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Chicago hopes technology will boost tax collections from valet parking operators

City officials want to boost how much in parking taxes they collect from valet operators. | Sun-Times file photo

Chicago has more than 100 registered valet operators parking vehicles at more than 400 locations, including restaurants, bars and private clubs.

Even so, the city collected only $2.1 million in parking taxes from all those operators.

Now, City Hall is finally cracking the whip on valet cheats — by using “technology-based solutions” to eliminate “intentional and deliberate failure” to pay the city’s 22 percent parking garage tax for monthly, weekly and daily parking and the 20 percent tax for daily parking in garages on weekends.

The Emanuel administration has issued a “request for information” from companies interested in improving

“tax and data collection” from valet parking companies in a way that enhances consumer protection.

The document declares there is no reason 100 valet operators at 400 locations should generate just $2.1 million in annual revenue.

“Based on historical audit findings, this should have been substantially more,” the document states. It adds that routine city audits and tax-compliance investigations have discovered “previously unforeseen gaps that can be addressed by enhancing data tracking tools.”

The document continues: “With a 20 percent tax rate on valet parking, each unreported transaction costs the city a significant amount of tax revenue. Furthermore, the valet parking fee includes a tax paid by the consumer with the understanding that it will be used to fund essential city services and operations. When a collected tax is not remitted, it’s a breach of public trust. The city is seeking to narrow this gap.”

Until July 1, valet operators had to pay their monthly tax liability by the 15th day of the following month and file a tax return annually.

Now, those same valet operators must file a tax return every month. But since the city does not offer “a technological solution,” licensed valet operators must remit taxes manually and provide operational data when the city asks.

“Enforcement activity involving the valet parking industry generally yields significant findings for several reasons, including a lack of sophisticated data tracking, inadequate internal controls and intentional under-reporting,” the document states.

“Additionally, due to a lack of real time data tracking, consumer and operator protections — such as ensuring valet operators are licensed, the ability to track cars and valet parking service, including at the parked locations — as well as overall security and safety are weakened.”

A “robust” technological solution has the potential to solve all those problems and more, minimizing chronic abuses and enhancing protections for consumers, the city contends.

It will “enable licensed valet operators to electronically track and inventory vehicles in their possession, provide consumers with proof of services as well as collect valet payments and remit taxes in real-time,” the RFI states.

“Such ideas will enable the city to increase tax receipts, increase compliance with operational requirements, generate robust data to facilitate the audit process as well as increase consumer protections.”

The high-tech solution the city seeks is expected to include: real-time reporting and tax remittance; license information and location tracking; date and time vehicles are dropped off and picked up; location and number of vehicles in possession of a valet operator at any given time and the date, time and duration of vehicle possession.

Other options include license plate recognition technology “as part of a ticket-less solution, if feasible.” That information would be linked to the city’s parking ticket database “to determine who was in possession of a vehicle when tickets are issued.”

Two years ago, valet parkers were still thumbing their noses at city regulation despite countless efforts over the years to rein in chronic abuses.

At the time, an eye-popping two-thirds of 388 valet operators investigated by the city were not in compliance with off-street parking mandates and other regulations; that triggered $300,000 in fines, 2,500 administrative notices of violation and 73 “removal orders to cease and desist.”

In May 2017, the City Council tried again to tighten the regulatory rein on valet parkers and make it tougher for SpotHero and other parking aggregators to avoid the city’s parking tax.

Downtown Ald. Brendan Reilly (42nd) championed both ordinances, for good reason. His downtown and River North ward is an entertainment and dining mecca plagued by parking, traffic and congestion problems.