Parking firms have Chicago ties

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When Pittsburgh proposed leasing its public parking facilities, the city became a magnet for a passel of firms -- many of them connected to Chicago by blood, politics or business -- that pursues similar deals around the country.

The firms may be partners in one city, rivals or referees in the next. The fluid nature of these business relationships hasn't raised many eyebrows in Pittsburgh, but it's reportedly raised a red flag in Los Angeles, one of the cities now considering a parking lease.

Pittsburgh finance director Scott Kunka said officials here have been careful to make sure that firms participating in the Pittsburgh project have no conflicts of interest.

"We had those questions ourselves" and posed them to advisers at the Downtown law firm K&L Gates, who produced "voluminous" guidance, he said.

In Pittsburgh, the winner of a parking lease would receive an estimated $2.4 billion in parking garage and meter revenue over 50 years, according to a City Council study. In the short term, however, other firms stand to share millions of dollars in commissions and advisory fees.

Chicago officials pioneered the parking lease last decade with a pair of long-term contracts to Morgan Stanley's infrastructure investment arm, which brought in Connecticut-based LAZ Parking to operate four garages and about 36,000 meters.

When Pittsburgh Mayor Luke Ravenstahl proposed leasing 12 parking garages and several thousand meters -- hoping to generate revenue for a troubled pension fund and save it from state takeover -- a high-powered, Chicago-linked crowd landed here.

The participants include:

• Morgan Stanley and Co. infrastructure market and acquisitions team, to be paid about $4 million if the city carries out the project. The team included William Daley Jr., nephew of Chicago Mayor Richard M. Daley.

• Katten Muchin Rosenman, a Chicago-based law firm that helped the Daley administration in the parking meter deal and is among the lawyers advising Pittsburgh. According to Chicago news reports, Terry Newman, a partner at the firm, is a friend of Mayor Daley.

If the lease goes through, the firm will bill the city parking authority hourly rates ranging from $480 to $620 for each lawyer involved in the project. No bill will be provided until next month.

• Scott Balice Strategies, a Chicago-based financial consulting firm that crunched the numbers for the Pittsburgh project. Before helping to found the firm, Lois Scott served on a budget advisory panel to then-incoming Illinois Gov. Rod Blagojevich, who was forced from office last year amid allegations that he tried to sell President Barack Obama's Senate seat. Two of the firm's executives have worked for Mayor Daley.

The city's financial terms with Scott Balice were not immediately available.

• Desman Associates, a New York-based parking consulting firm that was part of the Morgan Stanley team that landed the Chicago leases. In Pittsburgh, Desman is on the other side of the project as an adviser to the city and will receive about $560,000 from the parking authority if the deal goes through.

• J.P. Morgan Asset Management and LAZ Parking. At nearly $452 million, the highest of three bids for the Pittsburgh lease came from a consortium led by J.P. Morgan, LAZ Parking and a LAZ affiliate, P4 Partners. In return for the upfront payment, the consortium could realize about $2.4 billion over the life of the lease, according to council's study.

William M. Daley, one of Mayor Daley's brothers and father of William Daley Jr., is an executive at J.P. Morgan's holding company. The company said he has had no role in the Pittsburgh project.

Mr. Ravenstahl has asked City Council to approve a lease with the consortium by Nov. 1, setting up a showdown with council members who'd prefer to float a pension bond or let the state seize control of the pension fund.

Mr. Kunka said it isn't surprising that the firms involved in the Pittsburgh project have Chicago ties, partly because parking leases are still rare and the number of entities qualified to work on them is relatively small.

City Controller Michael Lamb, who's advanced his own alternative to the mayor's plan that would involve selling the city's share of parking assets to the city parking authority, said he isn't surprised by the Chicago presence, either. However, he said he's wary of the "cozy relationships" that firms may develop as they swap roles from one city to another.

Besides winning the Chicago parking projects and advising Pittsburgh on a parking lease, Morgan Stanley teams have had an advisory role in an Indianapolis parking lease and bid on airport leases in Chicago and Puerto Rico.

Desman Associates has worked with Morgan Stanley on many of those projects. Besides Pittsburgh, Desman is advising Los Angeles officials on a lease. In Harrisburg, Desman helped LAZ and Royal Bank of Scotland pursue a parking lease, a project eventually dropped by city officials.

In Indianapolis, Desman helped LAZ, P4 Partners and Aurora Capital Group pursue a parking lease, according to documents submitted there.

The role-changing was more unusual in Pittsburgh, where the J.P. Morgan group and LAZ started out as rivals but teamed up after LAZ's initial partner, Aurora Capital, backed out.

The switch occurred after the city had qualified seven teams of bidders, with J.P. Morgan on one team and Aurora Capital and LAZ on another. The city's advisers approved the change, partly because both firms already had been vetted and because it kept the bidding process competitive, said Tom Morsch, managing director with Scott Balice Strategies.

Despite the firms' business relationships in other cities, it was not a conflict for Morgan Stanley and Desman to advise Pittsburgh on a deal involving LAZ, Mr. Morsch and others involved in the project said.

Mr. Morsch said the Morgan Stanley investment group that hired LAZ in Chicago is a different entity from the merger and acquisitions group serving as Pittsburgh's advisers. Mr. Kunka said large financial firms erect information walls between business groups.

"As far as the process in Pittsburgh, no, there was no advantage" for LAZ, said Shannon Baker, spokeswoman for Pittsburgh Parking Partners LLC, the name of the J.P. Morgan-LAZ Parking consortium. She called Pittsburgh bidding process a "model of transparency."

In Los Angeles, however, a question about firms' shifting roles has held up J.P. Morgan's contract to advise city officials on a parking lease, according to a Sept. 23 report in Infrastructure Investor, a trade publication.

California law prohibits public employees from having a financial stake in government contracts they're involved with on the job. Los Angeles officials are wrestling with whether that prohibition would extend to a consultant such as J.P. Morgan, which may have business relationships with prospective bidders on the parking lease, the publication said.

Joe Smydo: or 412-263-1548.


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