Yesterday, members of the Chicago City Council made a snap decision to lease off
the city's 36,000 parking meters in exchange for $1.2 billion, marking
the fourth time a major public asset has been handed over to private
interests in just three years.
Only time ...
Yesterday, members of the Chicago City Council made a snap decision to lease off the city’s 36,000 parking meters in exchange for $1.2 billion, marking the fourth time a major public asset has been handed over to private interests in just three years.
Only time will tell if the move was a smart one. It seems the scenario will play out in one of two ways; either the Daley administration will go down in history as the team that was finally able to cut otherwise politically untenable deals and net $5.5 billion on infrastructure -- from parking meters and Midway Airport to the Skyway and downtown parking garages -- or future Chicago officials will be left to grapple with the question, “What happened to all of the city’s revenue?”
We asked Professor Michael Pagano, a public finance and policy expert at the University of Illinois, Chicago, which scenario he thinks is most likely to play out. His conclusion: It depends on what the city actually does with the windfalls.
“If it’s used for financing the stability of the city, it’s a good thing,” Pagano said. That means paying down debt and getting other long-term financial obligations off the books. If used to cover operating expenses or start new programs, well, that’s a problem, he tells us.
The Reader’s Mick Dumke breaks down how the latest privatization windfall will be spent, per city officials:
-$400 million will be set aside in an interest-bearing account to cover revenue lost in relinquishing control of the meters;
-$325 million will go toward balancing city budgets through 2012;
-$100 million will go into a “human infrastructure fund” that will help pay for existing social programs;
-$324 will be poured into a “budget stabilization fund”—also known as a “rainy day fund.”
Since more than half of the windfall will be socked away to cover long-term expenses, it appears that the city is heeding Pagano’s financial advice -- sort of.
Meanwhile, parking rates are set to quadruple this year and then again by 2013. And investors in far-away places such as Australia and Texas will be cashing in at parkers’ expense.
The Progressive States Network (PSN) has been following a spate of privatization deals across the country. In a 2007 report Privatizing In The Dark (PDF), PSN researchers highlighted transparency as one major pitfall of the deals:
One reason, it is argued, that privatized services can make money is that they do things that elected officials might not be able to get away with if decisions were subject to direct democratic accountability [...]
That’s the danger of privatization – out of sight, out of mind, except on the contractor’s profit sheets.
“It’s a real irony,” Pagan tells us. “The public ends up paying more because the company wants to turn a profit.”
In the meantime, PSN researchers note that taxpayers are left guessing over whether they’re getting the most for their money. Before more privatization deals are sealed, PSN is calling for some key reforms:
- Measuring the Costs of Privatization: Requiring private companies to provide evidence that they can perform those government functions more efficiently;
-Budget Accounting for Privatization: Requiring budget disclosure rules including a line item description of how much money is going to private contractors;
-Disclosure of Privatization Data: Getting privatization budget details on-line;
-Banning Pay to Play Contributions: Adopting legislation that bars companies that are bidding on state contracts from making some campaign contributions.
Given Daley’s current pace, now seems like a good time to get going on drafting some similar reforms.