Chicago’s ParkingMeter Priv


City’s pioneering, and controversial, moves to get out of the parking meter business BY LEONARD GILROY


tional investors looking to invest in public infrastruc- ture projects.Then Chicago changed the game in Feb- ruary 2009, inking a blockbuster $1.15 billion, 75- year lease of its 36,000 downtown parking meters– a deal that a number of other cash-strapped cities are scrambling to emulate.


N The city granted Chicago ParkingMeters (CPM), a consor-


tium ofMorgan Stanley Infrastructure Partners and LAZ Park- ing, the right to operate, maintain and collect the revenue from the meters throughout the 75-year concession term. CPMmust undertake a wholesale system overhaul (on its own dime), replacing the coin-based meter system with modern pay-and- display boxes and removing significant future operations, main- tenance and capital expenditure costs from the city’s books for decades to come. The city retains full responsibility for rate setting, parking


regulation enforcement and fine collection. Parking rates will be allowed to rise each year for the first five years of the contract, after which any subsequent rate increases over the remainder of the contract term will be subject to City Council approval. The deal also preserves policymakers’decision-making authority over the number of meters, hours of operation and length of time a customer can park.


OT LONG AGO, FEW INDUSTRY observers would have predicted that municipal parking meter systems would become a hot investment oppor- tunity for private equity and institu-


CPMhas the option of supplementing city ticketing staff if


their performancewanes in the future. But since all parking fines still continue to be collected by and to the benefit of the city alone, the operator would not stand to realize even a penny from enhanced ticketing. Hence, hiring additional private ticketers would effectively represent a net cost to the operator, with no additional offsetting revenues. While groundbreaking, the lease also has its share of con-


troversy, primarily centered on two key issues: implementation and valuation. On the operational side, Chicago ParkingMeters CEO Den-


nis Pedrelli acknowledged inApril 2009 that the concessionaire “underestimated the resources required” to reprogram meters to reflect higher rates and address a backlog of broken, jammed and mismarked meters that prompted numerous citizen complaints over dysfunctionalmeters and unfair fines. Mayor Daley later took responsibility for the implementa-


tion glitches, noting that the city should have undertaken the tran- sition to privatizationmore gradually. However, by the summer of 2009, the operational issues that


plagued the early rollout were largely resolved and the system overhaul was well underway and ahead of schedule. The early transition to concessionaire operation saw a spike


in average meter repair times. InMarch 2009, meters reported brokenwere repaired in about eight business days, far slower than the two-day repair time the city averaged before privatization. However, the addition of operational staff helped to decrease repair times significantly, and by December 2009, the average repair time had fallen to less than two hours. There has been a significant reduction in jammedmeters. In


16


JANUARY 2010 • PARKING TODAY • www.parkingtoday.com


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