Why Do Cities Get Such Bad Deals in Public/Private Partnerships

Why do cities have such problems hiring and supervising parking operators? Over the years, we have seen example after example in cities like San Francisco, Los Angeles, Portland, and Pittsburgh where cities have hired companies and they have done a less than stellar job in collecting the revenue or running the facilities. I think the problem is related to what we have been seeing in Washington DC. There is a mentality in much of government that says that it knows all and should set the rules and then its up to the rest of us to follow them.

Let’s look at some rules for parking operators. First, they are often told how many employees they are to have on a site, how much to charge, and in some cases what they are going to pay. In the next breath, the city then tells the operator that they are going to choose the low bidder. Or they are going to use a convoluted set of rules to make the choice, taking into consideration minority, female, disabled, and whatever else participation. When the sealed bids are opened, all these things are taken into consideration and in the end, it would take Solomon to sort out the reason one company is picked over another.

Then of course, the lawsuits begin and in the end, someone gets the deal.

Usually there are many auditing and reporting rules to follow; the only problem is that if the operator follows them, there is seldom anyone at city hall to look at the reports. And if they do, there is seldom anyone who understands at what they are looking. The bigger the city, the bigger the problem.

They talk about what comes next in hushed tones. The companies that bid on leases in cities around the country bid such high numbers because they know, after performing their own audits, that the amount of money that is not collected by cities is staggering. Look at Pittsburgh for instance. The bid came in millions higher than expected. These companies aren’t stupid. They want the deal because it’s lucrative. The numbers show them collecting substantially more than has ever been collected in the past.

How can this be? The operators bidding on leases will run the parking in the city like a business. They will install the most modern equipment, hire the best people, pay them appropriately for running multi million dollar companies, and keep an eagle eye on the bottom line. The main reason that everyone is so upset in Chicago is that Chicago Parking Meters is grossing tens of millions more than the city did on its best day, and are continuing to do so. These guys have investors to please, and please them they will.

City purchasing agents, I think, feel that they are protecting the public purse by inundating the bidders with rules, reports and requirements. However by wringing every penny out of the operator, much like one would wring a wash cloth to get that last bit of water, they also wring out innovation, and the desire to succeed.

The term describing many of these relationships is Public Private PARTNERSHIP. However seldom is it truly a partnership. Most often it is an employer/employee relationship. The city is the employer, and the operator is the employee. Show up, do your job, keep your nose clean and you will receive your pay. Where is the incentive to come up with new ideas? Where is the incentive to put in even one more second on the job? Where is the incentive to solve problems and increase the bottom line? In private companies folks who do those things are rewarded with promotions, congratulations, and most important a fatter paycheck.

I can hear it now: “We can’t have someone working here than makes more than the Chief or Police or the Mayor?” I know that those jobs are important and mission critical, but remember, the person in charge of your parking operations is responsible for generating a lot of money. They and their staff must be incentivized. They must be paid to do the job. Their paychecks must be open ended.

Can a city do that without a lease arrangement where basically all the money goes to the company after the rent is paid. I sincerely doubt it. And until that problem is solved, these deals won’t be very good business for cities.

I know that this is difficult for you CAPP graduates to swallow. You attend seminars at IPI, NPA, and PIE. You understand the mechanics of parking operations. You know the politics of parking well. But do you know how to set rates. In fact, can you set your rates, or is it done by the city council. Can you fire poor employees or are they civil servants? Do you KNOW how much money should be coming in from each garage? Do you regularly hire an outside auditor who actually knows the parking business and can find problems and help you solve them? Can you take the recommendations from those auditors?

In the private sector, the most successful companies reward innovation, punish incompetence, and promote those who find problems and solve them. You can do that in the private sector, can you do it on the public side.

JVH

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2 Responses to Why Do Cities Get Such Bad Deals in Public/Private Partnerships

  1. John Martin says:

    Very honest appraisal. Surprised and thankful for your insight.

  2. Your comments here are spot-on. Great editorial.

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