City could have gotten nearly $1 billion more for parking meters, report says
Chicago’s 36,000 parking meters were worth nearly twice as much as the $1.15 billion Mayor Daley got when he rammed through a 75-year lease in a few days without analyzing what the system was worth, the city’s inspector general has concluded.
A steep schedule of rate hikes and operational problems ranging from over-stuffed and improperly calibrated downtown meters to broken pay-and-display boxes have turned the deal into a nightmare for motorists.
(Sun-Times photos)
But Inspector General David Hoffman says the lease was a financial disaster as well.
After a five-month analysis, Hoffman has reached the “conservative” conclusion that Chicago Parking Meters LLC paid the city $974 million less than the system would have been worth to the city if it raised rates by the same amount and kept the meters for the next 75 years.
Instead of buying Daley’s “hurried, high-pressure” argument that the money was needed to fill a gaping, two-year budget gap, Hoffman said the City Council should have conducted its own independent analysis. And aldermen should have considered alternatives, such as a shorter lease with parking meter revenue divided evenly between the city and a private contractor, he said.
A 30-year lease with rate hikes 25 percent lower than those tied to the lease would have produced as much as $396 million, the report states.
“The bottom line is, there was no outside, independent consideration of whether it was a good idea to do this,” Hoffman said Tuesday, arguing that the City Council is “at fault for this as well.”
“If you’re getting a low-ball offer, maybe you still sell because you need the money. But, they didn’t even figure out what the comparative number was.”
Apparently aware that Hoffman was prepared to lower the boom, Daley launched into a vigorous defense of the parking meter lease before the inspector general’s report was even released.
Without the $150 million cash infusion used to plug a two-year budget gap, Daley said he would have been forced to lay off 2,300 city employees or raise property taxes by 18 percent.
“If we didn’t have this money, you’d better believe we’d be in the tank,” the mayor said.
Chief-of-Staff Paul Volpe, who was dispatched to the inspector general’s office to rebut the report, called Hoffman’s claim of a $974 million loss for Chicago taxpayers “ridiculous.”
“While he calls the parking meter transaction a ‘dubious financial deal,’ I would suggest to you that … many of the report’s central claims are, in fact, dubious,” Volpe said.
Noting that aldermen were briefed on the parameters of the deal in February, 2008, Volpe said, “We do not force things through City Council. … Members of the City Council had enough information … that they were willing and able to pass a budget that included $150 million in revenue from this transaction. It is insulting to suggest that the City Council made that decision irresponsibly and without the proper information.”
Running for cover from angry motorists, the Council is scheduled to vote Wednesday on an ordinance that would mandate at least 15 days of legislative review before the sale of any city assets valued at over $100 million.
Hoffman argued that’s not good enough.
He’s recommending a 60-day City Council review period — and an independent cost-benefit analysis — after lease terms have been decided, but before companies have placed their bids.
And he recommended that the mayor be prohibited from including lease revenues in the budget before the deal has received City Council approval. That’s what happened in the parking meter deal approved by a 40 to 5 vote.
“Putting potential revenue in a budget from a huge transaction that has not yet occurred makes it harder for proper deliberation to take place,” the report states.