Challenge to Chicago’s 99-Year Garage Lease Can Proceed

Chicago’s 99-year lease of four downtown parking garages to a business controlled by two Morgan Stanley investment vehicles will face a legal challenge to its terms.

Illinois state court Judge Rodolfo Garcia in Chicago today granted a taxpayer group’s request for permission to move forward with a complaint filed with the court on Feb. 13.

While that motion was unopposed, an attorney for defendant Chicago Loop Parking LLC, Bryna Dahlin of Chicago-based Winston & Strawn LLP, told the judge her client disputes the legal basis for the suit.

“The only way to get to the merits of this is by getting past that initial step of having something before me,” Garcia said from the bench. He gave Chicago Loop Parking and the city 60 days to respond to the complaint.

Chicago Loop Parking LLC paid the third-biggest U.S. city $563 million for the lease in 2006 and, in 2011, submitted a demand for $200 million for lost revenue after the city allowed a new garage to be built within a restricted zone, according to the filing.

The plaintiffs, Independent Voters of Illinois and Chicago resident Aviva Patt, allege the city’s agreement to cede its control over parking on the east side of its downtown business district, known as the Loop, constitutes an illegal delegation of its legislative and police powers.

Public Money

Patt and the Independent Voters group are seeking a court order declaring the challenged provisions void and barring city Comptroller Amer Ahmad from paying out public money under the agreement.

Chicago Loop Parking is controlled in equal parts by Morgan Stanley Infrastructure Partners LP and Morgan Stanley Infrastructure Investors LP, according to the complaint.

Matt Burkhard, a spokesman for New York-based Morgan Stanley, referred calls for comment to Chicago Loop Parking. Lena Parsons, a spokeswoman for the company from WPP Plc’s Hill & Knowlton public-relations firm, declined to comment on the ruling.

Ahmad is also a defendant in the case. Roderick Drew, a spokesman for the city’s law department, didn’t reply to voice-mail messages seeking comment.

The case is Independent Voters of Illinois v. Ahmad, 2013CH04219, Cook County, Illinois, Circuit Court, Chancery Division (Chicago).