B12 Solipsism

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Archive for the ‘privatization’ tag

Cities Need to Weigh Costs of Private Partnerships

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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.)

Written by Seth Anderson

July 26th, 2013 at 8:29 am

Parking Meter Firm Bills City Another $2.1 Million

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Put Money in the Parking Meter or else!
Put Money in the Parking Meter or else!

Gee, thanks, Mayor Daley and your rubber-stamp city council! Privatization strikes again…

While Chicago’s infamous parking meter lease deal quietly celebrated its third anniversary the first week of December, the city was releasing documents chronicling more evidence the privatization of the city’s more than 36,000 parking meters turned out to be more costly for taxpayers than originally imagined.

Financial statements, released by the Chicago Inspector General’s office via their Open Chicago government transparency initiative, reveals what many critics of the lease deal had feared–the city would end up owing or paying Chicago Parking Meters, LLC millions of dollars in compensation when any sort of change or activity by the city impacts parking meter revenue for the company.

Financial statements for the company show that CPM has billed the city an additional $2,191,326 in “True-up Revenue” through the end of 2010.

As the notes from the independent auditor’s report by accounting firm KPMG LLP to the financial statements explains:

“The Company has an agreement with the City, whereby, the Company receives compensation from the City in accordance with the Agreements in the event that the City implements changes to the System, which reduces the Company’s revenues (True-up Revenue).”

These same notes reveal the city owed CPM $533,290 in True-up Revenue for 2009 and $1,658,036 for 2010.

(click here to continue reading Parking Meter Firm Bills City Another $2.1 Million | theexpiredmeter.com.)

Booted!
Booted!

Street festivals seem to be the biggest culprit:

According to the over 500 pages of contract with CPM, these events could include any situation which would require the city to remove a metered space from the system (installing a loading zone, moving a bus stop, etc.), or if a tax on metered parking is imposed by the city, or when metered parking is temporarily out of commission during a closure.

While removing a metered space is usually handled by adding another space or spaces elsewhere in the city to compensate CPM, the most likely culprit for this over $2 million is street closures.

Closure is defined as anytime metered parking is taken out of commission for a prolonged period of time due to any street work, be it to replace a broken water main, for street repairs or resurfacing or even for a street festival.

Under the terms of the lease, any time this occurs above an annual allowance, CPM can file a claim for the loss of potential revenue due to street closure.

But wait, there’s more indignity!

Shamrock Shuffle No Parking Zone

Last week Chicago Parking Meters, LLC sent the City a bill for $13.5 million in revenues they lost from motorists with handicapped parking placards parking for free in metered spots. Today our friends at The Expired Meter report the company also sent the City a bill for an extra $2.1 million in what they call “true-up revenue” related to street closures.

Our analogy comparing the parking meter deal to herpes becomes even more apt.

(click here to continue reading Parking Meter Company Bills City for Street Closures: Chicagoist.)

Written by Seth Anderson

December 21st, 2011 at 12:29 pm