(Abel Uribe/Chicago Tribune)
Dow Jones Newswires | Cities across the U.S. are looking to one of the banes of urban existence — parking — to help bridge large budget holes, bolster sagging pension funds or pay for critical infrastructure. Inspiration has come partly from Chicago’s perceived financial success in privatizing its huge parking system, at a time when municipalities nationwide face severe budget strains in the wake of the economic downturn.
At least five cities — Hartford, Conn.; Indianapolis; Las Vegas; Los Angeles and Pittsburgh — have recently begun formally gauging interest from private investors in leasing or managing all or portions of their municipal parking systems. Several others are farther along in the process.
Chicago reaped an upfront payment of $564 million for its parking garages in 2006, and about $1.2 billion upfront for its parking meters a year ago. Both long-term leases were won by infrastructure investment funds run by Morgan Stanley.
The Chicago deals dwarf those currently being shopped. Chicago privatized 36,000 meters, for instance, compared to about 3,500 meters potentially in Indianapolis, although Indianapolis also is looking at possible management deals for another 20,000 publicly owned spaces.
Regardless, many cities are hoping to reap just a fraction of Chicago’s financial gains while avoiding its privatization pitfalls in which early technical difficulties and substantially higher meter rates initially sparked a consumer backlash.
“Every city in America, save just a couple, are experiencing serious revenue shortfalls and serious economic distress,” said Scott Adams, chief urban redevelopment officer for Las Vegas.
Adams said municipal parking is viewed as an asset ripe to be monetized during tough times because it’s generally among the few profitable city operations, and because it isn’t considered a crucial public service.
“For most citizens, it’s not something they absolutely have to use,” Adams said. In addition, he said, “parking meters and systems aren’t popular anyway.”
This privatizing of meters is a shortchanging of taxpayers because in this market you simply can’t get from investors what they’re worth. If cities really want to patch budget holes like this, they should have the guts to raise the parking rates themselves, increasing the stream of revenue and, if necessary, take out a mortgage or a bond issue secured against the revenue from the parking meters. That way, at least if a city decides to borrow instead, using the meters as security, and can only get the bank to loan, say, $500 million against the meters, the city can always keep the meter revenue that it doesn’t need to make the loan payments, or, alternatively, lower the parking rates.
Chicago on the other hand is stuck with not very much money from the lease and very high meter rates going one hundred percent to an investment bank. Effectively, we sold a $100 million a year revenue stream for 75 years for just $1.2 billion. We’re effectively giving the bank nine percent interest already and going up to 13 or 14 percent once all the rate increases are phased in, for 75 years. That’s truly ridiculous. I don’t even like to street park any more because all I can think about when I feed that meter is my money going to Morgan Stanley.
I hope other cities don’t make the same mistake. Seriously, if any municipal official happens to be reading this post, go and check out what Toronto has done with its parking meters — instead of selling them off, they raised rates, and the revenue lowers their property taxes by two percent on average, and of course it can always help patch budget holes in a bad year.
Copy Chicago and watch cutomers go away to other places where the parking price is cheaper, Increase your sales tax revenue by offering free parking and MORE people will become employed.
Chicago is retarded!