ALDERMAN REILLY WANTS TO BUY BACK CHICAGO’S PARKING METERS: “MY CREDIT GOOD ENOUGH TO BUY YOU OUT?”

5/14/13

42^nd Ward Alderman Brendan Reilly, who represents the part of Chicago that would be most hurt by Mayor Emanuel’s proposed deal to swap free Sunday parking in the neighborhoods for extended meter hours primarily on the city’s near north side (See my 4/30/13 post, RAHM EMANUEL AND THE PARKING METERS:   “GOT TO MAKE THE BEST OF…A BAD SITUATION”), would like to junk the whole lousy parking meter deal negotiated by former Mayor Richard M. Daley in the twilight of his (too) long tenure as mayor.

Despite Mayor Emanuel’s factual, common sense objection to undoing the entire deal, to wit,

“We don’t have the money.  We spent it prior to my coming here.  We don’t have billions of dollars,”

Alderman Reilly insists that the city’s buying its way out of the deal with Chicago Parking Meters, LLC (“CPM”) is “within the art of the possible.”   In support of this argument, he contends that “municipal bond experts” have told him so.

Yours truly does not doubt for a minute that “municipal bond experts” would tell Mr. Reilly just about anything he wanted to here, and do the same for Mr. Emanuel, if it would help them get a piece of the billion dollar plus bond deal that would be necessary to finance a legal exit from the swamp into which Mr. Daley sunk the city.   Further, such a deal might be “within the art of the possible,” whatever that means.  But such a deal is not within the realm of the probable.   Since all but a relative few dollars of the $1.15 billion that the CPM deal raised was spent by Mr. Daley, the city has little equity to support such a bond deal; the city would have to borrow 100% of the funds necessary to buy out CPM.   That would be tough…and expensive…if it could get done at all.

Even if the city could somehow sell bonds to raise the money to buy CPM out of this bowser of a deal, what would be accomplished?   The city would borrow more than a billion dollars.  It would then give that money to CPM to take CPM out of the contract.  The city would then once again own its own parking meters.  But ALL the money raised from the meters would go toward servicing the bonds used to raise the money to pay off CPM.  The city thus would realize NO revenue from the meters for a very long time, probably for at least as long the 71 years of the existing CPM contract.   And, since such a massive amount of money would need to be raised, the city would not have the latitude to reduce meter rates.  Doubtless the same “municipal bond experts,” if they were being honest rather than merely hucksterish, told Mr. Reilly that the bonds would have to include covenants dictating no reduction, and probably increases, in meter rates in order to assure the necessary revenues to service the bonds.  So what would the city accomplish by buying itself out of the CPM contract?

Put another way…

As things stand now, parking meter revenues go directly to CPM under terms of the meter deal.   If a scheme to buy CPM out of the contract were somehow put together, the city would borrow the money by issuing bonds backed by meter revenues…and probably the full faith and credit of the city of Chicago, but the latter would be subject to negotiations.  All meter revenues would flow into an escrow fund to pay interest and principal on those bonds that were sold to pay off CPM.   So parking meter revenue would still flow to CPM, but instead of doing so directly it would flow through an escrow account to the bond holders who would be collecting, with interest, and probably substantial interest, the money they paid CPM.  

The money would still wind up in the same place, i.e., with CPM, but now the city would be paying millions and millions in additional interest.  And instead of just CPM getting rich, CPM and a slew of bond underwriting firms would be getting rich.   Such an arrangement doubtless would appeal to any Chicago politician; think of all the “campaign” funds that could be extorted from the underwriters getting fat on the citizenry’s dimes, or, more properly, quarters and dollars.   But, as usual, the people of Chicago would be handing money to people who know how to befriend politicians.  

Ain’t government grand…especially here in Chicago?

The Mayor is right; the city doesn’t have the money to buy itself out of this stinker of a deal.  The best that we can hope for is to loosen the noose just a bit, as Mr. Emanuel is trying to do, with at best limited success, in his efforts to modify the CPM deal.  Again, see my 4/30/13 post.

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics.