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Column Wed Dec 17 2008

The Problem With Chicago's Parking Meter Lease Deal

Guest column by The Parking Ticket Geek

Overwhelmingly bad.

After spending not quite two weeks digesting the details of the City of Chicago's 75-year lease of their entire parking meter system for a paltry $1.16 billion, there is no other way to describe it.

It's not that your humble Parking Ticket Geek is against privatization. He is not. In fact, as someone who almost always embraces free market principles, I think government privatization of some public services and assets can be a very good thing.

However, in this particular case, Mayor Daley, and the Chicago City Council, screwed up and did it in a big way.

Here's the how and why.

Rate Increases Too Steep

Not just too steep. Way too steep of a price increase in meter rates. Most parking meter rates in Chicago have not been increased in 20 years. Admittedly, that's too long. Current rates in general are, indeed, probably too low. But why try to play catch-up for 20 years in such a short time frame?

Easing drivers into the higher rates would have done a lot to assuage critics and promote easier acceptance of the plan. But considering the current state of this economy, these dramatically jacked up rates will have the effect of discouraging some people from spending their money in our city.

I also do not buy the argument that the mayor and aldermen were too scared to increase parking meter rates over the years. That's not only unbelievable to the point of asphyxia-inducing laughter, but a pathetic and lame excuse.

Disproportionately Burdens Drivers

Everyone, including motorists, has to bear his/her fair share in this city. But this lease deal is just one of many policies (red light cameras, two-ticket boot threshold, street sweeper cameras, etc.) the City has pursued over the past year or so which target drivers as a source of revenue for this cash-strapped city.

While most members of the City Council were dislocating their shoulders patting themselves on the back for not "raising taxes," the truth is, they did. Aldermen can use semantics to rationalize their decision, but these higher meter rates are taxes by any other name. And they did it on the backs of drivers.

Negative Economic Effects

The long-term economic effects of increased parking meter rates will have an adverse effect on Chicago business and tax revenue. Chicago is already at a disadvantage because of our egregious 10.25 percent retail tax rate. Adding radically higher parking costs is not helping things — especially during an economic downturn. This can only have a negative effect.

Visitors living outside Chicago, and even local drivers, will re-think visiting the Loop and other neighborhoods, knowing it will possibly cost them so much more to park, or are afraid of the reports of aggressive enforcement.

Many businesses are fighting for survival in this recession. Why are we making it even harder on them? While the effects of these rate increases may be only marginal, in many cases, businesses live or die by the thinnest of margins.

72 Hours!?

This deal has been percolating behind closed doors for the better part of 2008, but the mayor gave City Council only 72 hours to make up their minds on this? I think there was more thought and debate on whether "jumpies" would be cut out of aldermanic budgets for 2009 than this billion dollar deal.

When so little debate, time and consideration is given to a plan with such immense and long-term ramifications to Chicago and its economy, what kind of faith can we have in the health of the democratic process in our city?

Don't all answer at once.

Too Long A Lease Term

Seventy-five years? Are you serious, 75 years? A lease term for the approximate lifespan of the average American male? A lease term that expires in 2083? Most of you reading this will be deceased by the time this lease ends. So many things could change over the course of 75 years. It's too long a lease term.

It's A Bad Deal

32nd Ward Alderman Scott Waguespack, who was one of the five council members with the steel gonads to cast a nay vote against the deal, believes the asset has a value closer to $4 billion.

Mayor Daley has so tragically mismanaged the city's budget that we're starved for cash. With the smell of desperation wafting over the city, Morgan Stanley and the other bidders took a big whiff, and delivered insulting lowball bids for the City's meter system. The City, desperate for cash like a crack whore chasing a fix, had no choice but to accept the cash and take it in the ass.

The black hole that was called the 2009 budget was so dark and deep, according to the City's own numbers, the entire $1.16 billion will be sucked in in the first four years of the 75-year lease! What kind of financial management is that? It's like the City took a payday loan out on the parking meters!

But Waguespack disagrees with my assessment. He believes there were at least a couple other alternatives to a 75-year deal for so little money.

"It was only a $150 million gap," explained Waguespack. "We could have issued a bond. It might be difficult but not impossible. It would cover us for this year. We would have to tighten our belt next year."

Everything Is Negotiable

It seems that whoever negotiated this deal went to the "Neville Chamberlain" School of Deal Making and Negotiation. That's because everything is negotiable.

Another option would have been for the City to negotiate a much shorter lease term (10-25 years) for an upfront amount that filled the short-term budget gap and then asked for a healthy percentage of revenue.

"We could have signed a 15-20 year lease," said Waguespack. "We don't need to mortgage our future for as little as $1.1 billion."

What the mayor, with the complicity of a majority of the City Council, has done, is fail to see past the short-term budget problems to take the cowards way out. He has ignored the city's long-term health for the sake of easy money.

Economist John Menard Keynes once said, "In the long run, we're all dead."

He must have said this with Chicago in mind.

~*~

The Parking Ticket Geek is a driving Chicagoan for nearly 20 years and author of The Expired Meter, a blog about Chicago's parking ticket rules and regulations.

 

mike / December 17, 2008 12:01 PM

Another thing: a private company gets to change the rules on us but it is the city that will reap the reward, in more revenue generated from parking tickets doled out overnight and on Sundays. The new regulations are outrageous. The meters in my neighborhood are always occupied overnight by people who move their cars early in the morning because there is not enough street parking. The mayor and city council will pay for this. At this point, they are trying to squeeze blood out of a rock by giving private interests unlimited ability to change the rules. Taxing every citizen $200 outright would be more honest than what these pieces of garbage passed.

Josh / December 17, 2008 7:48 PM

Driving is the new sin. Tax away! Remember that column a few weeks ago about the negative incentive for transit use CTA was creating by raising fares? This sounds like a positive transit incentive to me.

You make good points about the lack of review time and the potential raw deal to city coffers. But at $.25 an hour, people just hog spots all day long and there is no parking. When parking your car at a meter for your 8-hour shift costs more than CTA to work and back, we'll be "getting somewhere".

"The mayor and city council will pay for this" No drivers will and then we'll keep electing the same pretty faces as usual.

Wayne / December 17, 2008 8:12 PM

$1.6B over 75 years equals about 21.33 million a year over the contract.

First, I was at the Irving Park L station opening a couple of weeks ago when hiz honor stated that the guvmint just can't manage as well as private bizness (this after saying what a wonderful job the CTA is doing.... watch out on that privatization!).

What bothers me is that, yes, many things should be a bid for services (uh, not pay to play, mind you) for taxpayer services. The problem is private businesses work off the profit model, governments don't.

Believe me, parking rates will continue to rise yearly over this contract, and besides paying more for street parking, it will artificially raise the price of private parking as well.

Now, instead of having parking enforcement policing the street parking, we'll have private, rent-a-enforcers instead, or lipstick cameras in each meter which will time and photograph your license plate and send you an automatic ticket for exceeding your time... and as these components get more expensive, the private bizness will raise their rates since their stockholders/owners are only in this to make money, the only reason to be providing this 'service'.

And, to charge nights and holidays is quite the nail to us taxpayers as well...

You're right, this is a taxation without representation.... and I'm sure there will be unintended consequences here, just like there was in Boston over 250 years ago....

The Parking Ticket Geek / December 18, 2008 12:03 AM

Josh-

I don't disagree that $0.25 per hour is too low in some areas. In some areas it may be just right. But to quadruple the rate in just four weeks, during an economic downturn that is getting worse by the day, is just another reason for someone to spend their money anywhere else BUT the City of Chicago. Less spending means less tax revenue for the city, and makes it harder for business to survive.

Greg Pierce / December 18, 2008 5:49 AM

To the tune of Pennies from Heaven:

Every time it rains it rains
Dollars for Daley,
Dollars for Daley.

Don't you know each cloud contains
Dollars for Daley,
Dollars for Daley.

You'll find our fortunes falling
All over town.
But surely his umbrella
is upside down.

Got a shortfall in his budget?
Dollars for Daley,
Dollars for Daley.

He’ll just sell another asset,
Dollars for Daley,
Dollars for Daley.

You'll find our fortunes falling
All over town.
But surely his umbrella
is upside down.

Now he’s got a new idea,
Dollars for Daley,
Dollars for Daley.

Sell the city parking meters,
Dollars for Daley,
Dollars for Daley.

You think that business is bad now?
Wait till after he’s through.
There’ll be dollars for Daley,
But not for me, or for you.

Phil / December 18, 2008 9:56 AM

Do the math. In order to get an upfront 4 Billion dollar payment the meter system would have to generate 200 Million a year just to pay off debt at a very reasonable 5% APR interest. Add operating expenses and profit margin, in your scenario the meters would have to be at around $5 per hour.

Mike / December 18, 2008 10:42 AM

But at $.25 an hour, people just hog spots all day long and there is no parking.

B.S. Meters have time limits, whether you're paying them or not. Most have a 2-hr limit.

No drivers will and then we'll keep electing the same pretty faces as usual.

This isn't just about drivers. This is the mayor and his city council giving away a revenue-generating part of government at taxpayer's expense. We will all pay for this. None of this extra money is going to go to improving the CTA. Your dream of more people riding transit may just be a nightmare of the system becoming overburdened. The CTA's great if you live near an el line, work 9-5 and take it to work when the trains are running every five minutes. Most of this city, however is served by buses that run very infrequently at off peak hours. I'm pretty cynical about voters' propensity to elect corrupt career politicians, but I think the collective ire is reaching a crescendo here in Chicago. The economic downturn has finally revealed that Daley merely rode a wave, and he and his inept council have been abysmal managers all along. The last aldermanic election saw several incumbents get tossed out. In the next one, I think voters may finally give the blowhards and Daley-appointed hacks like Mell, Stone, Smith, Schulter and others the boot.

Jessica / December 18, 2008 1:51 PM

Sorry, drivers hogging meters is not B.S. I work in Andersonville (and take the bus). I can't tell you how many business owners and employees of stores in this neighborhood feed meters all day (despite the 2-hour limit). People always complain about the parking shortage in Andersonville. There was actually a parking study done that showed that there was plenty of parking, but that the real issue is turnover (people hogging meters for longer than the limit).

I'm actually glad that the rates are getting raised, even though I think they're getting raised too much. And I still think this deal sucks. I wish the City would have just raised rates themselves...

The Parking Ticket Geek / December 18, 2008 10:37 PM

Hey Jessica and others. I think the key to effective parking meters is a balance.

You want the rate to be high enough that it actually generates revenue for the city. It also needs to be high enough to encourage turnover for businesses. You DON'T want people parking all day for $2.00 and keeping other shoppers from spending their money.

At the same time, rates cannot be too high where they discourage people from visiting city neighborhoods and spending their cash. In some ways, reasonably inexpensive parking meter rates help city businesses draw in people that don't have free parking (like the suburbs).

There are some areas of the city where the meters are already under-utilized and a $1 per hour will totally discourage shopping in neighborhoods that desperately need the sales. The majority of the city is not Lakeview, Lincoln Park, Andersonville, Wicker Park, etc.

$3.50 an hour downtown is not unfair. $1 per hour in Lakeview is not unreasonable. $1 an hour in Avondale is plain stupid.

Josh / December 19, 2008 12:47 PM

$1 an hour in Avondale is not plain stupid. If you are driving in some dry cleaning, would you pay a quarter for 15 minutes to park in front of the shop? How about a two bucks for you and a friend to get the primo spot in front of KumaBurger or Friendship Chinese? Wally's Market and the new Best Buy have nice parking lots that they pay for, but the street parking is a valuable public resource and we should charge fees to the users. Even with all the new fees being dumped on drivers, do you think user fees actually cover the true cost of automobile use? Think again.

http://www.commutesolutions.org/calc.htm

Now if only we could make sure those sidewalks are shoveled when it snows. *That* would be progress, but I won't hold my breath.

Ramsin CanonAuthor Profile Page / December 19, 2008 1:09 PM

I don't increasing user fees for parking as a policy to both generate revenue and encourage use of public transportation: so long as we are investing that money and then some in public transportation. Nobody who lives in Chicago should "have" to own a car. The city is hardly bigger than it was forty years ago. Our sidewalks should be shoveled, yes, and our buses should run like trolleys--more frequently and everywhere. We need at least one more subway line in this city and we should integrate the suburban commuter trains better too. The MD-W, Rock Island, and SWS Metra lines can get you to some parts of the city that are otherwise a pain to travel to (using the CBD as a starting point).

At the same time, we have to realize that cars are particularly important for families and more so families with young children, and we shouldn't make driving cost prohibitive for them.

td / December 21, 2008 7:14 PM

Can we hold off on at least some of the bitching until we see how the increases actually play out?? That said the Loop is still easily accessible by train. Trains and buses are full of families that can't currently afford cars. If more of us joined their ranks I doubt the sky would fall

Ramsin CanonAuthor Profile Page / December 21, 2008 9:19 PM

You're right, we should make major public policy decisions FIRST and then just see how they play out, rather than critique and examine them before making a decision.

No one is saying the sky would fall--but we rely on our cars a lot in this city, which is fine but not sustainable. Commonly-owned transportation needs to improve markedly.

TD / December 22, 2008 9:33 AM

That makes about as much sesne as complaining about specifics that don't exist yet doesn't it. If you'll look around you'll note that commonly owned trasnportation works quite well for a great many of our fellow citizens that don't happen to be in our tax bracket. I don't have much sympathy for people who are too precious to use CTA and ALSO complain endlessly about traffic and parking not being exactly to their liking either.

C-Note / December 22, 2008 7:34 PM

TD, I'm not sure you're right this time. CTA doesn't work for some people, who would like to use it more often (which is not to say that they're "too precious" to use it), but would use it more if it worked better.

Whether it "works" doesn't necessarily depend on one's tax bracket, although it is true that people with more responsibility may perceive a need to eliminate the perceived waste of usable time that CTA represents in some cases. And in any case, saying "hey, it seems to work well enough for people that can't afford to drive" isn't the same as "it works well enough." Some people have plenty of time; some don't.

All Ramsin is saying is that people would use it more if it worked better, and the benefits of such an investment outweigh the short-term benefits of selling off our parking meters to the highest bidder.

It's not rocket science.

fred / December 23, 2008 4:27 PM

Another big downside to the deal is the way the City is using the money. When you sell a valuable asset, you shouldn't just spend the money in the short run. The money should be used over the 75 years of the lease, not in 4.

Mantaxer / July 3, 2009 8:53 AM

In order to get an upfront 4 Billion dollar payment the meter system would have to generate 200 Million a year just to pay off debt at a very reasonable 5% APR interest. Add operating expenses and profit margin, in your scenario the meters would have to be at around $5 per hour.

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