Privatized parking meters: Is it time?
Denver collects about $9 million a year from its parking meters and kiosks.
But what if the city can get a lot more money by having a private company manage them instead?
“A lot of other cities are looking at the possibility,” Denver city councilman Doug Linkhart said. “It’s a pretty firm source of revenue. It doesn’t vary during tough economic times.”
Linkhart cited a recent Chicago deal in which the city received more than $1 billion from a private company to maintain and collect the revenue from the city’s parking meters for 75 years.
“In Chicago, they (the private company) pay $1 billion, but get $4 billion over time,” he said.
Linkhart noted that at a time when Denver is facing a $120 million budget shortfall for 2010, the city needs to find creative ways to generate revenue.
“Our services are not keeping up with standards,” he said. “We’re looking at big cuts in libraries and recreation centers, and employee layoffs. Rather than going through the pain of all that, we should be using our assets, rather than cutting services.”
Linkhart doesn’t expect Denver to be able to get $1 billion for its parking meters like Chicago did. For one thing, Denver has far fewer meters, 5,265, while Chicago has 30,000.
“What I heard is: Chicago gets $23 million (a year) in revenue, and we get $9 million, so they get two and half times as much revenue,” he said. “So if we use the same proportions, we could get about 40 percent of what they got, or around $460 million (in a lease agreement).”
That kind of money would be more than enough to solve the budget crisis this year, Linkhart said.
“If we can sell it as an investment, we can use a bigger chunk up front, stick (part of) it in a bank and collect interest, and invest part of it,” he said. “We could use the money now, rather than collect the $9 million a year forever.”
In Chicago’s case, that’s exactly what they did. Out of the $1.156 billion, $150 million was used to shore up the 2009 budget, and $175 million set aside for use during the 2010-2012 budget years.
The rest was put into various reserve accounts: $100 million in a “human infrastructure” fund, $320 million in a rainy day fund and $400 million in long term reserves.
Some changes questioned
But Linkhart said he doesn’t like some aspects of the Chicago deal.
One was that the private firm — Chicago Parking Meters LLC, or CPM, which is owned by a consortium led by Morgan Stanley – was allowed to switch out the city’s parking meters for pay boxes, which are similar to the parking kiosks that Denver has in Larimer Square and the North Cherry Creek shopping area. Denver has 84 of these pay stations.
“We’re already going there — not with pay stations but with credit card meters, where you don’t have to walk half a block,” Linkhart said. “We could still maintain the meters if we want to. There are a whole spectrum of possibilities.”
Last November, Denver started a pilot program by installing 126 “smart meters” in the downtown business district. The solar-powered, wireless meters take credit, debit and pre-paid cards as well as coins, but not the Cashkey.
According to the Chicago city Web site, CPM plans to spend between $40 and $50 million this year to replace 30,000 meters. The company has been installing Pay and Display boxes at a rate of 30 a day. As of July 7, it had installed 1,357 of the kiosks, replacing 10,236 meters.
CPM also replaced 198 older pay boxes that had been installed by the city, with 207 new models.
Chicago touts a number of environmental benefits to the switch to the solar powered pay boxes, including reduced visual clutter on the street, eliminating the need to recycle more than 40,000 9-volt batteries a year, and reducing the carbon footprint of maintenance and collection crews, who don’t have to travel as much.
Another feature of the Chicago deal that Linkhart didn’t like was that the city allowed the private company to increase parking rates over a period of time.
“In Chicago, they gave them (the company) some leeway in rates, but they’re capped at inflation rates,” Linkhart said. “We need to maintain control over raising fees.”
Parking rates in Chicago are set by city ordinance, and the increases were included in the lease agreement with CPM that was approved by the city last December.
Hourly parking rates for meters in Chicago were increased slightly from 2008 to 2009, but will be almost doubled by 2013. The rate increases varied, based on the areas in which the meters were located.
Neighborhood meters, which used to cost 25 cents to 75 cents an hour in 2008, went to $1 this year. But they will increase by 50 cents each year until it reaches $2 in 2013.
In the central business district, the rates were $1 an hour in 2008, $2 in 2009 and $4 in 2013.
The highest rates were for meters in an area called The Loop, where they went from $3 an hour in 2008 to $3.50 in 2009. The rates then go up by 75 cents a year until they reach $6.50 in 2013.
Denver’s downtown meters had been as high as $1.50 an hour, but that was reduced to $1 an hour in 2003, after Mayor John Hickenlooper fulfilled a pledge to reduce downtown parking rates.
Linkhart said he also would want Denver to continue to receive the money from parking tickets issued for expired meters, which Chicago continues to do.
Opposition in Chicago
Five alderman (Chicago’s equivalent of city council members) voted against it last December, and David H. Hoffman, the city’s inspector general, issued a critical report against the lease agreement in June.
Hoffman called the parking meter lease program “a dubious financial deal.” He argued that the city got shortchanged by $974 million because it undervalued the revenue that would have been generated by the parking meters if the city had increased the rates and collected the money for the next 75 years.
He also blasted the way the deal was pushed through the city council without adequate public input or independent review, and proposed that the city pass an ordinance that would create a new review process for such deals.
The Chicago mayor’s office fired back a response to the report, with chief of staff Paul Volpe calling it “misguided and inaccurate.”
He argued that Hoffman’s logic was flawed in assuming that the parking meter system was a low-risk asset.
“There is substantial risk associated with the drop in utilization over the lifetime of the agreement, and there is substantial risk associated with change in population, economic activity, and technology,” Volpe said in a statement posted on the city’s Web site.
He noted that to make up the $150 million that the deal provided to the city’s 2009 budget, the city would have to increase property taxes by 19 percent, raise the city’s sales tax by 60 percent or tripled the vehicle fuel tax.
Conversely, if the Chicago had to cut $150 million in this year’s budget, it would have meant laying off 2,300 workers, Volpe said in the statement. That could mean 2,000 fewer police officers, 30 percent of the fire department’s budget or half of the department of streets and sanitation.
“Given the performance of the economy so far this year, there is no question that this fund will allow us to continue vital services and avoid steep tax increases,” Volpe said. “If we did not have these funds, we would be in much worse shape financially, and we would be forced to drastically raise taxes or cut City services.”
Still, that hasn’t stopped angry reactions from Chicago residents, which ranged from vandalizing parking meters in February to calls for a boycott of the new system in March.
Last week, a protester was arrested while trying to stop the installation of pay boxes on a Chicago street. Earlier this week, a Chicago lawyer filed a lawsuit on behalf of a group of taxpayers, arguing that the deal was unconstitutional.
Denver seeks solution
Officials for Denver Public Works, which also is responsible for parking management in the city, said they are dubious about the benefits of the long-term lease contract in Chicago.
“We call it the “Chicago experiment,’” said Revekka Balancier, spokeswoman for Denver Public Works. “We would be losing revenue by privatizing, especially if we raise the rates like they did.”
She said that if Chicago had raised the rates but kept the revenue from the parking meters, ”they would have made twice what they got in this contract” or about $2.8 billion over the 75 years of the deal.
Balancier said that although Chicago retains the right to collect money from parking citations, nothing is stopping the company from hiring its own enforcement officers to ensure that motorists are paying for parking, and the city can’t collect that extra money.
“We have done the research, and we don’t want to do this in Denver,” she said. “As a short-term fix, we can see why someone would be interested in something like this. But in the long term, the numbers don’t add up.”
Linkhart said he hasn’t spent a great deal of time looking at how the Chicago deal works, but he said he wants to at least “start a conversation” in Denver about the idea.
He said he has approached the Denver mayor’s office with the concept, and he also mentioned it to the city’s budget office a month ago.
“They’re looking at it,” he said. ”With so many people hurting now, the city needs to maintain services as best it can. If something like this is fruitful, it would be a good part of the overall solution.”