Chicago plugs budget deficit with parking deal proceeds

Starting with $1.16bn in 2009, Chicago has now budgeted so much of its parking windfall toward deficit reduction that hardly anything will remain by the end of next year, according to a 2011 budget released by Mayor Richard Daley.

Chicago Mayor Richard Daley proposed a 2011 budget for the city that would leave only $76 million remaining from the $1.16 billion windfall the city reaped through the 2009 lease of its parking meters.

The budget closes the largest budget hole in the city’s 177 year history, a gaping $655 million.

Of the $655 million gap, $120 million will be plugged using a transfer from permanent reserves the city created in 2009 after closing the parking deal. Daley acknowledged in a budget address the transfer would be “controversial” but staunchly defended the need to balance fiscal prudence “with the need to provide important services to people”.

The reserve fund was originally funded with $400 million from the parking deal, in which Chicago leased its 36,000 parking meters to a Morgan Stanley-backed consortium for 75 years. A separate $500 million reserve the city seeded with proceeds from its 2005 lease of the Chicago Skyway would remain untapped under Daley’s plan.

If the budget is approved by city council, it will mark the third year in a row that Chicago plugged its budget deficit with proceeds from the parking deal.

Daley blamed the persistent budget deficits on the severe recession, which has cut into many economically sensitive revenue sources for the city’s general fund, such a tax on real estate sales. Those economically sensitive revenues declined about $1 billion from their 2007 peak, according to a budget presentation posted on the city’s website. 

Daley said he plans to repay the borrowings from the parking meter fund as revenues recover.  

Chicago's parking deal remains one of the few in the US that have actually reached financial close. Ealier this week, the Pittsburgh City Council preliminarily rejected a plan to lease its parking assets to a JPMorgan investor group for $452 million.

New Jersey's transit agency, on the other hand, has just launched a bidding process for a long-term lease of some 80 parking lots located next to its train and bus stops.