Studies Show Dangers of PRIVATIZE "Enforcement" of ANY LAW! Chicago Parking Fiasco!
Ban the Cams note: Though this is not scamera related, it show what happens when you "outsource" law enforcement of traffic laws to private "FOR PROFIT" companies.
EVERYONE except the company loses long term!
http://theexpiredmeter.com/2011/12/parking-meter-firm-hits-up-city-for-2-1-million/
December 15th, 2011
Parking Meter Firm Bills City Another $2.1 Million
Documents Show Hidden Cost Of Lease Deal To Taxpayers
An LAZ employee documents a closure along Irving Park Road at California Ave. for Chicago Parking Meters, LLC
While Chicago’s infamous parking meter lease deal quietly celebrated its third anniversary http://newsblogs.chicagotribune.com/clout_st/2008/12/aldermen-deba-1.html the first week of December, the city was releasing documents chronicling more evidence the privatization of the city’s more than 36,000 parking meters turned out to be more costly for taxpayers than originally imagined.
Financial statements, released by the Chicago Inspector General’s office http://chicagoinspectorgeneral.org/ via their Open Chicago government transparency initiative http://chicagoinspectorgeneral.org/major-initiatives/open-chicago/, reveals what many critics of the lease deal had feared–the city would end up owing or paying Chicago Parking Meters, LLC millions of dollars in compensation when any sort of change or activity by the city impacts parking meter revenue for the company.
Financial statements for the company http://theexpiredmeter.com/wp-content/uploads/2011/12/Comp14-32.pdf show that CPM has billed the city an additional $2,191,326 in “True-up Revenue” through the end of 2010.
As the notes from the independent auditor’s report by accounting firm KPMG LLP to the financial statements explains:
“The Company has an agreement with the City, whereby, the Company receives compensation from the City in accordance with the Agreements in the event that the City implements changes to the System, which reduces the Company’s revenues (True-up Revenue).”
These same notes reveal the city owed CPM $533,290 in True-up Revenue for 2009 and $1,658,036 for 2010.
After reviewing the documents, Alderman Scott Waguespack (32nd) http://scottforchicago.com/ who had led the fight in the City Council against the meter lease deal, is not surprised by the revelations.
“Three years later and we’re still finding costs that were more than we originally realized,” says Waugespack. “Don’t let anyone say it (the meter lease) doesn’t affect them because this (money owed to CPM) becomes part of the budget. We knew it was coming and we knew it was part of the contract but didn’t do anything to prevent it.”
Based on the company’s statement of operations, CPM is supplementing the normal revenue it derives from drivers feeding parking meter pay boxes with True-up Revenue from the City of Chicago to the tune of 2.25% of the company’s total revenue for 2010.
Waguespack puts some of the blame on the speed in which the deal got passed by the City Council back in December, 2008. Aldermen were given less than 72 hours to read, review, debate and pass the bill. That was not enough time, in Ald. Waguespack’s mind, to give the 75 year deal for $1.16 billion the proper scrutiny it needed.
“Aldermen didn’t know what ‘True-up’ meant,” said Waguespack. ”It’s taken this long for the effects of the intricate details of the contract to begin to appear.”
The city has thus far not released any information regarding this type of revenue for 2011 thus far.
It’s All In The Contract
According to the over 500 pages of contract with CPM http://theexpiredmeter.com/wp-content/uploads/2011/12/CPM-Contract-Closure.pdf, these events could include any situation which would require the city to remove a metered space from the system (installing a loading zone, moving a bus stop, etc.), or if a tax on metered parking is imposed by the city, or when metered parking is temporarily out of commission during a closure.
While removing a metered space is usually handled by adding another space or spaces elsewhere in the city to compensate CPM, the most likely culprit for this over $2 million is street closures.
Closure is defined http://theexpiredmeter.com/wp-content/uploads/2011/12/CPM-Contract-Closure-Definitions.pdf as anytime metered parking is taken out of commission for a prolonged period of time due to any street work, be it to replace a broken water main, for street repairs or resurfacing or even for a street festival.
Under the terms of the lease, any time this occurs above an annual allowance, CPM can file a claim for the loss of potential revenue due to street closure.
Under the contract, the city is given an 8% annual allowance for required meter closures in the Central Business District, and a 4% allowance everywhere else. After the annual allowance is exceeded, any metered space(s) closed for more than six hours in a day or for six total hours over three consecutive days, the city must pay the meter company for the lost revenue from that metered space(s) for that entire day.
In other words, if the metered space is closed for six hours, the city is on the hook for the estimated revenue for the total number of hours the meter is in operation. Most meters are in operation no less than 13 hours a day.
CPM has teams of employees armed with cameras, clipboards and measuring wheels to document closures wherever and whenever metered spaces are involved. In fact, the company spent $273,454 in documenting and administering closure http://theexpiredmeter.com/wp-content/uploads/2011/12/comp-31-2.pdf last year.
Report Confirms Meters Generating Millions In Revenue
While previous different news stories had pegged CPM’s 2010 revenues as somewhere between $65 to $75 million, the company’s own books showing a tidy sum of nearly $73 million in gross income, and $30 million in net profit http://theexpiredmeter.com/wp-content/uploads/2011/12/comp-31-2.pdf –a stunning 41% profit margin.
Meter revenues generated when the city controlled the meter system typically hovered around $20 million per year.
Meter Company Spent Nearly $1 Million In Enforcement
One of the more contentious portions of the meter lease deal was the ability of CPM to hire their own parking meter enforcement staff to write parking tickets for expired meter violations.
While the fines from the tickets only enhance the city’s coffers, the meter company’s motivation for increased enforcement is to frighten drivers to always feed the meters lest risk an expensive $50 ticket.
Obviously, the company takes ticket writing seriously spending $957,701 on enforcement http://theexpiredmeter.com/wp-content/uploads/2011/12/comp-31-2.pdf in 2010.
More Bad News To Come?
Since closures and other compensation events will continue to occur over the life of the 75 years of the lease, city government will be on the hook to pay CPM more money every year.
Are there more surprises from the meter lease deal still to come?
Ald. Waguespack believes so.
“This (meter contract) is a hidden cost to taxpayers,” says Waguespack. “We continue to realize additional costs or issues (due to the meter lease) that are bubbling up to the surface.”
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