Chicago Mayor Richard Daley has approved a $1.2 billion bid from Morgan Stanley Infrastructure to operate the city of Chicago’s metered parking system for the next 75 years.
The transaction, which awaits approval by the city council, would mark the first major publicly owned parking system in the US to be privatised in a long-term concession. Morgan Stanley and operating partner LAZ Parking will maintain and collect revenues from the city’s roughly 36,000 parking meters.
“The funds from this historic parking meter agreement will strengthen our city’s finances for the long
Parking Meters: Morgan
term, give us the ability to continue investing in people’s need and most importantly, protect our city and taxpayers from a worsening economy,” Daley said at a press conference earlier today.
A spokesman for the city said that information concerning competing bids would only be publicly released after the Morgan Stanley offer was approved.
Judging by the time it took city councilmen to approve similar privatisation schemes, including Citi Infrastructure Investor’s $2.5 billion deal for Midway Airport in October, the Morgan Stanley bid could be approved within a week. But nothing is for certain, according to Dana Levenson, former chief financial officer of the City of Chicago and current managing director of the Royal Bank of Scotland's North American Infrastructure and Advisory business.
“These things are never done deals,” Levenson told sister website PrivateEquityOnline.com. “The aldermen always have questions.”
Under terms of the deal announced today, the city will implement graduated meter rate increases over a period of five years that will elevate rates across the board. Parking prices in high-congestion areas downtown will more than double from the current rate of $3 to $6.50 by 2013.
After the five-year period of rate increase, the system value will be adjusted by inflation through the addition of meters, expansion of hours, or further rate increases.
News of the Morgan Stanley bid reinforces Chicago’s reputation as a forerunner among cash-strapped US cities in the asset privatisation boom.
Aside from the Midway Airport privatisation, which stands as the largest airport concession in US history, Chicago has also privatised its downtown parking garages and the Chicago Skyway, an 8-mile long toll bridge.
Asked what other infrastructure assets Daley might look to privatise next, Levenson said, “There are always possibilities. A bigger question is what are the assets that are owned by other states and local governments throughout the rest of the country? Chicago is simply showing the way and exercising leadership.”
Much like he approached past privatisation revenues, Daley is planning to allocate the $1.2 billion upfront payment into various funds designed to shore up the city’s fiscal crisis and fund various municipal programs. Chicago is anticipating city deficits of at least $200 million a year for the next several years.
“I don’t know of any city or state in the nation, or the federal government for that matter, that in the space of three months has reached major and groundbreaking agreements like those for Midway Airport and our parking meters,” Daley said.
The parking meter concession also represents one of Morgan Stanley Infrastructure’s highest profile investments to date.
In July, the firm teamed with The Ontario Teachers’ Pension Plan to purchase SAESA Group, a Chilean electricity utility, for $887 million.
In May, Morgan Stanley Infrastructure closed on its latest fund on $4 billion exceeding its initial target of $2.5 billion.