‘PPP’ Passé, Abu Dhabi, The Holidays
By John Van HornLet’s review the bidding. A number of desperate cities are looking to sell or lease their on-street parking for quick bucks to cover budget shortfalls. Chicago did it, and the money was completely used up in a year (promised savings accounts somehow were never opened). Pittsburgh is trying, but the city council is balking as are the learned councilmembers of Indianapolis.
My sources tell me that many cities that were looking at the “Triple P” (public-private partnership) are rethinking the process. What happened?
First, there was Chicago. The mayor pushed the process through and a billion was realized, but what has happened is that a number of whistleblowers are claiming that the city left a bunch on the table. They also are seeing that the private sector can, in fact, perform and that revenue has jumped three times over what it was just a year earlier. Many are saying, “Gee, why couldn’t we have had all that money? All we had to do was clean up our act or hire the private sector.” Plus, the changeover in Chicago was shaky, with lots of initial problems that stuck in the craw of the folks in the Windy City.
Then there is Pittsburgh. The mayor said they had learned from the issues in Chicago, but still underestimated the amount that was going to be bid by, what, 40%. Then he didn’t have his political ducks in a row and an opposing city council killed the deal, after the city and a lot of vendors had spent a bundle to bid the deal. The council says it’s dead; the mayor is trying lifesaving measures.
Indianapolis is working on a redo of the proposal made by its bidder. They, too, seem concerned that there is a lot of money on the table and are reworking the deal to provide them a higher percentage down the road.
In LA, Hizzoner is trying to lease out on- and off-street parking, but the parking department has just upgraded 10,000 meters and the revenue has skyrocketed. The council is rethinking whether they can stand the political onslaught when voters discover they leased out such a lucrative operation.
What these and other city governments have seen is that parking revenue in their jurisdictions can be substantially more than it currently is. Someone realized that the private sector doesn’t just plop down a billion dollars if it doesn’t have a “lock” somewhere. Most of the time, that lock is parking’s dirty little secret – a lot of money never gets collected, for myriad reasons. They found that putting professionals in charge in Chicago, replacing meters, and some rate adjustments and, boy, the money just flowed in. Pittsburgh and Indianapolis saw the handwriting on the wall, and LA got a jolt when only 25% of its meters were upgraded.
There is something lurking in the background. The voters are beginning to realize that government’s troubles can’t be solved by more and more money. The time has come to look at the expense side of the ledger. Free spending has got to come to an end. Time to starve the beast. Sell parking today, and city hall and the police may follow tomorrow. Then what’s next?
There is another consideration, one dealing with public policy. When you lease out on-street parking operations, you also lease out your ability to affect policy decisions in the future.
Who knows what a city will look like 50 years down the road? Some streets may need to be closed, others changed to no parking; parks and malls may be needed. However, if the parking spaces are leased, the ability to make these changes can be difficult, if not impossible.
No private business is going to pay big bucks to have their future controlled by a planning commission or a city council, and if they do, the bucks aren’t going to be nearly so big.
Cities are realizing that they can hire professional parking operations and get much of the revenue increases they are looking for without resorting to sale or lease of assets. They are realizing that rushing in to sell one of their most visible assets is not necessarily the best possible option.
Is Triple P as it relates to parking history? Who knows? But I will tell you that they are realizing that farming out trash collection, or building maintenance, or even a court system is very different from leasing an asset as potentially revenue-generating, personal to the voters, and volatile as parking. Remember, all politics is local, and there is nothing more local than where you park your car.
Does Abu Dhabi, UAE, own the Chicago parking system? Well, sort of, kinda, not really.
Seems that after Morgan Stanley closed the deal in Chicago, they set out to do what investment banks do all the time – they wanted to use OPM (other people’s money). So they – well, let me quote from an Oct. 19 article on The Atlantic Wire, which quotes freely from journalist Matt Taibbi’s new book, “Griftopia,” as previewed in Rolling Stone:
“… So basically,” he writes, ‘Morgan Stanley found a bunch of investors, including themselves, to put up over a billion dollars in December 2008; a big chunk of those investors then bailed out to make way in February 2009 for Deeside Investments, which was 49.9% owned by (a subsidiary of the government-owned Abu Dhabi Investment Authority) and 50.1% owned by a company called Redoma SARL, about which nothing was known except that it had an address in Luxembourg. …’
“Taibbi calls this a ‘bait and switch’ pulled by Morgan Stanley on Chicago,” the Atlantic Wire article says. “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,” the article continues. “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, Taibbi says they could have gotten four times as much money for it, up to $5 billion,” the article says.
Now I’m not sure about the city of Chicago having to go to the Emirates to get permission to hold a parade; that’s a bit of a stretch. However, my guess is that if the AD Investment Authority put in a substantial amount of money, they will most likely have someone sitting on the board who will be interested when a money decision is made.
It’s Christmastime (or whatever you celebrate this time of year), and I would like to wish you the very best of the holiday season.
Times seem to be tough, but they aren’t so bad if you compare your lot with those less fortunate around the world. The poor in America, unfortunate as they are, live well compared with the poor in most other countries. We are truly blessed.