Today’s Headlines

  • Finally, Emanuel Will Allow Aldermen to Opt Out of Free Sundays (Sun-Times)
  • Aldermen Are Skeptical That Meter Deal Reboot Is Saving Drivers Money (Reader)
  • More Coverage of the Navy Pier Flyover (Tribune, Sun-Times, WGN)
  • Active Trans: Speed Cams Are a Huge Success. Now City Should Lower Tolerances
  • After Several Ped Fatalities on Devon, Cops Crack Down on Distracted Driving (DNA)
  • Pawar Surveys Residents on How He Should Spend Menu Money (DNA)
  • Melrose Park Plans Improvements to Broadway Corridor (Columbia)
  • Streetsblog Contributor Anne Alt Reports on National Bike Summit (Kevenides)
  • Gallery: Fading Winter on the Lakefront Trail (LGRAB)

Get national headlines at Streetsblog USA

  • Anne A

    Given the typical density of ped traffic across Devon and the recent fatalities, better enforcement on distracted driving is a VERY good thing.

  • R.A. Stewart

    Agreed. And I hope we’ll eventually see better enforcement, or more accurately *any* enforcement, elsewhere.

  • ohsweetnothing

    Haven’t clicked on the Reader link yet, but let me guess which Aldermen are skeptical…

  • No Ur Fax

    The Reader has no shame about trying to confuse facts and rampant speculation and conspiracy theories.

  • Karen Kaz

    I hope the future Devon Ave. streetscape plans help with safety in this area as well. I currently live right off Devon in West Ridge and I think it would greatly improve the district if more space and priority were given to pedestrians and transit. (Some Divvy stations would be nice, too!)

  • ohsweetnothing

    Yeah it’s frustrating sometimes, because there are legitimate reason to hate the meter deal and legitimate problems with TIF and legitimate problems with public education in this City…but it’s all framed by the Reader as “[insert mayor here] hates real Chicagoans and every initiative launched is solely to fatten his pockets or make a teacher homeless!”

    I can’t be the only one getting fatigued by this.

  • Does anyone care if the new meter deal saves drivers money? I never knew that was a problem anyone had with the deal. My only real objection to the meter deal is that it’s revenue the city could use. In fact, one thing i’ll credit the meter deal in doing is increasing the cost of parking, adding a disincentive to driving.

    Taking a wild, far-out view of the meter deal, I wonder if driving could ever become so costly that CPM regrets it. 75 years is a long time and quite a bit could change. Who’s to say that in the next 20 years gasoline prices don’t become near cost prohibitive to everyday driving? (With the rapid urbanization in China and, maybe one day, India, it’s not the most unrealistic scenario) I don’t know if it makes sense considering the long term risk taken on by CPM as a benefit to the city. But, it’s just something crazy to think about on a rainy day…

  • cjlane

    “Aldermen Are Skeptical That Meter Deal Reboot Is Saving Drivers Money”

    Who ever believed that it was about saving drivers (at least directly) any money? It was *always* about reducing the amount the city had to cough up for various shortfalls–which, if you think about it, “saves drivers money”, so long as the aggregate cost of parking is flat.

  • ohsweetnothing

    Beat me to it, but I think your first paragraph is spot on. Absent the meter deal, do you think there would have (ever??) been the political will to raise parking rates in the City?
    I will say that I know people who don’t quite grasp the impact of privatizing the meters (the real problem imo) but hate the meter deal only because it raised prices.

  • CL

    Yes, we should care. Money that goes to the company is money that leaves the Chicago economy — if drivers spend more on parking, they’re spending less on goods and services, and paying less in sales taxes. If that money were going to the city, it would be fine, but high parking costs aren’t in our interests given the deal.

  • rohmen

    Raising prices more than the City itself would be able to was always one of the strongest privatization arguments, but the City so undervalued the meters in the deal that this whole thing has become a joke.

    And I don’t see how CPM could come to regret this sweetheart deal. They only paid the City 1.2 billion, and they’re already making $132 million a year four years in. In light of those numbers, the money paid to the City is going to be recouped in under 10 years. I highly doubt that the need for parking in this City is going to evaporate anywhere near that fast; even with the increasing cost of gas.

  • ohsweetnothing

    Don’t we get a share of the annual meter revenue as well? Though I don’t know the split, and I don’t know how that compares to how much we brought in annually before the meter deal…

  • Fred

    I’ve been saying the same thing for awhile. Remember what cars were like in 1935 compared to today? That’s how different cars are going to be when this deals ends. No one can even speculate what a car will look like in 2085. One thing is for sure; it won’t be fossil fuel powered. It’s entirely possible that street parking won’t even be necessary by then so CPM could end up holding the bag on a worthless asset.

  • rohmen

    What do they care if they’re left holding a worthless asset by 2085 if they’ve already made 10x what they invested for said asset by that point??

  • Kevin M

    Chicagio, I’ve had that same wonder/fantasy, but sadly, I concur with rohmen, CPM has already seen a strong ROI in just four years and this trend shows they’ll see much more than their cost–even after future inflation adjustments to the value of the dollar.

  • Kevin M

    I sort of agree with rohman here for their reason plus this: the value of holding control over the public way is inherently a powerful asset, even in a car-free/less city.

  • Fred

    I, too, tire of the I’m-against-xxx-project-because-someone-might-get-rich argument. What’s the alternative? The government can’t just shut down because somebody who know’s somebody might get a piece of the action. Come up with a way to stop the practice or just accept it as a cost of doing business already!

  • Kevin M

    Does anyone know the CPM contract enough to answer this question: I believe there are revenue guarantees for CPM. So, if someday car use drops enough in Chicago so that parking revenues significantly fall, is it possible that the City would have to pay CPM the difference?

  • Fred

    That’s a good point. Does anyone know how much money they’ve made so far and when their expected break-even point is?

  • BlueFairlane

    Now, that’s a huge concern. Chicago may wind up subsidizing a parking company decades after people have stopped wanting to park.

  • Deni

    I agree with you completely, but my friends who drive seem to only bitch about the cost of meters, not the real problems with the meter deal. Trying to explain to them that meter parking price (which I think is still too low) is still a great deal is like banging my head on the wall.

  • Fred

    I think CPM also paid for the conversion to the electronic meters, so they’re more than $1.2b deep, but your point is still valid. The only good thing about them making a lot of money now is that once they’ve recouped their investment, it might be easier for the city to get out of the contract. The city would only have to work out a settlement for lost future revenue as opposed to paying back the initial investment.

  • But the higher prices act as a disincentive to drive. When people drive less, they become richer having money to spend elsewhere in the city. Maintaining auto oriented infrastructure costs far more to the city than lost revenue to the meter deal. In a perfect world, the city raises meter rates, discouraging driving, while simultaneously getting the parking revenue.

  • Edit: Skyrefuge found a financial statement. All the figures below are wrong.

    That $132m figure is revenue, though, right? Anyone know what their profit is? I ran a simple IRR calculation and, if that is their annual profit, assuming their profit grows 1% each year, their annual rate of return is 12%.
    A few things…
    – That’s a really nice return but, not totally gangbusters
    – If they had to pay for the electronic metering infrastructure, that would lower their return.
    – Their costs also rise over time so it’s probably not correct to assume that their profit rises 1% every year.

    Edit: Just to give you an idea, US 10 year bonds (assumed risk-free rate of return) returned about 5% over the same period of time. So that really is a nice return but it’s not totally crazy.

  • skyrefuge

    Search for CPMFinancialStatements2012.pdf (the link is broken, but Google’s cache still has it). It’s hard to know what to include in the “profit” calculation, but I would say that all their “real world” operational expenses (the stuff a non-accountant would consider an expense) seem to run in the ballpark $25m per year.

    It’s also likely that the investors in CPM were looking for an investment with a significantly different risk profile than the stock market, and are willing to accept less-than-stock-market returns for it.

    But yes, you’re right that you definitely can’t look at it as “once they’ve collected more than $1.2b in profit, they’ve won”. They have to collect significantly more than that to make up for what their $1.2b could have been earning all those years if it had been invested elsewhere.

  • I agree. If i had to guess, i bet CPM would be perfectly content getting 5% annually for their money. While this deal deserves criticism, i wish there were a few alderman who would take a basic finance course and learn about the time-value of money before opening their mouths.

  • Thanks for the info… So everything i posted above is complete wrong.
    Assuming they have a stabilized income of $30m, increase 1% every year. For an initial purchase price of $1.151b, their annual rate of return is about 3%.

  • rohmen

    EDIT: I admit calculating rate of returns is not my specialty, but I’ve seen articles suggesting a much higher ROR than 12%. http://theexpiredmeter.com/2010/09/the-parking-meter-fiasco-part-2/

  • Yeah, the person writing that article needs to learn some basic information about cash flows. You can’t just add up a series of amounts over time and say, “that’s my return”.

  • ohsweetnothing

    The City would not in that scenario. The City is on the hook for changes in revenue due to adjustments to the actual system (spaces), but changes in car use would be on CPM. This is probably why the City is slow to move on the whole Sunday parking issue. They got burned on this when they removed rush hour parking restrictions years ago…which you would think would have INCREASED parking revenues but this is where I start to get lost.

    So tell everyone, if you really want to screw over CPM, encourage more transit, biking and ped friendly investments!

  • Cameron Puetz

    CPM has already their money back, so anything at this point is gravy. Whatever happens down the road, they’ve still made enough for this to be a very good investment, and the contract shifts many future risks to the city. CPM won’t regret this deal.

  • Shlabotnik

    How long it did it take them to make their money back?

  • cjlane

    “CPM has already their money back”

    This is false.

  • cjlane

    “my friends who drive seem to only bitch about the cost of meters”

    I’m (at best) a fake internet friend, but I drive and I *LOVE* the increased rates. Makes it possible to park all sorts of places where there was no street parking available before.

    I *HATE* the financial deal tho.

    However, it’s not like the mayor and the aldermen would have taken on the heat for raising rates this much, so thinking “the city could have had all this extra revenue” isn’t really being honest about it.

  • cjlane

    It ain’t that low. But it also isn’t 11-12% *now*, either.

  • I don’t know where else to get info but in 2011 & 2012, their net profit was $28m & $27m, respectively. So with an initial investment of $1.15b. 3% is right. (again, that’s with just the information available on the one financial statement that’s available.)

  • cjlane

    Yeah, I agree that, based on the numbers reported by a private company, as required by the terms of a totally unfair contract, the current return looks that low.

    CPM contemplated, in 2010, levering up with $500m of debt at ~5.5%, which makes me doubt that (even tho they didn’t go thru with it) the net profit w/o the leverage was that close to the cost of contemplated financing.

  • skyrefuge

    The guy who wrote that is a moron and clearly knows less about finance than even all us commenting in this thread. The final comment on that story attempts to do a more sensible calculation based on his numbers, and comes up with a 12.7% annual return over the life of the contract.

  • DontShootMessenger

    I’m just fatigued by the corruption. May we could start by getting rid of that.

  • skyrefuge

    No, according to that doc, they DID lever up in 2010. $600m of debt at 5.489%. So their ~$20-30m profit numbers Chicagio is citing includes $34m in interest payments each year. Net operating income in 2011 (which excludes the debt payment) was $62m. In 2012 it was $55m, and would have been $89m if not for the one-time charge Rahm got out of them. That makes their forward-looking net income per year (including debt payment, excluding the one-time charge) around $55m. With $1.2b-$600m=$600m of their money in the game, that’s $55m/$600m=9.2% per year.

    Link is working now: http://www.cityofchicago.org/content/dam/city/depts/fin/supp_info/AssetLeaseAgreements/MeteredParking/CPMFinancialStatements2012.pdf

  • ohsweetnothing

    Agreed, but inaccurate news articles and editorials aren’t going to help.

  • cjlane

    There we go–that makes sense. (but you are calculating the irr wrong–you can’t count the leverage to reduce equity, but not count the cost of the leverage–the actual return for ’12 was (using your income numbers) 21/556 (orign $$ was 1.156B, not 1.2) 3.78%, or 9.89% (!!), ex the one time charge).

    What I found (quickly–ie I read the first relevant result, and didn’t go further) stated that they had *contemplated* the debt, but pulled it back.