We’ve written about the heinous deal to sell Chicago’s parking meters for a fraction on the dollar of its actual worth more times than we can count. Most every time we do, we trot out a quote from former Mayor Lori Lightfoot, who described the sale as (we paraphrase slightly) the worst deal made in municipal governance in the history of deals made in municipal governance. We’re always happy to lead with that. We’ll probably be six feet under before we stop.
Lightfoot was, of course, right. No adjective overstates the malpractice of the deal with Chicago Parking Meters LLC, the consortium led by Morgan Stanley and including both Allianz and the Sovereign Wealth Fund of Abu Dhabi, despite some feeble revisionist attempts of late to suggest otherwise.
As regular readers know, this deal resurfaced because of the desire of those original purchasers to cash in and sell their future interests in our city streets to a private equity outfit known as Stonepeak, which has some $88 billion in assets under management. There was a clause in the original deal — the one good thing about said deal — that gave the City Council the right to approve any sale.
Thereafter, much debate ensued about how much leverage that gave the City Council. We argued it gave the council plenty, not the least being the opportunity to embarrass the bucolically named Stonepeak, which clearly had not fully anticipated such controversy when doing its risk and rewards analysis And if there is one thing we know about private equity, it’s their aversion to publicity and controversy.
The lawyer Dan Webb, hired by the original purchasers, sent out an outrageously aggressive letter designed to scare the council into simply voting yes, but some aldermen found some backbone and, it emerged Tuesday, have made a deal with Stonepeak (and, by extension, the original group led by Morgan Stanley which gets to make its sale).
The outline of that potential compromise hit the news Tuesday.
We called for such a deal to be made for the benefit of all parties. So, let’s be clear, we are glad to see one. A deal was the only resolution: Something had to be made of this tiny bit of leverage, the city is in no position to borrow in order to buy back its mistake and Webb’s letter, especially, also made this even more of a matter of principle for Chicagoans. Including us.
Stonepeak is not giving up very much. Color us not so shocked.
The Chicago Sun-Times headline referenced “tangible benefits that could chip away at the city’s $882.4 million budget gap.” We guess all benefits are tangible, kinda, but the emphasis here is on the chip. Splinter might have been a better word choice.
Here is what the city gets in the proposal: 5% of net income received by Stonepeak with an expectation of some $367.2 million. That sounds like a lot when expressed over the entire term of this deal, which runs through 2083 and thus that is the figure that has been trumpeted to the media.
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But that’s misleading. Who knows how much inflation will have eaten away by 2083, which is many decades away. By our calculations, and with some help from a friendly alder, using the annual revenue expected in the near-term, this likely will net the city between $6 million and $7 million a year.
Not much of a chipping away. Then again, not nothing.
The city also will get a $75 million transfer fee (actually by far the bigger deal), as well as an additional 2% of the sale price should Stonepeak later sell to someone else.
The progressive alders also insisted that Stonepeak sell its interest in Omni Air International, which has provided planes for deportation flights to the Department of Homeland Security. This one is pure political theater. We’d bet that owning Omni was already proving a) a pain in the neck for Stonepeak, politically speaking and b) was much less profitable than the parking meter deal. So it was not so hard for them to agree.
On its face, that part of the deal is pretty absurd. Reportedly, a whole variety of entities do or have done business with Immigration and Customs Enforcement, an arm of the federal government, from AT&T to UPS to Dell Computers to FedEx to various blue-chip management consultants, so we trust that the virtue-signaling progressive alders slapping themselves on the back have checked their cellphone provider, the name on the back of their laptop and their shipper of choice. Omni Air has nothing to do with Chicago Parking Meters LLC or the precarious financial position of Chicago.
So we’re glad for the 5% (assuming the city doesn’t spend it all at once), the $75 million check and the possibility of a 2% commission (realtors get more when they sell a condo, aldermen!).
But you know who is missing from this deal? Chicagoans who pay to park.
What, we ask, is in it for us? Where is the break on that egregious 35 cent “technology” fee added to the rates every time we park for under two full hours and use an app that now is virtually compulsory in practical terms. Where are the minor breaks for our street fairs or block parties? Where is the modest reduction in hours of paid parking?
Where, in fact, is anything for the parker who has spent and will spend hundreds or thousands of dollars lining the pockets of Chicago Parking Meters LLC, whomever cashes the check?
Anything?
Come on, aldermen. Come on, Stonepeak. Finish up.
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