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Meter Shock in Cincinnati

Privatizing parking meters was a disaster for Chicago. So why is Cincinnati doing it?

If you want to start a political argument in Cincinnati these days, bring up the subject of parking meters. There’s an election for mayor Nov. 5, and while there are plenty of important issues on the table, the one that seems to excite voters the most is the question of who should run the city’s parking system—the local government itself or a consortium of private companies led by the Xerox Corp.?

A few months ago, the city council voted narrowly to make a deal with the private companies, and so far that agreement has survived a pair of court challenges. If it continues to pass judicial muster, the city would receive a lump sum payment of roughly $90 million, plus a check for $3 million every year for the next 10 and probably 30 years. In return, the agreement would give Xerox the management rights to 5,000 metered spaces scattered around Cincinnati.

Most legal observers agree there is little to be done at this point to keep the deal from going forward, but that doesn’t prevent it from being the fault line dividing the two candidates running for mayor.

One of those candidates is Roxanne Qualls, a fixture in city politics for nearly three decades, and a three-term mayor back in the 1990s when the mayoral office was largely ceremonial. A constitutional change a few years ago turned it into a position of real power, and Qualls, who is now 60 and serves on the city council, wants another shot at city hall. She has a long list of policy objectives that she would like to pursue, including investment in a streetcar system. But the one with the most political volatility is her support for turning over the parking meters to the private consortium. She backed it in council, and helped round up the votes to pass it 5-4.

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Qualls has an active and articulate opponent, however, in John Cranley. Cranley, 38, was on the city council for nine years and now runs an inner-city development company. His arguments are simple, but contentious.

In Cranley’s view, Xerox and the other companies wouldn’t be offering to take the meters out of the city’s hands if it wasn’t a favorable deal for the private consortium and a questionable one for the city. He insists that rates would increase, hours of meter enforcement would expand and Xerox would be ruthless about issuing tickets in a way that the city never has been.

It’s rather clear that rates will go up, and substantially. That is the fundamental element in Cranley’s populist campaign. “We’re talking about a massive increase in tickets for decades,” he said recently. “It’s a 100 percent hidden tax increase on the citizens.

”Qualls believes that the opponents of the deal are offering spurious arguments, and that they know it. “There has been an intentional campaign of misinformation,” she says. (Cranley did not respond to requests for an interview on the issue.)

But even supporters of the deal don’t dispute that the cost of a parking space is about to go up in Cincinnati. Laura Brunner, CEO of the Port of Greater Cincinnati Development Authority, which would have some management responsibilities, has said it bluntly: “There is more money to be made by getting people to pay. You can’t have zero enforcement, or people would stop putting money in the meters.” A common assumption has been that parking in many places in Cincinnati will be twice as expensive by 2016 as it is now.

One reason for the increase is that Cincinnati has been doing a remarkably poor job of handling its parking system. In 2008, the city handed out 104,026 parking tickets. By 2012, through lax enforcement, that number had dropped to 64,857. It was estimated that in 2012, only 39 percent of the city’s meters were under regular coverage.

That makes it clear why Xerox and its allies think they would be getting a good deal. They would step up enforcement, bring in substantially more revenue, turn $3 million a year back to the city and still end up making lots of money. That’s why Xerox is now involved in parking enforcement and technology in 30 cities across the U.S. Estimates are that the bulk of the additional revenue under the new system would come from higher rates. But tougher enforcement would be essential to realizing that money.

Why is Cincinnati so eager to do this? The answer to that is simple. It wants the money up front. The lump sum payment from Xerox and its partners will amount to as much as $92 million on day one, along with the $3 million booster checks coming in every year. Cincinnati has had budget balancing problems dating all the way back to 2001. At the beginning of this year, city manager Milton Dohoney estimated that without the $92 million parking deal the city would face a $35 million budget gap for the coming fiscal year. Some 344 layoffs of government workers would have to take place.

Interestingly, the shortfall seemed to disappear after the city council voted for the parking deal, and Dohoney announced that the Xerox windfall could actually be spent on such appealing capital projects as a new freeway ramp, subsidies for a mixed use high-rise project and bike trails in city parks.

Even with all these debatable numbers being thrown around, it’s highly possible Cincinnati would have gotten away with its parking deal unscathed had it not been for a word nobody in city government really wanted to mention. That word is “Chicago.”

As my colleague Ryan Holeywell points out clearly in “Public. Private. Practical?” it has now been five years since Chicago, under veteran Mayor Richard M. Daley, undertook what came to be the most ridiculed privatization deal in modern American urban government. It sold off ownership and management of 36,000 parking meters for 75 years for a lump sum payment of $1.2 billion. In the words of urban planning professor Donald Shoup of UCLA, the nation’s leading expert on parking, “What Chicago did was like burning all your furniture to stay warm on a cold night.”

That deal went wrong almost from the beginning. The consortium that bought the parking meters also bought the right to set rates, so that within a short time, Chicago had the highest urban parking charges in America, as much as $8 for two hours in a space in the heart of the Loop on a summer evening. The $1.2 billion lump sum payment helped with the city’s budget problems for a couple of years, but by 2012 the money was all but gone, and Chicago was in a budget hole again. A nonpartisan inspector general called in to evaluate the situation concluded that the city could have obtained at least another $1 billion for the rights it sold off, and that it might have done best of all by keeping the meters as a public asset and simply raising the rates on its own.

Chicago’s parking contract cannot be dissolved. So Chicagoans are basically stuck with it for the next 70 years. Current Chicago Mayor Rahm Emanuel did work out some tweaks this year with the private consortium, eliminating parking charges on Sundays, for example.

To much of the rest of the country, the experience has delivered a forthright and perhaps overdrawn political lesson: No matter how badly you need money, don’t mess with selling off the parking franchise; there is too much that can go wrong, and the potential for a painful backlash is too great.

Pittsburgh, facing a $250 million budget shortfall in 2010, and having been offered $450 million to transfer its parking operation to private hands, opted instead to turn down the money and bank on the $2 billion to $4 billion it hoped it could realize from parking over a period of 50 years. Los Angeles made a similar decision. Early this year, New York City, with the nation’s largest inventory—85,000 on-street parking meters—abruptly scrapped plans to explore a privatization deal. All these cities, one might say, are suffering from a version of the Chicago syndrome.

Which may be too bad. Over the past two decades, cities all over the country have brokered deals to privatize a wide variety of local services that they weren’t performing particularly well on their own. These run the gamut from garbage collection to parks to housing management. For the most part, they have been a help to the cities involved, not a hindrance.

Advocates of the Cincinnati deal like to point out that they studied the Chicago contract and learned some lessons about what not to do. Unlike Chicago, Cincinnati is technically leasing rather than selling off its parking meters and garages, so it will have some say over the raising of fees; meter rates won’t double virtually overnight the way some of them did in Chicago. Still, there’s no escaping the fact that over the next couple of years, Cincinnati drivers and city officials will have to brace themselves for a politically perilous case of meter shock. “The mistakes in Chicago engendered a lot of anxiety and fear,” Qualls admits.

Whether or not the Cincinnati parking meter experiment turns out well or not, the near-term political consequences, at least, are likely to be substantial. On Sept. 10, Cranley won a surprising 55 percent of the vote in the mayoral primary. If that result is repeated on Nov. 5, it will be a sign that privatizing parking—five years after the Chicago debacle—is still too hot an issue for most cities to mess with.

Alan Ehrenhalt is a contributing editor for Governing. He served for 19 years as executive editor of Governing Magazine. He can be reached at ehrenhalt@yahoo.com.
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