Saturday, February 12, 2011

Wish we could do that over

Back in 2009, the City of Chicago signed a contract leasing control of its 36,000 parking meters to private firm owned by Morgan Stanley. The deal, set to last 75 years, netted the city $1.15 bllion in upfront revenue which was a significant windfall in comparison to the roughly $19 million generated by the meter system annually.

The deal drew harsh criticism from all sides. Not only was the plan announced and made law almost overnight, but many believed that the low asking price and long contract amounted to nothing more than intergenerational theft.

At the time, however, cash was desperately needed. Chicago was facing a budget deficit of $169 million, and it was projected to balloon to $400 million by the following year. And some believed that the Chicago parking meter deal was a win-win situation and marked the dawn of a new era in the P3 (public-private partnership) world.

Two years later, however, the deal is looking more like a payday loan. The government initially used part of the $1.15 billion to close the budget deficit and then set the remainder aside in what it called a “Rainy Day Fund.” Now, the money set to last for 75 years is almost gone, with only $76 million left, and no revenue stream appears ready to take its place. Furthermore, recent reports indicate that Morgan Stanley will earn more than $11 billion over the next 75 years as a result of the contract.

Chicago’s budget deficit in 2010 now stands at just over $650 millionwith mayoral candidates offering no shortage of new proposals—such as building a city casino—as ways to close the gap. In the end, this series of events seems to reinforce the discussion about incentive-driven budgets. Politicians want to keep services and lower taxes, while residents want more for less.

After years of deficits, it seems that the residents have noticed the writing on the wall. A new Chicago Tribune poll found that citizens see service cuts as a way to balance the budget. But it’s anyone’s guess when those preferences will manifest themselves in the city’s budget.

By Jay Willms


  1. This reminds me of the outgoing governor of MN making his budget look good but making it harder for the next governor. Here Mayo Daley praised the deal as he suddenly had balanced budgets but he's not running for reelection. Chicago mayoral candidate Miguel del Valle says he'll try to get it reversed in court through loophole utilization. My question then is if they can reverse it, where will they find the $1.15 billion to return the money?

  2. It is painful to see such desperate moves.