After a rocky start hurt their bottom line, Chicago’s new parking meter operators are raking in more than $1.1 million a week and expect even more revenue next year, according to internal company documents obtained by the Chicago News Cooperative.
The parking meter company projects total revenues of more than $75 million and net income of about $58 million in 2010, after a second round of rate increases go into effect across the city on Jan. 1. In the first 10 ½ months of operation ending Dec. 31 of this year, the company expects $32.7 million in net operating profit, for a 70 percent profit margin.
Financial experts who reviewed the data say Chicago could have made out much better in the long run had it just kept the meters. The private company, Chicago Parking Meters LLC, paid the city $1.15 billion in February for the right to reap all parking fee revenues for 75 years. Under the deal, rates immediately quadrupled at most of the city’s 36,000 meters.
The source that provided the documents to a reporter said the parking lease value was a matter of great civic importance and the company’s profits should be made public. But the source wished to remain anonymous for fear of retribution from the private meter company or the city. The Chicago News Cooperative verified the authenticity of the documents.
The glimpse into the meter company’s books rekindles the debate over whether Mayor Richard M. Daley’s long-term lease of the system was the wisest approach for Chicago taxpayers.
“Had we done this ourselves, it could have made a lot more money,†said Alderman Scott Waguespack, one of the dissenters when the City Council took a quick 40-5 vote in favor of the deal. “It was too easy for the mayor to give it away and get the quick shot in the arm.â€
Another of the naysayers on the Council, Rey Colon, said this week that the parking meter company’s own numbers showed that aldermen should have raised parking charges and kept the money that the increases would have generated.
“At this rate, it was a great deal for the parking meter company,†he said. “I don’t know if it was a good deal for the city. We should have just bit the bullet and done it ourselves.â€
Mr. Daley heatedly disputes accusations that he mortgaged the city’s future, calling the deal a godsend for Chicago’s finances. The mayor also says that he would have been forced to raise taxes or cut services to balance the budget if not for the windfalls generated by the parking meter lease and the $1.83 billion privatization of the Chicago Skyway toll road four years ago.
“The people own the asset to be used today for this generation of people and not for 2050,†Mr. Daley said soon after the Council’s parking meter vote last December. “Our responsibility is to help the generation right now.â€
Also benefiting from the parking deal are investors in Chicago Parking Meters, the venture led by New York-based Morgan Stanley. Avis LaVelle, a former press secretary for Mr. Daley who works as the company’s spokeswoman, said the company officials declined to comment on the freshly revealed documents.
The financial records were compiled by LAZ Parking, which runs the system for Chicago Parking Meters. The firm’s figures show that the private parking effort was not generating as much revenue as anticipated in the first months after the Feb. 13 turnover of the parking meters from public hands.
According to the meter deal’s income statement for May 2009, revenues for the month were about 20 percent below projections. At the same time, expenses were far over budget, mostly for “supplemental staffing.â€
The company has acknowledged that it did not have enough workers to deal with the turnover, which was marked by widespread technical problems. Many meters became choked by the high flow of quarters needed to pay the new, higher rates.
To quell public and local political discontent, the company scurried to speed the replacement of meters with new “pay and display†machines that accept credit cards, further driving up its first-year costs.
Revenues began to rise after the rate increases were fully instituted at meters across the city in early June.
The early revenue numbers also fell short of expectations because the meter company voluntarily suspended writing tickets — as the deal with the city allows it to do — on March 21. That move was intended to allow the firm to focus on solving the technical problems.
Because the company is not writing tickets, it seems many Chicagoans are getting away with parking for free. A company audit of a section of the North Side found 41 percent of occupied spaces filled by motorists who were not paying, according to the company records.
Now, however, the parking company wants to resume writing tickets. The meter company “has notified city of desire to get enforcement back into effect,†the documents show.
City officials declined to comment when asked this week about the company’s plans to return to writing tickets. A spokesman for the Daley administration’s Revenue Department said the city could not comment on internal parking company documents.
City workers have continued to write tickets, and Chicago still keeps the fines, regardless of who issues the tickets.
Last year, before the privatization and the rate increases, the city reported parking meter revenues of almost $24 million. This year, despite its rough start, the parking meter company has received revenues of almost $35 million through October and expects to hit a total of about $46 million between Feb. 13 and the end of the year, the records show.
Examining the parking company’s numbers so far and its 2010 projections, financial experts said they expected that private investors would be happy with the deal.
“There is little doubt they will recoup their investment in a relatively short period of time,†said Dennis Enright, an investment banker who specializes in privatization deals for NW Financial in Jersey City, N.J.
Mr. Enright added that the Daley administration got about as much as it could have from a private bidder, given the economy. But he said the city’s taxpayers would have been better served by holding onto the system.
“The value the city could have captured was probably double what they got,†he said.
Like Mr. Enright, the economist Roger Skurski calculated the current value of the deal. Mr. Skurski said his conservative estimate was that “the city could have earned about $670 million more by keeping the asset.â€
“They left some serious money on the table,†said Mr. Skurski, an emeritus professor of economics at the University of Notre Dame in South Bend, Ind. “Sure, they got the money up front and plugged their budget hole, but on every other score, the city did not get a good deal.â€
Even without the benefit of revenue data from the private company, the city’s inspector general had issued a report in June asserting that the true value of the parking system to the taxpayers could have been more than $2 billion.
Some critics suggest that the city back out, but Mr. Daley has said that the deal has been a good one. In any case, the vast majority of the money that the company paid his administration will be spent within a couple of years of the deal’s approval.
The Daley administration will use up more than $400 million from the deal by the end of this year. Under the mayor’s proposal for next year, which the Council will vote on Dec. 2, almost an additional $600 million will go toward balancing the budget for 2010.
Alderman Waguespack said it was too easy for the mayor to give the meter system away “for a quick shot in the arm.â€
“Now they’ve burned through that,†he said.
The alderman recently introduced a measure that would require an “independent third-party valuation†of major asset lease proposals before any future privatization deal is completed. The legislation would require “a comparison of public retention and private leasing over the life cycle of the agreement.†Only 12 of the Council’s 49 other members have signed on as co-sponsors.
The city’s $2.5 billion deal with a private company that wanted to take over Midway Airport recently fell through, but the mayor remains eager to revive that effort. And he has met with consultants who have suggested other assets that the city could lease, with speculation swirling around the future of Chicago’s water system.
Before entering into the parking meter deal, the city hired a consultant whose confidential report suggested the lease could generate $650 million to $1.2 billion for the city.
The report was not disclosed to the public until after the check from the winning parking meter bidder cleared. Officials say revealing a consultant’s valuation analysis before a deal closes would hurt the city’s chances of getting the best possible deal.
