Many Chicagoans still remember with bitter discontent the outrageous deal that Chicago mayor Daley forced on the city in December 2008 which transferred control of 36,000 of the city's parking meters and public parking spaces to Morgan Stanley. The deal was sold to the equally irresponsibly Chicago city council as an absolutely must-do emergency parachute that could only be considered for mere three days, and that would save the day by generating $1.16 Billion, which the city, of course, desperately need to waste on more programs on which Chicago habitually wastes hundreds of millions of dollars. Of course, it is history now, but the deal was approved. Here's what was said at the time:
"...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," (mayor) Daley said."
"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.
Now, interestingly, at the time Morgan Stanley was freshly minted a "bank holding company" for the first in its entire history as an investment bank. If you'll remember, this is was a magical statutus granted to several investment banks (Goldman Sachs, Morgan Stanley) and even credit card companies (Captiol One, American Express) which was the sole discretion of the Federal Reserve, and which then allowed these non-bank companies to receive billions in TARP funding--TARP funding which Congress had authorized for banks only. So, Paulson and Geithner and Bernanke just made everyone a bank! Morgan Stanley received $10 Billion, and without the money, the irresponsible, toxic MBS-ladden firm would have met the bankruptcy it so honestly deserved within weeks of the bailout. But, of course, this is sadly true of several other fantastically irresponsible banks (Wells Fargo, BoA, JPMorgan Chase, GS) which were likewise saved by head bankster Hank Paulson and his cohorts at the FRBNY and FRS, Mr Geithner and Mr Bernanke. Still, it is worth remembering...
So, fast-forward to today, almost two years later. It appears the city finally got around to reading the contract.
According to a Bloomberg report today, the "fair price" and "good deal" mayor Daley had assured Chicago of regarding the massive 75-year transfer of parking spaces to Morgan Stanley is, indeed, a very "fair price" and "good deal," but not for Chicago. What, then, is the price tag on how much the deal will cost Chicago drivers, and how much revenue has the city itself surrendered to the bank of Morgan Stanley?
$1 Billion, $2 Billion?
Try $11.6 Billion.
That's right--a 10:1 ratio of costs to benefits. Of course, this is only assuming that Morgan Stanley stays within a standard deviation or so of the normal parking space prices, which is no guarantee, as the city even surrendered to the bank any review or input on the price increases the bank imposes! Morgan Stanley may very well make twice this estimate, as they have no apprehension, and no legal restriction, for jacking parking prices sky-high. Chicagoans saw this first hand, as within weeks of the transfer, Morgan Stanley increased the parking rates by 400%! So, as there are no contractual limits on what Morgan Stanley can charge for the 36,000 spaces it now controls for another 73 years, this $11.6 Billion number is likely a very low-ball estimate.
Furthermore, the profits are a cake-walk: the Daley deal has granted Morgan Stanley an amazing minimum estimated return of 80 cents for every dollar paid for parking: compared to other contracts in the city, such as at the airport, the average revenue is below 5 cents on the dollar. In other words, for every $1 a Chicagoan is paying for parking, 80 cents are returned to Morgan Stanley in pure profit. When reviewed from the City's perspective, this means that Daley and the City could have sold the contract to Morgan Stanley for more than ten times as much as the original $1.16 Billion tag and still kept within the norm for private leases of public property within the city; or, to put in term that Chicago gangster-banksters might understand better, Daley and the City left over $9 Billion on the table, and let Morgan Stanley lapped it up.
Now also please remember (as no truck driver can forget, given in huge increase in tolls since) that in 2004 the City and this same mayor Daley likewise leased out the Chicago Skyway for 99 years to a Spanish company, the private-equity infrastructure consortium known as Cinta. This is the same Cinta company that is so heavily involved in the "non-existent" North American corridor project. The practice of leasing toll roads has become too common in these days spendthrift cities and states, and as evidenced in Pennsylvania, some governors are even trying to transform non-toll roads into toll roads for the express purpose of then leasing the roads to banks and investment groups!
But getting back to the issue of parking spaces, the Bloomberg story breaks today because of the fact that two other major cities--Indianapolis and Pittsburgh--are both themselves in the process of negotiating deals. Pittsburgh needs the money to meet its ballooning pension obligations, and recently rejected a deal with yet another corrupt bank that is a plague on the American taxpayer and the entire world, JP Morgan Chase. Conversely, Indianapolis is not in as urgent need of cash-flow as Pittsburgh, but this city too is negotiating a deal with Xerox subsidary, Affiliated Computer Services for control and updating of the city's parking meters.
The vote in Indianapolis is tonight. Charges of cronyism have been flying for some time, as the mayor's office, the city council president, and Xerox seem a little too close for comfort:
"ACS is a powerful player in government contracting and already plays a role in Indiana's welfare-services modernization. And the mayor's office and ACS have shared a lobbyist at Indianapolis law firm Barnes & Thornburg. Council President Ryan Vaughn works at the firm as an associate but does not perform any work for ACS, he says.
Such connections make some critics uncomfortable, even if ACS, the law firm and the mayor's staff insist that the lobbyist, Joe Loftus, didn't participate in parking-meter negotiations.
(City Council president) Vaughn, who has faced pressure to recuse himself, plans to vote in favor because he views the deal as important for his Broad Ripple district.
He acknowledges an appearance of a conflict of interest.
"But it's one that I've gone to great lengths to explain," he said.
He doesn't view his firm's association with ACS as violating the council's ethics rules. Those require recusal if a council member or a business in which he or she has an interest would directly benefit by more than $1,000."
At the least Indianapolis is deal is not a billion-dollar commitment. Still, it is not a direly-needed project, either. Cities need to much more carefully consider these "partnerships" before they go selling off their public property for decades at a time. There is a long line of banksters who are just dying for the chance to get hold of infrastructure, and Morgan Stanley's Chicago strategy is their model.