Saturday, December 27, 2008

What Chicago can't do
























Chicago, striving to become a “green” city, has just made it very difficult to deliver green transportation options. By selling off -- I mean “leasing” – every single one of its 36,000 parking meters for some fast cash, Chicago can no longer do what other forward-thinking cities have done.

While it might be buried in the fine print of hundreds of pages of the lease contact, it would appear that for the next 75 years, the city cannot remove metered parking to:

• Create dedicated bus lanes (see New York City plans), or trolley lines (Charlotte NC).
• Allocate spaces for car sharing vehicles (see Washington DC and Boston) or bicycle parking (see Portland, Oregon, New York City plans, Paris)
• Create bike lanes (Paris, Portland, New York)
• Make pedestrian-only retail districts

Here is what the deal means for parkers (My comments are in italics):

• Quadrupling of meter costs in two-thirds of the city's meters over the next five years, from 25 cents/hour to $2/hour by 2013.

• Meter rates in the downtown Loop will rise from $3/hour to $6.50/hour over that same time period. Parking meters are generally underpriced across the country so I agree that these likely should be raised.

• Future rate increases (in years 5 through 75) will need to be approved by the city. It would seem that the city alderman needed to hide behind this lease, in order to get these first price increases done. What is the likelihood that they will be able to approve price increases in those later years when they aren’t shielded by the big bolus of cash upfront? nor get a piece of the increased revenue stream?

Here is how the city intends to spend the $1.16b it will receive in cash for the deal:

• $325m to balance the budget over the next 4 years ($50m 2009; $100m 2010)
• $324m for budget “stabilization” for budget gaps. These two added together mean that $649m of the money will be spent almost immediately, leaving the remaining 70 years of this lease without any benefit to the residents of Chicago.

• $400m will be put into a long-term account generating $20m in revenues annually, to “cover” the usual amount of revenues generated by the parking meters. Do we really believe that $20m/year will equal the expected annual revenue from parking meters 15 years from now? How about 30, 45, or 75 years from now?

• $100m in human infrastructure. Not clear what this is. Note that none of the money raised from this parking sale went toward improving transportation infrastructure in the city.

There are several things that really bother me about these deals:

1. Can’t we produce politicians or a public that can accept rises in parking rates without having to hide behind a privatization deal? In both cases there is an increase in fees, but in the privatization deals we lose flexibility over the asset and the management fee that goes to the private sector company, a much worse deal for citizens.

2. Assuming the city is desperate for an upfront lump of cash, isn’t it common for banks to loan money on the back of a guaranteed future revenue stream that is collateralized by an asset? Why the 75 year leases? It just doesn’t seem right to mortgage future generations for our quick fix today – politically easier yes, but not right.

3. And most egregious, is the loss of network control and flexibility over the asset. This parking deal has effectively locked up street use for the entire city of Chicago for the next 75 years! Forget about closing some streets to traffic (as has been done in cities the world over). Forget about changing the use of specific streets and traffic flows (just this last year New York city has changed city streets to accommodate bicycles, pedestrians, chairs and tables, dedicated bus lanes; in Washington DC they have changed some parking spaces into shared car parking; in Portland, Oregon, bicycle parking is substituted for some previously metered spaces). All of these options will be closed for the city of Chicago. And closed for 75 years.

Sources:
http://www.bondbuyer.com/article.html?id=200812021PTMA2E7
http://ohmygov.com/blogs/general_news/archive/2008/12/24/chicago-sells-right-to-city-parking-meters-for-1-2-billion.aspx

Some quotes:

"I wish we had other options at our disposal to help balance this budget without entering this 75-year concession agreement with one of our most valuable public assets, but we're in the situation we're in, with not many options" Alderman Brendan Reilly told the Tribune.

Alderman Richard Mell described the deal as being a "once-in-a-lifetime shot to grab this pool of money.

8 comments:

Peter said...

yes - this is a bad deal, but i wouldn't blame the victim. the council was given 72 hours to vote on it, apparently.

http://bikeblogs.org/sf/2008/12/16/chicagos-great-parking-heist/

Frank Paynter said...

When/if better options appear for the use of that metered space, the city can always assert eminent domain and pay a fair market value for the blocks they want to redevelop.

Robin Chase said...

Frank, your comment brings up a point I forgot to make. If we divide 36,000 parking spaces by $1.16 billion, it values each parking space at $32,222, or $268.50 per square foot (for the land plus the 75 year revenue stream). Seems like a sweet deal for some prime real estate (we only meter prime retail estate).

Anonymous said...

Great post.

I'm a Chicagoan who was angry about this decision. However, my Alderman (www.44thward.org) posted this to his Web site describing the city's rights:

The City and City Council will maintain their rights to:

Perform enforcement and to collect and retain all enforcement revenues

Add additional on-street parking spaces in the future and to eliminate any existing on-street parking spaces.

Restrict metered parking for special events or activities, festivals, construction activities. and public safety

-end-

I wonder then, if the City really is free to add additional bike parking and bike lanes as well. I'm curious to hear more.

Louis said...

Dont' forget that you can still put bike lanes behind metered spaces! You just move the spaces out, put the bike lanes between the spaces and the sidewalk, and leave the meters. The Bus way is a bit tougher, but you could actually still accomplish it that way.

Anonymous said...

While I don't live in Chicago, I'm surprised the City didn't seek to float an infrastructure bond, and move infrastructure money around to cover other budget shortfalls.
It is sad when public infrastructure is sold out from under itself, and reading this piece makes me nervous about other cities in the U.S.

Jeramey Jannene said...

Good breakdown of the issue, and something that I think is worth much further review.

Roy Russell said...

This is a nice piece done by US PIRG on the pitfalls of road privatization, with a few examples.

http://www.uspirg.org/uploads/H5/Ql/H5Ql0NcoPVeVJwymwlURRw/Private-Roads-Public-Costs.pdf