Chicago Pays the Price for Parking Privatization

It appears Chicago politicians who privatized city parking meter operations traded short-term political gain for long-term fiscal pain.

faillong.jpgPhoto: Best Recession Ever

Chicago may have left as much as $974 million on the table under the terms of last year’s agreement with Morgan Stanley. A June report from the city inspector general [PDF] blasted the deal for being rushed, secretive and vastly too expensive for taxpayers. The report’s revelations incensed motorists already antagonized by a ragged roll-out of meter rate hikes.

All in all, it wasn’t the money for nothing bargain the City Council seemed to think it was back in December when Morgan Stanley handed over a check for $1.157 billion. This manna from Wall Street plugged the city’s gaping budget hole and allowed the council to avoid painful tax hikes and service cuts. It also enticed lawmakers in Los Angeles and Philadelphia, where officials were considering their own parking privatization deals.

In return for the upfront cash, Chicago leased its 36,000 parking meters for the next 75 years to the Morgan-led consortium, and granted it the authority to double and triple meter rates. By 2013 downtown meters are slated to double to $6 per hour; neighborhood meter rates are to double to $2 per hour.

The deal was pushed hard by Mayor Richard Daley. The core of his privatization argument was that Chicago lacked the political will to raise meter rates and that desperate fiscal times demanded unlocking the value of public parking. He noted that city meters were only generating about $20 million a year, and because of neighborhood resistance, meter prices hadn’t gone up in 20 years. His conclusion was that Chicago had to outsource the political will to raise meter rates.

However, the inspector general’s report concludes that, "If Chicago were to keep control of the parking-meter system and operate it under the same terms as the private company, the system would be worth approximately $2.13 billion (in present dollars)," or $974 million more than the city received. Ironically, another cost of Chicago parking privatization was that it
quashed a number of neighborhood-supported parking improvement
districts, in which higher meter fees were to be invested in local
pedestrian, bicycle and transit improvements.

While public-private partnerships can be appealing because they require motorists to pay more of the actual cost of driving, are these deals really the only way to overcome political resistance to higher motoring fees?

ALSO ON STREETSBLOG

Cities Learn From Chicago Parking Meter Debacle. Did Goldsmith?

|
When Chicago Mayor Richard Daley announced that he was striking a deal to privatize his city’s 36,000 parking meters, it was a golden opportunity for transportation reform. If all went well, the deal could have cleared a political path for higher peak-hour meter rates, curbing double-parking and congestion-causing cruising. But Chicago managed to completely bungle […]

NYC Asks Banks For Ideas on Parking Privatization

|
New York City is moving forward with possible plans to privatize its on-street parking to some degree. An RFP released last week by the city’s Economic Development Corporation asks investment banks to submit their best ideas for privatizing city assets. Parking tops the list of assets the city is interested in contracting with the private […]

Chicago Outsources Parking Reform to Morgan Stanley

|
The Chicago City Council has approved by a vote of 40-5 a deal to privatize the city’s 36,000 metered parking spots for the next 75 years, trading meter revenues for an upfront payment of $1.15 billion. Under the agreement with Morgan Stanley Infrastructure, meter rates will rise substantially and some meters will operate overnight and […]

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

|
According 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.
STREETSBLOG USA

The Public Hazards of Privatizing Infrastructure

|
To privatize or not to privatize? When it comes to public infrastructure investments, from rail service in the UK to the Indiana Turnpike, more governments worldwide are choosing to hand the reins to private businesses. What are the early lessons of this trend? The companies leasing Chicago’s parking meters expect to generate $11.6 billion from […]