The same consortium that leased the four Grant Park Garages from the city of Chicago has, it seems, successfully bid $1.16 billion for the City's on street meter revenue for the next 75 Years. This will help the city get out of a current budget shortfall, and have some money left over to help "until the economy turns around." But then we know what that means.
I'm still not sure about the long term selling, or leasing, of assets for a single price. It seems to me that the city ends up leaving a lot of money on the table. I have always believed in privatization, however I would think the deal should be participatory. The wizards at Morgan Stanley wouldn't do this if they didn't think they could get a sizable return. The parking fees on street in Chicago are going to quadruple to $1 an hour next year and then double again in 2013. The most expensive meters in the loop will be set at $6.50 an hour.
The lease amounts to about $15 million a year but it's all up front. Of course you have to know the answers before you ask the questions, but the news reports are that the meters generate about $19 million a year now, before the increases (I'm trying to confirm that number from my sources at the City.) If that's the case, did the city get a good deal?
Of course they get all the money up front, but … Let's see how accurate the number is: If there are 35,000 meters in the city that would mean that each meter generated about $542 a year or $10 bucks a week. That seems about right, I would guess.
However if the meter costs quadrupled the first year, and assuming some decrease based on market forces, next year Morgan Stanley should collect at least $57million (that's only three times the number, not four to allow for my rounding errors). I must be missing something here. Assuming no more increases (and some are scheduled) over 75 years they will collect $4.3 billion. My guess is that number will be much higher, since they will use private industry techniques and modern technology to ensure all the money is collected, plus there will be more increases. WOW
I'm sure I'm wrong – Chicago couldn't have made this big a mistake. Can someone out there help me with the math?
JVH
One Response
Yea it seems to me the better solution would of been for Chicago to begin pricing their meters at the market rate, like the private company will be doing, and collecting those additional revenues themselves. Further they would have better control over parking policy in the city. That said it might of been to politically difficult to raise prices themselves so it’s easier for the city to have a private company do it.