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So what's the bottom line on this parking meter thing?
July 16, 2009

Dear Cecil:

I don't have a car, so this hasn't been an issue for me, but I was wondering about the full story behind the whole parking meter debacle going on right now. I know Chicago leased its meters out to a private company — I think I've heard the lease is for 75 years. And clearly the prices have been raised pretty dramatically, more so in some neighborhoods than others — enough to encourage normally law-abiding citizens to vandalize the meters.

My questions concern the details of the lease. The city must have gotten a great lump sum for the lease — was it even a remotely good deal? Or did Daley just sell off a reliable source of long term income for a quick but irresponsible budget fix? Also, the private company, I guess, gets the quarters (or dollars, now) that Chicagoans pump into the meters — but when a meter is vandalized, who bears the financial responsibility of fixing them, the city or the company? Who is responsible for writing tickets on expired meters? When a ticket is issued, does the city still get those funds? Or does that go to the private company as well?

— Jakze, via the Straight Dope Chicago Message Board

Cecil replies:

Jakze … you do realize we put out a newspaper, right? My colleagues Ben Joravsky and Mike Dumke have published roughly 15,000 words about the parking meter lease, including three Reader cover stories on April 9, May 21 and June 18. If you want the "full story," read what they wrote; it's all online. However, let's face it — in these days of information overload, sometimes you just want the Cliffs Notes. So allow me to digest matters in the form of a FAQ, starting with the easier questions you raised. If even that's too taxing, here's a quick take: We seriously don't want to do a deal this way ever again.

Who fixes broken or vandalized meters?

Officially the concessionaire — a private entity called Chicago Parking Meters, which employs LAZ Parking to do day-to-day management — is on the hook, per Sections 3.16 and 13.3(a) of the contract. That didn't stop CPM from calling in city mechanics for repair help during the wave of vandalism in March.

Who writes the tickets for parking violations, and who gets the fines?

According to Section 3.2(e), the concessionnaire is empowered to write tickets for meter violations using ticket books it purchases from the city. As spelled out in Section 7.6, the city is responsible for everything else having to do with parking enforcement, including issuing all other parking tickets, setting regulations, booting scofflaws, adjudicating contested tickets, and collecting fines. The contract emphasizes at a couple points the city's duty to enforce the parking rules. No doubt that was put in at the behest of the lawyers for the concessionaire: All it wants to do is maintain the meters and keep the money people feed them. It wants the city to make sure they pay.   

Did the city get a good deal?

In the narrow sense, which is how the city prefers to look at things, you can make the case that it did. There was a competitive bidding process, with two finalists. Both firms were invited to make "best and final offers," and both slightly increased their bids in doing so. Competitive bidding is normally considered a reliable method of discovering value, so absent allegations of funny business, the city can say it got the best deal it could given the terms of the contract. (In fact, the bids came in at the high end of the range predicted by William Blair, the city's financial advisor.) The question is whether those terms — that is, turning over a major public asset to a private entity for longer than most of us discussing this are going to be alive — were the most effective way of maximizing the asset's value.

What alternatives were there?

The simplest is that the city could have kept control of the meters and operated them more efficiently, instead of turning them over to a private entity.

Why didn't it?

Two reasons. The most obvious is that the deal generated a billion-dollar upfront payment to the city during a budget crisis. The second is the belief the private sector is better at managing revenue-producing assets than the government. Where Chicago parking meters are concerned, that's not a tough argument to make. The city's parking management record was unimpressive. Set aside the broken meters or the antiquated technology. The real failing — I realize this isn't what people want to hear — was the absurdly low rates. In most of the city's commercial districts an hour's parking cost a quarter, an amount that hearkened back to the days of penny gumball machines. Low rates had several consequences. First, the city was shorting itself out of needed revenue. Second, in moderately busy districts, there was rarely any legal parking available — early arrivals fed the meters all day, inconveniencing shoppers and encouraging them to take their business elsewhere, to the distress of local merchants. Finally — the Active Transportation Alliance makes this point in a recent report — low meter rates downtown encouraged people to cruise around looking for cheap street parking, increasing congestion and pollution.

Raising the rates was the cornerstone of the parking meter deal. Neighborhood rates quadrupled immediately, to $1 an hour, and will go up more in coming years, reaching $2 per hour in 2013. Rates in the Loop will eventually reach $6.50 per hour, and $4 per hour elsewhere downtown. People may grouse about having to carry a pocketful of quarters, but casual observation suggests higher rates have accomplished one thing — metered parking spaces are easier to come by.

Why didn't the city just raise the rates without leasing the meters?

Maybe it should have — that's the gist of the argument in a report criticizing the privatization deal issued by the Chicago inspector general's office, which says that, over the long run, the city could have generated much more cash than it got from the lease by simply raising rates an equivalent amount. (DePaul University professor Woods Bowman, a former Cook County chief financial officer, came to a similar conclusion.)  The counterargument is that the city lacked the political will to raise rates. It had floated a proposal to do so in 2007, but withdrew it after initial grumbling. Planning for privatization began soon after, presumably in part in the expectation that transitioning to private control would provide political cover for an increase. As it turned out, the opposite happened and the deal turned into a public relations disaster.

So privatization was a mistake?

Not necessarily. The IGO's report points out that public-private partnerships are common in Europe and Australia; presumably some of them work out OK. Some scoff at the notion that the city would ever have raised parking rates on its own, however much money it might have made in theory. But the deal could have been structured differently. The IGO suggests a 50-50 revenue split over a 20-year term would have generated enough cash to cover the city's budget needs while giving the city more control. (The report also says the deal could have been adjusted so parking rates went up less, but it's pretty clear they were going to go up.)

What did City Hall say about that? 

The city's written response to the IGO report contends the claim the meters were worth more than we got is based on an unjustifiably rosy assumption about how to value an asset far into the future. (The city also insists it was a good move to transfer future risk to CPM — if the bottom falls out of the metered-parking market in the next 75 years, CPM's the one left holding the bag.) But it doesn't really address the two central objections by critics: first, giving up long-term control of assets to solve short-term budget gaps is an inherently dangerous practice, and second, any decision having such profound implications ought to be widely debated beforehand. The city's attitude largely has been: Well, we understand this. In fairness, City Hall has done deals like this before and this is the first time any significant number of people other than the experts showed much sign of caring.

Why did the City Council go along?

Because it always goes along. While this deal was shoved through more quickly than most, in other respects it wasn't unusual.  The Daley administration routinely undertakes enormously complicated ventures involving vast sums of money with minimal public scrutiny— the privatization of the Skyway and the Grant Park garages; the effort to do the same with Midway Airport (that deal fell apart because the private partner couldn't raise the cash); Millennium Park; tax increment financing (TIF) projects all around town.

So it's the fault of our tyrannical mayor and his toadies?  

No, it's our fault. When Chicagoans get sufficiently exercised over an issue, they have no difficulty making themselves heard.  The controversy over the relocation of the Chicago Children's Museum to Grant Park, for example, received a thorough airing, whatever you think of the outcome. (It's still in court, in case you're wondering, although Crain's suggests fundraising problems may doom the project.) Complicated ventures that don't affect anyone personally are another story. They're hard to understand and up till now relatively little has gone wrong — in contrast to, say, the ongoing nightmare in Boston known as the Big Dig. Sure, Millennium Park was years late and way over budget, but everyone liked how it turned out, and Chicago now enjoys a national reputation as an innovative, can-do metropolis that accomplishes things less dynamic burgs can't. Who wants to be sand in the wheels of progress? It's not just the City Council that rolled over; the parking meter deal received only superficial media coverage until things went south last spring. Had the startup not been bungled, it's likely most Chicagoans would have remained happily ignorant of the deal's larger implications. The Skyway had been leased to investors for an even longer term, 99 years, with no outcry to speak of. (Interestingly, some transportation experts felt the Skyway consortium paid too much, although the current consensus seems to be that the price was fair. The Tribune's David Greising, meanwhile, has suggested the real screwup was letting investors in the failed Midway deal off the hook — the price they'd agreed to pay was astonishingly high.)

The fact is, though, we've been lucky, and we can't assume we always will be. As the Daley administration's schemes have gotten more grandiose, the stakes have sharply increased. Already some projects have gone dramatically awry — I call again to mind the $213 million hole under Block 37 for an airport express train service that may never be built. Now we're faced with hosting the 2016 Olympics, another risky proposition that has been subjected to little examination other than, well, here. Are the games bound to be a disaster? I reserve judgment, but it would be foolish to proceed based on the information we have now.

— Cecil Adams
Photo by Pat O'Neil

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