Chicago's Sale of All Parking Rights for 75 Years Was A Colossal Mistake

Connie Wilson By Connie Wilson, 13th Sep 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/7zatclzx/
Posted in Wikinut>Money>Debt

Is it a good idea or a bad idea to sell parking rights in order to bail out your bankrupt city?

The Chicago Parking Rights Debacle


With the announcement by Mayor Richard Daley that he would not seek another term, the albatross around his neck that the sale of Chicago's parking would have been became someone else's problem (in this case, current Mayor Rahm Emmanuel.). Many had predicted that the unpopular sale of all downtown parking for 75 years to Morgan Stanley in December of 2008 for $1.15 billion upfront would come back to haunt the long-time Mayor, politically. Now that Daley is not going to run, any City Council member who is thinking about a run for Mayor of Chicago would face questions about why he or she voted for this boondoggle of a bill. (Daley had appointed 5 of the Council members who voted for it.)

One alderwoman who voted against Daley's plan to sell Chicago's parking rights to Morgan Stanley for a period of 75 years for a lump sum payment upfront was 5th Ward Alderwoman Leslie Hairston. She flew to Pittsburgh recently to talk to the city fathers about the controversial Chicago method of raising revenue in these cash-strapped times. Pittsburgh has a proposal on the table for a similar sale of its parking meters.
Hairston, who voted against Daley's plan, "talked about how she didn't think people really knew what they were voting on and now they're living with the aftermath," according to Pittsburgh Councilman Bruce Kraus. (Chicago Tribune, "Chicago A Model To Avoid,' Sunday, Aug. 16, 2010, by John Byrne).

I've written previously about the outcry over the sale of all Chicago parking meters and lots to Morgan Stanley (and its partner, the Abu Dhabi Investment Authority and Alliance Capital Partners). Bloomberg, on his blog, reported that "Morgan Stanley, Abu Dhabi Investment Authority and Alliance Capital partners may earn a profit of $9.58 billion before interest, taxes and deposits." That article stated that the return on the investment was 80 cents on the dollar.

On his blog, The Urbanophile (Sun., Aug. 22, 2010, "Parking Meters and the Perils of Privatization") Aaron M. Renn commented "there is an enormous structural incentive for mayors who operate on a 4-year election cycle to grab that pot of money, even if it means signing a bad deal."

Of such a long-term deal, Renn says, "They're a lot more getting married. And if you marry the wrong gal---particularly with no option of divorce for 75 years---the consequences are a lot worse than a bad stock price." Asking repeatedly, "How likely is it that we'll know what we need even 10 years from now?" Renn, who thinks the Chicago deal was a very bad one, says, "In effect, Chicago has irrevocably set public policy with regards to parking for the next 75 years."

Indianapolis just signed a similar 50-year deal for $32 million (at least Chicago got $1.15 billion, even if only something like $360 million remains unspent) for its downtown parking. And Pittsburgh is looking at selling its downtown parking, but the votes may not be there. As Mayor Daley said at the time of the hurry-up vote in the city, "I get calls every day from mayors. They're doing the same thing we did."

Well, yes and no.
In the case of Pittsburgh, the winning bidder (if there is one) will be required to provide technology that would allow businesses to provide validation for customers. And, rather than the +155% rate increase that nearly tripled revenue for city parking overnight in Chicago to an annual take of $59 million, (sticking it to residents and hapless tourists), Pittsburgh's rates would not go up at the end of March, 2011.

Alderman Scott Waguespack (32nd Ward) says that all around the country, "They're really looking at Chicago as '˜what not to do' now." (Chicago Tribune, Aug. 15, 2010, "Chicago A Model To Avoid" by John Byrne).

The real downfall in Chicago in the short term is the loss of parking ticket revenue to the city. Five enforcers hired by Chicago Parking Meters wrote 1,345 tickets between June 21 and July 14, which is a tiny fraction of the hundreds of thousands of tickets issued each year and down 12% from last year. The only public hearing on the entire Chicago sale in the first place was a hastily called council meeting, versus seven meetings that have been held in Pittsburgh, to date.

Says one expert (Aaron M. Renn on "The Urbanophile, Aug. 22, 2010, "Parking Meters and the Perils of Privatization"), "For an integral part of the city's public space, it is catastrophically bad -- In an era of ever more rapid change, locking yourself into a fixed policy for public space for decades is a terrible mistake." Renn also commented, "But part of the monopoly is on policy, meaning that the vendor is now in a position to extract even further rents from the city to change policy -- They believe that there is even more future value to be extracted through penalties and inevitable renegotiations."

Renn continued, "The lesson is very clear: maintain policy flexibility -- Fixed pricing for parking is on the way out -- A long term parking meter lease should be a no-go zone for cities -- In the future, there might be two kinds of cities: those who sold off a long-term property right interest in their onstreet parking (which is to say, in the most important component of their city's public space) and those who didn't.
And make no mistake about it, no matter what anyone might claim about these meter leases, the long-term sale of a property right interest is what they represent."

Two experts on urban planning, Douglas Kolozsvari, MA in urban planning from UCLA in 2002 and Associate Olanner of San Mateo County's Transit District and Donald Shoup, Professor of Urban Planning at UCLA commented favorably on the use of $1.2 million in parking revenue in 2002 to revitalize Old Pasadena. ("Turning Small Change Into Big Changes.") All businesses in that neighborhood were in agreement on the installation of parking meters, however, and it wasn't a done deal locked in for 75 years. Also, they said, newer parking meters are on the way that will keep occupancy at 80 to 90% and charge variable rates. Old Pasadena surpassed Westwood with the revitalization it was able to do using its parking meter funds.

But, on the negative side, as Renn said in his article, "The deal (in Chicago) illustrates how U.S. banks, recipients of more than $300 billion in taxpayer bailouts in the worst credit collapse since the Great Depression, are profiting from helping states and cities close record recession-induced deficits by selling bonds and leasing public properties -- Rather than being rooted in a vision of how to improve government services, these deals are about how to generate cash from underperforming assets. It's an investment banker mindset, not an operator mindset -- .In effect, these deals aren't about just parking spots. They are assigning a property right interest in the biggest component of public space in the city to a private monopoly that doesn't have the public's best interests at heart. The city of Chicago has ceded a portion of its urban planning powers to a private company." (The Urbanophile, Aug. 22, 2010, "Parking Meters and the Perils of Privatization" by Aaron M. Renn.)

(SOURCES: The Urbanophile, Aug. 22, 2010, "Parking Meters and the Perils of Privatization" by Aaron M. Renn; Chicago Tribune, Aug. 15, 2010, "Chicago A Model To Avoid" by John Byrne; "Turning Small Change Into Big Changes" by Douglas Kolozavari and Donald Shoup; Bloomberg blog, ""Morgan Stanley $11 Bill Makes Chicago Taxpayers Cry").

Tags

Broke Cities Selling Parking Rights, Chicago Parking Rights, Pittsburgh Pondering Sale Of Parking Rights, Why Selling Parking Rights Is A No No

Meet the author

author avatar Connie Wilson
Author - 27 books. Yahoo Content Producer of Year (2009); MWC Writer of the Year (2010); IWPA Silver Feather winner (Chicago), 2012 & 2014. Professor: 6 IA/IL colleges.

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