Under the $563 million, 99-year deal that privatized four city-owned parking garages in downtown Chicago, City Hall made a promise:
It wouldn’t allow any parking facilities to open nearby.
That was six years ago, under then-Mayor Richard M. Daley.
Today, though, you can park just a block away in a new garage at the 82-story Aqua building – and it’s cheaper, too.
That’s angered the consortium of investors who took control of the garages and thought they were safe from competition. Their group, known as Chicago Loop Parking LLC, has filed an arbitration claim against the city that could leave Chicago taxpayers on the hook for $200 million or more, documents obtained by the Chicago Sun-Times show.
The Emanuel administration also is fighting a separate, $13.5 million claim stemming from another privatization move spearheaded by Daley – the unpopular 75-year deal that turned over the city’s parking meters to private investors and led to higher parking-meter rates.
That deal calls for the city to reimburse the private investors – operating as Chicago Parking Meters LLC – for lost revenue from drivers who use, and sometimes misuse, disability license plates and placards to park for free in metered spots. The meter company claims it doled out $13.5 million worth of free parking between February 2010 and February 2011, the Sun-Times has reported, and it’s demanding that City Hall pay up. Emanuel is fighting that. The bill for the past year hasn’t come in yet.
Both parking claims are coming from companies controlled by the Morgan Stanley financial services firm. Partnerships assembled by the Wall Street giant hold a 99 percent stake in Chicago Loop Parking LLC and a 50.1 percent interest in Chicago Parking Meters LLC, city records show.
Instead of settling these disputes in court, the privatization deals spell out that such matters are to be resolved in arbitration hearings, largely outside of public view. Both claims are before the American Arbitration Association, which promises total confidentiality to the parties in conflicts it’s asked to referee.
But the records lay out previously undisclosed details of the $200 million dispute involving the downtown garages.
Morgan Stanley’s newly formed Chicago Loop Parking was the winning bidder for the right to operate – and collect all payments from – the 9,178 spaces in the city’s Millennium Park garage and the Chicago Park District’s Grant Park North, Grant Park South and East Monroe Street parking garages.
Chicago Loop Parking could raise parking rates as high as it wanted under the deal, which the City Council approved 37-8 in November 2006. At the time, Daley called the plan “an outstanding deal” for Chicago taxpayers, and his aides said the competitive downtown parking market would keep rate increases in check.Â
To protect the investors, the city promised it wouldn’t allow any new garages offering public parking to open within the area bounded by East Wacker Drive, Harrison Street, Lake Shore Drive and State Street.
In the arbitration claim, which records show was filed against the city in March 2011, lawyers for Chicago Loop Parking said the investors “would not have paid the city anywhere near $563 million for the right to operate the parking garage system without this provision.”
Within months of signing the garage lease, the Daley administration approved plans for the Aqua tower that included a garage with 1,288 spaces, and Standard Parking Corp. then was granted a license to operate an open-to-the-public garage at the new building at 225 N. Columbus Dr.
City officials say they made a deal with Standard Parking in February 2010 restricting public parking in the Aqua garage to drivers only from the surrounding area.
The Aqua garage remains open to the general public, though, charging $13 for the early-bird special – a buck less than the former city garages that were privatized.
Standard Parking officials declined to comment.
City Hall’s lawyers maintain that Chicago Loop Parking’s claim “incorrectly assumes that all the public parkers at the Aqua would have parked at a [Chicago Loop Parking] garage had the Aqua not been available.”
The parking disputes with the operators of these former city assets come as Emanuel is pushing to launch a $7 billion fund that would seek private investors for the city’s public-works projects. The mayor and his aides have tried to distance themselves from the Daley-era moves, saying the new “infrastructure trust” would not involve privatizing city assets.
Emanuel administration officials declined to comment on the parking-garage company’s $200 million claim.
They made the dispute public with a recent filing that disclosed the impasse to potential buyers of city bonds, saying they were “actively defending the case and cannot predict the outcome at this time.”
Lawyers for both sides in the dispute signed an agreement in January that would keep much of the arbitration proceedings private.
Avis LaVelle, a spokeswoman for both the parking meter and garage companies, says executives of the firms would not comment on either dispute.
Morgan Stanley executives include William Daley Jr., the former mayor’s nephew. Morgan Stanley officials have said William Daley Jr. had nothing to do with the firm’s two Chicago privatization deals.