Ecomomic Opportunity Lost

An “economic opportunity lost” is when someone COULD have earned money from something, but circumstances or a faulty business decision caused him to lose the chance.  There are currently two examples of this economic phenomenon happening now between Chicago Parking Meters LLC, the company that now controls the city’s parking meters, and the City of Chicago.

First Economic Opportunity Lost

In December 2008, the City of Chicago signed a lease with a fund, managed by Morgan Stanley, securing the right to operate the city’s 36,000 parking meters.  The city received $1.6 billion as immediate payment and Parking Meters LLC held the rights to operate, maintain and retain all of the revenues derived from the city's parking meters until the year 2083.

Giving Chicago all that money would be a good thing, if the city had invested it, but all of it was spent within three years.   To make taxpayers in Chicago cry even more, they learned the “true value” of the deal when data published by Bloomberg News on August 8, 2010 showed that “Morgan Stanley, Abu Dhabi Investment Authority and Allianz Capital Partners may earn a profit of $9.58 billion before interest, taxes and depreciation, according to documents for a $500 million private note sale by their Chicago Parking Meters LLC venture. That is equivalent to 80 cents per dollar of projected revenue.”

So the City of Chicago got $1.6 billion on a deal that will profit Morgan Stanley $9.58 billion.  If it had not leased the meters, it would have profited billions of dollars.  That is a major economic opportunity lost.

Second Economic Opportunity Lost

Illinois state law allows disabled people to park free all day in metered spots.  That benefit dates back to when public transportation wasn’t handicapped-accessible, and meters had to be coin-fed.  I could not find the actual law, but I know that is the history.

Even though the condition that created the law no longer exists, it has never been changed.  Anyone with a disability placard or plate gets to park for free at any metered spot in Chicago.

The Sun-Times recently did an investigation into the misuse of handicap placards which I wrote about on November 22^nd.

The Sun-Times reported, “With the help of a retired Chicago Police Department lieutenant, the newspaper did regular spot checks in the South Loop and elsewhere in the city. In September and October, those checks found as many as 60 cars with handicap placards or handicap license plates were parking for free each day in the area bounded by Roosevelt Road and Van Buren Street, and Des Plaines Street and Canal Street.”

The parking meter lease allows Chicago Parking LLC to recover revenue lost by people parking for free.  Chicago Parking LLC used a formula outlined in the deal (I read through the 521 pages and could not find the exact section that dealt with this) and calculated that there was $17.9 million worth of free disability parking in the last year.  The formula for reimbursement includes that Chicago Parking LLC has to absorb part of the lost revenue, but Chicago owes $13.5 million of the total.

Mayor Rahm Emanuel is disputing the bill, and the city has not paid anything yet. Mayoral spokeswoman Kathleen Strand said that the company’s audit “illustrates that the city has long been losing parking revenue as a result of disabled-parking cheating.”

Not only has Chicago lost billions of dollars in revenue by selling off the parking meters, the taxpayers are now being billed to pay for the free parking consumed by those with handicap placards, which is the second economic opportunity lost.

CONCLUSION

I really have nothing new to conclude.  We all know the parking meter lease deal stinks and now we discover it stinks even more.  Dead fish never start to smell better.