Last year, I wrote about Chicago’s decision to lease its parking spaces to a private company. Although no vendor had yet been selected, the deal seemed like a good idea in principle.
Parking reform — which generally means raising the price of curbside spots to something approaching market rates, and perhaps even dynamically adjusting them based on time, location, and other conditions — offers a lot of benefits. Underpriced parking leads to increased tailpipe emissions, because drivers tend to circle looking for spots. The resulting congestion also has economic consequences for cities. Finally, a basic fairness issue comes into play: underpriced parking is effectively a subsidy paid by non-drivers to drivers.
(The list of parking-related social problems is actually much longer than this and takes some surprising turns. For example, parking regulations appear to be partially to blame for the low availability of healthy food in poor neighborhoods. Basically, on-street parking is insanely valuable real estate that we tend to take for granted. Giving it away to car owners carries heavy opportunity costs.)
Parking reform also poses a political problem: drivers loathe fee increases, and retail business owners are wrongly wedded to the notion that low parking prices increase access to their stores. So Chicago sought to sidestep the problem — while also plugging a huge gap in its budget — by leasing the city’s 36,000 parking spaces to a private entity in exchange for a lump sum payment. At the time of my last post, ten private consortia were bidding on rights. Eventually Morgan Stanley was granted a 75-year lease in exchange for an up-front payment of $1.15 billion.
Which appears to be a somewhat crappy deal for Chicagoans. Streetsblog highlights the fact that Chicago appears to have left about $974 million on the table, but that’s not really the worst of it. As described in a report from the Inspector General (pdf), the city failed to do even the most rudimentary analysis of the value of the public space it was auctioning off, and then gave the City Council only two days to evaluate the terms of a deal that would lock up possession of parking spaces for the next 75 years. I’ve got nothing against public-private partnerships, but Chicago’s process fails the most basic test of good governance.
All that said, the deal isn’t as bad as all that. The city raised a good chunk of cash, and parking reform will come to the streets of Chicago. Moreover, the visibility of the deal will no doubt inspire other cities who are looking for new sources of revenue. Let’s just hope they learn from Chicago’s mistakes.