

  15. Dane K says:

    from Tunney’s talking points on the meter deal, the day he voted in favor of it: “An upfront payment will be made to the City. The City will get the City Council’s approval for the proposed use of the proceeds, including a meter revenue replacement fund”

    ..the real bamboozle-ment here is they spent the billion $ + was soon as they got it. What ever happened to the “rainy day” fund we were promised to get out of it? spent. what ever happened to the fund that was to pay for the True-ups? does the true-up fund exist like Tunney said they would create?

  16. PulSamsara says:

    Let’s figure out a way to utilize what we’re left with in this fiasco.

    Perhaps issuing one free city permit per legally zoned residence and charging $30-50/mo. for others.

    Plow the money straight back into the community at the ward level – administered by a community council.

    Enough with the city’s horrible fiscal policies and the bloated patronage machine we finance !

  17. DoR Employee says:

    Think this is bad?

    Consider this point.

    Every City Vehicle with an M Plate on it has a 99% chance of being a Leased Vehicle. Leased Vehicles have an Annual Mileage Cap and a Fee for each mile over the Annual Maximum.

  18. Saucexx says:

    I guess Rahm thinks this deal is so good the Midway Privatization is back one.

    Anybody know if the the city have a recall provision? One year of Rahm is apparently enough.

  19. Chris says:

    “Katten Muchen Zavis probably billed the city a million or more bucks to review and “scrooten” that deal.”

    Zavis has been out of the firm name for close to a decade.

    “In allowing it to go forward the firm almost certainly committed LEGAL MALPRACTICE”

    Nice idea, but, um, no.

    “while the firm’s malpractice insurance probably only has $50 million or $100 million in coverage”


    “the partners of that firm are personally liable and their net worths probably exceed $1.16 billion.”

    Um, no. Firm is an LLP. Indiividuals who scrootened it *might* be subject to a claim, the rest of ‘em, no way.

    ALSO: Everyone realizes that the city can choose to *replace the meter space* taken out of service, right? Totally okay to replace the out-of-service meters with new meters. But no political willpower to do that, becuase then the immediate constituents get pissed at the alderman directly.

  20. David Cohen says:

    This deal stunk to high heaven from the beginning. Meters should never have been privatized, period… and this privatization was grossly corrupt and anti-competitive by any standard.

    The key to breaking the contract and fixing this mess, both for drivers and the city, is to expose the underlying corruption. Follow the money. Find the bribes or whatever and prosecute all parties under the Racketeer Influenced and Corrupt Organizations Act. With the elected officials who signed off on it proven guilty of corruption, the contract is nullified. Or at least CPM would be on the hook for all ill-gotten proceeds, which amounts to the same thing.

    Unfortunately, it is up to the public to make this happen.

  21. Bustinloose says:

    Strange how this parking meter deal was passed the same way Obamacare was. The City Council never had time to read the bill. It was a hurry up and pass it. Obamacare with its over 2700 pages was passed the same way. No time to review, pass it quickly. In both cases deception and liberal trickery was used. Ultimately the tax payers, you and I are left holding the bag. I’m glad I don’t live in Chicago, it may be time to consider leaving Illinois. I’ve been alive 54 years and can’t think of one thing the Dummicrats have done to strengthen this state, or the nation. They grab our liberty and our money and lie constantly.

  22. David says:

    The solution is obvious. A law which provides that any entity that operates more than 3000 parking spaces must provide an attendant within 500 yards of every parking space or pay a tax of $1.50 perd day per space.

  23. [...] what it sees as the failings of the parking deal, greeted the news with these three words: “Told ya so.” Looking at the recent bills, and doing some back-of-the-envelope calculations, the blog pointed out [...]

  24. [...] let’s take a look at this deal more specifically, with analysis from The Expired Meter: With the Sun-Times report that Chicago Parking Meters, LLC has billed Chicago $14 million for [...]

  25. chigal says:

    Walk, Bike or CTA as much as possible. Drive only when necessary.

  26. Dat phenom says:

    What the hell does obamacare have to do with this? Have you read either of the bills? No? Then keep the argument germane to those who are screwed: Chicagoans!

  27. Rahm = haRm says:

    F-bomb Rahm will talk a good game about this but ultimately will not do a thing to reverse it. He’s merely warming the 5th floor chair until he’s got enough support [read $$ from fat cat contributors] to run for president. He’s not going to do anything that might jeopardize said support from an outfit like Morgan Stanley that he’ll be counting on for cash in the future. Unless his successor – whomever that may be – wants to seriously tackle the issue, drivers in this city are screwed. Honestly, the only way to beat this thing is for people to stop parking in metered spaces, or even better, stop driving altogether. Starve them of revenue. Walk, bike, take CTA, park in garages or on sidestreets or anywhere where there are no meters. Make it so unprofitable for them that -they- want to end the deal.

  28. [...] My friend Bill Savage sent me this happy news.  By the end of the parking meter lease, the city will probably pay “fines” that equal [...]

  29. 1pbfoot says:

    Two words would solve this mess, the unfunded pension albatross, and a host of other city, CTA, Park District, CHA, and CPS liabilities…


  30. Annonymous says:

    pbfoot….that would cause more problems than it would fix

  31. [...] The Geek gives us an update on the parking meter lease deal.  Check out his blog post on the subject HERE. [...]

  32. Money says:

    Not sure if there’s any hard data yet, but based on firsthand experience plus talking with other folks I know… LOTS of people avoid going downtown in Chicago because of the crazy parking fees, which of course has measurable negative impact on business revenue in the city. I miss the days when folks were squeezing Superglue into the coin slots in protest…

  33. [...] ends up obligated to "pay back" all the cash received due to poorly structured deals — Analysis: Bad Skips Worse, Goes Directly To Disaster When It Comes To Parking Meter Lease Deal | the…) the inevitable result is insolvency. Really there is just no way to expect that all the costs of [...]

  34. Denis Drew says:

    When does $15 million + $10 million + $15 million = $15 million? When Chicago sells its parking meter system for $15 million a year — $1.15 billion all at once averaged over 75 years …
    … and the new owners sue Chicago for $15 million a year for street closings …
    … and the new owners sue Chicago for $15 million a year over handicapped parking …
    … and the new owners levy a “street tax” — raise rates across the board — which wide spread character I have to imagine adds at least as much to the take as the two fractional charges (closing and handicapped).

    Now for the really big question: If Chicago were getting the $15 million one year at a time instead of all at once — would this multi billion dollar bamboozle be allowed to continue — for one more year?

  35. Ctaylor says:

    What happened to the 1.1 billion dollars, we weren’t 1.1billion in the hole when the deal was done what happened to all the money.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>