Oh, hello, America. Here in Chicago the parking meter mess is all over but the grumbling, but it's making headlines again. This time it's because Los Angeles is trying a radical new experiment in city parking based on the theories of UCLA economist and parking-theory star Robert Shoup, and Chicago is the cautionary tale.
The Chicago deal had a number of problems with it, and is inferior to LA's Express Park (basically a high-tech city-owned system to dynamically price spaces according to scarcity) along a number of dimensions. But I think this emphasis on the fact that Chicago created a privately owned monopoly ends up understating the main problem with deals of that sort. The basic "problem" that we're confronting is that land is valuable, it's bad for society when land is mismanaged, and municipalities often mismanage the land they own by turning it into dedicated underpriced parking. One possible solution, à la Express Park, is to try to manage the land better. Another solution, appropriate in many cases, is to simply sell the land. The Chicago "third way" manifests itself as inferior primarily by inserting a new layer of parasitical rent-seeking into the ecosystem.
ExpressPark, as outlined in a long and interesting Los Angeles Magazine piece, is a fascinating attempt to apply market pricing through civic infrastructure:
This spring the DOT plans to introduce an $18.5 million smart wireless meter system based on Shoup’s theories. Called ExpressPark, the 6,000-meter array will be installed on downtown streets and lots, along with sensors buried in the pavement of every parking spot to detect the presence of cars and price accordingly, from as little as 50 cents an hour to $6. Street parking, like pork bellies, will be open to market forces. As blocks fill, prices will rise; when occupancy drops, so will rates. In an area like downtown, ideal for Shoup’s progressive pricing, people will park based on how much they’re willing to pay versus how far they are willing to walk to a destination.
As (Chicago expat) Mike Konczal describes, addressing (Chicago expat) Peter Frase, the two parking-meter plans are complete opposites: the first is privatization without market competition (aside from a little bit of it in the bidding phase, but even then not all that much), the second is market competition without privatization:
We now have two ways to distinguish changes in the provisioning of government services. On one axis, there’s who controls the provisoning and the residual – is it in public hands or private hands? On the second axis there’s how much competition and market reforms are driving the reform versus how much there’s monopolies and single firms dictating the allocation and the real reform comes through private ownership itself.
Chicago arguably got the worst possible scenario: the inflexibility of private ownership with the inflexibility of non-market-based-pricing. So who actually liked the Chicago parking meter fiasco? Stephen Goldsmith, former Indianapolis mayor, who would probably still be Mayor Bloomberg's right-hand man in New York City were it not for a run-in with the cops. Goldsmith, a professor at Harvard's Kennedy School of Government, broadly elides the mess ("two qualified bidders participating in a last-best-offer runoff"), but does touch on one important element of the parking meter sale:
Prior to the privatization, Chicago's metered parking rates were way below market. Some meters cost just 25 cents an hour, while nearby parking lots charged $15 an hour. Many folks who worked downtown found it well worth it to dash outside and feed the meter. In essence, Chicago taxpayers were subsidizing parkers from the suburbs.
This is one of the things that angered Shoup about parking in Los Angeles, as he told LA StreetsBlog:
Meter rates were based on revenue when the city doubled meter rates everywhere, with a minimum $1 an hour, two years ago. Since most meters had been 25¢ an hour, that meant quadrupling the price at most meters. Rates at most of the city’s meters had not changed at all in the previous 18 years. Inertia had been the city’s policy, not maximum revenue or good management.
In short, exactly what happened here. Goldsmith continues:
The new rates went into effect at the same time as the new operator started, so in the public's mind the rate hikes were the contractor's doing. It was city officials who set the rates and it was city coffers that benefited. No matter. These highly unpopular price increases – more are scheduled – were determined by elected officials rather than being a consequence of the outsourcing.
By then the city had already given the Morgan Stanley consortium, known as Chicago Parking Meters LLC, the authority to raise rates and extend hours. Though the city technically retained final say over meter placement and pricing, any changes to their lease agreement, such as reducing the number of meters or even their hours of operation, would cost taxpayers big money in penalties—potentially more in just the next few years than the city had been paid.
The parking meter rates were, yes, raised by the pols that sold the meters. But it was part of the privatization deal; the politicians may have raised the rates, but it was one half of a deal that was predicated on raising them. In other words, if by Goldsmith's opinion the public was wrong, they also had reason to be confused.
For much of the past decade the meters have brought in about $20 million a year, costing $3 million to $4 million a year to maintain. But as the economy began to cool in fall 2007, the administration proposed a series of fee and tax hikes for the next year's budget. Among them was a doubling of parking meter rates: in documents released publicly in October 2007, city officials predicted the hike would boost meter revenues from about $22 million in 2007 to $56 million in 2008. Aldermen protested that the increase would be bad for business.
On October 17, 2007, Sun-Times columnist Michael Sneed reported that a source had told her that "a super secret deal is afoot at City Hall. . . . Sneed is told Mayor Daley's fiscal advisers are working on a deal to privatize the city's parking meters, which could potentially reap 1 BILLION bucks for the cash-strapped city."
Sneed went on: "The sweetener to the deal is already on the books: a provision to raise the parking meter rates, which is clearly a carrot for whomever buys the meters." Her source also told her the city had already hired legal and financial advisers to help work out a deal.
This brings up something that doesn't come up in the optimized, theoretical discussion of parking-meter privatization. One of the things that was privatized, as Ben Joravsky and Steven Goldsmith agree, was blowback. As Konczal describes in his analysis, there are lots of arguments for and against privatization, based on different criteria. But one voters and citizens have to be careful of is the desire to not just sell off public property, but political risk; privatization shouldn't be a substitute for political will when it comes to necessary but unpopular increases in the cost of public goods.
Photograph: janibowe (CC by 2.0)