CHICAGO Dec 2 Chicago on Tuesday said it agreed to lease its parking meter system to a fund managed by Morgan Stanley in a 75-year, $1.16 billion deal, the latest privatization deal by the city as it struggles to close a yawning budget deficit.
The deal with Chicago Parking Meter LLC, an infrastructure investment fund managed by Morgan Stanley, marks the first time a U.S. city has privatized its parking meter system. It adds to the list of infrastructure assets Chicago has cashed in on with leases of an airport, a toll road, and some downtown parking lots.
The deal covers more than 36,000 parking spaces, with rates on many meters expected to quadruple to $1 an hour. It requires City Council approval, and a special council meeting was set for Thursday.
Chicago Parking Meter LLC had previously paid $563 million to lease city-owned underground downtown parking lots.
Chicago Mayor Richard Daley's $6 billion 2009 budget counted on $150 million from the sale of the parking meter system to help close a budget deficit for the fiscal year beginning Jan. 1.
The city said $400 million from the parking meter lease deal will go into a long-term reserve, $325 million will go toward the city budget through 2012, $324 million will go toward budget stabilization until the economy recovers, and $100 million will fund programs for low-income residents.
Daley said the deal will not solve the city's budget problems, which will depend on the depth of the economic recession that has led him to lay off of hundreds of workers and a planned shutdown of city government for six days around holidays next year.
The city recently leased Midway Airport for $2.5 billion to private operators, pending federal government approval, and in 2004 leased its Chicago Skyway toll road for $1.8 billion.
"Because of our innovative Midway Airport and parking meter transactions, we're taking steps that no other city or state is taking to cushion our taxpayers from the bad economy and keep our city moving forward," Daley said.
Proceeds from parking tickets will still go into city coffers.
"I think it's a fair price" for the parking meter system, said Dana Levenson, head of North American infrastructure banking for Royal Bank of Scotland, who helped negotiate the parking lot lease in his former position with the city.
The idea of leasing infrastructure to private companies, which take on the risks of operating and maintaining the assets, should appeal to cash-strapped local and state governments, Levenson said.
"If you look at the magnitude of the country's needs in terms of infrastructure, which the American Society of Civil Engineers has pegged at $1.6 trillion, it's not just going to be government. It has to be all different sources that need to be available to improve infrastructure in this country," Levenson said. (Editing by Michael Conlon and Leslie Adler)