Scales added that after this bait and switch, the original 6 percent Abu Dhabi "entity" reduced its stake by roughly half after Tannadice got involved. According to my math, that still makes Abu Dhabi– based investors at least 30 percent owners of Chicago's parking meters. God knows who the other real owners are.
Now comes the really fun part — how crappy the deal was for other reasons.
To start with something simple, it changed some basic traditions of local Chicago politics. Aldermen who used to have the power to close streets for fairs and festivals or change meter schedules now cannot — or if they do, they have to compensate Chicago Parking Meters LLC for its loss of revenue.
So, for example, when the new ownership told Alderman Scott Waguespack that it wanted to change the meter schedule from 9 a.m. to 6 p.m. Monday through Saturday to 8 a.m. to 9 p.m. seven days a week, the alderman balked and said he'd rather keep the old schedule, at least for 270 of his meters. Chicago Parking Meters then informed him that if he wanted to do that, he would have to pay the company $608,000 over three years.
The bigger problem was that Chicago sold out way too cheap. Daley and Co. got roughly $1.2 billion for seventy-five years' worth of revenue from 36,000 parking meters. But by hook or crook various aldermen began to find out that Daley had vastly undervalued the meter revenue.
When Waguespack did the math on that $608,000 he was going to be charged, he discovered that the company valued the meters at about 39¢ an hour, which for 36,000 meters works out to $66 million a year, or about $5 billion over the life of the contract.
"When it comes to finding a figure for the citizens of Chicago, they say the meters are worth $1.16 billion," Waguespack said shortly after the deal. "But when it comes to finding a figure to cover Morgan Stanley, they say they're worth, what, $5 billion? Who are they looking out for, the residents or Morgan Stanley?"
The city inspector at the time, David Hoffman, subsequently did a study of the meter deal and concluded that Daley sold the meters for at least $974 million too little. "The city failed to make a calculation of what the value of the parking meter system was to the city," Hoffman said.
What's even worse is this — if they really needed the up-front cash, why sell the meters at all? Why not just issue a bond to borrow money against future revenue collection, so that the city can maintain possession of the rights to park on its own streets?
"There's no reason they had to do it this way," says Clint Krislov, who's suing the city and the state on the grounds that the deal is unconstitutional.
When they asked why the city didn't just do a bond issue, some of the aldermen say they never got an answer.
"You'd have to ask the mayor that," says Colon.
But the most obnoxious part of the deal is that the city is now forced to cede control of their streets to a virtually unaccountable private and at least partially foreign-owned company. Written into the original deal were drastic price increases. In Hairston's and Colon's neighborhoods, meter rates went from 25¢ an hour to $1.00 an hour the first year, and to $1.20 an hour the year after that. And again, the city has no power to close streets, remove or move meters, or really do anything without asking the permission of Chicago Parking Meters LLC.
Colon, whose neighborhood had an arts festival last year, will probably avoid festivals in the future that involve street closings.
"It's just something that's going to be hard from now on," he says.
In the first year of the deal, Alderman Hairston went to a dinner on Wacker Drive near the Sears Tower (now the Willis Tower, renamed after a London-based insurer), parked her car, and pressed the "max" button on a meter, indicating she wanted to stay until the end of that night's meter period. She got a bill for $32.50, as Chicago Parking Meters LLC charged her for parking overnight.
"There are so many problems — I've had so many problems with them," says Hairston. "It tells you you've got eight minutes left, you get back in seven, and it charges you for the extra hour. Or you don't get a receipt. It's crazy."
But to me, the absolute best detail in this whole deal is the end of holidays. No more free parking on Sunday. No more free parking on Christmas or Easter. And even in Illinois, no free parking on days celebrating, let's say, a certain local hero.
"Not even on Lincoln's birthday," laughs Krislov.
"Not even on Lincoln's birthday," sighs Colon.
Wanna take Lincoln's birthday off? Sorry, America — fuck you, pay me! And here's the last very funny detail in this whole business. It was the grand plan of CFO Volpe to patch the budget hole with the interest earned on that big pile of cash. But interest rates stayed in the tank, and so the city was forced to raid the actual principal. In a few years, the money will probably be gone.
"We did have a big hole in the budget," admits Colon. "But this didn't fix the problem. We might still have the same hole next year, and then where will the money come from?"
Bizarrely, a month and a half or so after this deal was done, a gloating Mayor Daley decided to offer some advice to the newly inaugurated President Obama, also an Illinois native. He told Obama he needed to "think outside the box" to solve the country's revenue problems.
"If they start leasing public assets — every city, every county, every state, and the federal government — you would not have to raise any taxes whatsoever," he says. "You would have more infrastructure money that way than any other way in the nation."
And America is taking Daley's advice. At this writing Nashville and Pittsburgh are speeding ahead with their own parking meter deals, as is L.A. New York has considered it, and the city of Miami just announced its own plans for a leasing deal. There are now highways, airports, parking garages, toll roads — almost everything you can think of that isn't nailed down and some things that are — for sale, to bidders unknown, around the world.
When I told Pennsylvania state representative Joseph Markosek that someone had been pitching the Pennsylvania Turnpike to Middle Eastern investors, he laughed.
"No kidding," he said. "That's interesting."
Markosek was one of the leading figures in killing Governor Ed Rendell's deal to sell off the turnpike, but even he didn't know who the buyers were going to be. He knew that Morgan Stanley was involved, but that was about it. Mostly he just thought it was a bad idea on general principle. "It would have been a bad deal for Pennsylvania," says Markosek. "There's a lot of speculation that the governor would have just taken that lump sum and used it to balance the budget this year, because he has a significant problem with the budget this year. But that would have left us with seventy-four more years on the lease."
The reason these lease deals happen is the same reason the investment banks made bad investments in mortgage-backed crap that was sure to blow up later, but provided big bonuses today — because the politicians making these deals, the Rendells and Daleys, are going to be long gone into retirement by the time the real bill comes due.
Welcome to life in the Grifter Archipelago.
From the Book, GRIFTOPIA by Matt Taibbi. Copyright © 2010 by Matt Taibbi. Reprinted by arrangement with Spiegel & Grau, an imprint of The Random House Publishing Group, a division of Random House, Inc. All rights reserved.
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