CHICAGO, April 29 (Reuters) - Chicago settled a payment dispute with a private company operating the city's parking meters that will greatly reduce money owed by the city, Mayor Rahm Emanuel announced on Monday. Under the deal, Chicago will pay Chicago Parking Meters LLC $8.9 million, instead of the $49 million the company demanded in compensation for out-of-service meters due to street closures and other reasons covering a two-year period that ended on March 31. The agreement will be presented on May 8 to the city council, which will have 30 days to review it, according to a statement from the mayor's office. "The $40 million difference between what was invoiced and what would be paid under this agreement represents over $1 billion in estimated future charges in today's dollars to the city over the life of the contract that will no longer be payable," the statement said. Chicago Parking Meters said in a statement that it is hopeful the city council will ratify the deal. The third-largest U.S. city received $1.157 billion in 2008 from the 75-year lease with the company during former Mayor Richard Daley's administration. The deal, which resulted in parking meter rate hikes, was slammed in 2009 by a Chicago inspector general report that said it undervalued the system of 36,000 parking meters by $974 million. In addition, Chicago tapped parking meter deal proceeds to help close budget gaps under Daley. Emanuel, who inherited the contract, has been fighting the company over the reimbursements and ordered an operational and financial management audit of the lease deal last fall. "When I was elected mayor, I said this was a bad deal, but promised to do everything I could to make improvements on behalf of the taxpayers of this city," Emanuel said in the statement, adding that the deal will bring "some necessary and positive changes to this contract."