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Here's more detailed breakdown of the original concession deal https://reason.org/commentary/setting-the-record-straight-on-1/ https://reason.org/commentary/se

Here's more detailed breakdown of the original concession deal https://reason.org/commentary/setting-the-record-straight-on-1/ https://reason.org/commentary/setting-the-record-straight-on... The deal is lot more complex than just a lump sum in exchange for 75yr lease. By the stated face-value, the $1.16b for 75 years splits to some $16m/yr. Previously, the city was reported to be making some $19m/yr from the parking fees. However, it seems that in present value terms such revenue stream should have been compounded to a larger present amount. Reasonably, Chicago could choose to just raise the parking fees at any future point (with some political repercussions). This also would have changed the deal calculations. The fact that CPM raised the prices and the residents have no choice but pay them only proves this. The deal is quite involved with some limit terms, infra expenditures, and other provisions. Each piece was likely evaluated in dollars to present it to both sides as fair value. Is it really a fair deal to city residents? It seems that the popular sentiment is that it is not, even after so many years since it was signed. I guess, no one has reasonably presented to the public an alternative to not having the deal. Or perhaps, other municipal fees like more speed cameras, zoning, and good old property tax increases have further muddied the fairness outlook.

mattmaroon 3y ago
Here’s the question: how much would you pay for an annuity that gave you whatever CPM is going to get out of this? If it’s more than $1.16b then you could say the city got a bad deal, but I just don’t think it is. I think it’s likely less, though that’s basing it on this article which is not well-written. 75 years is a long enough time horizon that you could consider the stock market “risk free”. It has never not performed way better than this annuity in that time period, and if it did, it would probably mean something so terrible happened that the money doesn’t matter (or maybe doesn’t exist) anymore. Add to that the fact that Chicago very wall may go bankrupt and default on this. The city already got their billion. There’s a lot less risk the stock market (or take your pick of many alternative places to park a billion) goes to 0 and again if it does, we’re probably talking America having collapsed so the money doesn’t matter anymore anyway. I just don’t see any reasonable set of mathematics where this wasn’t a good deal for the city. And yeah, people don’t like it because it’s costing them more at the meter and 95% of people don’t understand finance or math and they’re really mad that their city is going a poor job of fiscal management. If it weren’t this problem, the city would have had to do something else to raise or save a billion and they’d be mad about that instead.

mattmaroon 3y ago

Here’s the question: how much would you pay for an annuity that gave you whatever CPM is going to get out of this? If it’s more than $1.16b then you could say the city got a bad deal, but I just don’t think it is. I think it’s likely less, though that’s basing it on this article which is not well-written. 75 years is a long enough time horizon that you could consider the stock market “risk free”. It has never not performed way better than this annuity in that time period, and if it did, it would probably mean something so terrible happened that the money doesn’t matter (or maybe doesn’t exist) anymore. Add to that the fact that Chicago very wall may go bankrupt and default on this. The city already got their billion. There’s a lot less risk the stock market (or take your pick of many alternative places to park a billion) goes to 0 and again if it does, we’re probably talking America having collapsed so the money doesn’t matter anymore anyway. I just don’t see any reasonable set of mathematics where this wasn’t a good deal for the city. And yeah, people don’t like it because it’s costing them more at the meter and 95% of people don’t understand finance or math and they’re really mad that their city is going a poor job of fiscal management. If it weren’t this problem, the city would have had to do something else to raise or save a billion and they’d be mad about that instead.