Rahm’s Parking Meters 2013 – City keeps paying, CPM keeps getting more revenue

Looking back to the transcripts of the December 2008 parking meter deal it becomes evident how quickly our city and future generations were sold out by our government. Unfortunately, nothing in Mayor Emanuel’s amended meter lease (passed on Wednesday, June 5, 2013), is going to change the long term financial strain on the taxpayers, residents, small businesses and visitors. Yet, with the same tenor that we heard back in 2008, we were told “it’s easy to vote no” there are no consequences. To the contrary, a yes vote exacerbates the negative consequences of this ill conceived and poorly executed lease amendment will not end with its financial implications, but also extend to sever limitations on the City’s ability to manage its on-street parking spaces or in general, implement basic urban planning.

The City of Chicago’s 2008 lease of its parking meters has been an unmitigated financial disaster for the residents of this City. This asset lease was sold to the 2008 City Council as a financial boon that would insulate the City from the fiscal strains associated with start of the Great Recession, but in a short time it was discovered this lease would continue to siphon off public resources for generations to come.

Faced with trying to mitigate the losses from this deal, one would assume that increasing the number of metered parking spaces controlled by CPM and lengthening the meter hours would be the last thing the City would want to implement. Yet, this is precisely what Mayor Emanuel and the 39 City Council members have has done as part of the amendment to the lease passed on Wednesday, June 5th. Simply put, they have expanded the private sphere’s power over our public way and guaranteed CPM millions of dollars in additional annual revenue. We reject the premise that accepting an expansion of this failed deal is a way to improve it.

The Mayor’s amendment has two primary components: First, a settlement of an overstated $1 billion bill from CPM. Second, “Free Sundays” in exchange for valuable meter spaces and times throughout the City with a Pay-By-Cell package.

The first component of the Mayor’s amendment is significant in that a few years of true-up bills were audited and the bills were reduced. The 2008 contract called for the City to develop estimates of this true-up revenue but neglected to do this until late 2012. From 2009 to 2012, CPM developed their own true-up revenue estimates and bills to the City quickly escalated from $1 million in 2009 to $20 million by 2011 and it became evident that the City was ill-equipped to manage the lease agreement and refute the bills. The Mayor finally stopped paying the bills, announced that they would challenge their validity and thus the two sides ended up in arbitration starting in late 2012.

As the arbitration played out, the City finally compiled actual utilization data and developed its own model for true up. When it became clear that CPM was unable to justify the exorbitant true-up revenue bills, CPM agreed to settle two year’s worth of true-up revenue payments for $8.9 million rather than the $ 49 million it had initially billed.

In aldermanic briefings, when alderman requested all arbitration related documents between the City and CPM, Mayor’s staff claimed they were confidential and Attorney Client Privilege. Aldermen would not be able to see the memos or any view of what really happened in the arbitration proceedings. This

further diminished the Mayor’s position about transparency as well his position that the City was going to lose arbitration, especially while he simultaneously claimed victory in the face of a billion dollar loss. The confidential, attorney client privilege stance calls into question who the city corporation counsel represents.

In order for the Mayor’s claim that he is saving the City $1 billion to be accurate, one must assume the following: 1) the City’s true-up revenue model was invalid, 2) the arbitration would have gone entirely in favor of CPM, 2) the City would pay over $25 million in true-up every year for the remaining 71 years of the lease and never challenge another true-up revenue bill or go back to arbitration. The fact the City was required to create the true-up revenue calculations in the first place, would have been a strong advantage for the City to come out ahead of the arbitration based on the City’s calculation. If this was this exercise on the “Mayor's strength,” and he was committed to “fight until he had no air left,” you have to believe the City had another advantage to win in arbitration. We also discovered that in April 2013 CPM wrote-off these overstated revenues in their 2012 audited financials which led us to believe the City’s calculations were now correct.

The Mayor and his team do deserve credit for their hard work on challenging the overcharges the City was receiving from CPM. But the Mayor should have stopped and allowed the city Council to vote 50-0 on his true-up revenue audit. As my colleague Alderman John Arena stated, CPM was “like a vendor contracted to perform work for one price who then sends a bill for ten times that amount. As anyone would, the Mayor sent that bill back and said that we wouldn't pay it. Good for him, and good for the city he serves. But just as I could not call a client and say, "See how much money I have saved you," we can't call that [$1 Billion] "savings." It was never due and payable.”

The second component of the Mayor’s amendment is a proposal to exchange metered parking on Sundays for extended metered parking on all other days with three additional hours in the River North neighborhood and one extra hour in all our neighborhoods. The Mayor refers to this second component as “Free Sundays,” but there will not be nothing free about it.

The City is compensating CPM for the ability to disable the meters on Sundays by giving it these extended hours. Despite the Mayor’s and Navigant’s figures suggesting this exchange as revenue neutral to the City, our own in depth analysis revealed that the private company’s revenues will come out ahead by millions of dollars per year…again.

Mayor Emanuel’s repackaged deal ignores the important urban planning concept of why metered parking exists—to manage the availability of on-street parking spaces by encouraging turnover for small businesses. Consider your neighborhood bakery or boutique that may do a large percentage of its weekly business on Sundays and customers are quickly in-and-out of their business. Making the parking meter spaces nearby this business free, all day Sunday, will decrease the likelihood that its customers will be able to locate an available space nearby and business owners run the risk that customers move-on and shop elsewhere. Prior to the 2008 meter contract with CPM when the City had control of the parking meter system and could properly adjust pricing, our neighborhoods saw the benefits of turnover versus clogging the spaces all day with parked cars.

We know small businesses are critical to our neighborhoods. We know it is important when drastic changes are made in our City, to talk to the people and understand the impact it will have on them. However, the Mayor forced through this Sunday swap without any meeting any local businesses or Chambers of Commerce. Ignoring the poor urban planning policy inherent in this proposal amendment, the Mayor said “Sunday should be a day when folks are freed from the grasp of the parking meter company” but failing to look out for small businesses and the neighborhoods has insisted that people, “deserve a day of rest from the parking meters.

The two other components of the new deal were Pay-By-Cell and the additional parking spaces CPM would add and secure more revenue for CPM.

The Pay-By-Cell portion of the Mayor’s amendment was fraught with misconceptions, and inadequate responses to serious questions about the finances and privacy concerns with individuals personal data. These include the security of users information and the lack of any research or financial analysis provided to us by the Mayor’s office.

Because the Mayor’s administration failed to deliver all data, it is unknown the impact of the additional parking spaces CPM would lease. This includes 828 reserved spots and another 983 concession metered spots.

What was stunning about the Navigant analysis was failing to add the additional millions of dollars in potential profit on Pay-By-Cell and the additional parking spaces CPM would lease.

During the Aldermanic briefings and public hearings in May and June, it was clear to all that the deal could be split in half, allowing for a True-Up vote and a separate vote on the Mayor’s Free Sundays. Several Aldermen signed on to a substitute ordinance we authored in order to allow for the split. Unfortunately, the vote went 14-5 in opposition to the substitute. If, as the Mayor’s office administration insists, the Sunday swap is essentially revenue neutral, CPM would have easily walked back to the table and agreed to a deal that addressed the true-up revenue component and the trade-off between Sundays and extended hours separately. Even the Chicago Tribune editorial board weighed in on this specific issue: “We think the aldermen should test that. Amend the agreement to remove the meter swap and send the city's negotiators back to the company. Emanuel's team makes a solid argument that it has knocked down what appear to have been inflated penalties and reduced taxpayers' obligations in the future. But the meter swap could be a much better deal for CPM and a worse deal for motorists than the city realizes or represents. Free parking on Sunday isn't an emergency. Neither is a pay-by-phone option. If CPM doesn't want the deal without those elements, that probably tells us something. If they're really not linked to the rest of the contract, it ought to survive just fine.”

Aldermen took the floor at last Wednesday’s City Council meeting generally speaking favorably of the mayor’s challenge of the overcharges. But many Aldermen repeated the sins of the past by delving into areas they could never understand nor wish to. As was mentioned, some argued the NO vote was the easy way out, and that once again, Aldermen should just do what the Mayor says. Unfortunately, that is what puts this City into trouble over and over again. Whether it is because members can’t read or

understand the documents put before the Council, or when there is a wall set between the executive branch and the legislative, the taxpayers lose.

Aldermen had asked for an independent analysis. Some aldermen argued that the Navigant study (hired by the Mayor’s office in a no bid contract) was a great step toward independence. This begs the question of what makes a qualified independent analysis and who should perform it. Some aldermen have been asking since 2007 for an independent budget office (IBO). The Mayor’s administration secretly selected a private firm (aldermen and the public were unaware) and allowed them access to all the meter data and models (including revenues) on May 24 that we alderman requested on May 16. Aldermen were told on May 24 that the data we requested to make decisions was not available. Navigant received the crucial data we aldermen asked for at least ten days before aldermen received it. Mayor Emanuel boasted 30 days was plenty of time for alderman to decide. However, the clock should have started once aldermen had all of the data and all of the questions answered. Even internal supporting data was changed during public presentations just days before the vote, further complicating the analysis. Receiving final data sets after the private contractor did, and only three days before the vote repeats what we tried to avoid in 2008.

This is disingenuous to the taxpayers and voters who we represent and far from transparent.

Eleven aldermen voted no for varying reasons. Two groups of aldermen signed onto letters asking for more specific answers. Our Progressive Reform Caucus document can be found here, with the Mayor’s answers. Fifty may have voted for a deal that was straightforward and actually worked for Chicagoans. The new deal goes too far and does nothing to end the disastrous parking meter deal and straightens the path for future privatization deals. But Mayor Emanuel’s approach to this deal is his decision and we will live with it.

Under Rahm's new agreement, the public will continue enriching private investors.

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