Public/Private/Passé

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Public/Private/Passé

Let’s review the bidding. A number of desperate cities are looking to sell or lease their on street parking for quick bucks to cover budget shortfalls. Chicago did it and the money was completely used up in a year (promised savings accounts somehow were never opened. Pittsburgh is trying, but the city council is balking as are the learned councilpersons of Indianapolis. My sources tell me that many cities that were looking at the triple “P” are rethinking the process.

What happened?

First there was Chicago. The Mayor pushed the process through and a billion was realized, but what has happened is that a number of whistleblowers are claiming that the city left a bunch on the table. They are also seeing that the private sector can in fact perform and revenue has jumped three times over what it was just a year earlier. Many are saying “Gee, why couldn’t we have had all that money, all we had to do was clean up our act or hire the private sector.” Plus the changeover in Chicago was shaky. There were lots of initial problems that stuck in the craw of the folks in the windy city.

Then there is Pittsburgh. The mayor said they had learned from the issues in Chicago, but still underestimated the amount that was going to be bid, by what, 40%. Then he didn’t have his political ducks in line and an opposing city council killed the deal, after the city and a lot of vendors had spent a bundle to bid the deal. The council says its dead; the mayor is trying lifesaving measures.

Indianapolis is working on a redo of the proposal made by its bidder. They, too, seem concerned that there is a lot of money on the table and are reworking the deal to provide them a higher percentage down the road.

In LA, hizzonner is trying to lease out on and off street parking, but the parking department has just upgraded 10,000 meters and the revenue has skyrocketed. The council it rethinking whether they can stand the political onslaught when voters discover they leased out such a lucrative operation.

What these and other city governments have seen is that parking revenue in their jurisdictions can be substantially more than that it is currently. Someone realized that the private sector doesn’t just plop down a billion dollars if it doesn’t have a “lock” somewhere. Most of the time, that lock is parking’s dirty little secret – a lot of money never gets collected, for a myriad of reasons. They found that putting professionals in charge in Chicago, replacing meters, and some rate adjustments and boy, the money just flowed in. Pittsburgh and Indianapolis saw the handwriting on the wall, and LA got a jolt when only 25 % of their meters were upgraded.

There is something lurking in the background. The voters are beginning to realize that government’s troubles can’t be solved by more and more money. Time has come to look at the expense side of the ledger. Free spending has got to come to an end. Time to starve the beast. Sell parking today, the city hall and the police may follow tomorrow. Then what’s next?

There is another consideration, one dealing with public policy. When you lease out on street parking operations, you also lease out your ability to affect policy decisions in the future. Who knows what a city will look like 50 years down the road. Some streets may need to be closed, others changed to no parking, parks and malls may be needed. However if the spaces are leased, the ability to make these changes can be difficult, if not impossible. No private business is going to pay big bucks to have their future controlled by planning commission or a city council and if they do, the bucks aren’t going to be nearly so big.

Cities are realizing that they can hire professional parking operations and get much of the revenue increases they are looking for without resorting to sale or lease of assets. They are realizing that rushing in to sell one of their most visible assets is not necessarily the best possible option.

Is triple P as it relates to parking history? Who knows? But I will tell you that they are realizing that farming out trash collection, or building maintenance, or even a courts system is very different than leasing an asset as potentially revenue generating, personal to the voters, and volatile as parking. Remember, all politics is local, and there is nothing more local than where you park your car.

JVH

John Van Horn

John Van Horn

2 Responses

  1. As has been discussed previously on this site, there are some cities out there that are in desperate situations and are grabbing for any life line available;
    http://www.post-gazette.com/pg/10300/1098253-454.stm
    “…..Mr. Ardo said the time to act was, in a sense, yesterday. “They needed to address this issue years ago,” he said of the city, “and they didn’t.”
    As with the case in Harrisburg over the years politicians seem to typically look for the “quick fix” to problems and don’t think a lot beyond their term in office. Those easy fixes only delay the issue, they don’t resolve them. Now there are a lot of cities that are facing a situation where their options are very limited and they have very little time in which to choose before the choice is made for them either by the banks, bondholders, the Courts or the State.
    I don’t know of any City in this mix where the problem all of a sudden just snuck up on them, but it seems like most of them are dealing with it like they have only now realized what the situation is. I don’t know the answer to their problems, but what I do know is that a solution involving municipalities defaulting in masse on bonds and pension obligations is not acceptable. I also know that covering debt by taking on more debt doesn’t solve anything long term, it only makes matters worse.
    We need to get out of the “crisis” mindset and get into an “opportunity” frame of mind. Someone is going to figure out the right formula for these PPP’s, one that is both financially and politically acceptable. From looking at the progression from Chicago to Pittsburgh to LA to Harrisburg to Indianapolis, etc, etc it seems like they are getting closer. I wish I had the “answer” right now, I could be a gazillionaire. I know there’s a way to do it, and I’m putting my powers of concentration (limited as they are) on trying to figure it out.
    These situations aren’t going to be resolved by either government or the private sector acting alone, it’s going to require a cooperative effort.

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