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Comment by Baader-Meinhof | Hacker News Reader

This is clearly presented with a slant. I'm curious if there is a more neutral reporting on this? Like the article points to the 10x returns over 75 years as an example of the city being fleeced... But that sounds kinda like normal returns to me?

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The deal is objectively awful. If Chicago needs to move parking meters or removes them in order to do construction work or change the road infrastructure (e.g. add sidewalk seating, bus stops, bike lanes), the city needs to pay the company for the lost revenue from those spots. Hell, if too many people get handicap placards and use them to get free parking, the city needs to pay for the lost revenue. Also, Chicago needs to make up any shortfalls if revenues don't match inflation.

It's really hard to come up with a deal that does a better job at effectively preventing any changes to road and street infrastructure.

Normal cities forego the revenue for themselves when they close parking spaces, so it's never free. If they payed those fees out of the billion dollars in advance revenue they got at the start of the contract, it wouldn't seem so bad. Perhaps the real problem is how they spent that money too quickly.

The deal being awful doesn't mean this article isn't.

Basically they've committed to have parking meters for the next 75 years - want to install bike racks, bus/bike lanes, ban parking in busy streets at rush hour, widen pavements for restaurant tables, close a road for a party, it all requires compensation to CPM. If in 2070 Chicago citizens are using hover cars or being dropped off by their Teslas which then drive home, the parking meters will still be there.

If this hastens us toward a car-less future, maybe it will turn out for the better. Probably won't do that though, probably will just fleece those already dependent on cars.

It will do the opposite. City officials will be more hesitant to close parking spaces. Even if it turns out that the revenue paid out to CPM is still lower than the added benefit the city receives.

10x over 75 years is a ~3% risk-free annual return. It looks like ordinary government long-term bonds (like 30-year treasuries) were yielding around 4% in 2008, making this look at first glance like a good deal for Chicago.

However, municipalities with a good credit rating can usually issue bonds that pay out about a third less yield than treasuries, thanks to favorable treatment of municipal bonds in the US tax code. I don't know how healthy Chicago's rating was in 2008 but even if somewhat mediocre, it's likely they could've gotten 3% or less on the bond market.

So at a minimum there was no advantage for the city in signing up for a sweetheart deal with strings attached, instead of covering the shortfall by issuing a bond.

This deal was secured by something other than Chicago's taxing power, so it should have less effect on Chicago's creditworthiness and ability to issue other bonds.

In any case, if it was 3% it's economically very comparable to issuing a regular bond and not the "fleecing" that's talked about. If the city regrets the deal, it should be able to issue a regular bond and use it to buy out the investors, or issue regular bonds annually and use them to pay the penalties, all at roughly a wash economically.

I'm not sure 3% is correct, though. I'd like to see another source on that. It reads like it has some protection against inflation. If it's 3% + inflation, that's a really enormous return.

I remember when this stunt was pulled. It was loudly reported on all sides an obvious fleece for a quick buck. No one in the city supported this except Daley and the aldermen. Daley avoided having to actually deal with a budget shortfall, and then got a job with the firm that negotiated the deal.

As for “normal returns”, it was sold well below value, and the whole enterprise is literally just rent seeking.

I'm outside the US.

Typically I'd think of a city having a contract with a service company for them to manage and service a city's parking meters for a cut of the revenue, "the city in control of its subcontractors".

This reads very much as the City of Chicago tightly subcontracted to maintain the 72 year revenue stream of Chicago Parking Meters LLC, "the tail wagging the dog".

As per the article Chicago needed cash, and quickly, to fill a budget shortfall, so they sold a lease up front to fill the hole.

As per the implication in the article, the former Mayor and close circle pushed an asymmetric "cash now, big trouble later" deal through in exchange for (implied) kickbacks and as a result of leaving office with zero chance of having to deal with the consequences.

There's much to be said for tying some form of liability to office holders who make a deal.

Sounds very much like that story of Jacob and Esau where Esau sold his birthright for a bowl of soup.

I first heard about the story on this podcast episode of “Cautionary Tales”. I thought that an article would be a better post.

https://overcast.fm/+5K6ZISYMc

That explains why this appeared on HN the day after I'd listened to it!

The book "Paved Paradise" by Henry Gubar that was the source of the podcast, looks an interesting read:

https://www.amazon.com/Paved-Paradise-Parking-Explains-World...

I read this over the summer, it's a great read.

I would love to hear a steel man argument justifying the deal.

The city needed the cash today, not in 75 years. They did a similar deal with the Chicago Skyway. Both deals had a heads-I-win-tails-you-lose vibe when implemented.

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