There’s nothing more annoying than people who say “I told you so”–especially when they told you so.
But, dammit, I told you so. Not that I was the only naysayer–not even close–but I posted several arguments against the privatization of Indianapolis’ parking meters.
So I’m going to be obnoxious, and share the lede of a recent report from the Indianapolis Star
In the five years since Indianapolis leased its parking meter operations to a private company, rates have skyrocketed, hours have expanded and the number of paid spaces has increased.
But the city is reaping only about a quarter of the dollars ParkIndy projected when it paid $20 million to the city to operate the meters until 2061.
Those of us who opposed this “deal” (a word that is beginning to take on Trumpian implications for me) raised several issues:
The fifty-year length of the contract. Even if the deal had been less one-sided fiscally, decisions about where to place meters, how to price them, what lengths of time to allow and so on have an enormous impact on local businesses and residential neighborhoods. They are decisions requiring flexibility in the face of changing circumstances; they are most definitely not decisions that should be held hostage to contracting provisions aimed at protecting a vendor’s profits.
Added costs to downtown development and civic events. More often than not, new construction interrupts adjacent parking. If the city is managing its own meters, it can choose to ignore that loss of parking revenue, or decide to charge the developer, based upon the City’s best interests. Street festivals and other civic celebrations also require that meters be bagged, and usually there are good reasons not to charge the not-for-profit or civic organization running the event. The ParkIndy contract requires the City to pay ACS whenever such interruptions disrupt its projected revenue from those meters.
Why privatize at all? This isn’t rocket science. There was never a satisfactory response to the obvious question “why can’t we do this ourselves, and keep all the money?” Why couldn’t Indianapolis retain control of its infrastructure, and issue revenue bonds to cover the costs of the necessary improvements? Interest rates were at a historic low at the time, making it even more advantageous to do so. If the Ballard administration was too inept to manage parking, it could have created a Municipal Parking Authority, as Councilor Jackie Nytes suggested at the time.
There really was no compelling reason to enrich private contractors and reduce (desperately needed) City revenues.
Why ACS? ACS is the primary partner of ParkIndy. There was extensive publicity about ACS’ performance problems in Chicago; there was also troubling information about the company’s track record in Washington, D.C., where an audit documented mismanagement, overcharging, over-counting of meters, and the issuance of bogus tickets (ACS got all the revenue for tickets). Washington lost $8,823,447 in revenue and experienced a twenty-fold increase in complaints from the public.
As I noted at the time, one of the problems with privatization in general is that it leads to speculation about cronyism and political back-scratching. In this case, the Mayor’s “personal advisor” was a registered lobbyist for ACS through the same law firm that employed the then-President of the City-County Council (who did not recuse himself, and whose affirmative vote was what allowed the contract to be approved by a narrow 15-14 margin.)
All of these criticisms were brushed aside as mean-spirited and uninformed. We were told that ACS/ParkIndy’s “expertise” would generate more revenue than would be realized under city management.
So, according to the Star, how’s that working out?
ParkIndy has collected $40.5 million in parking fees and fines since converting the first meter March 3, 2011. Projected over 50 years that amounts to about $426 million. The city’s take in a profit-sharing agreement has been $15 million, which would total about $158 million in 50 years.
ParkIndy estimated the city would earn $620 million over the 50-year life of the contract. To achieve that, ParkIndy would need receipts of about $1.5 billion, or more than three times its current pace.
Told you so.
Sounds like Indy got the shaft in this deal!
Professor, is there any way the new mayor can override this decision from the previous administration?
If so, what would it take?
The contract requires a large payment from the city for early termination–and as I recall, in response to strong opposition to its 50-year term, a “re-evaluation” option for year 19 was included. It still requires a hefty payment if the City terminates then.
The city and state have earned their reputations as some of the most corrupt in the country through arrangements just like this one. There are plenty of other examples.
Sheila; please continue your “Told you so.” posts, hard to keep track of the many times you have been right – especially regarding privatizing of government business at all levels.
To paraphrase a line from the old Dick Van Dyke movie, “Divorce American Style’, he stated he “got the shaft” and “his wife got the aluminum”. In this case Indianapolis got the shaft and ParkIndy will continue getting the aluminum till that 50 year contract ends.
I hope Mayor Joe Hogsett keeps a giant-size jar of Vaseline with him during his administrations as these many privatization “shafts” continue coming to light.
There’s a word for all this – it’s “corruption.” Just because a contract or process is legal doesn’t make it any less corrupt.
Has anyone checked the Panama Papers yet for famous Indy names?
Yep, corruption is a good term for a contract that can’t be voided without a hefty fee involved. That’s it in a nutshell. Thanks for your response Professor.
Ron,
There’s a word for all this – it’s “corruption.”
ditto! As with the Indy parking meters, even major parts of the Jewish, Christian and Muslim religions have been “corrupted.” To be more specific it’s called AFFINITY FRAUD.
Don’t forget that “I told you so.”
IF it is a corrupt deal, a corrupt arrangement, is there a legal way out? Maybe a nice jail cell for some people?
This sounds like legalized organized crime.
This time only the city of Indianapolis and their businesses and visitors are being forced to support the criminals. Most of the time residents of the entire state are being held hostage to this type of robbery.
Just last week the same judge that ruled against the State in the privatized Medicaid debacle denied to pay the state any funds for winning against IBM at the Supreme court level. This has all cost us millions (billions maybe?) and it is going to continue to cost us while they continue to fight it out in court.
It would be wonderful if Indianapolis could sue the former mayor and that councilman for the damage they have done to the city. I wonder how much money/gifts each of them reaped from this fleecing of the public.
I have often wondered how and why the whole “private sector can do it better, cheaper than the public sector” thing came from. Is it because Daniels, et al hates public sector unions? Is it because of political cronyism? Ideology? Money?
If you exceed your time limit at a meter and receive a ticket and a fine, is it issued by a private company and if you challenge it is their a private court?
So my question is can justice be privatized?
Nancy,
As you said, “it sounds like legalized organized crime.” That’s exactly what it is. That’s why relying ONLY on our laws to protect us is not the sole answer. You also need “civic courage” like Sheila represents. Unfortunately, Sheila is, for the most part, treated as an anomaly and, consequently, the mess in Indianapolis like most everywhere else will only continue to get worse.
One possibility—just a suggestion and, btw, I blogged against this boondoggle when it went through, over at CivilDiscourseNow—is for the City to sue ACS for fraud of some stripe. One aspect could be fraud in the inducement. If ACS made representations it knew or should have known were false (the amounts the City would make over the course of the contract) and the City relied (entered into the contract) to its detriment (i.e.—well, got screwed), then we would have common law fraud.
The business of business is to make money. The business of government is to serve the interests of the people. While not necessarily mutually exclusive, the latter does not often conform to the former. That is the best reason not to privatize government operations.
It might make a great assignment for a Contracts class of law school students to review that contract looking for ways out.
Mark Small – do you know if anyone in the city or council is looking into bringing suit against ACS?
Marv, civic courage seems to be almost an after thought in our society. We need to change our secondary curriculum to requiring civics classes as a very important part of education. Of course, as long as Republicans owned by the wealty elite are in charge of this country that will never happen. They need the public to be uninformed about our constitution and rights as citizens in this country.
Nancy—if so, I have not heard about it.
Nancy; when I was trying (undercover, of course) to fight Goldsmith’s privatization and underhanded practices and to find support…I found cowardice in some very surprising high places. One anti-Goldsmith contract employee who left her high-level position quickly of her own accord; answered my question as to why so many people were afraid of him. She said Republicans ran him for Mayor as payback for favors he did for them during his years as City Prosecutor; that covered a lot of ground. Could this be at the bottom of the surprise outcome of the Peterson/Ballard Mayoral election? Ballard was an unknown quantity to the general public; I still picture both Peterson and Ballard scratching their heads the night of the election and asking themselves, “What the hell just happened?” Unless, of course this was a foregone outcome due to Daniels and the GOP underhanded political machine because City government quickly returned to those “thrilling days of yesteryear” under Goldsmith using many of his cronies.
Regarding privatizing the legal system, we’re already there. Any cell phone contract, credit card agreement, and many other contracts require you to agree to private arbitration in the event of a dispute. You’re bound by the contract to keep the dispute out of the court system. This has been challenged all the way to the supreme court, who rubber stamps it “ok” every time. So yes, a private government approved legal system already is in existence. Bone chilling if you ask me.
JoAnn, regarding purchased government jobs: Daniels appointed Purdue trustees who then hired him as the next President. I am sure this was all just a fluke – said no one ever!
Nancy; fluke if you ask any Republican, dastardly deed if you ask any thinking resident of this state.
“Honest To Goodness Indiana” Please; pick one Indiana, Honest OR Goodness, no one expects you to strain to provide both. Actually, no one really expects either but I wish whoever thought up that state motto would come forward and admit their error.
Nancy,
Same thing happened in Jacksonville. Mayor John Delaney after finishing his term and causing the bankruptcy of the city was appointed President of the University of North Florida. His cohort John Thatcher followed him and is now President of Florida State University. This appears to be the secret path to the recognition of academic success.
Can someone please direct me to “Noah’s Ark #2.” The POLITICAL TSUNAMI is on its way. Am I losing my mind?
The Star as usual is way behind the times. It would not have taken a Math Major to figure out the City was going to get the shaft. Privatization in Indianapolis has as one of it’s key but unsaid goals is Crony-Capitalism. Everyone knows this.
The Magic of the Market Philosophy and the superior efficiency of the private companies is lauded as superior to the Government. How often though the Private Companies are given a monopoly such as our Cable Company Franchises. When is the last time Comcast had to compete for their geographic piece of pie here Indiana?? It is odd thing, the people pay in via various taxes to pave the streets, then the private company somehow through a legal slight of hand receives a permission slip to “rent” the spaces back to with the people.
I’m glad that I went to school when I did. Back then we knew that there was no magic to Capitalism. There was however to competition. Competition inspired the best from everyone. Capitalism only inspired greed.
Since then education through media has robbed many of us of that basic knowledge. Why? Capitalistic greed, make more money regardless of the impact on others, found that even including the advertising cost to deprive us of the knowledge, even including the cost of buying government, even monumental greed could be satisfied by Capitalism in the absence of competition.
No better examples than privatization.
Even if I accept something that I don’t believe, that only greed inspires our best, that socialism is thereby always less inspired than capitalism, privatization cannot overcome the deprivation of zero competition.
That’s why Capitalists spent so much on advertising to deprive us of the facts and buying government.
I’m sure that the Capitalists who bought Indianapolis’s parking concession carefully figured how to hamstring the city into accepting a disadvantageous arrangement. They have lawyers too. They also carefully figured out how to make more money regardless of the impact on others for years to come by eliminating competition. They have financial managers too.
You’ve been screwed. You’re being screwed. Your kids will be screwed.
There is probably no way left to stop that train. Don’t enjoy it, change the cause to prevent recurrence. Use democracy to change who governs. Install people who know that performance comes from competition not Capitalism. Install those educated by schools not TV.
Pete,
“There is probably no way left to stop that train.”
Think of it as a POLITICAL TSUNAMI. Then you can take action. The naked eye can see a train coming but not a tsunami. “Train” is the wrong metaphor. You have to understand what is going on under what appears to be a succession of small waves. You must have a tsunami warning capability to survive. That’s also the only way American democracy can survive from a political tsunami.
Government officials should not be permitted to enter into a contract with such a lengthy term. The up-front money is great, but the public always seems to end up losing. Keep hammering away, Sheila!
Privatization’s basis is a myth that business/corps do things more efficiently/ profitably then public sector. Having worked the street’s both sides my experience says ample error and chicanery exists in ‘private enterprise/business/corp’ entities.
Anything I’ve seen of ‘privatization projects’ is simply privatization of profits and socialization of costs/expenses/grief/lose of public money.
Here’s a faint light on the horizon.
Futurists are speculating the end of urban parking near the end of Indie’s parking meter give away.
Urban and suburban transportation will largely be assumed by driverless Ubbers. When you want to get from A to B you use an Ubber like app to call a car which picks you up by access at the location that your phone knows, wisks you to your destination under direction of master computer managed traffic flow, silently (electric drive), efficiently and quickly while your phone takes care of charging your bill to a credit card. No tipping required.
These “people pods” have exchangeable batteries at charging stations so they virtually never park.
Nobody owns a car or needs a garage or buys gasoline or insurance or maintenance. Life without car dealers or accidents or traffic jams or climate change or hard to breath air or bank loan predation or busses or subways or commuting trains or taxies or road rage. Work or play on your phone/computer while you travel.
No new technology required.
I know longer go downtown after a few very questionable tickets. My husband I paid for 2 slots and took our picture to show we paid…come back with two tickets. You don’t get a receipt and so I go to contest it…there is no way to contest these tickets. If you don’t pay the $20 within 7 days it goes up to $40.
Another time, in Broadripple near Bazbeauz’s…I paid and came back and found a ticket. I still had 45 minutes left and I waited for the parking dude and told him…he looked and told me I was right and then he looked again and told me that I paid the wrong meter…I said how as when I pulled in the arrow pointed to the right…he said the meters are misplaced on that road and that he actually has to count the number of meters and parking places…I was beyond infuriating.
Sitting at Ball and Biscuit with several attorneys and lobbyists we notice the parking dude trying to give a ticket to one of the attorneys and who ran out and said “wth” I have paid…there were large piles of snow and because she was not exactly perfectly parked they were giving a ticket based on the slot and meter payment. She showed him the snow pile which was taller than any of us …she still got a ticket. I was told that the parking peeps know when your car will expire and they wait…1 minute over and you are getting a ticket. Don’t even bother calling and contesting as you will pay more money.
Of course, the profiteers’ profits were guaranteed, but not the City’s share. Why is this allowed to happen over and over again?
Forgive me for wandering from the topic de jour but us mature folks have to act while any thought is in gear or it floats away un-acted upon.
One topic we have discussed here is if the truth about Hillary is as Republicans have claimed for 20 years and which is evidenced by the fact that she’s a well paid speaker married to a former President all of whom are wealthy.
Here’s my favorite topic, the largest existential threat facing us and Hillary’s documented plans to address climate change.
http://www.vox.com/2016/5/9/11548354/hillary-clintons-climate-and-energy-policies-explained
To claim that she’s no different than Republicans in terms of being enslaved by business interests is ludicrous.
There is no way that the next quarter profit slaves are in love with this public policy stance. And there’s no way that the world including us can accept less from our next President.
If the private company doesn’t meet its obligations under the contract, the city likely has a cause of action to terminate it.
Politicians often move to privatize (sell off) public services for a short-term cash infusion, to make previously public information private, to reward political contributors and allies, and/or to manage something the public official doesn’t wish to or can’t figure out how to manage. Maybe there’s one out there somewhere, but I’ve yet to see an example where privatization served the PUBLIC’s interest.
Just to recap. The city of Indianapolis was relieved of the expense of updated parking meters (3700 of them) that accept credit cards, making them more convenient for the patrons. The operation and maintenance was also absorbed by the lessee. The city received $20 million up front and shares in between 35% and 40% of the revenue for the next 50 years. Total revenue in the first 4 (maybe 5) years was $40.5 million with Indianapolis receiving about $15 million. In order to keep pace with expected revenue stream, the usage growth/rate increases will need to combine to mean a bit more that 3% annual growth. I am having trouble finding the downside to this.
Ken what are the capital and operational costs for a new parking meter?
Another perspective Ken. Is it possible for the deal to be good financially for both the company and the city? I doubt it. The company proposed it and there’s no way that they’d propose a loser. Ergo…..
I’ll bet what the city did is agree to a deal that’s good for the administration that made it at the expense of all future administration. Just like borrowing now and letting the future pay it back…….which gets me back to climate change (and infrastructure and education and health care).
Our kids are going to be pissed.
BTW, if you want to do the math….about $600 for a credit card parking meter plus <10% per year operational costs.
The relationship with ACS dates back much further than the parking meter deal. ACS managed many IT functions for the City under Goldsmith. When Goldsmith left office, he worked as a Vice President for ACS. His Chief of Staff, Mitch Rube, also got a high-paying job at ACS. Fortunately, the City ditched ACS under Peterson.
When Rube became the head of the State FSSA, ACS was selected to run the Welfare Services Modernization Project. As Gomer would say, “Surprise, surprise.” If I’m correct, ACS was the prime contractor on that project, yet IBM got thrown under the bus.
Michael Gargano, who had also been a paid consultant for ACS, took over FSSA in 2010.
And then there’s the whole Barnes & Thornburg lobbying connection to ACS. It’s just one big circle.
When has privatization of any public service been beneficial? If anyone knows of one, I would love to hear about it.
Pete! There are always examples of abusive activity, but you need to consider the real possibility that both parties to a transaction can benefit from it. Generally, commerce is not a zero sum game. If some of the people are right, parking meter profits are circling the drain.
Anytime and anywhere you find a pile of cash and an activity supported by taxes or other public support (schools, social security, post offices etc.), you will find Wall Street sniffing around. First you trash the gummint activity as poorly run etc. so that the public is softened up for the coming privatization. The pattern is familiar. Where else can the privateers find such cheap capital and businesses in place?
I hope that you’re right Ken that among the consequences of the cures for global warming are benefits like less space wasted on parking underutilized vehicles.
I’m sure that like all Capitalist business models the parking meter company is making a good return on their investment every quarter not just the final ones of their 50 year contract. Whatever their return is it could have been accruing to all of the taxpayers of Indianapolis not just a few out of owners if smart people were running the city rather than crony capitalists.
Business in the absence of competition is always better for the people if done by the people not just some of them.
Substitute “towners” for “owners”.
@Jan Lindemann: “When has privatization of any public service been beneficial?” When it gives a new revenue stream to a city that falls $50 million short each year. The up-front cash provides a way to afford infrastructure improvements. It’s also beneficial to the folks in government who could not get away with raising the meter fees as often as a private company can. The politicians avoid being blamed for the fee increases while being able to take credit for new sidewalks, etc.
I have not seen the pricing structure, but I am sure there are limits on the increases. How do you get $50 million per year behind. Even if the revenue stream was assumed to be constant (which it wasn’t) the annual revenue would only be $12 million per year, so it definitely is not “$50 million short every year”!
Ken, I’m referring to the overall City budget, not to the meters. The $50 million figure comes from local media coverage.
EFK. Like Citizens raising the sewer and water rates to pay for upgrades; which the politicians didn’t have the balls to address head-on by explaining the necessity to the tax payers and building support . So you wind up w the politicians getting re-elected for not doing the hard work and the contractor taking the hit for a profit.