I Told You So

There’s nothing as annoying as someone who tells you “I told you so.” It’s a taunt that’s anything but gracious. So I’ll try to throttle my desire to do just that, but it won’t be easy.

When the Ballard Administration entered into a fifty-year contract to manage the city’s parking meters with a consortium headed by ACS,  a lot of us were highly critical. The length of the contract was excessive. ACS had a horrible reputation nationally. There was really no good reason we couldn’t manage our own parking meters (other cities seem capable of doing so) and keep all the profit, rather than giving the bulk of it to ACS. The terms of the contract favored ACS over Indianapolis taxpayers.

Many City-County Councilors shared those criticisms. Even after the administration engaged in considerable reported arm-twisting, the contract was only approved by one vote–and the deciding vote was cast by then-Council President Ryan Vaughn, a lawyer employed by the law firm that represented ACS.

After the new meters were installed, we were treated to a series of press releases–uncritically accepted by the local media–telling us how well everything was going. Revenues were up! (As a cynical friend noted about one of these glowing reports, of course revenues were up; hours had been extended and rates had been raised. For this you need a contractor??)

This week, the Star (finally) examined the numbers, rather than repeating the Administration’s hype. And guess what?

The first year of Indianapolis’ 50-year parking meter lease brought doubled rates in some areas as a tradeoff for a wholesale upgrade of equipment and the convenience of paying by credit card or smartphone.

Was it worth it?

New financial data provided by the city shows its share of revenue from the vendor in 2011 — nearly $1.4 million, or 30 percent — fell well short of the city’s own projection of $2.1 million.

And the city didn’t end up seeing the full amount: After the vendor subtracted $286,000 in charges to compensate for the city closing metered spaces, often for RebuildIndy road construction work, the city pocketed $1.1 million.

The contractor, by contrast, made 3.5 million.

And we’re stuck with this bit of crony capitalism for the next 49 years. Forty-nine years of foregoing 3.5 million plus–money that could be used to pay for paving streets, improving parks or plugging budget shortfalls at IMPD.

This was a very bad deal. And I did tell you so.


Why Doesn’t Mitch Want to Testify?

Governor Daniels was the “hands on” manager responsible for Indiana’s failed effort to privatize welfare eligibility determinations in the state. He originally bragged that the move was his idea, and when it proved to be a huge mess, he was admirably forthright about taking the blame. While I’ve not read his book, friends who have read it say that those admissions and regrets made it into print as well.

So why is he doing everything he can to avoid testifying about it?

IBM has sued the state over the termination of their part of the contract (ACS, as usual, escaped the consequences and continues to feed at the public trough). IBM wants to depose the Governor. Seems reasonable–Daniels is clearly “in the know” about a number of issues critical to the litigation. But he’s fighting tooth and nail to avoid being deposed, and it’s hard not to wonder why.

The American system of justice depends upon the compliance of parties and witnesses in order to function. In our system–at least theoretically–no one is “too busy” or “too important” to discharge this civic duty. If I receive a subpoena, I have to respond; so should the Governor.

The Supreme Court insisted that Bill Clinton had to give testimony in the tawdry Paula Jones case, even though he was President and the litigation had absolutely nothing to do with the conduct of the government. Daniels, on the other hand, is being asked to testify about the use of tax dollars and the delivery of critical public services.

The continued stonewalling makes one wonder what the Governor doesn’t want us to know.

Ballard Administration, Part 2

After my post yesterday, I got an email from a former Republican who is evidently no fan of our Accidental Mayor.

He had read the recent IBJ article–which he characterized as a “puff piece”–in which the reporter uncritically repeated the administration’s claim that the parking meters are “netting” additional revenues since they were privatized in a 50-year deal  with ACS.  As he wrote, the claim doesn’t hold up under even cursory scrutiny.

The IBJ wrote, in part:  “Total revenue from meter operations grew to $1.7 million in the quarter ended June 30 from $1.3 million in the same time frame a year ago. The city’s share of that revenue totaled $498,273, compared with $108,265 it made from meter operations from March through June a year ago—a whopping 360-percent increase.”

As my friend pointed out in his email, the IBJ simply ignored a number of issues, most significantly that these numbers were “apples and oranges” and accepted the 360% “increase” at face value, without noting the following: (1) Hours were increased from 7:00 PM to 9:00 PM every night  and ACS added a day to the week (it used to be Mon.-Fri., now it is Mon-Sat.); (2)  the rate increase by $0.25/hour in Broad Ripple and most of downtown.  Clearly, these increases would yield substantially more revenue whether ACS or the City had increased hours and raised rates–and if we hadn’t privatized the meters, the City would keep all of the increased revenues after the relatively modest investment in new meter technology.

The final point made in the email was that the math makes no sense: As he wrote, “According to the IBJ, the administration claims that revenues increased a total of $400,000 (from $1.3MM to $1.7MM) – which is a total increase in revenues of 30% ($400K over $1.3 million) TOTAL; however, the IBJ reports that the City’s revenues went from $108K to $498K – something doesn’t add up here… I think the IBJ is comparing apples and oranges (i.e., comparing (A) the City’s old “net-of-all-expenses” revenues after all costs and before increases in rates and hours, against (B) the City’s gross revenues under the ACS deal after increases in rates and hours that they could have instituted without sharing revenue with ACS), and even more significantly, (B) not asking what in my mind is the most pertinent question: HOW MUCH HAS THE CITY HAD TO CREDIT OR GIVE BACK TO ACS DUE TO BAGGED METERS?   Do the “totals” reported exclude the amounts the city is contractually obligated to remit to ACS as compensation for bagging meters under the terms of the contract?. ”

The email raises some pretty important questions, to which I’d add another. There is a rumor floating around that in addition to control of our parking meters, the City also handed over to ACS the collection of past years’ parking fines that remain uncollected. Does anyone know whether this is true, and–if it is–whether receipts from those collections are part of the reported numbers?

I do wish Indianapolis still had real reporters covering government……


Management versus Leadership

Mayor Ballard’s much-debated 50-year contract with ACS to manage Indianapolis’ parking infrastructure squeaked through the City-County Council, thanks to the deciding vote cast by Council President Ryan Vaughn, who refused to recuse himself even though his law firm represents ACS.

As a national commentator wrote to Bill Hudnut after that vote, the fact that Indianapolis gave an insider a sweetheart deal is less distressing than the fact that this transaction was yet another piece of a longer-term trend. “When you were Mayor, it seemed to me that the community leadership was really committed to downtown and the City, to the point where they even invested their own cash to make it happen, such as the corporations that helped fund Circle Centre Mall. Today, it’s pretty much a portion of the community elite using government simply to pull money out of the City.  I’m not sensing that there’s the same commitment to the City and its future as there once was.”

My husband and I both served in the Hudnut Administration (we met there), and we can still recall the energy and excitement of being part of a team that was working to create a new Indianapolis.  We were partners with local business and civic leaders who were equally invested in that future.

A local civic leader I admire believes there is an important distinction between leadership and management: as he notes, cities must operate in a businesslike fashion, but they aren’t simply businesses requiring managers.  Leaders understand that a city is the sum of the human values that make it up, the values that give cities their character, their “soul.”

For those who believe that there is no such thing as a city soul, or an identifiable civic culture, who think that this is all soft-headed romanticism, Neal Peirce has news for you: Civic culture drives economic development and fiscal health.

“We know the old and familiar way—grant tax subsidies or other special favors to nail down new office or factory prospects. Local tax bases take a hit and all taxpayers end up subsidizing the favored businesses. But to draw both investment and talented individuals—demonstrably the base of strong economies in today’s globalizing world—cities might focus more intensely on the qualities that most prominently build residents’ attachments to their communities.”

Peirce cites a key finding from three years of Gallup polling: what drives attachment to a community is not “the usual suspects” like jobs, the economy or even public safety.  While these things are important, “soft” quality of life factors—social offerings, openness, aesthetics and education (especially the presence of colleges and universities) drive attachment.

Communities scoring well in these categories also have higher rates of economic growth. The theory is that when people feel more attached to their communities, they spend time and money there, are more productive, and tend to be more entrepreneurial.

Such communities develop when people elect leaders concerned with the greater good, rather than managers interested in cutting deals with favored insiders.

The Crux of the Matter

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.”