The $1.16 billion deal that privatized Chicago’s parking meters has been the gift that keeps on giving for private investors, who have long since recouped their investment and raked in $150.9 million in additional revenues last year.
But, the widely despised 2008 agreement could get $120.7 million worse thanks to a risky scheme authorized by former Mayor Lori Lightfoot.
Determined to reduce or eliminate so-called “true-up” payments that required the city to compensate Chicago Parking Meters LLC each year for meters taken out of service, the Lightfoot administration came up with a way to use the pandemic to its advantage.
It called for the city to reclaim 4,011 parking spaces at a time when the stay-at-home shutdown had dramatically reduced the value of those spaces, then give 2,646 of those spaces back to CPM two months later — but retain 1,361 parking spaces for the city.
Project manager Ben Davidson devised the plan to “remove and add back parking spaces in a strategic way that would add value to the system,” according to an independent arbitrator’s ruling against the city.
“Davidson was aware that the scheme would have a long-term impact on CPM’s revenue stream, as the city would retain 1,361 spaces and the revenue generated by those spaces. … In deciding which spaces to ‘flip,’ Davidson focused principally on maximizing the financial benefit to the city,” the ruling states.
“He acknowledged in his deposition that these actions would reduce the aggregate revenue value of the concession. Davidson understood the plan carried a risk that CPM would sue the City.”
Chicago Parking Meters CEO Dennis Pedrelli sent a letter to Lightfoot’s Chief Financial Officer Jennie Bennett on Nov. 18, 2021, underscoring that risk.
“The current values at which the city has designated the spaces for conversion do not reflect the actual values of those spaces both historically and going forward. Should the city subsequently convert the spaces back to concessions spaces, the potential economic harm to the concessionaire and thus the city’s exposure, could grow exponentially,” Pedrelli wrote.
“Either of these actions could materially decrease the market value of the Concession, both immediately and over the long-term. They may impair the current revenues generated from the system and also imperil the value of the Concessionaire’s investment and relationship with third party stakeholders, including investors. … CPM is evaluating the full potential economic consequences of the City’s action. But it is apparent that the actions would give rise to rights in favor of the Concessionaire to additional relief.”
The Lightfoot administration forged ahead “notwithstanding this explicit warning.” That triggered a legal battle that saw the company’s expert peg its losses at $321.5 million and the city’s own expert acknowledge a $120.7 million loss to private investors.
The arbitrator found the city expert’s estimate “more reliable.”
Bennett did not return repeated phone calls. Lakesha Gage Woodard, spokesperson for the city’s current CFO, Jill Jaworski, had no immediate comment.
Civic Federation President Joe Ferguson said the meter deal “screwed Chicagoans” so badly, it’s “not surprising that there is a continuing endeavor to try to figure out how to mitigate its effect.”
So Ferguson doesn’t fault Lightfoot for trying to “make lemons out of lemonade,” as former Mayor Rahm Emanuel once put it.
“The problem is that we tend to lose almost every time we try to push the envelope,” Ferguson said.
The scheme should have been cleared with both the Law Department and the company, he said, adding that $120.7 million is “a lot of money at a time when we don’t have it.”
With 59 years left on the 75-year lease, Chicago Parking Meters LLC now has recouped its entire $1.16 billion investment and well over half a billion dollars more. The latest audit shows $150.9 million in parking meter revenues last year, up from $140.4 million in 2022.
The parking meters, the downtown garages and the Skyway were all unloaded by former Mayor Richard M. Daley, who used the money to avoid raising property taxes while city employee pension funds sank deeper in the hole.
Of those three deals, the parking meter lease has been the biggest political nightmare for the mayors who inherited it and for the City Council members who gave it lightning-fast approval.
There were steep rate hikes initially. The metered rate for parking downtown, for example, went from $3 an hour in 2008 to $6.50 an hour in 2013.
Motorists were so incensed, they vandalized and boycotted meters, leading to a dramatic drop in on-street parking. Revenues eventually recovered — until the pandemic.