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City Hall’s $57.8 million folly: Clout firms profit on parking-garage fight, taxpayers on the hook

City Hall is now suing over $57.8 milliarbitratiruling favor private investors who took over four city-owned parking garages downtown Chicago

City Hall is now suing over a $57.8 million arbitration ruling in favor of the private investors who took over four city-owned parking garages in downtown Chicago for allowing this competing parking garage to open at the Aqua building, 225 N. Columbus Dr.

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Updated: April 25, 2013 7:06AM

One deal. Three Daleys.

Any way you do the math, it adds up to one costly mess for Chicago taxpayers, even as firms tied to two family members of former Mayor Richard M. Daley profit.

An arbitration decision made public last week puts Chicago taxpayers on the hook for $57.8 million to the private company that runs four city-owned parking garages downtown.

The costly ruling stems from steps Daley’s City Hall took that benefited a client of attorney Michael Daley, the mayor’s brother, according to hundreds of pages of documents involving the parking-garage case.

It culminates a series of events that began when the city agreed to allow Standard Parking, Michael Daley’s client, to operate a 1,288-space parking garage that opened to the public in May 2009 at the Aqua tower, 225 N. Columbus Dr. That’s a block away from city-owned garages operated by Chicago Loop Parking LLC, controlled by Wall Street financial services giant Morgan Stanley, where the former mayor’s nephew William Daley Jr. works.

Allowing the competing Aqua garage to open violated terms of the $563 million, 99-year privatization deal that Daley pushed through in 2006 with Chicago Loop Parking, the company complained. Under its deal with City Hall, Chicago Loop Parking operates the city-owned Millennium Park, Grant Park North, Grant Park South and East Monroe Street garages. It can charge what it wants and gets all revenues from the 9,178 spots in the four garages.

Chicago Loop Parking invoked its right to take its complaint to closed-door, binding arbitration and won.

William Daley Jr. started working for Morgan Stanley months before the Chicago City Council approved the garage privatization. He had no role in the deal nor in the separate, 2008 deal that turned over Chicago’s parking meters to another Morgan Stanley-controlled business, according to the company.

The younger Daley, who is the son of former White House Chief of Staff William Daley, was involved in a failed effort by Morgan Stanley in 2011 to privatize public parking in Pittsburgh.

Executives of the parking-garage company have said they would not have offered anything near the $563 million price tag to take over the garages if the city hadn’t agreed to bar any new public garages from opening in an area bounded by East Wacker Drive, Harrison Street, Lake Shore Drive and State Street.

But even though the Daley administration agreed to the non-compete clause, it issued a permit on May 1, 2009, to allow public parking at Aqua.

Within months, Chicago Loop Parking complained that the new garage was cutting into its business, urged city officials to revoke the permit and sought $2 million in compensation from City Hall.

On Aug. 28, 2009, city officials informed Standard Parking — operator of the Aqua garage — that its permit had been “issued in error” and would be revoked.

But Standard Parking’s lawyers — from Michael Daley’s firm, then known as Daley & George — fought the revocation, city records show.

In February 2010, Mayor Daley’s aides replaced the Aqua garage’s permit with an “accessory garage license.” The license allowed people to park there if they were going to the building or anywhere inside the surrounding 43-acre area known as “Planned Development 70,” bounded roughly by Wacker Drive, Michigan Avenue, Randolph Street and Lake Shore Drive.

That move was unprecedented, according to the arbitrators’ ruling. Had City Hall instead gone according to its usual practice, the accessory license would have allowed only drivers who live, work or stay in a hotel in the 82-story Aqua building to park there.

Signs went up announcing that the Aqua garage was open to anyone visiting 32 buildings within Planned Development 70.

The Daley administration told Chicago Loop Parking the problem was taken care of.

But the arbirtrators concluded that “the Aqua garage has continued to accept parkers from the general public.

“After the city issued the ‘accessory’ garage license to the Aqua in February 2010, the city informed CLP that the Aqua’s public parking license had been ‘canceled,’ and CLP thought the issue was resolved,” the arbitrators’ Jan 14 ruling states. “But a few weeks later, the city acknowledged that it had not ‘canceled’ the license after all but asserted it had issued an ‘accessory garage license’ that ‘clearly eliminate[d] any claim” for compensation for future lost business.

The $57.8 million judgment — about 75 percent less than the $200 million Chicago Loop Parking originally sought — was finalized Feb. 25 and covers any past or future losses. The city has 90 business days to appeal, but its deal with Chicago Loop Parking says arbitration decisions are final.

Michael Daley and his longtime law partner, Jack George, ended their business relationship recently. Michael Daley’s firm is now called Daley & Georges, for new partner Mara Georges, who was the Daley administration’s top lawyer when the Aqua dispute began. Jack George continues to represent Standard Parking at his new firm, records show.

George, Michael Daley, the former mayor and representatives of Chicago Loop Parking and Standard Parking either declined to comment or did not respond to calls or emails.

At Aqua, signs limiting parking to visitors of Planned Development 70 are still up, though a visit last week found no one checking. The “early-bird special” at Aqua is $13 — $1 cheaper than at Chicago Loop Parking’s nearby Millennium Park garage.

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