Chicago Parking Meters LLC, the private firm that controls the city’s street parking system through 2084, sold $600 million in bonds on Thursday, the same day the city generated the latest round of negative news about its financial health by confirming it was postponing a bond sale of its own.
The Chicago Parking Meters bonds were given a “stable” outlook by two independent agencies, Moody’s and Standard & Poor’s, though they were assigned low investment-grade ratings because of uncertainty over how parking-meter use could fluctuate as the firm raises meter rates in the coming years.
Still, the agencies see reason for great optimism in the firm. “We view the company’s business risk profile as excellent, our highest business risk profile category, due to its long-term concession of an important city asset, on-street meter parking, and the strong concessionaire protections of the concession agreement,” wrote the Standard & Poor’s analysts.
The city’s bond rating, meanwhile, has taken a beating recently, with agencies downgrading it twice since August.
“The downgrade reflects the city’s weakened financial flexibility as evidenced by the continued use of long term financial reserves and other non-recurring revenues to offset severe revenue declines and increased spending pressures,” analysts for the Fitch ratings agency wrote last month. They went on to note that among the short-term revenue sources was the money from the parking meter deal.
Mayor Richard M. Daley wants to use $120 million in meter funds to help plug a $655 million deficit in 2011. If, as expected, the City Council signs off on the plan, just $76 million of the $1.2 billion received in the meter handoff will be left for the remaining 72 years of the agreement. On Wednesday the Civic Federation gave Daley’s budget plan a thumbs down “because it does not effectively address the structural deficit and relies too heavily on asset lease reserve funds and debt restructuring.”
The city had been making about $20 million a year on the meters until the privatization deal was put into place in early 2009. Over the summer Chicago Parking Meters told investors that, with the help of increased meter rates, it anticipated bringing in more than $73 million from the meters in 2010 and nearly $162 million by 2020.
“We have decided to postpone the GO bond sale, which was set for next week, to wait for a more opportune time to access the lowest possible rates,” said Peter Scales, a spokesman for the city’s budget and finance departments. “A new sale date hasn’t yet been determined.”
Also on Thursday, a Cook County judge let a lawsuit challenging the legality of the meter deal proceed, saying many of the city’s arguments for dismissing the suit were unconvincing.
Why did the meter company sell bonds? What is the purpose of it?
Have been told that original US Supreme Court decision in late 20′s or early 30′s legitimized parking meters as Traffic Control Devices. Was further informed that decision peripherally found meters could not be used primarilyly as source of revenue. Supposedly this was based on English Common Law which states, “The King’s Highway shall not become a Public Stable”. This may be worth researching. If my info is correct then the whole meter sale would appear invalid under the original Court ruling. I can hardly believe that the City and purchaser wouldn’t have researched this but stranger things have happened.