Thursday, May 24, 2012

Chicago Parking Meter Operator Demanding $50 Million From City

The private company that operates Chicago's parking meter assets under a 75-year lease agreement keeps sending multi-million dollar bills to the City, and Mayor Rahm Emanuel is refusing to pay all of them. The first bill from Chicago Parking Meters LLC for $14 million asked the City to reimburse it for $14 million it says it lost from street closures. A second bill for $13.5 million sought reimbursement for free parking that is provided to persons with disabled license plates or placards. Yet a third bill for $22 million seeks additional reimbursement for disabled parking. Mayor Emanuel is disputing how the private operator calculates the bills and has refused to pay all three of them, now totaling about $49.5 million. That's nearly 5% of the $1 billion, one-time payment the City received from the private operator under the terms of the 75-year lease agreement in the first three years. The private operator retains all of the revenues it earns from the parking meter assets during the life of the lease. The problem is so bad that the state legislature is now considering a state law that would bar the company from receiving reimbursements for free disable parking, which will no doubt be challenged in the courts if it becomes law. From the Sun-Times:

Mayor Rahm Emanuel’s administration had been bracing for another hefty disabled-parking reimbursement bill for 2011-2012. That third bill — for $22 million — arrived just last week, according documents Emanuel’s administration provided to the Chicago Tribune.
The mayor is refusing to pay all three bills, which total about $49.5 million, and has disputed how the company calculated them. Chicago Parking Meters has declined to respond to Sun-Times questions about the issue.
Meanwhile — in response to the Sun-Times recent “Meter Cheaters” investigation — the Illinois Senate this week approved legislation that is expected to stop Chicago Parking Meters from seeking multimillion-dollar reimbursements for providing free parking to the disabled.
Illinois law has allowed handicapped motorists to park for free in metered zones for decades. The legislation, now on Gov. Pat Quinn’s desk, would change that in 2014.
It would set up a two-tiered disabled-parking placard system that would allow only wheelchair-bound and other severely disabled people to park for free in metered spots.
The Sun-Times last year observed dozens of able-bodied people using relatives’ placards, deceased people’s placards, fake placards and even stolen placards to cheat Chicago’s meter system. A subsequent Sun-Times report revealed that taxpayers are on the hook to reimburse the meter company for drivers who use disabled-parking placards or plates to park for free.
The deal that privatized Chicago’s meter system in 2008 has been widely criticized for selling taxpayers short. Under the plan championed by former Mayor Richard M. Daley, Chicago Parking Meters was given the right to keep all meter revenues until 2084 in exchange for a $1.15 billion upfront payment to the city. Drivers have since seen sharp increases in parking rates under the deal.
I predict that Mayor Emanuel will soon announce that the City is walking away from the 75-year lease and will fight it out in the courts with the private operator. He really has no choice given how obvious the deal has proven to be one-sided in favor of the private operator. Remarkably, there was little debate when former Mayor Richard Daley brought the 75-year lease before the Democratic-controlled Chicago City Council for debate in 2008. The cash-strapped city was just anxious to get its hands on the $1 billion payment, which it immediately spent to satisfy short-term obligations. With the city receiving no share of the parking meter revenues, it simply cannot afford these annual, ongoing multi-million dollar obligations to the private operator.


Cato said...

I never thought I'd say this, but, wait, steady myself, easy there, here goes, Good Job, Rahm.

...crash, thunk, splat....

I think I picked up a nasty lump falling off my chair.

Rahm's right. The meter company uses biased and shady accounting to present a bill for annual fees.

The unscrupulous meter company knew what it was buying: x meters at x revenue, essentially 75 years of more or less the same meter use that was occurring the year prior to the sale, waivers, exemptions, street closures, and all.

If the meter company charges $15 million for 75 years, it will have billed Chicago $1,125,000,000 in annual fees, or $125 million more than the price of the sale. Effectively, the sleazy meter company will have received 75 years of Chicago meter payments without having spent a dime of its own money. This is criminal and not to be permitted at the public expense.

If Ballard had any backbone, he'd do the same with Indy's sleazy meter company.

Ellen said...

"If Ballard had any backbone...."


Gary R. Welsh said...

As you know, Ellen, I've been a critic of Indy's parking meter deal. We could have installed new electronic meters and easily recouped the money through the higher rates instead of handing control over to a private operator. Nonetheless, at least the deal was structed for a shorter term and there are intervals at which the city can walk away from it--albeit at a cost, and the city still shares in revenues. The city will need to be vigilant in watching to make sure it is not overbilled for meters taken out of commission for street repairs and special events though, which could substantially eat into the city's share of revenues. The biggest problem right now seems to be with the issuance of parking tickets, which many people claim are being issued when they still have time on the meter.

Paul K. Ogden said...

Gary, I have looked at the 10 year out provisions in the ACS -Indy parking contract. The terms are so onerous they could never possibly be used. The 10 year out provisions was simply a provision to sell the deal to the public, but I don't believe those provisions are a realistic option in practice. We'd have to claim a signficant breach and almost certainly we're looking at litigation.

Marycatherine Barton said...

I fear that Paul's prediction is right. I still can't believe that the City agreed to be saddled with this expense.

marksmall2001 said...

Also, I would like to ask: who checks the meter company's books to monitor how much the City either is due (chuckle) or owes (wince) according to ACS's calculations? I never would, and do not now, impugn the integrity of a corporate entity that has maneuvered itself into a sweetheart deal with a group of politicans and highly-placed lawyers and lobbyists. After all, corporations are people.

Gary R. Welsh said...

Agreed, Mark. I can't trust my own brother. I sure as hell wouldnn't trust anyone working for ACS. There is no concern on the part of this administration. Ballard is bought and paid for by their attorneys/lobbyists, which is a license to steal. They know Ballard has their backs and not the taxpayers.