Parking Meter Wars

The economics of meter privatization are rather straightforward. The politics of meter privatization, however, are another matter entirely.
by | September 27, 2010

Mayors in both Pittsburgh and Indianapolis appear ready to turn over operation of their parking meters -- and the revenue stream -- to private contractors in exchange for cash. But the politics of privatization and balky City Councils are putting those deals at risk.

Facing the threat of a state takeover of its underfunded pension fund, Pittsburgh’s mayor let go of its parking meter operations for fifty years in exchange for $452 million in cold hard cash.

“The bid exceeded my wildest expectations,” Mayor Luke Ravenstahl told the Pittsburgh Tribune-Review.  The mayor wants to use $220 million of the proceeds to bolster the city's pension system and about $110 million to erase Parking Authority debt.

The City Council must approve any such contract, and right now the Council is torn between concerns about the deal and the dire fiscal circumstances facing the city. A $250,000 study commissioned by the Council, expected within days, could prove critical.

All discussions of meter privatization take place in the shadow of Chicago’s notable -- and in some circles notorious -- 2009 meter deal.

Chicago’s decision to lease its parking meter operations became a big political black eye for Mayor Daley. Criticism came in part from the fact that Chicago’s deal called for significant hikes in parking rates, and part of the criticism came from the decision to use much of the proceeds to “comb over” massive operating budget shortfalls. Defenders of the deal point out that the competitive bidding generated a huge $1.16 billion lump of cash for the Windy City and shifted the headache of meter upgrade and maintenance to a more efficient private sector contractor.

Will Pittsburgh get things right? Like Chicago, Pittsburgh appears to have baked in significant rate hikes to the terms of its RFP. According to the Beaver County Times, the deal “could more than double parking meter rates, which currently range from 50 cents to $2 an hour, depending on the neighborhood. Rates for downtown garages would probably jump as well.”

In Chicago, much of the public anger directed at Mayor Daley -- and there was plenty of it -- came because the hike in parking rates were linked in the public’s mind to the “greedy” private contractor’s desire to maximize profits, when in actuality it was a way for the city to maximize the cash it would receive in exchange for the revenue stream. Pittsburgh may be headed for a similar PR nightmare.

In Indianapolis, Mayor Ballard has proposed a 50-year lease of its parking meters as well, though the contract is structured for the city and private contractor to share in the revenue stream. Council Members there are similarly queasy.

Part of the Indianapolis proposal? Yep, you guessed it, rate hikes, with downtown rates doubling and the hours of operation being extended. Of course, the rates haven’t changed in 35 years, so the city has probably been undercharging—though drivers probably won’t agree. Indy’s aging meter system is in need of upgrade—the Indianapolis Star said “the city's system as it exists is in the dark ages of parking management”—and the city isn’t particularly adept at doing upgrades. As with Chicago and Pittsburgh, changing the rates in concert with the privatization, while a negative with the public, makes sense because the new contractor can upgrade meters and change rates economically.

In both Pittsburgh and Indy, councillors are gunshy, in part because Chicago’s City Council approved that deal relatively swiftly, only to regret it later. Mayor Ballard in Indianapolis has delayed a vote on the contract, looking to mollify concerned councilors.

The economics of meter privatization are rather straightforward. The private sector offers economies of scale and experience that municipal meter operations simply don’t have. Part of the reason the meters are so outdated is that there is never a good time for the city to devote the massive resources to upgrading them, nor do they have good mechanisms to do so.

The politics of meter privatization, however, are another matter entirely. Doubling parking rates might make economic sense, but try telling that to voters.

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