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Politics / Clout City / News A Privatization Scheme That Might Make Sense—Might
Posted by Mick Dumke on Tue, Feb 23, 2010 at 12:07 PM

The word is out that Mayor Daley is interested in privatizing McCormick Place.

"In the private sector, you manage it, get out of the business of McCormick Place, in the sense that it should be fully privatized. Then you can run the costs down. Each show runs their own costs," Daley told Channel 7.

After the parking meter mess, any major privatization effort is going to be a tough sell politically—and rightfully so. But this is one that could actually make sense.

The emphasis is on could.

Channel 7 reports that McCormick Place generates $12 billion annually for the city. But that's not the whole story. The convention center is just part of the publicly run apparatus known as the Metropolitan Pier and Exposition Authority, or McPier. The authority's struggles with retaining convention business have been widely reported in recent months, with most of the blame being placed on high fees and wages charged by unionized labor.

But as investigative reporter Jim Ylisela showed in a jaw-dropping piece in Crain's last November, McPier's troubles go far beyond that. The authority is losing lots of money because of a huge management payroll, patronage hiring, and enormous debt obligations.

In short, the people running the operation—picked by the mayor and the governor—have turned in a less-than-stellar performance.

In theory, a private firm driven more by profits than by politics would have the incentive to make the convention business more efficient. Attorney John Schmidt argued to me last fall that privatization should be on the table in cases where there are firms around with a good track record of doing the kind of work in question. "I once said to someone, what would Old Orchard be like if it were run by the village of Skokie?" Schmidt told me. "The answer is that I think it would be all right, but I don't think it would be the quality that it is. There are areas like that where you have people who have learned how to do it and do it well, and not to take advantage of that, if you can do it on financially attractive terms, seems to me to be a mistake."

Convention centers appear to fall in this category. But the devil is obviously in the details.

It is possible for publicly run convention facilities to make money that goes straight into the public coffers—the Los Angeles convention center is one example. In fact, its top officials are currently fighting a privatization push by Mayor Antonio Villaraigosa.

Plus, Chicago's parking meter deal shows that efficiency and the public good aren't necessarily by-products of privatization agreements.

More to the point: if Mayor Daley hasn't selected the right people to run McPier, then what makes us think he'll pick the right people to work out a fair deal for McCormick Place? There was no process in place to protect the public while insiders met behind closed doors to broker a sweetheart deal for the meters that made themselves millions of bucks. And now we're stuck with it for the next several generations.

Tags: Mayor Richard M. Daley, privatization, McCormick Place, McPier, Jim Ylisela, parking meters, parking meter lease deal, John Schmidt, Mayor Antonio Villaraigosa, Los Angeles

gapersblock.com/mechanics/...park-place/
Urban Planning Wed Mar 17 2010
Park Place: Parking Policy and Public Transportation

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"The Parking Meters" will not mean just "the parking meters" in Chicago for at least another generation. The popular outrage over privatization of the city's parking meters was one of the largest expression of popular discontent of the Daley era, and caused a crack, albeit a fine one, to appear in the Mayor's monolithic governing coalition. Given as we are to think of government and politics as a collection of personalities, the Daley administration's ham-handed negotiation and rolling out of the parking meter privatization have taken centerstage. The concession agreement has been treated as a political disaster, with reports that the entire lease was undervalued adding to rage over an opaque process..

But are the projected sharp increases in parking costs and the potential coming of variable or market rate pricing projected over the coming years really a blessing in disguise?

Indeed, urban planners have been arguing for more realistic parking costs in cities for years, and market pricing is increasingly looked at as a critical component to make cities more "sustainable"--that is, more efficient, less dependent on exhaustible sources of energy, more carbon-neutral, and more conducive to healthy lifestyles. These (largely academic) planners looked at the abundance of cheap parking and deduced that the prevalence of cheap parking stimulated demand, and that the abundance was a result of direct and indirect government intervention. This is primarily in the form of mandated creation of parking in the zoning code. As a result, non-drivers end up subsidizing drivers, since developers build the cost of parking construction and maintenance into their business models. What's more, in outlying areas mandatory parking lots create expanses that incrementally push commercial and residential districts further and further apart, making alternatives to driving--particularly walking and biking--less feasible.

A two for one solution appears: make parking sensitive to demand (i.e., increase the rates) and reinvest the revenue in foot and bike friendly urban design and public transportation. Result: efficiency and diversity of transportation options.


Parking Policy Closer to Home

Chicago's Active Transportation Alliance issued a report last month that follows that line of thinking and argues that the lease of the parking meters is a positive step towards that progressive Elysium, Sustainability.

elysian-fields.jpg
Permaculture

Sustainability in this case means, among other things, efficiency: the most people being able to move in the least amount of time for the least amount of money; environmental quality, improving air and noise qualities to level that don't negatively impact people; and public health, combating obesity and encouraging activity.

Yet, you may have picked up on something: the city no longer collects the revenue from the lion's share of Chicago's parking meters. That goes to the parking meter consortium that leased them. Increased revenue from parking meters in Chicago can't be reinvested into public transportation. The city got its money up front.

Well, aren't you a smart cookie. As it happens, the ATA, formerly the Chicagoland Bicycle Federation, picked up on that, too.

This latest report comes on the heel of a bit of mild controversy: the ATA, which is funded in part by contracts with the city, initially criticized the privatization scheme, arguing that on top of the inability to reinvest revenue, control of the meters by a private entity would endanger the city's ability to redesign in favor of bike and rapid transit, in particular the creation of bus rapid transit. After getting a strong rebuke from the city for what they said was a misunderstanding of the agreement, the ATA did a 180 and admitted to factual errors and withdrew their report. A column written by ATA policy director Arline Welty was even removed from Progress Illinois, at Welty's request*. The Reader's Mick Dumke reported on the reversal that followed, including that ATA director Rob Sadowsky was "embarrassed" by their initial, critical report.

In the reissued report, the ATA cites prominent studies of parking policy, as well as original research, to demonstrate that the lease concession was, indeed, a good thing at least in its results. Increasing rates and, potentially, market pricing of parking will ensure spots are always available--the ATA studied several streets and confirmed their hypothesis that demand-sensitive pricing could ensure at least some available parking on every (metered) block. This, in turn, would eliminate or reduce the "cruising" that happens when drivers circle looking for parking, and make the streets safer for bikers. Stressing that the market-rate pricing of meters can only be one part of a comprehensive "active transit" public policy, the ATA encourages the city to find revenue, including the revenue from the meters still under their control, to invest in alternatives to driving. It does suggest that suburban communities consider raising curbside parking prices and reinvest that money in transportation alternatives.

It is an encouraging and convincing--to a point--analysis of the ramifications of the lease deal. Ignoring for a moment the clearly dysfunctional process that led to its ratification, it is conceivable, as ATA argues, that technological advances (electronic parking boxes that can track user habits) and market pricing could improve transit habits in the city and increase demand for public transit and bike access on arterial roads.

Among the studies that follow this recent trend in urban planning is "U.S. Parking Policy: An Overview of Management Strategies" [PDF] by Rachel Weinberger, John Kaehny, and Matthew Rufo, released last month. This page-turner comes to the same conclusions as the ATA on a national basis, citing the inherent inefficiency of urban planning policies that create parking at a rate incommensurate with the ability of roads to handle the traffic and insensitive to air quality and public health.

The Weinberger study details how the artificially low prices of curbside parking has a skewing influence on off-street parking: garages have to compete with the subsidized price of meter parking. The result, again, is that the public subsidizes the cost of driving, keeping it unsustainably low. However, that study also takes Chicago as a case study, and their conclusions are similar to the ATA's original conclusion:

However, in Chicago, the city has done more than privatize meter operation and revenue collection. It has essentially made the meter franchise agreement the highest street management priority for the next 75 years. Under the meter agreement Chicago cannot shorten hours of meter operation, reduce rates or remove meters without compensating Morgan Stanley. Thus, planners must take into account the expense of losing meter hours when considering any change in street use, including: bus rapid transit, pedestrian bulb-outs, or protected bicycle lanes. Since most of the city's arterial streets are metered, these restrictions could seriously impinge reprogramming street space for pedestrians, bicyclists and transit. Additionally, the rigid, and blanket price zones adopted in the parking deal may have created local parking dysfunction as nearby blocks with vastly different parking demand are priced the same.

The factual errors ATA copped to in the original report in part had to do with a supposed "loss of control of street space" as Weinberger details here. In that Progress Illinois piece (as quoted by the Reader) Welty wrote:

In order to maximize profits, the city not only gave up control of future meter revenues but just as importantly, gave up all control of the public right-of-way on any streets with parking meters.

As a result, every potential project on a street featuring meters--including expanded bicycle lanes, sidewalk expansion, streetscaping, pedestrian bulb-outs, loading zones, rush hour parking control, mid-block crossing, and temporary open spaces--are dictated, controlled, and limited by the lease agreement. These restrictions severely limit innovative planning for bicyclists, pedestrian, and transit users.

This was not technically speaking correct. The public right of way--the "street space"--is indeed still controlled by the city. However by the terms of the lease, the city (in city budget spokesman Pete Scales' words) "retains responsibility" for any drop in the total revenue rake. So, no, the parking meter group can't veto urban design decisions. But the concession agreement could make any potential change prohibitively expensive.

It is true that the city in approving the parking meter lease didn't cede control of street space to Chicago Parking Meters,LLC; however, it did add a calculus to any "reprogramming" of that space: specifically, the city will have to compensate the consortium, for example by increasing hours or rates at existing meters or adding meters elsewhere.

Meter revenue, in any case, is in the low eight figures--they gathered about $20m in 2007--so it was not as though meter revenue, even if increased through market pricing, would have funded a world-class public transit system. Still, if the lease consortium moves to apply market forces to their asset, parking prices will go up without a clear plan to provide alternatives. Absent those alternatives, Chicago will not get any closer to bikefootopia.

A Comprehensive Plan

Allowing curbside parking to more accurately reflect demand will discourage people with a viable alternative from driving to their destinations. That's an important distinction: the point isn't to eradicate cars, but to make them just one of a menu of options. Obviously for suburbanites, or city residents who need to travel to remote or generally unaccessible neighborhoods or inner-ring suburbs, driving will remain the most cost-effective and convenient option. The difference would be that for a majority of trips, the street space would make walking, biking, or a bus a more attractive alternative. You could eliminate nearly half of car trips, for example, if residents felt they could get to distances within two miles without use of a car.

Half as many cars on Chicago's arterial streets would make the streets much more friendly to bikers, reduce crossing time at intersections (the ATA also heavily emphasizes the potential benefits of pedestrian bulbouts in this regard) for pedestrians, and decrease travel times for buses.

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Also known as "Neckdowns"

Speaking of buses.

One planning solution proffered by Weinberger et al is bus rapid transit--dedicating curbside spaces exclusively to buses, to take them out of traffic and decrease their time between stops. One of the necessary reforms for bus rapid transit is, as you'd expect, the elimination of curbside parking along the bus route. While the city retains the authority to do such a thing, the revenue it would be responsible for replacing would be considerable. Look for example at Chicago Avenue. Chicago Ave is an uninterrupted, wide street that goes from the edge of the Central Business District to the suburbs and is lined much of the way with parking meters. The hundreds of meters that would have to be removed to accommodate a bus lane between, for example, Sacramento on the West and State Street on the East, would represent several million dollars over the course of the lease agreement--according to the formula used by Dumke and Joravsky in the Reader (whereby an average of $0.39 per meter hour is derived).

This is just one segment of one street. For a comprehensive rapid bus transit plan that served every part of the city, the city would be looking at a potential additional cost of millions each year, or shoehorning parking meters into outlying neighborhoods--or jacking up the cost of parking in higher density areas beyond the market price (which could ultimately price some of the meters out of the market). Perhaps more importantly, it creates a disconnect between the increased parking meter revenue and investment in alternatives to driving. The city would bear the full cost from general revenues (or more likely debt), which in turn would require cuts in other places or increasing revenue sources (i.e., taxes).

That would be, to put it mildly, politically difficult.

All of that said, a comprehensive "active transit" plan for the city is not made impossible by the privatization of the parking meters and CPM's hogging of the revenue from curbside parking. The increasing cost of curbside parking could actually end up being a critical component of any such plan. And it pains me to acknowledge at least in part one of the administration's arguments for making the deal, it also makes commitment to that market-pricing policy politically easier--no annual votes for the Aldermen to take. This deal is a mess of liberal and libertarian paternalism awkwardly intertwined and a little stinky.

Still, all of that is not unqualified. In order to prove their sincerity, the city needs to pursue those other avenues of reform: funding for transit alternatives and reform of the zoning and planning codes.

Chicago's zoning ordinance in particular is fairly generous with its parking requirements, although there are some common sense elements--such as lightening parking space requirements for developments within a short distance of transit stations.

Train Reading. You're Welcome

The city should begin a review of the zoning code to identify places where parking requirements can be reduced or eliminated, and potentially used to raise revenue for alternative transportation. According to the ATA, it costs developers approximately $18,000 to construct a parking spot in Chicago--knowing this, could charge a fee or create a taxing area to direct revenue into neighborhood funds to improve bike access and public transportation.

Whatever the result of any study, it should be done in earnest. The cost of parking will only increase, and if the city tries to take a piecemeal approach to creating alternatives it will result in yet another regressive policy. Chicagoans will continue to be forced to drive, but it will just be more expensive.

Alderman Scott Waguespack tried to remove 270 meters from his ward in 2009, only to find it would cost more than half a million dollars over three years. So long as no real comprehensive plan is in place, Aldermen with an eye on the next election will be wary of potentially depleting their ward funding, and will not have leverage individually to raise alternative funds. The terms of the parking meter lease simply will not allow the administration to bluff its way out of trouble by singing loudly about the potentially good results.

Market Pricing

CPM in tandem with the city has not thus far instituted a market-pricing system for the city's parking meters, although rates are expected to increase in the coming years, commensurate with the overall value of the agreement. However, given the technology in the pay boxes, CPM could over time calculate when users are using the metered spots, and with debit and credit cards in increased use, even begin to track single user behavior. According to the ATA report, LAZ Parking, the operator of the meter asset, is already using usage data to better assign staff to parking enforcement.

While allowing the market to determine the cost of meters could be positive for its resulting change in driver behavior--by encouraging use of alternative modes of transportation--that doesn't in itself justify the policy. Why shouldn't the city keep curbside parking cheap, the way it subsidizes public transformation or builds and maintains the roads; after all, it is tax dollars--our dollars--that pay for all of these things. Especially since the city and suburbs are designed such that driving is often the only feasible option.

Several studies--the ATA and Weinberger studies, and studies by the California Polytechnic [PDF] and the Canadian Victoria Transport Policy Institute [PDF]--have come to somewhat similar conclusions: market pricing is justifiable because parking constitute a regressively-funded subsidy. Non-drivers are subsidizing drivers. Non-drivers are less expensive to move--either they move themselves or move with a group of people--and presumably at least are not driving in part because they cannot afford it (and thus are more likely in a lower income class than drivers). Parking construction requirements in the zoning code also force developers to factor in an additional cost, presumably passing this on to consumers--drivers and non-drivers alike. Parking is not an entitlement, in other words, and should reflect the ability of its users to pay.

The efficiency side--which says that eventually an equilibrium will be found that would mean there would always be spots available--assumes again that feasible alternatives are available. People will only be priced out of driving at the point where there is an affordable and convenient alternative. So long as people do not feel they can reliably and safely get from point A to point B, they will swallow the cost difference. This is particularly true for families and seniors for whom travel by bike or foot is often already inconvenient.

These arguments in defense of raising parking rates seem pretty satisfying to me--but as comments on an earlier post showed at least, the instinct that subsidies for parking are indeed justifiable and desirable is pretty strong. Change will be painful.

There's also the conservative instinct that prejudices mass transit as a European "graft" onto America's superior car culture. Conservative thinkers Ramesh Ponnoru and Rich Lowry recently characterized the progressive focus on mass transit as a symptom of misguided Europhilia:

Why couldn't we be more like them -- like the French, like the Swedes, like the Danes? Like any people with a larger and busier government overawing the private sector and civil society? You can see it in Sicko, wherein Michael Moore extols the British national health-care system, the French way of life, and even the munificence of Cuba; you can hear it in all the admonitions from left-wing commentators that every other advanced society has government child care, or gun control, or mass transit, or whatever socialistic program or other infringement on our liberty we have had the wisdom to reject for decades.

Efforts to encourage alternative forms of transportation are sometimes seen as paternalistic social engineering, so the savings inherent in zoning code reform and the de facto subsidy to curb side parking need to acknowledged and stressed by the city if they want to pursue genuine reform towards more efficient and diverse transportation options.

The city can't expect to allow parking costs to just eat into people's income--largely for the benefit of a private operator--without providing some remedy. The streets and meters were built and maintained with public money, specifically to make it easy to get from place to place. Once those assets cease to be easy to use, government should take responsibility for the loss of quality. It isn't a kind of welfare, it's fiduciary duty.

In summation, I know you're thinking that if I was going to go with a Monopoly theme in a post about subsidized parking I should reasonably have chosen "Free Parking", not "Park Place". Well, when you get a column and write your long-winded piece about parking policy, you can name your post whatever you want.

Baltic Avenue.Gif
Rough neighborhood

*Updated to reflect confirmation that piece was removed at Welty's request.

— Ramsin Canon / Comments (0)