Chicago-Style Parking Plan Could Raise $5 Billion Plus for NYC

muni_meter.jpgAccording to a senior municipal bond analyst at a leading Wall
Street firm, New York City could
raise between five and six billion dollars immediately if it privatized its parking meters as Chicago
is doing.

Whether privatization is the right way to unlock New York City’s parking riches is debatable. What’s not in question is that curbside parking in New York and most U.S. cities is grossly underpriced and could potentially be a crucial source of revenue for much needed transportation improvements. Chicago has chosen to outsource the political will to raise meter prices. Cities with the gumption to raise their own meter prices will keep much more of the revenue. That said, at least Chicago is doing something about its parking dysfunction, and will get the very real benefits of reduced cruising traffic and double parking.

The Bond Buyer reports
that Chicago expects to raise more than a billion dollars upfront when it awards a minimum 50-year concession to
operate its curbside parking meter system. Ten corporate consortiums are
bidding for the contract, which is expected to go before the City Council in
the fall. According to Transportation Alternatives’ recent report Pricing the Curb [PDF], Chicago will require vendors to use state-of-the-art parking meters
that monitor parking space availability and adjust rates to ensure an open
space on every block. Chicago
will raise meter rates as part of the deal.

Chicago’s 36,000
parking meters generated $23 million in 2007. New York
City’s 75,900 meters produced $114 million. (New York anticipates $120 million in meter revenue in
2008.)

Chicago leads
the U.S. in
privatization deals or "public-private partnerships." It leased the Chicago
Skyway toll-way in a 99-year deal with a multinational consortium in 2005 for
$1.82 billion. It followed up that deal with another 99-year lease of four
downtown parking garages to a private operator for $563 million in 2006.

Mayor Daley says Chicago
will use lump sums from the privatization deals to create a reserve fund which
will generate interest for long-term infrastructure investments and to pay down debt and
pension obligations. But some Chicago City Council members have expressed
concern about the proposed parking privatization and higher meter rates. "We saw that in the Skyway. Fees went up. If we lose
control of that, the citizens have nobody to complain to. They’re not going to
listen to John Q. Citizen," Transportation Committee chairman Tom Allen
(38th) told the Sun Times.

Photo: jeanphony/Flickr

  • Some on-street (and on sidewalk) parking is already “privatized” (if you know what I mean) –but the garages don’t pay to use the public space.

    Still, I don’t see anything wrong with this, I just want to see better organized market rate on-street parking in more places. And peak and off-peak parking rates. I wonder if the city might make more money doing this in own though?

  • Never understood why most congestion pricing advocates wanted CP AND this. Always seemed to me that one or the other would do fine; no need for both, and parking in the City would be politically and practically easier to deal with than entering it.

  • Larry Littlefield

    There is only one word for this and every thing else like it: EVIL.

    Wall Street analysts aren’t saying NYC could get $5 billion a year. And they aren’t saying they could get $5 billion over time.

    What they are saying is by giving up the right to any and all revenues from a portion of the public space FOR THE NEXT 50 YEARS, the city could spend $5 billion RIGHT NOW. And then, the money would be gone, and nothing would be available in the future.

    “I don’t see anything wrong with this.”

    Are you planning to move out before the $5 billion is spent?

    There has been so much of this done already. No wonder this is the first thing Wall Street thinks of. If the city would net $5 billion you can bet it plans to skim $1 billion.

  • CP + parking review = revenue + more revenue. Until the MTA’s capital plan is fully funded, we should be looking at every possible option.

  • Er, parking reform, not parking review.

  • Larry Littlefield

    Oh, and forget about creating an “endowment” to throw off money over time. If Albany saw the city had $5 billion for future infrastucture maintenance, it would cut the city’s school aid by $5 billion, and tell the city to use that money.

  • I really hope this actually happens — with one caveat. Where will the revenue go? If we’re going to take out the stick, then we also need to put up a carrot. Considering we’ve been subsidizing bad habits so long with below-market pricing, we’ll need to provide alternatives for when people begin to change their habits. The revenue from this deal should really go toward improving our mass transit system, but I’m not very confident it will be used that responsibly.

    Regarding the city doing this on its own — I think it would be politically impossible in Chicago. Ald. Allen’s complaint is a perfect demonstration of why. We need to take some of this power out of the hands of the Aldermen — it’s impossible to coordinate anything citywide otherwise and ends up being each neighborhood just doing its own thing without any regard for the impact on surrounding neighborhoods.

  • John Kaehny

    Susan, it is a much better deal for the tax payer if the government raises fees for parking or tolls without privatization. Chicago (or NYC) would probably bring in twice as much from a full peak-hour parking pricing scheme if they did not privatize it. The issue for Chicago (and now it appears New York State which wants to privatize some highways) is whether the political will exists to price the parking or roads based on actual demand instead of politics. Chicago found it politically easier to get higher tolls on the elevated Skyway by having a private company raise the tolls in exchange for a big upfront payment. Because of this, Chicago is going to try to raise parking fees the same way. Unfortunately, Chicago’s Mayor Daley of Chicago, and now it appears, Governor Patterson have concluded that the only way to get higher revenue from parking and tolls is via privatization.

  • Larry Littlefield

    “Until the MTA’s capital plan is fully funded, we should be looking at every possible option.”

    How about turning over to a private consortium (presumably financed from abroad) all fare revenues for the next 50 years, in exchange for an up-front fee sufficent to run the system for the next five years?

    How about trading the right to all city property tax revenues for the next 50 years in exchange for enough money up front to get us through the next five years in splendid style?

    Once the five years are up…oh well who cares.

    Don’t kid yourself, that is what is being proposed everywhere. If you can’t borrow any more against the future because people know you can just not pay it back, give up rights to future money and say it isn’t a debt.

  • Larry Littlefield

    In fact, perhaps people’s personal financial problems could be solved the same way. They could get a big up-front payment, which could be spent immediately, in exchange for the rights to all future earnings which, when the money ran out, they would work for in chains.

    I’d bet Americans would be lining up for such a deal, given both their personal and political choices in the past few decades, and Wall Street would be happy to handle the arrangements in exchange for massive fees.

  • I’m very much in favor of variable market-rate parking, but the city should manage parking fees itself. What’s to be gained by letting some private company leech off profits? Am I missing something here?

  • Larry the points you raise are why I wonder if the city can’t just make more money off of on-street parking on its own. Ultimately, though, there is a public benefit from charging for on-street parking no mater who gets the money. Frankly, that’s the primary reason I support it. Not just because of the revenues (though that is a nice bonus) but because of the impact it would have on traffic and driving in the city.

  • John Kaehny

    Larry, as you know, city parking meter revenue is a small part of the City’s vast stream which backs long-term, general obligation (GO) bonds. So, the city has probably already borrowed against this money. So, it’s not just a question of borrowing against the money. That’s already happened. To me the big questions raised by Chicago’s move are:
    > Does NYC have the will to properly price curb space, both for the traffic and quality of life benefits, and for the much needed revenue.
    > Why do politicians find is so much easier to give away the store to a private company for, when they could just as easily create Meter Bonds, keep all the money for the public and give some modest share back to neighborhoods in the form of walk, bike and transit improvements. (A form of Shoup’s revenue return.)

    I am not a fan of PPPs, which I agree short-change the public. But some political mechanism needs to be created to unlock some of the value in pricing scarce public streets and parking.

  • The way I see it, one problem with privatization of street parking that hasn’t been mentioned is that a private concern would be most interested in maximizing profit, rather than accomplishing any goals regarding congestion.

  • CP also kicks in to regulate transient traffic that doesn’t park in the zone. Although, loophole-free bridge tolls could do the same thing. If we can get a good parking system up and running, it would make sense to reevaluate the need for CP. But the obstacles to effective parking regulation might be greater than even those of congestion pricing. Parking policy needs to be:

    * Universal: no free/cheap parking anywhere in the zone, and so many car owners within the zone would need to give up their cars completely. (Not immediately true of CP.)
    * Blind to influence: no exceptions for civil servants or anyone else. e.g. doctors on emergencies should certainly be able to park, but that doesn’t need to be free any more than their gas does. And let the city pay the city for its parking, so at least there is some accounting of the resource’s exploitation.

    I’m happy with both of those points and their outcomes, but they’re massive political obstacles. Which is why were talking, sadly, about outsourcing the space so that John Driving Citizen doesn’t have anyone to lodge his incessant self-centered complaints with. We should probably wait it out. If we can talk about privatizing now, we can probably talk about giving the public its due in a matter of months or years.

  • Larry Littlefield

    “Larry the points you raise are why I wonder if the city can’t just make more money off of on-street parking on its own.”

    The point I am trying to make is one of generational equity. The issue of “privitization” and “rational pricing” is just a subterfuge. The real issue is today’s politicians and today’s interests taking all future resources and cashing them in right now.

    Yes, they can also do so by borrowing against future revenue streams and issuing bonds. They have been doing so for years, to the point where we are broke.

    The reason this subterfuge is coming up is because those with money (in Asia and the Middle East) realize our future is so sold-out that younger generations will be unable, unwilling or both to pay back what older generations have spent on themselves.

    So they come up with a new and different way to sell out the future to pretend that isn’t what they are doing! AND give up even MORE revenue in exchange for EVEN LESS up front money for the privilege of having the counter-party go along with the deception!

  • Larry Littlefield

    “But some political mechanism needs to be created to unlock some of the value in pricing scarce public streets and parking.”

    Let’s put it this way. How do you think a deal to allow some private entity to charge whatever it wants for parking for the next 50 years, in exchange for turning over to the city 70% of what it takes in year-by-year. So the city would be getting a little bit of money every year, instead of all that money up front. Do you think ANYONE would be in favor?

    No — the whole game is destroying the future to let the party (that most people weren’t invited to) go on a little longer.

  • Hilary

    How was the City able to charge $100 for permits to use its tennis courts – even once? And there’s some hefty fee now for using recreation centers — even when the City wants to encourage their use. Maybe curb space, along with street trees, greenways and bike lanes, should be given over to the Parks department. They seem to be able to run a concession when they have to.

  • Greener Grass

    Let’s also keep an eye on whether Chicago has the will to price curb space. T.A./JK keep blending their tenses on this topic, but Chicago has not adopted this plan – it’s a proposal. And obviously the degree of will and level of public benefit change as the municipality in question moves to outsource the political pain of doing it.

    “To me the big questions raised by Chicago’s move are:
    > Does NYC have the will to properly price curb space, both for the traffic and quality of life benefits, and for the much needed revenue.”

  • John Kaehny

    Yes, Chicago’s City Council could still reject this plan. But if it’s approved and Chicago takes its billion in upfront money, then the private vendor will raise meter prices a lot. That’s the political seductiveness of privatization. It allows the electeds to make one decision, one time, and justify their vote with a big pile of money to wave around in-front of the public. Then, the deed is done and a big, evil company, is in charge and take the blame for higher meter rates. This is “outsourcing political will.” ( I want the copyright on that phrase.) Incidentally, when it comes to New York City’s “political will” the issue is City Council. There’s little doubt that the Mayor and DOT are interested in pricing meters based on measurable criteria like vacancy targets and turn-over — they’ve said as much. Using such criteria would result in higher peak hour meter prices.

  • John I think you hit the nail on the head. This is all about “outsourcing political will” –the trouble is it sounds like the private company buying this operation would be getting too sweet of a deal. The city needs steady revenues sources.

    I think if people knew that pricing could be set so that they would always be able to find a free space when it was needed this might sell. Just explain how, by letting the price creep up as vacancies fall, charging more for each successive half-hour, and by having “peak” prices we could have more empty spots and reduce people circling for parking. I think it is possible to educate people about how this could be a public benefit. (this is not even talking about the benefits for peds, bikes and air quality) I saw a recent “unscientific” poll in the daily news when 60 percent of people said that our taxes are too low. Yes people are greedy short sighted and stupid, but we can each get over it when we see the bigger picture.

    Everyone can see that our streets are dysfunctional.

  • Spud Spudly

    Just curious, but how are meters enforced in a situation like that? What happens when someone doesn’t pay or stays too long? Does the City still ticket them and share the fine with the private parking entity? Does the City keep the money? Does the private entity have the right to issue parking tickets on its own? If so, is there a mechanism in place to adjudicate those violations properly under rule of law?

  • Larry Littlefield

    “Just curious, but how are meters enforced in a situation like that?”

    Your point that people will be less likely to comply with the law when they realize their community gets not one cent of benefit from the parking revenues (because they were already cashed in and spent in the past) is well taken.

    Pretty soon, people will feel the same way about taxes.

  • Spud Spudly

    My point was that I hope the city wouldn’t also turn law enforcement over to a private entity.

  • John Kaehny

    Spud, under the plan, Chicago keeps parking violation money (which is typically 5x meter revenue.) Not sure if the private vendor writes the violations, I doubt it, though RFP doesn’t say. Though, lots of big cities internationally hire private companies do parking enforcement. (Tokyo for instance.)Be interesting to see if violations go up or down when meter prices go up. Studies have shown about a third of parkers in big US cities overstay the meter limit. Will that go up even more in Chicago if the plan is approved? Susan, NYC DOT is doing a very measured roll-out of peak hour pricing, and documenting the results very carefully. If they get good results they will probably do exactly what you suggest.

  • Greener Grass

    I think “outsourcing political will” was used heavily in NJ media during Corzine’s various attempts to sell-off or partially privatize NJ’s toll highways.

  • John Kaehny

    Well said by these guys. So much for the copyright royalties:
    December 6, 2007, USPIRG: “There’s nothing innovative or magic about these proposals,” explained Ashwell. “It’s just borrowing money from big future toll hikes. If elected officials believe they must raise tolls, then they should make that case to the public, rather than outsourcing the political will and the revenues to some company in return for a short term wad of cash.”

  • Larry Littlefield

    “If elected officials believe they must raise tolls, then they should make that case to the public, rather than outsourcing the political will and the revenues to some company in return for a short term wad of cash.”

    Exactly. It isn’t the outsourcing that matters here, OR the parkign policy. It is lost future revenues in exchange for money cashed out now. It’s all hocus pocus designed to bring transporation policy people in. Don’t buy it!

    The politicians and Wall Street would not be interested in privitizing if that just meant a private entity would take an ongoing cut of an ongoing revenue stream. And Wall Street doesn’t want to just issue more bonds, because they know we are going bankrupt.

    Not that the issue is out there, however, I’m afraid Sheldon Silver et. all will latch onto it. Cut NYC’s state school aid by $6 billion next year but allow the city to sell of the rights to all future parking revenues. That solves the state budget crisis in a way that is “fair” by Albany standards. And then, follow the $6 billion cut, increase both NYC and other state school aid by the same percent. Pay off the UFT by allowing a one-time early retirement incentive for everyone over age 45, but let the city defer the cost of the added pension contributions for three years. Perfect.

  • John Kaehny

    Larry, why do you think the state would have to approve a Chicago style privatization deal for the city?

    If the issue for you is mainly about upfront lump sum versus spend as you go, then you should consider that Chicago and NYC already bond against parking revenue and have already taken their upfront money from the system. So, on that front, this is about the cities getting upfront money from 30 year or shorter bonds backed by low meter rates versus upfront money from some portion (not sure what 75%?) of 50 years of higher meter rates. I’m not a fan of PPP because I believe the public pays too high a price to outsource the will to raise tolls and fees. But, it’s not correct to characterize the Chicago plan as pay as you go versus bonding. Chicago and NYC are borrowing against future generation’s parking revenue already with or without privatization.

  • Larry Littlefield

    “Chicago and NYC are borrowing against future generation’s parking revenue already with or without privatization.”

    And their Social Security taxes, farebox revenues, sales tax revenues, etc. But that doesn’t mean we should buy into more of it.

    For you, perhaps, the ability to spend all that money now, leaving nothing for later, may be a hook for higher parking prices. Otherwise your title would have been “fair value pricing for on-street parking could net NYC X dollars per year indefinately.” THAT I’d love to see (but do not expect to).

    For the legislature, the transportation aspect would be merely a hook to further degrade the future of life in this city.

    Remember, the asset transfers are going to be proposed as a substitute for debt because it will be clear the debts will not be paid, limiting people’s willingness to lend more.

  • The economics of parking revenue and fines will change drastically in the future and a private contract might lock the City into an outmoded technology. For example, the whole curb parking system could be wireless and have real-time recording of status of every parking space. Information about available spaces and the current curb price would be accessible to drivers in vehicles via cell phones, and estimated on a daily and hourly basis. Information about vehicles parked with expired parking times would be available for manual or automatic electronic ticketing.

    See example from San Francisco: http://www.streetlinenetworks.com/site/index.php#

  • LK

    In the case of some cities parking meter revenue plus fines amount to a very large part of the revenue stream. The PR stream attempting to put a positive spin on parking meters and related issues is, however, even wider. I have no problem with making parking more difficult and more expensive as they do in, say, San Francisco if public transit is made proportionately less expensive, more efficient, more convenient, and safer than driving. I do have a big problem with parking as an ever fattening cash-cow that makes life ever more irritating and troublesome than it already is for city dwellers.

    This, of course, is the trend and the trend seems to me ti be more like an extortion racket than a fair means of ensuring access to merchants and businesses, which is one of the big PR points. More fundamentally, when it is the government milking the cash-cow there seems to be a huge incentive to make it more and more likely that the citizen will commit some sort of fine producing infraction. After all what we have in this racket is a monopoly with the folks who are supposed to provide the oversight making the money from the monopoly through fines and fees.

    Finally, if revenue is really what is needed let the government tax income, the only relatively fair kind of tax, and then face the taxpayers come election time. Government revenue collecting in a democracy needs to be transparent. Just try to get at the real dollar figures (not cooked) for net income from something like city parking revenue. Go on, try it.

  • I don’t have much time to comment but I don’t need it: re-read everything Larry Littlefield just wrote above.

    This is a disastrous scheme to sell off, at a huge discount, a revenue-generating resource. It is shortsighted, counterproductive, awful policy that will leave us all the poorer, for a short term kick. It is the equivalent of buying a round of drinks on your children’s credit card.

    Sharpe James attempted to do this with Newark’s watershed. Corzine floated it as a balloon with the Turnpike assets. Indiana I believe did it with highways. It is a short-term gimmick, a cheap, dirty high with a long, and unpleasant hangover.

    There is a TON of money to be made in this type of deal, so expect to hear a lot more about this type of “budgetary crack”.

  • John Kaehny

    Gary,

    Totally agree that we will be hearing much more about PPP/privatization from both parties. It’s like the children’s story “Stone Soup.” A hungry soldier tells a village he can make soup from stone. Then he gets the villagers to bring all the ingredients, including the water and the pot, and cooks up a great soup. What a genius. Here, the soldier is Wall Street and the cities and states are the villagers. No doubt they will be happy to serve us.

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