17 ms·

Chicago sold rights to 36k parking meters for $1.2B that generate $200M per year

• mochomocha 4y ago
  Ha yes, the good old "privatize profits, socialize losses" American capitalism.
  • pengaru 4y ago
    I prefer "American Socialism", but maybe that's a tomato tomato difference.
• time4tea 4y ago
  So much to unpack. City selling things cheaply to sovereign funds. Price hikes when bought by VC for no reason (other than profit) Capture of car-centric infrastructure, which makes it less likely to turn towards zero-carbon or multi-modal space - you can park 20 bikes in 1 car space. and more....
  • krashidov 4y ago
    Very well said. What a shit show. I wonder if there was corruption involved. "Sell this thing for me on the cheap and we'll hire you in 5 years."
    • boomskats 4y ago
      That's not corruption. That's 'lobbying'.
      • garyfirestorm 4y ago
        That's not lobbying. That's 'business' /s
    • evol262 4y ago
      Count backwards. Sixty-one years left on a 75 year lease. It was in the middle of the 2008-2010 crash, and the city was facing massive budget shortfalls. They also leased Midway: https://www.reuters.com/article/chicago-parkingmeters/chicago-leases-parking-meters-for-1-16-billion-idUSN0227950220081202 https://www.reuters.com/article/chicago-parkingmeters/chicag... This is around the same time that PA tried to lease their turnpike, and cities all over the US were facing a post-boom hangover when projected revenues from permits and property taxes didn't align with budget realities. I'm not defending the decision, but it was far more shortsightedness than corruption.
      • themitigating 4y ago
        Either the public doesn't reelect you due to economic conditions probably out of your control or you do this. Democracies often force short sighted thinking because of 1. Frequent elections 2. Situations outside of your control but you are blamed by the public or attacked by the opposition for 3. Voters who may have nostalgia, emotions, and or a bad memory
        • jacobjjacob 4y ago
          People are often trying to implement and shorten term limits. But it amplifies this problem, and it gives lawmakers an incentive to line up their next job in the private sector while in office.
          • jszymborski 4y ago
            I think UK-style recall elections for ridings makes a lot more sense than short term limits.
      • deleted 4y ago
        [deleted]
      • Kon-Peki 4y ago
        > They also leased Midway That deal fell apart; it was never completed. But Chicago did lease the parking garage underneath Millennium Park to the same parking meter investor group. And that deal went bankrupt with the lease going back to the lender (who set up a new consortium which is also on the verge of bankruptcy). So basically the two parking deals have just now broken even ;) > Amid a legal skirmish with the city over the underground parking garages, the venture is in talks to relinquish them to banking giant Societe Generale S.A., which provided a $403 million loan to finance the 2006 deal, sources said. It's a sign that the investment has lost so much value with little prospect of a turnaround that the venture no longer sees a reason to own it. https://www.chicagobusiness.com/article/20130912/CRED03/130919936/investor-group-prepares-to-hand-city-parking-garages-back-to-lender https://www.chicagobusiness.com/article/20130912/CRED03/1309... > Chicago CFO Gene Saffold said the Midway Investment and Development Company, the group that successfully bid on the 99-year airport lease in September, was unable to secure financing, leading to the deal’s demise. https://www.reuters.com/article/us-chicago-midway-lease-idUSTRE53J5LS20090420 https://www.reuters.com/article/us-chicago-midway-lease-idUS...
    • ElevenLathe 4y ago
      In Chicago, there's always corruption involved.
    • pessimizer 4y ago
      It was done at the end of the reign of someone who had been mayor for 22 years, whose father had been mayor for 21 years. There aren't really any laws against corruption in Illinois unless you get both sides of a clearly stated quid pro quo on tape, and physical proof of the action and the compensation actually having occurred. It's also illegal to tape people unless they consent.
    • robotnikman 4y ago
      It's Chicago, of course there was.
    • sokoloff 4y ago
      > I wonder if there was corruption involved. It clearly said it was in Chicago and involved a Daley.
  • wrycoder 4y ago
    And what happens when a meter breaks or gets run over? Chicago fixes it?
  • throwaway5959 4y ago
    lol yeah I want to bike to the grocery store in December in Chicago, come on.
    • glaucon 4y ago
      You might be interested in this https://www.youtube.com/watch?v=URMQ0d286hY https://www.youtube.com/watch?v=URMQ0d286hY . Oulu is at least as cold as Chicago and has twice as much snowfall https://en.wikipedia.org/wiki/Oulu#Climate https://en.wikipedia.org/wiki/Oulu#Climate vs https://en.wikipedia.org/wiki/Chicago#Climate https://en.wikipedia.org/wiki/Chicago#Climate . I'm not saying that _you_ would wish to cycle in December but making it practicable for many is a choice, as Oulu shows.
      • lapsed_pacifist 4y ago
        That city has a tiny fraction of the population density, commercial activity, and industrial transport of Chicago, they're really not comparable. Transporting people and goods over large distances by bicycle doesn't scale very well.
        • dublinben 4y ago
          So now a city is too dense for cycling to work? It’s usually the other way around. Either way, cars are inherently less space efficient than bikes, because they occupy so much more road space per passenger.
          • TheGigaChad 4y ago
            [dead]
        • glaucon 4y ago
          throwaway5959 mentioned travelling to their grocery store. I'm going to guess that their grocery store is not on the other side of Chicago from where they live. How big the city is that contains the grocery store doesn't seem directly relevant to that or does it ?
  • sva_ 4y ago
    > 20 bikes in 1 car space That must be a very big car, or very tiny tightly packed bikes?
    • deleted 4y ago
      [deleted]
    • tmnvix 4y ago
      Parking spaces are big: https://www.dimensions.com/element/parallel-parking-spaces-layouts https://www.dimensions.com/element/parallel-parking-spaces-l... At 7x2.5m I can imagine 10 bicycles side-by-side with ~70cm each, with another 10 'interleaved' opposite.
  • hn_throwaway_99 4y ago
    I really wonder if there is any way to change the structure of government so that politicians are forced to reckon with some of the longer term impacts of their decisions, as opposed to "I'll be out in a couple years, that'll be future mayor's problem". Right now Austin is trying some very dubious eminent domain measures (which were pretty drastically clobbered in court) to get out of a long term lease they signed just a few years ago to have a private operator run a small separate terminal at the airport. I think it was especially braindead for Austin to ever sign that lease - we were (and still are) growing like crazy, it didn't take much foresight to think Austin would eventually need to seriously expand the airport. Of course, hardly anyone involved with the original bad decision is still on city council, so it became someone else's problem.
  • a_puppy 4y ago
    > Price hikes when bought by VC for no reason (other than profit) The company doesn't actually control the prices. See https://parkchicago.com/about/ https://parkchicago.com/about/ > The City Of Chicago retains control over pay station parking rates. CPM does not – and never has – set pay station parking rates. The City retains exclusive authority to determine and establish rates, set hours of operation, and place, add or remove metered spaces. The initial five‐year rate schedule, which ended in 2013, was approved by the City Council to align with rates comparable with other large U.S. cities. Prior to the agreement, parking rates in Chicago were much lower than the national average. Seventy percent of meters had not seen an increase in 20 years.
  • LatteLazy 4y ago
    This should be the opposite: Sell the rights. Then abolish most of the parking and replace it with bike paths. No drop in city revenue. Sorry "investors", you SOL.
• V__ 4y ago
  What I don't understand: If the city really needed short-term money, why couldn't they take out a loan against the parking-meter-system? It's extremely low-risk and in the long run the city could have keept it. This has to be corruption, doesn't it?
  • electric_mayhem 4y ago
    Why take out a loan against it when you can sell it to your buddies, or at least get some nice kickbacks? Chicago is pretty famous for corruption.
    • jjtheblunt 4y ago
      > Chicago is pretty famous for corruption. That might be an understatement of all time winner, I opine, as someone originally from there.
  • kodt 4y ago
    Mayor Daley was on his way out and only cared about the short term boost. This was his MO for years though, he took several pension holidays which the subsequent mayors have been trying to grapple with, and yet people remember the Daley years fondly because of it.
    • mdasen 4y ago
      People often don't associate the bad things with the people that caused them. They associate the bad things with the person cleaning up the mess. Daley didn't raise their taxes. The meters didn't skyrocket in price under his tenure. People rarely look for causes to things. Ah, so he didn't fund pensions so now my taxes are going up? No, it's the newer mayors who are the ones raising my taxes! Yes, if you look at the situation, he might have caused those problems, but during his tenure people probably felt better. They had more money in their pocket and weren't being told bad news. Why can't things be like they used to be? Well, turns out it was never sustainable for things to be like that and when you mortgage your future the bill eventually comes due.
  • 4y ago
• jsnell 4y ago
  The HN title says $200M, the article $136M. Where is the discrepancy from?
  • jerrysievert 4y ago
    at the bottom of the article it notes that it was updated with corrected numbers.
  • GauntletWizard 4y ago
    A very reasonable if not generous projection of where they're going to be in the next 10 years, still short of 1/3 of the way into the 75 year lease.
• TaylorGood 4y ago
  “With 61 years left on the 75-year lease, Chicago Parking Meters LLC now has recouped its entire $1.16 billion investment and $502.5 million more.” Ridiculously advantageous to the partners of the LLC, and good on them for securing this. Easily one of the best rev deals in history.. Can't knock it
  • nickdothutton 4y ago
    I was going to say, absolutely tremendous yield. Can’t cost them much to operate.
    • kurthr 4y ago
      Well, they might have to grease the wheels more than once. There's nothing to stop the city from setting a maximum rate on parking, or tickets, or recovery in court or during vehicle registration. Changing a city, county, or state ordinance/law or simply not enforcing rules is the purview of the state and mostly the executive. I guess what I'm saying is that these are long term grifts and the city could deal with it (the fleecing of their voters), but chooses not to, because they know where their bread gets buttered.
    • HDThoreaun 4y ago
      They replaced all the meters with the boxes and made an app. They also pay for all the meter maids even though the ticket revenue goes to the city. So there are definitely some expenses, but yea margins are surely crazy.
    • ISL 4y ago
      Without seeing the financial statements, that's hard to say. Source: have had visibility into businesses that look like they ought to print money reliably, but actually don't.
      • mikeiz404 4y ago
        Doesn’t the word “recouped” imply the profit was at least enough to recover the investment cost (and millions more in this case), or am I missing something?
• tiffanyh 4y ago
  States do the same with toll roads. It’s weird to think that the state Highway you drive on is owned by some private equity company. https://www.npr.org/templates/story/story.php?storyId=5695395 https://www.npr.org/templates/story/story.php?storyId=569539...
  • mindslight 4y ago
    It's "weird" because it should be straight up illegal. Anything developed with public money or eminent domain should be off the table for selling to a private entity. If private investment wants to own parking spots or highways, it can pay to create them itself. Private investment should result in development, not rent seeking on things that were already developed. Law should be fully mutable and not subject to privately owned restrictions. Any terms that have been written in to keep the city from doing things like lowering parking rates should be considered unenforceable. And since the city is no longer getting revenue from the meters, citizens should vote to eliminate the parking fees. Furthermore, most long term debts or contracts that a government could enter into should be repudiatable due to the principle agent problem - specifically the corrupt incentive of politicians to favor short term benefits and ignore long term liabilities. There should be very limited exceptions such as purely financial bonds that are voted on directly, and even those should have time limits of a few decades.
    • MikePlacid 4y ago
      > should be off the table for selling to a private entity. It’s not sold, it’s leased.
      • katbyte 4y ago
        99year leases should not be allowed
        • gruez 4y ago
          98 years then?
      • 4y ago
• diordiderot 4y ago
  This seems like one of those clear cut everyone involved should be in jail situations.
• ValentineC 4y ago
  Thought of this bit of humour when I read that: https://news.ycombinator.com/item?id=33712685 https://news.ycombinator.com/item?id=33712685 Also: https://www.youtube.com/watch?v=vLfghLQE3F4 https://www.youtube.com/watch?v=vLfghLQE3F4
• tcbawo 4y ago
  Who employs the parking enforcement officials? Does this company have a say in zoning and permitting changes and decisions? Do they have easement rights on both preexisting meters and future meters?
  • cozzyd 4y ago
    It's pain when attempting to add bus lanes or bike lanes, since that often involves removing street parking which has to be compensated somehow.
    • tcbawo 4y ago
      Yes, the details of the arrangement is the part I’m interested in. If the parking enforcement officials work for the city, what is their incentive for diligence? Does the city need company approval to add a loading zone or driveway, or do street work?
      • selectodude 4y ago
        No, but they have to recoup the money that the parking meter didn't generate and pay the consortium.
  • HDThoreaun 4y ago
    The parking enforcers are employed by the company but the city gets the ticket revenue. They enforce the city’s laws though so my idea has been to make the ticket some negligible amount like $1 so that everyone stops paying the meter in order to force the company to renegotiate. Lawyers probably thought of that though and made the contract iron tight. Here’s the contract https://www.chicago.gov/content/dam/city/depts/fin/supp_info/AssetLeaseAgreements/MeteredParking/AmendedRestatedConcessionAgreeement1st_2ndAmendments.pdf https://www.chicago.gov/content/dam/city/depts/fin/supp_info...
• cozzyd 4y ago
  Well they generated a lot less before price hikes. Ideally the city would have kept it and hiked prices, but unfortunately, high prices for street parking is politically unfavorable, even if socially optimal.
  • hammock 4y ago
    This is a really interesting counterpoint that I hadn’t considered. The fair value would be roughly somewhere between a 3x multiple of what the city could make by operating the meters (low value), and a 3x multiple of what a private operator could make (much, much more with higher prices). That is a huge range and the city wasn’t in much of a position to negotiate
  • HDThoreaun 4y ago
    Right I think privatizing parking revenue makes a ton of sense because of this political problem of people disliking the optimal parking price. That being said this deal was absolutely horrible for Chicago. My least favorite part is that now the city has to pay millions every time they get rid of a paid parking spot, so they couldn’t close streets during the pandemic.
    • cozzyd 4y ago
      Yes, it was absolutely a terrible deal. But I'm not sure it's even Daley's biggest boondoggle (like the block 37 cave...)
• paganel 4y ago
  This brings us back to feudalism. Reminds me of how princes of old used to sell the right to collect taxes on all sorts of things to the highest bidder.
• shirro 4y ago
  South Australia sold its state owned electricity grid to Chinese owners for 200 years. Every time people say our high power prices are due to renewables think critically. A "conservative" government granted the right to tax our entire population and our businesses for multiple human lifetimes, longer than our state has existed for a short term windfall that disappeared in the blink of an eye. Call it corruption, or call it mismanagement, probably neither given Australia's harsh defamation laws but privatization should be viewed with extreme suspicion. Services can often be run more efficiently in private hands but the opportunities for corruption in the sale of public assets is massive and there is rarely any accountability.
  • Teever 4y ago
    Wow, it honestly sounds like the best course of action there would be to just start a second electrical grid as crazy as it sounds.
    • mikeyouse 4y ago
      Contracts are only as good as the enforcement mechanism and in this case, the fact that it’s critical infrastructure only works in their favor. Just nationalize it, pay the existing owners some “fair value” amount for their trouble and resign to fighting a WTO lawsuit.
      • dannyw 4y ago
        ISDS, lose arbitration, get fined.
    • darzu 4y ago
      Just take it back, pay compensation. People r so scared to set a bad precedent for future business deals and yet businesses repeatedly don’t care about leveraging every advantage they have for profit over people.
    • shirro 4y ago
      Over 40% of homes have rooftop solar PV as do many businesses. It is harder for renters and low income earners. Going off grid completely is difficult and generally impractical for most people as the return on investment with storage is still questionable and the costs are high. While they can offset some costs with their own generation they, their children and grandchildren are still going to be taxed for their grid connection. Overbuilding the electricity grid would be a ridiculously inefficient and expensive task and is unlikely to save anyone money. It is a natural monopoly. The grid was originally bought by the state from private operators to support the state's industrialization and economic growth as foreign investors didn't want to help grow our economy. That was decades ago under an old-school conservative leadership that was pro-business and the interests of all and not just looking after their mates and themselves. I think we need to rethink our conception of political parties and who they represent because I question how many truly represent me.
• dopidopHN 4y ago
  The french did the same with their highway system. It’s the same, but slightly nicer and considerably more expensive. And we payed for it in the fist place. Infuriating
• swader999 4y ago
  Where's Cool Hand Luke when you need him?
  • wrycoder 4y ago
    Busy communicating.
• idrathernot 4y ago
  Do you still have to pay it? If it’s a private meter my first thought is that non-payment becomes a civil matter and in that case you likely can get away without paying. I get “civil speeding tickets” (traffic cameras) all the time in my state. I simply throw them away without repercussion because the cost of suing to collect from every individual who hasn’t paid just isn’t worth it. Not sure if it applies in this case but in my state these also cannot legally be reported to credit agencies or insurance companies. If this is not the case and the city is criminally prosecuting people (with taxpayer resources) to enforce private debts owed to the meter company, there’s a good chance a court would find the practice to be illegal. At least I hope that’s how it would turn out…
  • NotYourLawyer 4y ago
    This is where my mind immediately went too. It’d be an interesting case.
  • LanceH 4y ago
    Typically laws get passed along with them allowing for an (insane) increase in fees associated with this. So the $0.75 toll might not be worth collecting, but on the Dallas tollway, every single one of those unpaid incurs a $75 charge on top. It very quickly becomes worth collecting.
    • idrathernot 4y ago
      $75 is not enough to pay a lawyer for 1 hour to prove the company’s right to collect $75, and they have to file a new suit for each person who didn’t pay. Not to mention there is a chance of losing and having to pay legal fees for both parties after years fighting in court. It’s far more profitable for them to pocket the money from those who do pay and forget about the rest. In my case, the tickets I get are usually $150 to $350 per and there isn’t a single instance of someone being sued for non-payment.
      • LanceH 4y ago
        They tack that $75 on per unpaid toll. So you drive the length of the tollway and pick up 9 of them, that's 9x$75 or $675. Then you drive back in the evening. Do that for a couple weeks before the mail arrives.
• AlbertCory 4y ago
  (native Chicagoan, not living there now) Selling something with long-term value for a short-term lump sum is the kind of thing a politician would do. He or she isn't going to be around later, so why not get reelected now? On the other side, Richie Daley didn't have the acumen of David Bowie, who did the same thing: https://www.investopedia.com/terms/b/bowie-bond.asp https://www.investopedia.com/terms/b/bowie-bond.asp https://www.billboard.com/music/music-news/david-bowies-bowie-bonds-55-million-wall-street-prudential-6843009/# https://www.billboard.com/music/music-news/david-bowies-bowi...! Just think: who knew that parking meters would continue to throw off money? what happens when self-driving cars are cruising around and no one needs to park anymore?
  • sacrosancty 4y ago
    In the 80's, some western governments did that. People were unhappy but those economies did great. Eg. UK (Thatcher), and New Zealand (Rob Muldoon). Some of these businesses were just weird to be government owned - like a print shop. Some businesses are best owned by government and some privately. It's not just a blanket good thing that governments should ratchet their way towards communism. Natural monopolies and public goods can be better owned by government because the private sector needs competition to be efficient.
  • ryathal 4y ago
    This situation is also exactly what the rather famous Ben Franklin Quote was about.
    • AlbertCory 4y ago
      I thought maybe "the rather famous Ben Franklin Quote" was in one of those references. But no. So what is it? He has lots of quotes.
• willio58 4y ago
  It’s kind of amazing in a sick way.. cities are allowed to make such an uneducated and horrific decision without the input of their citizens in the name of short term cash, and VCs are able to basically purchase a money printing machine that relies on the city to enforce :)
• chaps 4y ago
  Yeah. And the system that's used to track the parking tickets by the city, CANVAS (IBM), cost the city over 100 million dollars alone. Currently suing for the system's database schema and our oral arguments are being brought to the IL supreme court later this month.
  • gr33nq 4y ago
    Would you mind sharing the docket number or anything similar that would allow me to follow this case? I work in government and have had similar concerns about software vendors being very restrictive with data that's paid for with public/taxpayer funds.
    • chaps 4y ago
      Here's the appellate opinion, which has a lot of the most-helpful information: https://ilcourtsaudio.blob.core.windows.net/antilles-resources/resources/5ff80f52-17df-4b2a-ba91-4b977f150c6f/Chapman%20v.%20Chicago%20Department%20of%20Finance,%202022%20IL%20App%20(1st)%20200547.pdf https://ilcourtsaudio.blob.core.windows.net/antilles-resourc...
• not2b 4y ago
  This kind of thing is basically looting: public officials making sweetheart deals, often to companies that have made generous campaign contributions, and selling public assets for far less than they're worth, allowing private companies to collect rent forever. And then the residents are stuck with some unaccountable company.
• cgb223 4y ago
  Wow only 6 YEARS of revenue for the total sale price? How much does it cost to upkeep the network? Do they expect demand for parking in Chicago to somehow decrease over time…? If this was a sale of music royalties (a “security” that loses value over time as songs get played less) the multiple for the sales price would still be much higher. Either the Chicago government is stupid or deliberately lowballing the sale in a brazen act of corruption
• karaterobot 4y ago
  Pretty dumb move. They got screwed on the terms. They should have said "$3.6 billion or 75 years, whichever comes first." A 200% return should be enough to get investors on board. What does it mean to buy the rights to parking meters? Are they buying the physical meters along with the right to collect and enforce fees on them? If the city passes a law that says "no more parking meters, we use drone enforcement now", what happens? What happens if parts of Chicago become car free zones, do the investors get to sue the city? This seems so dumb. So, so dumb.
• chrisbrandow 4y ago
  freaking privatization…
  • deleted 4y ago
    [deleted]
• perfecthjrjth 4y ago
  What a great deal for the investors with connections to the local political 'mafia'. If profit is 70% after taking away expenses, that is about $140M. $140M * 7 = $980 (7 multiples). Where can one find such a profitable business for 7 multiples?
• 1024core 4y ago
  It's corruption, plain and simple. Could Chicago use "eminent domain" to undo the sale?
• YeBanKo 4y ago
  Is it something that can get corrected, by passing a ballot measure that makes it much profitable. Like for example, limit towing and surcharge or service fee pricing?
• latchkey 4y ago
  https://brianmohr.medium.com/the-daleys-and-their-russian-deals-2aa85e8b2f4d https://brianmohr.medium.com/the-daleys-and-their-russian-de...
• Waterluvian 4y ago
  I’m guessing they’re also not allowed to outlaw parking meters?
• thatboyz 4y ago
  [flagged]
• digianarchist 4y ago
  Toronto's Highway 407 is another privatization debacle. https://www.thespec.com/news/canada/2019/09/03/birth-of-a-fiasco-how-the-ontario-tories-completely-botched-the-sale-of-highway-407.html https://www.thespec.com/news/canada/2019/09/03/birth-of-a-fi...
• euroderf 4y ago
  The fix is in.
• whywhywhywhy 4y ago
  Just safe to assume someone involved is getting a kickback on this deal.
• gcanyon 4y ago
  $200M/$1.2B = 16.67% annual return on investment. It's not that simple, since there are costs associated with collection, enforcement, etc. -- but if those costs are $80 million annually (which seems absurdly high) the return is still 10%, which is stupid good for a guaranteed investment.