The City of Chicago Made the Worst Deal in Business History Involving Its Parking Meters and a Middle Eastern Investment Firm

I like Chicago for the most part. The summer and fall were great, the new office is awesome, there are fantastic restaurants, blah blah blah. It's a fine town. But the local government leaves quite a bit to be desired in a few areas, which I'm now learning includes the art of the deal.

In The Public Interest — As you recall, Chicago (like all cities) was struggling financially because of the Great Recession. Out of desperation, the city rushed to take a $1.15 billion offer from private investors—including some from as far away as Abu Dhabi—in exchange for control of 36,000 parking meters for 75 years.

Once the ink was dry, the deal’s finer details came into focus. The city’s inspector general concluded that the meters had been sold off $1 billion dollars under their value. And because the investors demanded a healthy return on their investment, parking rates shot up to some of the nation’s highest.

Since, the investors have made out like bandits. By 2019, they had made back their initial investment plus $500 million in profit on top.

Combined with two other privatization deals made around the same time—four parking garages and the Chicago Skyway bridge—the parking meters have sucked billions from Chicago’s budget.

“Chicago today would have between 3 and 4 billion dollars more than it has from these three deals together,” Clint Krislov, director of IIT Chicago-Kent’s Center for Open Government Law Clinic, told the Chicago Sun-Times. (Krislov has also said that the parking meters contract “pales by comparison” to the horrendous Skyway deal.)

This has to go down as possibly the worst deal in business history. I'm sure the city understood it was going to take a loss in exchange for short-term cash, but what's on pace to be a $7 billion mistake seems like a pretty bad trade. I don't have an MBA, though.

My financial model — wildly guessing with barely any information — would have deemed this to be a bad deal at the time. Unless the federal government was going to send Dick Cheney as its mob boss to break the mayor's kneecaps and then kick Chicago out of the United States, probably should have just kept the rights to the parking meters.

The good news, I guess, is Chicago got its act together after this catastrophe in 2008 and started electing sensible leaders who have only continually improved the quality of life here.