More Parking Meters Would Help, Not Hurt, City Neighborhoods

Flamingo
Another way the city can re-earn revenue from the meters is by encouraging more people to use the smartphone app to pay for car parking as the city collects a portion of the service fee after a minimum amount. Photo: Mike Travis

It turns out that, despite Chicago’s disastrous parking meter deal, the city government can still use meters to benefit neighborhoods. During a recent discussion of Chicago’s parking challenges and their accompanying report, Metropolitan Planning Council vice president Peter Skosey and research director Chrissy Mancini Nichols told me how the city can make lemonade out of this lemon of a deal. There are a few issues that need to be resolved first, and this turnaround would require installing more meters, but that would only be a good thing for neighborhoods.

In 2008, then-mayor Richard M. Daley pushed the meter contract through City Council, where the vast majority of aldermen voted for it. The deal turned over the next 75 years of meter revenue to private investors in exchange for a lump sum payment of $1 billion, most of which Daley quickly spent on balancing the budget.

That was likely billions less than the concession was actually worth. To add insult to injury, the city is now required to repay the Chicago Parking Meters, LLC, a company representing the investors, anytime meter revenue is lost due to festivals and other street closures. (The city has started charging contractors for lost revenue when they close roads for construction.) It also means that any time the city strips metered parking for other street uses like bike or bus lanes, they must compensate CPM by installing meters of equal or better potential revenue nearby.

However, Mancini Nichols explained, the contract does allow the city to collect 85 percent of the revenue from new “reserve” meters it chooses to install. Rather than lining the pockets of the investors, Mayor Rahm Emanuel and the City Council could opt to use that money to pay off Chicago’s pension debt, or for investments in the neighborhoods.

Unfortunately, we can’t start collecting that additional revenue until CPM gets the full annual revenue promised in the contract, based on the number of functioning meters that were available in 2009. Until CPM reaches that level of compensation, the city must use revenue from new meters to “true up” its payment to CPM at the end of every year. The meter availability is called “system in service,” and the 2009 level is considered 100 percent system in service. Currently, Chicago’s meters are at 96 percent system in service, Mancini Nichols said.

Parking meters are good for businesses

If Chicago reaches 100 percent system in service, then the lion’s share of additional revenue from new meters will go to the city. That money could be reinvested in the neighborhoods it came from, in the form of transit improvements, storefront façade renovations, landscaping, and sidewalk repair, Mancini Nichols said.

In 1993, Pasadena, California, created a “parking benefit district,” as a strategy to revitalize its old downtown. To make new parking meters palatable to people accustomed to free parking, the revenue was earmarked for street furniture, trees, and events in the district. Metered parking also helped out businesses by promoting turnover of parking spaces. Since employees and shoppers could no longer hog parking spaces all day for free, more spots became available for short-term visits from customers.

“The rationale [for more meters] goes back to creating healthy retail corridors,” Skosey said. While good pedestrian, bike, and transit access to business districts should be prioritized, it has to be acknowledge that many shoppers arrive by car, he said. “If they can’t park their car, they’re going to turn around and go somewhere else.”

As part of Emanuel’s renegotiation of the parking contract in 2013, he exchanged longer paid parking hours on weekdays and Saturdays (with River North metering even longer because of its active night life) for free parking on Sundays. This approach backfired on several bustling North Side business strips in the 32nd and 44th wards. In these areas, residents would park in metered spots from Saturday night to Monday morning for free, which meant there were fewer spaces available for Sunday shoppers, Mancini Nichols said.

MPC conducted a parking study of Wicker Park and Bucktown and found many unmetered areas, right outside retail establishments, where it’s common for people to park for seven or eight hours. This is the case on parts of the the restaurant row on Division Street, west of Ashland. The Belmont business district in Roscoe Village also has plenty of unmetered spaces. Even in some parts of the Loop, the most valuable real estate in the city, you can park as long as you like for free.

Renegotiation improved the parking deal

Another change in the contract that benefitted Chicagoans was correcting a mistake that cost all taxpayers – not just people who paid to park – $25 million a year, Mancini Nichols said. Soon after the original contract was signed, the city extended the maximum parking time near movie theaters to three hours, changing 10,000 meters. CPM argued that the change reduced meter revenue that year, and would in future years, and the city paid dearly for it.

It turned out that the drop in revenue was because extending the hours happened as the parking price increased dramatically, at the deal’s start. The renegotiation dropped that policy, saving taxpayers – including those who never put money in a meter – $1 billion (in today’s dollars) over the contract’s remaining 72 years.

Parking fraud is paid for by taxpayers

There’s another problem, Mancini Nichols explained. Disabled parking fraud is another issue that prevents the meters from reaching 100 percent system in service. The meter deal allows six percent of people to park for free, an arbitrary figure designed to accommodate the state law. Over the first four years of the contract, people fraudulently using disabled placards cost Chicago taxpayers an estimated $73 million in compensation to CPM.

In 2013, Emanuel convinced legislators in Springfield to revise the definition of who could park for free, limiting it to people with physical limitations that make it very difficult to access the meters. “Prior to the new law, 90 percent of people parking in the Loop had disabled placards, and after the new law that number fell to 17 percent,” Mancini Nichols said. That’s still too high. The city is now conducting stings to enforce the law, and educating doctors about the law so they won’t issue placards liberally.

Getting to the positive benefits of parking meters

Once Chicago reaches 100 percent system in service, the city would have the financial leeway to experiment with variable meter pricing. MPC recommends changing prices according to demand, raising prices during peak times to increase turnover, and decreasing prices at low-demand times to encourage people to spread out their errands over the course of the day. This can actually be done using the current meter technology, but the city would be on the hook for any revenue decrease.

Chicago’s parking meter deal is notorious as one of the worst-ever examples of privatization. However, meters are a useful tool for promoting thriving retail strips when the revenue is reinvested in local infrastructure.

If our city is to take advantage of that phenomenon, we need to reach the mandatory 2009 service levels by adding more meters. After that, City Council can start earmarking the surplus revenue for business district improvements. “We’d be happy to work with any alderman who wants to do something about this,” Mancini Nichols said.

  • cjlane

    “a lump sum payment of $1 billion”

    $1.16 billion. $160 million is still a big deal.

    “billions less than the concession was actually worth”

    Cite, please, to some reputable calculation of it being worth *at least* 3 times more. I think it’s easy to pencil it out as worth ~50% more, but 300% more is goofy.

  • cjlane

    Oh, and PS:

    Agree with the rest–issue is the knock-on effect to near-ish by residential streets, and the attendant backlash when you make “their” parking more congested. Can you imagine what would happen if all of the spots on Stockton and Cannon were metered (tbc: I would *love* it, but I don’t live two blocks from there, w/o off-street parking, anymore, either)?

  • Here are a couple of reputable sources stating that billions may have been / probably were left on the table:
    http://www.inthepublicinterest.org/case/chicagos-parking-meters
    http://www.chicagoreader.com/Bleader/archives/2015/02/19/mayor-emanuel-says-he-reformed-the-parking-meter-deal-but-he-actually-sold-off-more-of-the-city-streets

    Two billion more than roughly one billion would be about 200 percent more, not 300.

  • cjlane

    John:

    Be serious. The ITPI article only says “Some officials have stated that the asset might have been worth closer to $3 billion”. So that’s a “reputable source” restating an unattributed rumor without any actual facts.

    The Reader article you link doesn’t even suggest a different number, nevermind showing any calculation of the suppsed higher amount.

    If that’s the best you got, then there can’t be a serious discussion that it was “worth more”. But, even if it were the best possible price, it was STILL and ABSOLUTELY indefensible deal, especially in retrospect.

  • From the MPC report:

    “The day the 2008 contract was signed, system in service was 100 percent. Since that day, the city has never hit 100 percent system in service – currently it is around 95 percent.”

    It is astounding that there is a formula used under the contract that is so skewed against the city and its residents that the above statement is true. Recall that in 2008, meter rates were 25 cents, $1 or $3 per hour in the three zones, and between 2009 and 2013, the rates increased to $2, $4, and $6.50 per hour, respectively. In turn, according to the documents posted on the city’s website, the amount of parking meter revenue that was raised under the system went from $56 million in 2009, to $72 million in 2010, $108 million in 2011 and $140 million in 2012, with Chicago Parking Meters, LLC collecting and keeping nearly every dollar of it.

    And yet! Somehow under this formula in the contract, the city has owed additional money to CPM each year, because the system was not “performing” adequately? It’s outrageous.

    It’s hard for me to see where the transfer of risk was in this contract. If there is a guaranteed minimum that CPM is to receive each year due to a deeply one-sided formula that makes us owe money in spite of yearly revenue increases of 25% or more, then it seems there was zero risk taken on by CPM.

    I’m still hoping we will not live with this deal for the next 68 years.

    Also, I disagree with MPC and your recommendations to add new metered parking. Whether they are reserve or concession spots, every time we add new metered parking, it makes it harder to design the street to add things like BRT stations, pedestrian bulbouts, streetscaping for trees and benches, or protected bike lanes. I’m sure the city has the right to move or remove concession spots at will, but once they’re in, their removal is still another barrier to making changes favoring other street users.

  • Fred

    “Prior to the new law, 90 percent of people parking in the Loop had disabled placards”

    Bullshit.

  • From the MPC report:
    “Beyond being illegal, abuse of disabled parking has major financial implications: In the first four years of the concession, people who fraudulently used disabled placards to park for free in metered spaces cost City taxpayers $73 million. Placards were so widely abused that in one year, a truly astonishing number—more than 90 percent—of people parking on Loop streets did so with a disabled placard, compared with the six percent allowed. Monthly sting operations by police have found that one in five people parking with disabled placards are doing so illegally.”

  • Fred

    90% of all parkers were using disabled placards
    18% of all parkers were using illegal placards
    72% of all parkers were using disabled placards legitimately?

    I do not believe those numbers.

  • Chrissy Mancini

    That’s correct, surveys are frequently done to measure how many parkers are using disabled placards to measure whether or not it is over the six percent limit. Prior to the new law, the placards were abused in the Loop and the neighborhoods, routine surveys showed up to 90% of Loop parkers were using the placards. If you walked around the Loop prior to the new law, you would have seen that most parked cars had a placard.

  • Chrissy Mancini

    That’s correct, surveys are frequently done to measure how many parkers are using disabled placards to measure whether or not it is over the six percent limit. Prior to the new law, routine surveys showed up to 90% of Loop parkers were using the placards. If you walked around the Loop prior to the new law, you would have seen that most parked cars had a placard.

  • Yet Another Reader

    I gave the MPC the benefit of the doubt at first, but I searched through all of the local paper archives about disabled parking and didn’t find any articles that even began to approach these numbers.

    It’s disappointing to see unattributed and obviously incorrect numbers published by a group like the MPC. It undermines their entire argument and any advocacy based on the numbers. There’s simply no way believe anything else in the report.

  • I realize that what I’m saying here is sheer anecdata, but prior to the placard reform, I would walk by the cars parked on Madison between State and Dearborn, and I noticed one day that of the 7 or so vehicles, nearly every one had a disability placard. After that, I would look every time I passed by, and sure enough, there were usually 5 or 6 that had disability placards displayed, often the same vehicles from day to day. So the 90% sounds right to me, at least for that one block.

  • Chrissy Mancini

    Even Access Living, a disability advocacy group, supported the new law because they too knew disabled placards were widely abused. http://articles.chicagotribune.com/2012-07-24/news/ct-met-quinn-disabled-parking-0724-20120724_1_placards-quinn-signs-law-fines

  • Yet Another Reader

    Chrissy, no one is questioning that the placards are widely abused. It’s a longstanding and well-known problem.

    But a longstanding problem does not justify your numbers. 90%? The figure is so out of the realm of possible, I don’t know how it got in your report. As Fred notes, more than 70% of all Loop parkers were using legitimate placards? Impossible. Furthermore, that you haven’t responded with a source suggests to me that you don’t know where the number came from.

    The most comprehensive reporting on the issue was done by Chris Fusco for the Chicago Sun-Times in 2011 and 2012. He’s basically responsible for the reform around disabled placards in the city. Look through all of his articles (you’ll need to use a web search and the Internet Archive, since the Sun-Times does such a terrible job with its website), and you’ll see that there’s nothing even close to 90% referenced in your report. There’s nothing reported elsewhere either. The numbers are all much lower. It’s a problem, but you’re wrong about the scale.

    Here is one example: When the city stepped up enforcement, it sent 21 police officers into the Loop solely to check disabled placards. They found 54 handicapped placards in use in the entire Loop, and they found that 10 were fake: http://web.archive.org/web/20130311084944/http://www.suntimes.com/news/watchdogs/10344711-418/disability-parking-abuse-crackdown-targets-meter-cheaters-in-loop.html

    With errors like this, it’s hard to take MPC seriously.

  • As Chrissy stated, “Prior to the new law, routine surveys showed up to 90% of Loop parkers were using the placards.” You seem to be arguing that the people who did the surveys were incompetent or lying.

  • Yet Another Reader

    I see three possibilities:
    1. The survey researchers were incompetent or lying.
    2. MCP staffers are incompetent or lying.
    3. The Chicago Sun-Times, the Chicago Tribune, the Chicago Reader, the City of Chicago, and the Secretary of State’s office staffers were incompetent or lying about the same thing.

    I suppose it’s possible that all three possibilities are true, but the intersecting investigative reporting, ticket numbers, and regulatory efforts by groups with different interests make it pretty unlikely that number 3 is true. So that leaves points 1 and 2, both of which are bad for MCP, particularly since MCP hasn’t provided any data or sources for the surveys.

    Moreover, the results are so absurd that even if the source of the issue is point 1, point 2 is still true.

  • Tom Foyer

    I was told by a nice man in Humboldt Park at 843 N. Mozart that he paid for the handicap pole and signs himself. He warned me that if I parked my bike there he would mess up my bike. I don’t think he actually paid for them and he was not disabled. I am sure the disabled person was his mother. He is basically abusing this privilege to have a spot on the street all the time.

  • Chrissy Mancini

    This data is based on City and CPM quarterly surveys of parkers that was then used to calculate what the City owed CPM. For example, in 2013 Q1 90.08% of Loop parkers were using disabled placards, Q2: 91.43%. The Loop survey includes: Wacker Drive on the west
    and north, Congress on the south, Lake Michigan on the east.

  • Yet Another Reader

    That’s good to know. These are the same data that: 1. were produced by the parking company that benefits from having inflated numbers, 2. fly in the face of police data and published newspaper surveys of the area, and 3. were challenged by city attorneys as inaccurate.

    When you make the decision to base your argument on obviously contested data, you hurt all of us who want to promote alternative transportation. So much for the MCP’s trustworthiness on transportation issues…

    No reputable organization would publish these “estimates” as accurate. So we know now that points 1 and 2 are correct.

  • planetshwoop

    It’s very easy to point to how it easily is worth substantially more than $1.16B the city received. This is textbook finance — the net present value and discount rate.

    So two easy ways to prove it was worth substantially more:

    #1 — “Selling” an asset in Dec 2008 was absolutely the bottom of the market. It was the worst time to sell, as everyone else was too. So comparing similar assets that sold at the same time vs valuations even a few months or years later shows that it was substantially undervalued.

    #2 — $1B in 2008 is the sum of all the cashflows over 75 years. In finance this is the “present value” and the foundation all valuations. This is a bit wonky, but easy to see if you plug some of the numbers into a spreadsheet using the NPV function.

    What matters tremendously in the valuation (ie, it’s worth $1B) is the discount rate and the cashflows expected. Assuming like in 2009 that you get $56M per year as mentioned above, then to get $1.16B they assumed that a) the $56B would never go up and b) the rate was 4.68%.

    Change the rate to the time of the sale to the Fed rate (0.5%) and the valuation jumps to $3B.

    What will the actual discount rate be? No one knows. But EVERYONE knew that the cashflows would dramatically increase immediately because they planned to raise the rates. The rate in 2009 wasn’t going to be the same in 2059, much less 2010. In fact, the consortium that bought the parking meter lease issued bonds and estimated that they would get over $11B over the life of the contract.

    So the contract was built to assume that they would get their money back in full from the city in 10-15 years (1) and then suck profits for the remaining periods.

    Happy to share Google docs spreadsheet that illustrates this as it’s easier to follow that way.

    (1) The investors actually paid themselves off much sooner as they issued bonds to pay themselves back sooner.

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