Council should heed the red flags from Chicago

By Charlie Winburn

COUNCILMAN CHARLIE WINBURN AND ATTORNEY TABITHA WOODRUFF EXPRESS MAJOR CONCERNS ABOUT THE CITY COUNCIL'S PLAN TO PRIVATIZE CINCINNATI'S PARKING METERS. THE PLAN COULD LEAD TO A REPEAT OF CHICAGO'S PARKING DISASTER.

In 2008, Chicago gave control of its public parking to private companies through a 75-year lease that plugged a short-term budget hole and caused long-term woes. Cincinnati City Council is currently looking to do the same.

Desperate government is our best customer. There will be a lot of desperate governments out there;" said the chairman of a company specializing in infrastructure privatization. He was addressing the National Council for Public-Private Partnerships annual meeting in the midst of the recession in 2008. He might not have known it at the time, but he was predicting Cincinnati's future. Here in Cincinnati, City Council is desperate in its search for solutions to balance the budget, and companies like those this chairman represents are lining up to take advantage.

While a large lump sum to lease Cincinnati's parking meters, lots and garages might sound like a sweet deal, we must consider potential pitfalls and hidden costs that often accompany privatization deals. Chicago is now suffering from buyer's remorse, and Cincinnati is in a position to learn from its mistakes. In particular, there are three common problems with privatization that should make City Council think twice about its privatization plans:

Short-term fix to a long-term problem. Although Chicago put 35 percent of the payout from the multi-decade parking meter lease into a reserve fund, nearly all of the rest has already been spent covering budget deficits. Signing a multi-generational lease to balance a short-term budget isn't just bad math it's fiscally irresponsible. Here in Cincinnati, severe state cuts to local funding left a budget hole not just for this budget cycle, but also for future budget cycles. Instead of developing a long-term solution, City Council is considering a short-term fix that will only get us through the next two years. Where will that leave Cincinnati two years from now? We'll have decades left of this lease and the same budget hole to resolve. What will City Council privatize to balance the next budget? City Hall? It might sound ridiculous, but it's been done. Arizona, for instance, sold off government buildings to rent them back from private companies.

Indirect tax increase through higher parking rates. An advantage to having a private middleman is that he can be blamed for the increased parking fees. City Council can claim that it hasn't raised taxes or fees, even though it's arranged for a private company to charge more money from Cincinnatians. A report by the Chicago Inspector General found that Chicago received $974 million less for the private meter deal than the city would have made itself by increasing parking fees at the same rate allowed to the private company. At the last minute, Texas rejected a $2.1 billion upfront payment in 2008 when legislators realized the public North Texas Tollway Authority could net far more by collecting the same higher tolls themselves.

Lawsuits and high transaction costs. The Morgan Stanley subsidiary in control of Chicago's parking garages is currently suing the city for $200 million it believes it is owed for violations of the terms of the lease. Only a month after that suit was filed, bills totaling another $50 million arrived on Chicago's doorstep from the other Morgan Stanley subsidiary in control of the parking meters. Chicago paid Goldman Sachs $9 million to negotiate its toll road privatization deal and is now paying tens of millions of dollars to attorneys to handle lawsuits resulting from parking privatization. Governments often ignore these high transaction costs with their sights set on a big upfront payout.

All things considered, privatization of public parking poses more hazards than benefits to the city of Cincinnati. City Council should maintain full public control of our parking and abandon this costly short-term budget gimmick.