Why would 25 private parking operators be eager to take over Sacramento’s downtown parking garages and meters?
That’s how many have notified the city they are considering applying to manage the city’s facilities in exchange for paying hundreds of millions of dollars upfront to help the city build a downtown arena, according to a Bee story last Friday.
Why the keen interest? Because the operators smell blood in the water. These companies know they’ll make a ton of money in the long run. They know Mayor Kevin Johnson and his Kings arena allies are desperate to get money without a public vote and are under an NBA-imposed deadline to devise a financial plan. City officials are likely to sign any kind of contract. That’s what happened in Chicago three years ago, and the city is paying dearly already for turning over its parking meters to a private operator for an astounding 75 years.
“There’s a reason that there’s been so much enthusiasm in the finance community for privatization deals,” David Johnson, an analyst with ACM Partners in Chicago, told the Huffington Post. “You are dealing with a less savvy partner. The bigger sucker is always the government.”
As parking rates skyrocketed in Chicago and the city got hit with millions of dollars in unexpected costs, the Pittsburgh City Council in 2010 decided not to be a sucker and rejected a parking privatization plan pushed by the city’s mayor, who was looking for quick cash to meet a pension funding problem. The proposed 50-year deal had many contract provisions similar to those in Chicago.
One clause in the Chicago contract that should make any proponent of democracy worry is this: a non-competition clause that restricts the city from creating or improving additional parking facilities. The private operator is spared the risk of competition while the city and its residents could face all kinds of parking and commuter hassles that they couldn’t alleviate for 70-plus years.
A report by the Illinois Public Interest Research Group titled “Privatization and the Public Interest” called attention to the danger of non-competition clauses. The PIRG report, which should be mandatory reading for everyone concerned over Sacramento’s parking privatization plan, also focused on these problems in Chicago:
■ No formal evaluation of impacts on the public interest and failure to obtain an independent financial analysis of the value of the asset to the city.
■ A closed-door process largely outside of the public eye, with no opportunity for public input and little outside scrutiny.
■ Multigenerational leases. The deals for the Skyway, Midway Airport and the parking garages involved 99-year leases, while the parking meter deal will last for 75 years. This time frame binds future generations of residents and city leaders far longer than future risks or problems can be anticipated.
■ High transaction costs that undermine value while enriching deal makers. For the three privatization deals competed to date, the city paid more than $26 million in fees to lawyers, accountants and other advisors, including investment banks such as Goldman Sachs.