It’s Official: Chicago Parking Privatization a Massive Rip-Off
City parking meters are a gold mine, and in Chicago, Morgan Stanley is rolling in parking riches. Secret company documents leaked to reporters show the company will rake in a 70 percent profit margin this year from its $1.15 billion, 75-year lease of Chicago's parking meters. This profit is on top of the millions Morgan paid to buy new, high-tech meters. The good times will keep on rolling for investors: In 2010, after another meter price hike, Morgan expects to make monthly profits of $4.8 million, roughly 55 percent higher than in 2009.
Streetsblog has been following the Chicago parking privatization closely because it is the poster child for all that can go wrong with Public Private Partnerships, or PPPs. The basic idea behind a PPP is that the government leases public transportation infrastructure -- say a bridge, highway, airport, or parking meters -- that can generate user fees. In exchange for the fees, a private investor pays the government a large upfront fee or assumes the cost of improving the infrastructure. PPPs are popular in Europe, especially at airports.
Sustainable transportation advocates should care about PPPs for a number of reasons. First, politicians and bureaucrats are captivated by the fantasy that PPPs are the ultimate free lunch, generating billions in transportation investment at no cost to the taxpayer. President Obama's euphemism for PPPs is "creative financing."
In New York, state officials have repeatedly presented a PPP as the way to raise billions for the astronomical cost of replacing the Tappan Zee Bridge. This is dangerous thinking. PPPs do inflict a cost, and it's a big one. Huge amounts of revenue that could be directed to public transit, or crucial road and bridge repair, is instead going to Wall Street.
The second concern is that PPPs allow public officials to skew the public planning and review process and put private profit before public benefit. A private investor has tremendous leverage over what gets built if they are the government's main financing option. The investor's goal is to make money, not to produce the greatest public benefit over many decades.
Despite the latest revelation, Chicago is only beginning to recognize the inherent problems with privatizations. According to the Times, Alderman Scott Waguespack introduced a measure that would require an "independent third-party valuation" of major asset lease proposals before any future privatization deal is completed. The legislation would require "a comparison of public retention and private leasing over the life cycle of the agreement." This could serve as an important safeguard, but so far, the measure only has 12 co-sponsors among the council's 49 other members.