Why Does Abu Dhabi Own All of Chicago’s Parking Meters?
Atlantic Wire has a post based on Matt Taibbi’s book America on sale, Griftopia. There are a number of considerations to be drawn from this deal, but the head spins with possiblities. When visiting my son in Chicago this year he told me of the changes on the practical side…charges from 7 AM to 9 PM, no holiday parking waivers, no merchant holidays, rates raised 400% as a first step increase…
Why Does Abu Dhabi Own All of Chicago’s Parking Meters?
By Max Fisher
The city of Chicago has 36,000 parking meters. In 2008, it sold them on a 75 year lease for over one billion dollars. The buyers were led by Morgan Stanley. But as Matt Taibbi reports in his forthcoming book Griftopia, previewed in Rolling Stone, the state-owned investment arm of Abu Dhabi ended up owning a large share — possibility a controlling majority — in Chicago’s parking meter system.
It was December 1, 2008. That morning would be the first time that the Chicago City Council would be formally notified that Mayor Richard Daley had struck a deal with Morgan Stanley to lease all of Chicago’s parking meters for seventy-five years. The final amount of the bid was $1,156,500,000, a lump sum to be paid to the city of Chicago for seventy-five years’ worth of parking meter revenue.
…
He then gave them the details: he had arranged a lease deal with Morgan Stanley, which put together a consortium of investors which in turn put a newly created company called Chicago Parking Meters LLC in charge of the city’s meters. There was no mention of who the investors were or who the other bidders might have been. … The council at this time has no idea who’s actually behind the deal. “We were never informed,” says Hairston. “Not even later.”
…But while the City of Chicago was deliberating on whether to sell their parking meter system to Morgan Stanley–which they ultimately decided to do–the Wall Street megabank was making plans to offload the parking meters to a third party.
…Taibbi calls this a “bait and switch” pulled by Morgan Stanley on Chicago. He explains why this is about more than just parking meters. Now if city officials want to do anything that might disrupt parking meter revenue — let’s say close down parking for a street festival or parade — they need to get the approval of those meters’ shadowy, foreign owners. They also need approval to change parking hours or fees. The new ownership has already made unwelcome changes, ending the previous policy of allowing free parking on holidays. But not only did Chicago cede the operation of an entire segment of the city to mysterious private investors -…
Wow. Mayor Daley is an idiot for entering into this foul contract. My concern is, why would any city government have authority to sign a 75-year contract?
idiocy. why would the government cede their rights like that? i don’t see how you could see any of this as morgan stanley’s fault at all.
also — they had meters that were only 25 cents per hour? how does that make any sense at all?
wg…Yeah. Head spinning. I didn’t make a point because there are too many, other than it is possible that the global economy has in your face consequences, and boy are they luck it wasn’t water supply.
Why Does Abu Dhabi Own All of Chicago’s Parking Meters?
Because they paid Chicago $1.16B, cash, for that stream of future cash flow. Shows the government as as rent-seeking entity kind of “in your face” doesn’t it?
Street parking has a market price and thus a rent. Privatizing this rent is the crime here. The city and the community created that value, but now the money goes to Abu Dhabi.
Welcome to The Ownership Society.
The bulk of the prodeeds was supposed to go into a long-term rainy day fund but the economy went down the tubes within months of the deal. Instead, it’s been used to cover the city’s budget deficits the past two years and now most of its gone. So, if the city can just hold out for 73 more years…
Not the canniest business deal I’ve ever read about. I would assert that this undercuts my argument that you can’t run government as a business sincet they are not the same thing. Or…
…maybe not.
‘America the Stupid’ in all it’s glory. I guess Rahmbo kin ‘fix’ this when he gets to Chi-Town. Maybe he can get the Mossad to take out a hit on the Abu Dhabi investors, eh?
LOL
I’ve read quite a few stories about the Chicago’s parking meters mess. Locally, The Expired Meter in Chicago kept up with the action, and the Illinios PRIG summarized the issue as did In the Public Interest. Bloomberg had a pretty good story early on, and Leonard Gilroy of Reason Foundation did a pretty good job of defending the lease contract in a presentation back on August 7, 2009 if one hadn’t bothered to read the fine print elsewhere.
Chicago is a leader in contracting out its public services, having leased the Chicago Skyway in 2005 ($1.8 billion net) followed by the lease of four downtown parking garages in 2006 ($563 million net), then the parking meters in 2009. Let’s not forget the attempt to lease the Midway Airport (FAA approved for such consideration) for 99 years for $2.52 billion until the deal fell apart in April 2009. That lease effort appears to be back on the table as a reconsideration report is due on November 30, 2010, according to a filing with the FAA.
Chicago isn’t alone. Elsewhere in the nation, the lease traveling road show for parking meters and parking garages is rolling into cities like Pittsburgh, Las Vegas, Los Angeles, New York City, Indianapolis, and probably other cities. Pittsburgh’s city council defeated its mayor’s attempt to lease out its parking facilities this month. Proposals active in the last 60 days are supposedly under consideration in the other cities. LA looks like a lock to lease as that city is broke. Indy will probably lease after modifications to its proposal. Deputy Mayor Stephen Goldsmith, NYC, is pumped up to lease NYC’s 54,236 parking meters, but appears to have met some opposition within the city Department of Transportation or others in city government. Those meters produced $138.9 million in income last year.
I am waiting for Atlanta to lease out MARTA, the Metropolitan Atlanta Rapid Transit Authority. It’s probably just a matter of time.
Has the lease circus come to your area?
It would probably help if PrivatizationWatch.org published some new articles… For whatever reason, they stopped on September 29. I just noticed that.
Public transportation, anyone? 🙂
The real problem, in my opinion, is that politicians are absolute cowards.
Rather than charge a sensible rate for parking or tolls themselves, they eschew all responsibiity for the increase in rates by selling off the infrastructure. It is going to continue to happen with the rest of the crumbling infrastructure in this country until the sniveling politicians find the courage counter to the looney ”Taxed Enough Already” crowd and tell people that if you want to live in the greatest country in the world, you have to damn well pay for it.
I think Bob Dylan had it right: “Don’t follow leaders – Watch your parking meters.”
They own it, we rent it!
How about we actually analyze this?
Seller. Chicago decides to turn a long-term revenue source into a short-term one-time payment. Why would the city decide to do this, since a major city’s time-horizon of financial requirements should be longer than 75 years, whereas a commercial purchaser (the assumption behind the sale, if the sovereign wealth fund was a surprise) would certainly discount the present value, and one could factor in the tax difference for municipalities raising money over private corporations. When the Council complains they don’t know who “really” purchased the rights, are they saying they would have held out for a higher price, or barred this bidder entirely snce they wouldn’t have the same clout over decisions? Whose bad faith would this be? Leaving aside Coyote’s excellent point that the city may have more constraints on maximizing revenue from the parking meter program than a private entity (and Coyote thinks this is bad thing, the tone of the original post and some of the comments imply that this is a positive thing, since parking has aspects of a public good), why would the city do this? Hmm, would it be all that hard to jump to agency cost and incentive? What would be the time horizon of the officials making the decision and would there be a mismatch with the city of Chicago as a corporate entity. And that the money is already spent? Is this only the unavoidable response to the downturn, sweet and countercyclical, or a response reflects the same mismatch between the needs of the city and the incentives of the decision makers? I’d say this mismatch explains the deal much more than the inability to raise parking rates.
Buyer. I’m not sure I get the xenophobic tone that it is the dreaded Abu Dhabi that owns the rights rather than Morgan Stanley, other than the implication that Abu Dhabi would be less likely to be responsive to pressures not to maximize revenue (which begs the question of the sale since it implies that they’d actually pay more for the concession than entities that would feel the pressure). There’s not even the implied presence of hooded and masked terrorists emerging from shipping containers that sunk the port deal a while back. Unlike the rhetoric about trade with China, it can hardly be argued that Abu Dhabi is engaged in competitive international manufacture and artificially limits its imports. Once its consumer needs are satisfied, it’s going to invest the surplus – it has to invest the surplus. Its time horizon is as long as Chicago’s should be, and, in addition, there’s at least the prospect of diminishing primary revenues from energy sales in the indefinite future.
Of course you folks and the libertarians can get into a donnybrook over whether the problem is revenue or expenditure, and everyone can point out that the city isn’t all that well run for the money – but, gosh, leave the poor Gulfies out of it
One of the things I was wondering about this morning re: this deal… How does Abu Dhabi (or any other investor) manage enforcement of meter fines?
Imagined scenario: Public outcry over jacked up parking fees on the now privatized meters puts the pols in hot water so one of them realizes “Gee we really need to make further cutbacks – let’s lay off 95% of our meter enforcement staff” So people start parking without paying the fee or getting ticketed. What do the investors do to protect their um investment? MBS investors can push crappy bonds back (we’ll see anyway) but what can AD do?
Privatization. Who benifits? Who is doing the up front buy/sell? The problem I see, is there isn’t any benifit to the cities save for a one time amount, that usually gets wasted in a stupid way, but making the people indebted for way to long. When will the American people wake up to the fact that “Privatization is just this side of failure, a ponzi scheme if you may. Gullibility, who would have thought, in this day & age of enlightenment, such could take place. If the U.S.A. is a safe place to invest in because of the adhearence to “Laws”, then, if “Fraud” is going to be given a pass by the Government as being O.K., then we might as well sell everything, take the money & run. The hell with paying it back. If the Banks can do it, then so can the “People”.
I’ve been thinking for years this would make a great graduate thesis topic for some bright econ student: “Privatization, does it work?”
He goes and looks up the promises made by the privatizers, measures the performance of the privatized entity against the promises, then gives them a grade. voila!
OMG. Things are worse than even I imagined. Will our pay toilets be next? Will we become a nation of BYO toilet paper? Two sheets only? Will coin changers still take US minted coin, or will we need to carry Euros, RMB or perhaps SDRs to park and relieve ourselves? What about the potentially captive market on airplanes? Shouldn’t airplane pay toilets be regulated like electric utilities? Or will there be a futures market where we can hedge our price risk? Will the ACLU fight for our right to pee freely?
The implications are mind boggling.
Will the ACLU fight for our right to pee freely? Only if you are pointed in the wind direction. “You don’t need a weatherman to know which way the wind blows.”
The Chicago parking meter system lease has already been analyzed.
Chicago’s Parking Meters
http://inthepublicinterest.org/case/chicagos-parking-meters
Chicago’s Parking Meter Lease: A Win-Win-Win for Motorists, Taxpayers and the City
Asset concession brings fiscal, operational, environmental benefits
By Gene Saffold, Chief Financial Officer of the City of Chicago
January 29, 2010
http://reason.org/news/show/chicagos-parking-meter-lease-a
Setting the Record Straight on Chicago Parking Meter Privatization
August 7, 2009
by Leonard Gilroy
http://reason.org/news/show/setting-the-record-straight-on-1
Morgan Stanley’s $11 Billion Makes Chicago Taxpayers Cry
By Darrell Preston – Aug 9, 2010
http://www.bloomberg.com/news/2010-08-09/morgan-stanley-group-s-11-billion-from-chicago-meters-makes-taxpayers-cry.html
Privatization and the Public Interest
October 7, 2009
Executive Summary
http://www.illinoispirg.org/home/reports/report-archives/transit/transit/privatization-and-the-public-interest
Chicago, Illinois Ripped Off By Parking Meter Lease
Morgan Stanley estimates $9 billion in profit from Chicago, Illinois parking meter lease deal.
By The Expired Meter
August 12, 2010
http://www.thenewspaper.com/news/32/3228.asp
*Note the embedded links.
Archive for the ‘Parking Meter Lease Deal’
The Expired Meter
http://theexpiredmeter.com/?cat=56
Leonard Gilroy, Reason Foundation, explained:
“Under the terms of the parking meter contract, the city retains full responsibility for rate setting, parking regulation enforcement and fine collection. The deal also preserves the city council’s decision-making authority over the number of meters and hours of operation, as well as the city director of revenue’s authority over the length of time a customer can park.”
“The operator does have the ability under the contract to supplement the city’s ticketing function if the city’s own performance wanes in the future. But since all parking fines will continue to be collected by and to the benefit of the city alone, the operator does not stand to realize even a penny from enhanced ticketing; hence, hiring additional private ticketers would effectively represent a net cost to the operator, with no additional offsetting revenues.”
Setting the Record Straight on Chicago Parking Meter Privatization
By Leonard Gilroy
August 7, 2009
http://reason.org/news/show/setting-the-record-straight-on-1
Interesting thanks MG. So in my imaginary (quite possibly delusional) scenario above the only thing AD can do is hire their own cops to write citations. Sounds like a hell of a loophole to me.
Cedric, you might consider reading up on WTO GATS. The problem is worse than most imagine. This is a good place to start:
http://www.speakeasy.org/~peterc/wtow/wto-gats.htm
I had a suspicion the WTO is behind it all. In Nogales, our Mexican border town, they use public-private partnerships already. The public restrooms are pay restrooms. There is a guy that sits out front with a pocket full of the correct size peso coins. Since none of us Gringos ever carry Mexican currency, for $1 he will insert the correct coin into the lock and allow us into the restroom. The restrooms are clean, and he may be the one that cleans them. Not sure about that.
Then they say the allure of going to the border towns is all the great deals you can get. But drinking water is not one of them either. Or electricity for AC. Or telephone service from Carlos Slim. But dentists are half price, which makes it all worthwhile.