CHICAGO (CN) - Chicago illegally privatized four downtown parking garages in a 99-year lease to a private company - which is demanding $200 million because the city approved another parking garage, a government watchdog claims in court.
The Independent Voters of Illinois Independent Precinct Organization sued City Comptroller Amer Ahmad and Chicago Loop Parking, in Cook County Court.
Chicago Loop Parking has demanded $200 million from the city, claiming Chicago violated an agreement by letting another parking garage open up downtown.
In 2006 Chicago and Chicago Loop Parking, which is owned by Morgan Stanley, entered into a lease agreement that "allows for private control over the city's legislative and police powers to permit anyone to open new public garages in the Chicago Loop for the next 99 years - an unacceptable, extraconstitutional limitation on the exercise of the city's power," the nonprofit plaintiff claims.
Under the agreement, Chicago relinquished control of all four city parking garages downtown to Chicago Loop Parking, for 99 years, for a onetime payment of $563 million, according to the complaint.
In addition, "if, during the term of the 99-year agreement, the city grants a public garage license to another private party for a public garage within the defined Loop area, that triggers a 'Compensation Event,' within the 'Competing Parking Area,' the provision of the agreement entitled 'Concession Compensation' and required the city to compensate CLP [Chicago Loop Parking] with public funds," according to the complaint.
The Independent Voters add: "Accordingly, the city has agreed to preclude or condition its exercise of its police power in the public interest, to regulate rates and permit other garages to open, upon paying CLP public funds compensation for each such exercise.
"This is an illegal and offensive sale or lease of its sovereignty and exacerbated by the 99-year term.
"Not an idle threat, the agreement has already resulted in substantial claims for payments arising from the city's exercise of its legitimate legislative/police powers in the public interest.
"On March 1, 2011, CLP filed a statement of claim, under the agreement, against the City of Chicago for alleged lost revenue in the amount of $200,000,000."
The $200 million claim came after Chicago awarded a contract to a rival, Standard Parking Corporation, to run a parking garage connected to The Aqua, a mixed-use high-rise downtown.
"CLP makes claims for lost revenues to date and future lost revenues expected to be suffered through November 2105, as well as CLP's alleged losses, including increased operating, financing, capital, and maintenance costs, that are reasonably attributable to the alleged Competing Parking Action," the complaint states.
The city is fighting the $200 million claim, but according to the Independent Voters, "the city's defenses asserted under the agreement do virtually nothing to ameliorate the huge amounts likely to be due under this agreement now and for 99 more years to come, under the terms of the agreement."
"By the agreement, the city illegally contracted to restrict its ability to legislate and exercise its legislative-police powers under the public interest for 99 years with respect to city garages and contracted to expend public funds in the process."
Chicago claims on its website that "the $563 million lease of the downtown parking garage system helped to pay off all of the debt used to build Chicago's world-class Millennium Park, and allowed for a massive shift of capital resources from downtown parking garages to neighborhood parks throughout the city by investing $122 million in neighborhood park infrastructure."
Sale of the parking garages was one of a series of privatization deals reached by former Mayor Richard Daley in his last term as he faced a huge budget deficit. Chicago sold 36,000 parking spaces to Chicago Parking Meters, also controlled by Morgan Stanley, for $1.16 billion for 75 years.
Both that deal and the parking deal created furors among taxpayers, who decried the longtime loss of city income for a onetime boost of money.
Despite the privatization deals, Mayor Rahm Emanuel inherited a $636 million budget shortfall when he took office in January 2011.
Today, Chicago's downtown parking meter rates are the most expensive in the United States: $6.50 per hour, according to ABC News.
Chicago also faces two multimillion-dollar claims from Chicago Parking Meters, which claims it lost revenue due to street repairs and misuse of disabled parking placards.
Independent Voters of Illinois seeks a declaration holding the city's contract with Chicago Loop Parking null and void, and an injunction forbidding the City Comptroller from disbursing public funds under the agreement.
It is represented by Clinton Krislov with Krislov & Associates.
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