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.

Graphic: New York Times/Chicago News Cooperative.

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." Here 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.

Photo: Best Recession Ever

All in all, it wasn't the money for nothing bargain the City Council seemed to think it was back in December when Morgan Stanley handed over a check for $1.157 billion. This manna from Wall Street plugged the city's gaping budget hole and allowed the council to avoid painful tax hikes and service cuts. It also enticed lawmakers in Los Angeles and Philadelphia, where officials were considering their own parking privatization deals.

In return for the upfront cash, Chicago leased its 36,000 parking meters for the next 75 years to the Morgan-led consortium, and granted it the authority to double and triple meter rates. By 2013 downtown meters are slated to double to $6 per hour; neighborhood meter rates are to double to $2 per hour.

The deal was pushed hard by Mayor Richard Daley. The core of his privatization argument was that Chicago lacked the political will to raise meter rates and that desperate fiscal times demanded unlocking the value of public parking. He noted that city meters were only generating about $20 million a year, and because of neighborhood resistance, meter prices hadn't gone up in 20 years. His conclusion was that Chicago had to outsource the political will to raise meter rates.

However, the inspector general's report concludes that, "If Chicago were to keep control of the parking-meter system and operate it under the same terms as the private company, the system would be worth approximately $2.13 billion (in present dollars)," or $974 million more than the city received. Ironically, another cost of Chicago parking privatization was that it quashed a number of neighborhood-supported parking improvement districts, in which higher meter fees were to be invested in local pedestrian, bicycle and transit improvements.

The House version of President Obama's stimulus plan has left bus riders with nothing to look forward to but stiff fare hikes and painful service cuts. Bus systems got zero in immediate operating support from the bill that passed yesterday -- stunning neglect compared to the $150 billion in educational "operating assistance" to local schools and universities and $127 billion in emergency health care "operating assistance" to state Medicaid and private insurance programs. A relatively puny request for $2 billion in transit operating support was shot down before even reaching committee.

Buses carry 59 percent of American transit riders and are the core of transit service in both urban and small town settings. But according to the New York Times:

Fifty-one transit systems have recently proposed service cuts or fare increases... (which) make it harder for people to get to work (or look for work), and they will undermine one of the long-term goals of the stimulus package: laying the groundwork for a greener economy.

The burden of these transit cuts falls disproportionately on African Americans, who comprise 38 percent of all bus riders in the country, compared to 12 percent of the overall population. (There's a reason that Rosa Parks acted for her civil rights on a bus.)

Unfortunately, the Obama administration and the House of Representatives have largely forsaken bus riders. It is now up to the Senate to provide emergency transit operating help to sustain service and reduce fare hikes. Otherwise, Americans will watch billions of stimulus dollars rain down on schools and hospitals while major transit systems teeter on the edge of insolvency, green collar jobs are cut, and energy-conserving transit riders are forced into cars.

There are a number of reasons why bus riders have lost out so badly in the struggle for stimulus help. One is that they have no effective lobby in Washington. This is partly the result of conventional thinking that hasn't caught up to the current crisis. Transit agencies and advocates tend to equate "transit" with "infrastructure" or capital expenditures, so the federal government is not expected to help with operating expenses. This formulation is generally biased against buses, which are cheap to buy but relatively costly to operate.

The "transit=capital" formula also ended up hurting overall transit aid because Obama fiscal czar Larry Summers believes that transit projects take too long to get underway, and are not a good way to inject money quickly into a depressed economy. Unlike local schools, whose teachers' unions made a strong case for an unprecedented infusion of $150 billion in federal operating help, transit agencies and their supporters have kept fighting for more capital aid and have not pressed their elected officials for the emergency operating help needed to bail out the nation's floundering bus and transit systems. This must change. The same arguments for emergency help to schools apply to bus service.

The failure of the stimulus to help bus riders will have big implications for the working class and poor Americans hardest hit by the recession: Bus riders will be spending more for less service, while green collar transit workers will face rounds of layoffs. It's bad public policy, bad urban policy and inequitable social policy. Not what bus riders were hoping for when they voted for Obama.

Under the agreement with Morgan Stanley Infrastructure, meter rates will rise substantially and some meters will operate overnight and on Sundays. Chicago currently nets $20 million a year from its meters, and revenue should triple or quadruple given planned meter rates. The deal is by far the largest of its kind in the US and continues Chicago Mayor Richard Daley's privatization of city transportation infrastructure, including Midway Airport and the elevated Chicago Skyway.

The agreement is interesting from a transportation reform perspective because the higher meter rates, applied through modern meters, will help sharply reduce double-parking and cruising traffic. This means less air pollution, less time wasted in traffic, and more potential street space for sidewalk extensions, bikes and buses. 

Despite these benefits, Chicago's privatized road to parking reform has serious flaws. The concession will cost future taxpayers several hundred million to even a billion dollars in foregone parking revenue -- a lot to pay to outsource the political will to raise rates. Additionally, none of the upfront payment will be dedicated to transportation improvements. The bulk of the money will go to balancing the budget and fiscal "stabilization" with $100 million earmarked for social programs.

Chicago will soon have the highest meter rates in the United States. The 8,100 meters in the Loop Central Business District will rise 50 cents to $3.50/hour next month and $6.50 by 2013. Neighborhood rates will quadruple to $1 an hour next year and reach $2 by 2013. (San Francisco's SFpark is also raising rates, though it's not clear how fast and by how much.)

Daley’s press press release further details how meter rates will be set:

• The City will implement graduated meter rate increases over a period of five years that will bring rates closer to market level. After that, any increases will be subject to the approval of the city council and are expected to be at the rate of inflation.
• These increases will be the first in more than 20 years for more than 25,000 of the 36,000 meters.
• By the middle of 2011, all meters must have both cash and cashless payment options.The City Council retains the right to revise the meter increases, change the number of meters or the hours of operation. But to the extent the City takes action that negatively impacts meter revenue, it will be obligated to make the private operator whole.

Despite its problems, the Chicago deal should send a loud message to New York, and other big US cities, that they are leaving huge sums of potential public revenue untapped, and contributing to traffic congestion and air pollution by leaving meter rates too low.

Photo: itsbetteronamac/Flickr

Starting in September, the $23 million SFpark program will use an array of new policies and technologies to raise meter prices during peak periods, so as to make parking more easily available, thereby reducing rush hour driving, cruising for spaces and double parking. SFpark will include 6,435 curbside spots. This is a quarter of San Francisco's curbside parking, and is roughly comparable to the 6,500 metered curbside spots in Manhattan south of 60th Street. The project also includes variable pricing for the 11,677 off-street spots managed by the city.

According to San Francisco Mayor Gavin Newsom,"The idea is to give people more choice, more convenience and to reduce congestion."

SFPark is a portion of San Francisco's Urban Partnership congestion pricing proposal to the USDOT. Though it will generate substantial revenue, the feds will pay $18 million of the start-up costs. SFpark is the parking component of an overall congestion reduction plan which also includes peak hour tolling near the Golden Gate Bridge, along with bus and other transit improvements.

The underlying premise of SFpark is that the city wants to reduce driving, and will not attempt to do so by building more parking. Nor does the city want to suffer from parking shortages, manifested as double parking and congestion caused by cruising for spots. Instead, SFpark will raise meter prices so that demand is reduced to equal the existing parking supply. During peak periods, meters will be priced high enough to ensure some parking is always available. During off-peak times, meter prices will go down, so that most spots are used. The idea is that if you really have to drive, you shouldn't have to cruise around or risk a ticket. Along with an easier time finding parking during peaks, and lower prices when and where there is lower demand, other carrots for motorists include easing time limits during periods of low demand, enabling payment by cell phone, and delivering text messages to drivers when their meters are running out.

Historically, big city parking policies have been based on a mixture of political pandering, myths and half-truths. (New Yorkers can thank their City Council for the traffic congestion caused by eliminating Sunday metering, keeping meters artificially cheap, and limiting when meters are on and where they are located.) Curbside parking in San Francisco is notoriously scarce and a big
political issue. But unlike New York City, SFpark shows that San
Francisco actually has the political will to do something about the
problem.

SFpark is a big experiment. Extensive data will be collected to form accurate conclusions regarding policies and technologies. Different neighborhoods will be used to test different measures, while some will be "control areas" where parking rates and rules will remain the same. At the conclusion of a one-year trial period, San Francisco will assess what worked and what didn't. Aspects that worked, which project designers are confident will include some forms of variable pricing, will be kept and applied across the city. The results will be closely watched elsewhere, since no other large U.S. city is doing anything remotely as ambitious or intelligent.

Politically, it will be fascinating to see how one of the most progressive cities in the country addresses the real and imaginary issues raised by making motorists pay a more realistic price for the public space they use.

Photo: albeeeezy/Flickr