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Chicago-esque government

Cities Need to Weigh Costs of Private Partnerships

By Dec. 31, 2009, Chicago had only $180 million left from the $1.15 billion parking meter deal, forcing the city to consider alternative sources of revenue rather than relying on long-term reserve funds generated by the parking meter lease.

The city is sucking the life out of you and you just give coins
The city is sucking the life out of you and you just give coins

The parking meter debacle will always be Mayor Daley’s legacy, and a stain on Chicago’s history. Daley made this decision, rammed it through a compliant City Council, and then decided not to run for Mayor again, leaving behind a budget in shambles. 

An after-the-fact investigation (PDF) by the city’s inspector general concluded that the decision to enter the lease contract lacked “meaningful public review” and neglected the city’s long-term interests to solve a short-term budget crisis. Specifically, it found that “the city was paid, conservatively, $974 million less for this 75-year lease than the city would have received from 75 years of parking-meter revenue.” That’s nearly $1 billion that could have been used for better police and fire protection, longer library hours and many other services that would benefit the public good rather than private profits. By Dec. 31, 2009, Chicago had only $180 million left from the $1.15 billion parking meter deal, forcing the city to consider alternative sources of revenue rather than relying on long-term reserve funds generated by the parking meter lease.

Parking rates increased to as much as $8 for two hours. The initial contract required seven-day-a-week paid parking. The city was able to negotiate out of that requirement but in exchange had to extend paid parking until 10 p.m. Downtown business owners have blamed the increase in rates for a decrease in economic activity.

Taxpayers are further harmed by the contract’s fine print, which says that they must reimburse Morgan Stanley and its Qatar-based business partner for any time the space is used for anything other than parking — including parades and festivals. The city is prevented from performing routine road maintenance that would occupy a parking space on all but a few days a year without paying a penalty.

Perhaps most egregious, Chicago cannot build parking lots for the entire duration of the contract because they might compete with the outsourced parking meters.

In fact, the “noncompete” and “compensation” clauses mean the city won’t be able to make, for 75 years, fundamental economic development, land use or environmental policy decisions — anything that would affect the revenue of the parking company. Roderick Sawyer, alderman for Chicago’s Sixth Ward, has called this parking privatization scheme “outrageous for taxpayers, undemocratic, and un-American.”

(click here to continue reading Cities Need to Weigh Costs of Private Partnerships – NYTimes.com.)

Mayor Emanuel
Mayor Emanuel

Of course, the experience of privatization hasn’t stopped the current mayor from selling off more of the city’s assets as quickly as he can find bidders.

A preliminary agreement for a 62-year lease, not yet spelled out in a contract, calls for Denver-based transportation behemoth the Broe Group to invest a minimum of $100 million, and perhaps as much as $500 million, over the next 10 years in the port to modernize its infrastructure and draw new business. In return, Broe would retain 90 cents of every dollar in new revenue generated by port operations, with the remaining 10 cents going back to the port district, a hybrid city/state entity. Broe also will pay the agency $1 million a year.

The shared revenue would be used to pay down the district’s debt, around $30 million, and its pension liability, around $5 million, Forde said.

Emanuel said the project ultimately would create 1,000 new jobs.

The district’s board approved the framework Friday and authorized Forde to negotiate the contract, which could take about 60 days. The district anticipates port improvement work would begin next year.

The move to private management is the latest step in that direction by local and state government, and bears some resemblance to the privatization of management at the McCormick Place convention center. In both instances, public boards appointed by the mayor and governor will continue to have oversight.

A major question is whether such a deal robs the public agency of potential future revenue — a major criticism of the city of Chicago’s privatization of parking meter operations. Currently, the district’s operations are supported entirely by rent and fee payments.

Transportation expert Joe Schwieterman, a professor at DePaul University, said such a negative scenario is possible, in theory, if the industrial segment of the economy were to take off, robbing government of revenue.

(click here to continue reading Private operator Broe Group to invest in Port of Chicago – chicagotribune.com.)

Increased Risks
Increased Risks

and you have to wonder at the timing of articles like this:

When Mayor Rahm Emanuel announced Sunday that a private company would take over management of the Port of Chicago on the city’s Southeast Side, it was evident port operations were not shipshape. For one thing, the port lost money every year for the past decade, until last year.

Now it’s clear the port — run by a government authority — was more deeply troubled.

A blistering 155-page report by the Illinois Auditor General released this week details instances of rampant mismanagement at the port, sloppy record-keeping, issuance of no-bid contracts for sizable purchases and generally poor oversight by the Illinois International Port District. The district owns and operates the Port of Chicago as a landlord, leasing land, buildings and docks to private operators.

The report details numerous shortcomings in how the port operated, from big-picture failings such as having no long-term strategic plan for developing the port, to day-to-day operating failures, such as not having written leases with some tenants and many instances of poor or non-existent record-keeping.

It noted the district’s policies governing use of port facilities and services, including rates for dock and wharf fees, hadn’t been updated in 30 years, since April 1983, also noting the rates are the lowest among several comparable ports.

(click here to continue reading Audit of state port authority turns up widespread mismanagement – chicagotribune.com.)

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