01/04/2011 06:20 pm ET Updated May 25, 2011

Parking Meter Deal Would Be Costly To Cancel, Says Former IG David Hoffman

Perhaps the biggest albatross hanging on the neck of Chicago's outgoing Mayor Richard M. Daley is the controversial deal he negotiated to privatize the city's parking meters. For a little over $1 billion, Daley leased the meters to a conglomerate called Chicago Parking Meters LLC, which controls the meters, their rates, and their revenues for the next 75 years.

The various candidates to succeed Daley have ranged from ambivalent to outraged on the meters issue. Rahm Emanuel, the race's front-runner, refused to say in an interview whether or not he would have done the deal; "It's done," was all he said. Gery Chico has called the deal "the worst since the Louisiana Purchase" (we assume he means for the French).

And Miguel del Valle and Carol Moseley Braun have both said that they would sue the conglomerate to cancel and then renegotiate the deal, arguing that the arrangement is unconstitutional because it allows a private company to carry out the police duty of issuing tickets.

But the change might not be as simple as they'd hope.

Former Chicago Inspector General David Hoffman has long been a critic of the meters deal, writing a report in July 2009 that ripped into the city for the "dubious" deal and its overly hasty approval by the City Council. Maybe most damningly, Hoffman wrote that "the City was paid, conservatively, $997 million less" than it would have gotten from keeping the meters itself.

When asked about cancelling the deal, however, Hoffman was pessimistic. From Crain's Chicago Business:

If a court were to overturn the parking meter contract, Morgan Stanley et al. "would have a good argument" to reclaim their $1.16 billion, says former Chicago Inspector General David Hoffman, who for two years has criticized the deal as providing an inadequate return.

The courts more than likely would order both sides "to return to the starting point," Mr. Hoffman says. Meaning that Chicago would get the meters back, but the Morgan Stanley group would get its $1.16 billion back -- money the city has already pretty well burned through to fill budget holes.

Even getting that far is questionable, Mr. Hoffman adds. "The idea that you can overturn this contract in court is just highly unlikely," he says.

Of course, the problem with getting back to square one is that the city has spent nearly all of the $1.16 billion in the two years since the deal was struck. The money was supposed to be kept in a fund that would last the duration of the lease, but budget shortfalls forced Daley to dip into it in order to keep from raising revenues.

Clint Krislov, an attorney prosecuting a lawsuit against the city over the meters, argues that a judge could invalidate the contract's penalty clause. But that would mean Chicago Parking Meters LLC would lose its assets and the money it spent for them over an constitutional flaw in the deal, an outcome that hardly seems fair.

Gery Chico seemed to agree with Hoffman in a discussion on Monday, saying that the deal likely couldn't be undone. "[L]et us not mislead voters because it's a campaign season into believing that something's there when it's not," he said, according to Bloomberg.