As Indianapolis prepares to enter into a 50 year contract with ACS, under which it will hand over management of this asset–and an estimated 1.25 billion dollars that would otherwise come to the City during that period–I thought I’d share an observation from my son, made in response to a letter from the Mayor’s office to City Council members, defending the proposal against criticisms. I think he gets to the heart of the matter.
“Having scanned the administration’s response to the analysis of the non-partisan Public Interest Research Group (PIRG), and particularly the Administration’s view that it is leveraging a “non-core asset” (parking meters), it finally struck me why the Mayor continues to press this deal to give so much money, and particularly control, to ACS. Ultimately, there is one glaring analytical flaw, which is really at the heart of the City’s analysis: The Administration fundamentally doesn’t understand the “value” and “purpose” of the asset it is selling. This leads to a fundamental error in the financial terms and structure of the deal and explains why the city is willing to give away so much in the deal.
The Administration’s ignorance of the true value of the parking meter assets is evident in its label of parking infrastructure as “non-core assets.” From a revenue raising perspective, they are right in a very limited sense: the city hasn’t used parking meters as a “core” revenue raising tool. But as Aaron Renn has forcefully argued, parking meters and control of rights-of-way are NOT, first and foremost, revenue raising tools/powers, but instead are central or “core” to a city’s ability to plan and control its use of public space and, ultimately, to control and encourage economic development. The Administration’s analysis actually ignores the “core value” of parking meter assets to the city: that is, control over parking meters gives the city control over how it manages development, transportation, land-use, etc. And by ignoring this “core value,” or by failing to see the value in it, the Administration is failing to properly value the asset…. Or to fully understand and protect those other rights and benefits that are tied to control of its rights of way. (It’s kind of like a landowner selling a plot of land that he thinks is barren or only useful on the surface, when there are mineral/oil rights below ground that he is giving up without receiving value.) It’s the City’s ignorance of the true value of the asset that is leading it to agree to terms that it should never agree to.
As some councillors have observed in their very well-stated remarks, the City is not simply striking a very bad deal – it is striking a deal that future councils and future administrations will be effectively unable to undo and will have to live with for decades… As Bill Hudnut observed a few weeks ago in an interview with WTHR, there is no need for the city to give up so much revenue or control.
There are other flaws in the analysis forwarded by Mr. Cochran to City Councillors, but perhaps the most telling one is that they apparently don’t understand the true value of the asset they are selling and so, as day follows night, they have incorrectly valued it and placed inappropriate restrictions on it’s future use.”