Chicago's Mayor Richard M. Daley, the nation's longest serving big city mayor, called it quits this month. The impact of the political machine he wielded will leave a lasting legacy on Chicago and the business of big cities for years to come.
Chicago has been the most aggressive city in the U.S. in the privatization of public infrastructure with public-to-private partnership transactions (P3). Since 2004, the city has privatized the Skyway tollway through the city, four downtown parking garages, and the city's system of 36,000 parking meters. These deals have been used to address short-term budget shortfalls, though the contracts will last anywhere from 75 to 99 years.
Defenders of Mayor Daley's policies have pointed to Chicago's wave of infrastructure privatization as a positive example of urban innovation. Unfortunately, these measures have mainly angered Chicagoans, and will create many problems and budget shortfalls in future decades. The best that can be said of this legacy for other cities is that Chicago's failings can help others to avoid its mistakes.
Cities from Los Angeles to Pittsburgh have looked to Chicago's privatization experience as a potential solution to dwindling municipal revenue. After all, it offers an easy way to get a big up-front wad of cash without raising taxes, laying-off workers or cutting popular city services.
Confidence in this strategy began to shift with the most recent Daley deal, the lease of the city's parking meters that gave control and profit to a Morgan Stanley backed group of Wall Street investors. Parking rates quadrupled overnight in some parts of the city, meters malfunctioned, and critics, including the city's own Inspector General, argued that the city received hundreds of millions of dollars less for the meter system than it was worth.
All of these factors have led some streetwise Chicagoans to wonder what was really behind the privatization deal. The fact that the city spent millions of dollars on consultants hired via no-bid contracts to arrange the deal, rushed consideration of the plan through City Council in only two days, and offered the public no way to scrutinize the deal or voice its opinion add to the sense of suspicion.
It may be too late to undo parking meter privatization in Chicago, but it's clear that the Chicago way shouldn't be the model for selling taxpayer-owned assets.
When considering privatization of public assets, like parking meters, there must be basic taxpayer protections in place before selling off taxpayer-owned assets. For example, no lease deal should last longer than thirty years because uncertainties over conditions and risks rise exponentially over time. And of course, no deal should move forward unless the public receives fair long-term value for the assets that are leased. Just because the government faces dire fiscal straits doesn't mean its assets should be sold at a discount.
With the public outrage the parking meter situation has sparked, and the retirement of Mayor Daley, many politicians are running scared. This provides a great opportunity for reform, allowing Chicago to start promoting more transparency and accountability in city government. Corruption and backroom dealing cannot be the way of the windy city any longer. We just can't afford it.
The Illinois Public Interest Research Group (Illinois PIRG), a statewide non-profit, non-partisan public interest advocacy organization. IllinoisPIRG is one of 26 state Public Interest Research Groups (PIRGs) a part U.S. PIRG, the federation of state PIRGs.