8/12/2010Chicago, Illinois Ripped Off By Parking Meter Lease
Morgan Stanley estimates $9 billion in profit from Chicago, Illinois parking meter lease deal.
By The Expired Meter
In December 2008, the city of Chicago, Illinois leased for 75 years its 36,000-space parking meter system to Chicago Parking Meters LLC. This firm, which is owned primarily by Morgan Stanley Infrastructure Partners, made a one-time, $1.16 billion up-front payment for the right to collect meter revenue for the life of the deal. By next year, Mayor Richard M. Daley will have spent the entire payment shoring up the budgets for 2010 and 2011.
As different studies and analyses of the much debated lease deal were released and brought to the notice of the public over the past eighteen months, the Daley administration scoffed at them, if it did not belittle them outright. Each time a major study made news, Chicago's chief financial officer, Gene Saffold was trotted out to extol the benefits and reiterate what a great deal the city got with that $1.16 billion payment.
Chicago's Inspector General report, Alderman Scott Waguespack's analysis, DePaul Professor H. Woods Bowman's figures, Illinois Public Interest Research Group's study, news analysis from the Chicago Reader's Mick Dumke and Ben Jorvasky, and of course The Expired Meter, all came to the same conclusion: the city of Chicago drastically undervalued its parking meters.
Now even the new lessees of Chicago's parking meters, Chicago Parking Meters LLC agrees they really got over on Mayor Daley and the city according to a report by Bloomberg News. Looking over memorandum from Chicago Parking Meter's recent attempt to secure a $500 million bond, Bloomberg found that the company estimates, at a minimum, it will bring in $11.6 billion in meter revenues -- and over $9 billion in profits -- over the 75-year life of the lease.
That is over ten times what Chicago Parking Meters paid the city back in December of 2008 when it cut a check to the city for $1.16 billion. Oddly, up to now every other independent valuation of the deal has been off by at least 50 percent. Waguespack's crew, which generated the highest value estimate, figured it at as much as $5 billion.
But what does the city say now? It trots out CFO Saffold to defend the deal once again. Detailed coverage of Chicago motoring issues can be found at The Expired Meter.