Is privatization driven by corruption? The Chicago parking meter debacle

Update: I spoke at length with Angie Coiro and Blaine Rummel, from In The Public Interest, about this topic. The show was In Deep with Angie Coiro, and the audio is available here. Scroll down and click the player to listen. Enjoy!

I’ve been writing about privatization lately, a movement that’s picking up steam all over the country, and indeed all over the world. The Mubarak regime, for example, was widely considered a  “neoliberal” and privatizing one, famous for looting the Egyptian state and economy of its wealth.

I want to just add this. Given the immensely favorable deals that governments — federal, state and local — give to their private “partners,” how can crony corruption and kickbacks not be a part of it.

For example, consider just this via Rich Perlstein, on the sale of revenues from Chicago parking meters to a consortium led by Morgan Stanley and including the Sovereign Wealth Fund of Abu Dhabi.

Perlstein writes (my bolding and some reparagraphing):

On Privatization’s Cutting Edge

… Everyone, I suppose, dislikes parking meters. Chicagoans hate them even more. That’s because Mayor Richard M. Daley in 2008 struck a deal with the investment consortium Chicago Parking Meters LLC, or CPM, that included Morgan Stanley, Allianz Capital Partners and, yes, the Sovereign Wealth Fund of Abu Dhabi, to privatize our meters.

The price of parking—and the intensity of enforcement—skyrocketed. The terms were negotiated in secret. City Council members got two days to study the billion-dollar, seventy-five-year contract before signing off on it. An early estimate from the Chicago inspector general was that the city had sold off its property for about half of what it was worth. Then an alderman said it was worth about four times what the city had been paid. Finally, in 2010, Forbes reported that in fact the city had been underpaid by a factor of ten.

Who would negotiate such terms, if they had anything like the city’s interest at heart? But wait, there’s more:

Money politics corruption

Money via Shutterstock

The deal, you see, is structured like this. Not only does CPM get the money its meters hoover up from the fine upstanding citizens of Chicago. It gets money even if the meters are not used. Each meter has been assigned a “fair market valuation.”If the City takes what is called a “reserve power adverse action”—that can mean anything from removing a meter because it impedes traffic flow, shutting down a street for a block party or discouraging traffic from coming into the city during rush hour—“CPM has the right to trigger an immediate payment for the entire loss of the meter’s fair market value over the entire life of the seventy-five-year agreement.”

Shut down one meter that the market-valuation says makes twenty-two bucks a day, in other words, and the City of Chicago has to fork over a check for $351,000—six days a week (why six days? more on that later), fifty-two weeks in a year, times seventy-five—within thirty days. Very easily, Geoghegan points out, a single shut-down of parking in a chunk of the city—say, for something like a NATO summit Chicago hosted last year—“could be more than the original purchase price of the deal.”

Do read the rest. A great many privatization schemes like this have the same profit-guaranteeing clauses in them. I recently did a radio interview with Angie Coiro and Blaine Rummel of In The Public Interest discussing just this subject. Blaine pointed out that prison privatization contracts typically had a “guaranteed occupancy” clause (think about that; think about the incentives that sets up), as well as a taxpayer-funded reimbursement if those occupancy quotas aren’t met.

Who would negotiate such a contract, except someone in bed with cronies, or benefiting from kickback.

By the way, in the Chicago story, Richard M. Daley (of that Daley family) is the brother of Bill Daley, of JP Morgan Chase  — and also the Obama administration.

The Rich and the Rest. Predators and prey.


To follow or send links: @Gaius_Publius

Gaius Publius is a professional writer living on the West Coast of the United States.

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35 Responses to “Is privatization driven by corruption? The Chicago parking meter debacle”

  1. Kim_Kaufman says:

    Same deal with public schools – only more complicated. They’re sucking out every last bit of public money from the commons into private hands.

  2. ArthurH says:

    At least Chicago came to its senses and decided not to privatize Midway Airport. But other things can be privatized. Years ago Molly Ivens wrote about a town (I believe Alton, Illinois) that privatized its water service. The company contracted promised to upgrade the delivery pipes, then over 100 years old. But all they did was quadruple the water bills, and the town had to go to court on the matter.

  3. ArthurH says:

    And much of the time no tolltakers. The booths are empty and you pay tolls with either credit cards or insert cash. But the credit card machines don’t work when its too hot, too cold or too moist (even in foggy conditions). The bill acceptors stop working when they are full, so you get stuck behind people digging for nickels to pay the toll. If you zap through the Indiana state troopers issue you very expensive tickets. On a scale of 1 to 10, with 10 being the most ineptoid, the folks running the Indiana Toll Road score a 42. Oh, and the $1.50 toll will soon go to $2.00.

  4. UncleBucky says:

    You shop at Walmart?

  5. crazymonkeylady says:

    This is EXACTLY what happened to the Indiana Toll Road. Mitch Daniels, the ubergenius governor of Indiana at the time, ‘Leased’ the Indiana Toll Road to a foreign group for a Billion dollars. Mitch used the money to pay balance his budget (he says), sent the rest to the Indianapolis area and it is now all gone. The lease, however, will go on for 75 (?) more years, with all tolls going to the group. Did I mention the toll prices have nearly tripled?

  6. emjayay says:

    Because it’s so convenient to not have any idea how the parking works every single place you go.

  7. UncleBucky says:

    I didn’t say all other countries, but, yes, STILL, in some other Nations, Adelson’s grubby fingers are being held at bay.

  8. UncleBucky says:

    Worms come to mind when I think of neoliberal capitalists…

  9. nineteen50 says:

    This is capitalism devouring the commons. Privatization makes the operations imperative maximize profits. It is easier to purchase a system that already has a money source or stream than to take the time to develop one making any public funded agency a huge target. The problem is it changes the
    public agency’s imperative from it’s original purpose to one of making money and maximizing profit.

  10. rmthunter says:

    They’re getting heavy use here, too. As are the bike lanes on major streets. It seems, just from observation, that a lot more people are riding bikes these days.

    And CTA buses now have bike racks on the front, and little signs reminding people to tell the bus driver that you’re going to be taking your bike off the rack when you get off the bus. And you can bring bikes on the el/subway trains, except in rush hours.

  11. Mike_in_the_Tundra says:

    The free bicycle stands have gone over really big in Minneapolis.

  12. rmthunter says:

    GP —

    You missed one point: they took out the meters. Now, instead of a meter for each parking space, there’s a pay terminal, one on each block. You walk to the terminal, pay the parking fee, get a receipt, and walk back to your car to put it in the window.

    They’ve also moved or taken out bus stops to allow for more parking spaces.

    I don’t know what that does to your description of the revenue picture, but you’d be hard-pressed to find a parking meter in Chicago these days.

  13. Tor says:

    ….or everywhere.

  14. Tor says:

    I’d say it’s gone to “L.”

  15. lynchie says:

    The police were militarized at step 1A.

  16. lynchie says:

    Not only Chicago. Pennsylvania has tried to privatize Route 80, the Pa turnpike, and just about everything else. Since the taxpayers paid for the original construction, maintenance and upkeep how dare the pols sell if off. They are all dirty. They all take bribes, kickbacks and payoffs. But the sheeple continue to sit on their hands vote back in these corrupt bastards who could care less if the poor are hungry, the old don’t have health services and the middle class are fast sinking to the bottom. The new Trans Pacific Pact gives away the farm in return for nothing and our O’highness is all for it. Negotiated in secret, going to be signed in secret. One nice feature is that it guarantees every american to a job at McDonalds at $7.25 an hour

  17. karmanot says:

    Parasites in its bowels comes to mind.

  18. karmanot says:

    End Stage capitalism: Neo-liberal privatization results in the looting and destruction of the state. An elegant and highly successful form of treason indeed! Four words; The University of Chicago.

  19. BeccaM says:

    No, but it’s always in the interest of the corrupt politicians infesting our governments, like ticks on a dog.

  20. nicho says:

    Well, the steps can overlap. They don’t have to be sequential. Step 7 has been underway for some time now. You don’t hear much about Blackwater these days. They changed their name to something innocuous and disappeared off the radar — but they haven’t gone anywhere.

  21. caphillprof says:

    Contracts for private entities to operate government services are simply a transfer of public revenues to private pockets and rarely if ever in the interest of any government.

  22. BeccaM says:

    Sadly, these measures won’t stop until the citizens decide to make it happen.

  23. BeccaM says:

    Somewhere within Steps 1 through 6 is “Militarize the police”. That way Step 7 becomes much more viable.

  24. JayRandal says:

    Everything in Chicago is about corruption and stupidity. So-called deals are just back door slush funds for criminal corporations. New Mafia same as the old Mafia.

  25. Monoceros Forth says:

    I was about to type “unbelievable” but really it’s easy to believe. Demanding to be paid impossibly high compensation for the loss of one parking meter really isn’t all that different from a music publisher’s demanding to be paid impossibly high compensation for the supposed loss of projected revenue from someone file-sharing one album. Clearly the only valid function of government is to guarantee the profitability of a corporation’s business model from now till the day Birnam Wood should come to Dunsinane.

  26. ArthurH says:

    Former Indiana Gov. Mitch Daniels came up with a great way to save money and increase revenues. He eliminated a lot of attendants working the toll booths on the Indiana Tollway. The attendants were replaced with cash acceptance devices. In wet, very hot and very cold weather the credit card acceptance devices failed, forcing you to use cash acceptance devices. As the tolls are $1.50, they had bill acceptors. But when these devices are full they stop taking new bills, forcing you to come up with the equivalent in coins. Nothing bogs down traffic than people ahead of you at the toll fishing for nickels when they run out of larger denomination coins. And if you don’t have enough coins and run the booth the state police are waiting to issue you a ticket costing you 100 times the toll. Mitch Daniels probably learned customer service from the computer companies that make you wait nearly an hour to talk to a tech support agent whom you discover English is not even his second language.

  27. nicho says:

    Sorry, this is being repeated in country after country. Greece. anyone? We’re seeing it in Spain. An analysis just this week reported that if current corporatist “austerity” measures continued in Spain at their present pace, 35 percent of the population will be below the poverty level by 2025. Already, Sheldon Adelson is over there dangling hundreds of millions of dollars in front of their faces — if only they’ll sell out their unions, social programs, environmental laws, etc. The goal is to kill socialism. It’s just taking a little longer in European countries than it is in the US, where they Sheeple are marching willingly into serfdom.

  28. Hue-Man says:

    The U.S. federal and state governments should be piling on the debt to fund infrastructure (and should have been for the last 5 years). The world is willing to lend to the U.S. Treasury today for 30 years at a rate of 3.8%. Money is so close to free that you could even afford to build the Bridge to Nowhere! Particularly if it creates well-paying union jobs, stimulates engineering businesses, steel producers, etc.

    Instead governments everywhere are getting sucked into PPPs for essential infrastructure; the rules of the game for public private partnerships seem to be “Private Wins, Public Loses”.

    What exactly did Chicago do with the cash it got from the meter giveaway? Feed the poor, house the homeless, teach some more illiterate kids? Nah, didn’t think so.

  29. UncleBucky says:

    8. Machine guns, tear gas and concentration camps. (?)

    It’s the logical extension… I agree with your points, Nicho. In other Nations (ohhh how socialist!) each and every point is the reverse.

  30. UncleBucky says:

    Parking should ALWAYS have been a local concern, in the neighbourhood. Let merchants control the parking. Some neighbourhoods would have free parking with patrols of chalk markers who fine those who flagrantly take up parking. Other neighbourhoods would have valet parking. Still others would parking meters, parking boxes and other ways to permit parking but not abuse of parking and/or collect revenue.

    This CHICAGO DEAL was like free money for the corrupt…. Makes me so angry. Well, because of things like this, and the horrible work being done on public transport, and other such stuff, Chicago is going down the tubes…

  31. SkippyFlipjack says:

    Unfortunately that’s kind of a good byproduct of nasty enforcement. From a non-revenue perspective the point of parking meters is to keep cars moving throughout the day so that parking is available to everyone. So if you find plenty of free parking meters the system is working (ignoring the other half of the equation, whether the city is earning the revenue it should be earning.)

  32. nicho says:

    Once more, the Corporatist Game Plan:

    1. Create crushing debt
    2. Drive down wages
    3. Destroy unions
    4. Eliminate taxes on the wealthy
    5. Privatize the infrastructure
    6. Eliminate social programs
    7. Deal with the civil unrest that follows

    Anyone seeing a pattern? It’s being played out all over the world — with slight variations — as we speak.

    None of this was a secret. Greg Palast laid out the plan in detail in 2003’s book “The Best Democracy Money Can Buy.” I’m not sure why you or anyone else is surprised when they move from one step to another.

  33. BillFromDover says:

    Is this just not another scheme to move the money pile up the scale to about, oh, let’s say, twenty-three levels?

    Hey, they got theirs, now fight for yours.

    What’s that, ya say, too late?


  34. iamlegion says:

    Is privatization driven by corruption?

    Yes. Yes, it is.

    This has been another edition of simple answers to simple questions.

  35. TonyT says:

    People in the city hate them. And I don’t blame them. When I used to come on from the ‘burbs there would be no parking. Now I can find a space anywhere.

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