I'm quite sure Merritt and Peregrine are making money.  They're a business; it's their primary purpose.  I don't see that as a bad thing, yet you seem to imply that his making money is somehow a problem.  Is it?  Why?

I'm not sure exactly the connotation of "all gravy."  Is that supposed to imply a complete absence of cost?  I'm pretty sure that's not implied by the article, which does mention that the city had to invest a great deal of money before expecting any payback.  I'd say if the balance sheet is positive, that's a good thing (better than having gravy in one's pocket, which I'm not so bullish on).  

I'm sure the city has costs related to a lot of things, PP included.  I'm not sure how many of those costs are related to the decision to invest and the contract that resulted; for example, even if it had been 100% private funding, the city would still have parking / traffic to deal with (which...do they make money on the parking fees?).  

It appears to have been sound investing.