So Monday is the Chicago Tribune Editorial Board review for the Second Ward candidates and as I was having breakfast this morning I got to thinking. How bad really was the parking meter deal? So I started poking around to find out.
Ten minutes later I was shocked!!
Based on this story here I estimated that initial annual revenue from the parking meters was $19.5 million. Then, on this page here I figured that long term municipal bonds were around 5%. Then I built a quick spreadsheet using OpenOffice’s Calc (I’m a big fan of open source software.) But I had to stop because I needed one more piece of information; so I found this story here about rate increases. A few clicks later I was reaching for the Advil.
If one assumes a 7.5% annual increase in rates (2011 was around 20%) and a fixed 5% interest rate, then the present value of the parking meter revenues is:
That’s right, $3.775 BILLION dollars. How much did we get?
That’s right, the Mayor and the City Counsel left potentially over $2 Billion on the table.
What’s amazing is that this took me 10 minutes. Why didn’t anyone in the City Counsel or the Mayor’s office — or the media for that matter — do this very simple analysis? My guess is that they didn’t even think about it. Politicians do NOT even understand the concept of time value of money.
Just doubly insane that Bob Fioretti voted for this abomination.
If you want to see my spreadsheet you can find it here.