News / Publications » Publications

Chicago Parking Meters: An Outsourcing Fiasco

When Wall Street wants more money, they come for public services. In the Windy City, the alleged benefit dried up in two years but the damage remains for 75.

By Pablo Ros

(Photo by Seth Anderson)

In February 2009, Mayor Richard M. Daley of Chicago pushed through the City Council a new outsourcing scheme. This one involved public parking meters.

Aldermen on the council had practically no time to review the plan to lease the city’s parking meters before a vote, even though city officials worked on it behind the scenes for more than a year. The idea came from the Chicago-based investment firm William Blair and Company, which saw a way to enrich its bottom line. The private firm was politically well-connected and did not go through any bidding process to get the outsourcing job.

Among other things, William Blair and Company was tasked with putting a price tag on the city’s parking meters. It also brought one of its clients, Wall Street bank Morgan Stanley, to the table. When they finally got up from that table, the final deal was a 75-year, $1.15-billion agreement between the City of Chicago and “Chicago Parking Meters, LLC,” a consortium led by a Morgan Stanley investment group. In the deal, the City of Chicago got quick cash and investors found a safe place to put their money in.

Everyone won, right?

Hardly. Not only was the money – yes, the $1.15 billion – nearly gone by the time Daley left office less than two years later, but Chicago residents lost out in other ways. Here’s what outsourcing in Chicago brought:

Analysts determined the city’s parking meters were worth $1 billion more than they were leased for. That billion stayed with the Wall Street bank, not the people of Chicago.

Within months of the deal, parking rates in some areas of the city quadrupled. Since then, rates rose every year between 14 and 25 percent.

According to the terms of the agreement, should the city decrease the number of parking meters in a way that hurts profits, taxpayers will have to make up the difference.

If a street is closed for a parade or festival, taxpayers must reimburse Morgan Stanley and its partners for loss of profits.

The city cannot build parking lots for the entire duration of the agreement – again, that’s 75 years – because they might compete with parking meters.

These are just some of the absurd consequences of a terrible deal that was cooked up behind the scenes with Wall Street, not public welfare, in mind. Though Mayor Rahm Emanuel negotiated small improvements, it’s likely Chicago drivers will continue to enrich Morgan Stanley and wealthy investors for the next 71 years, one parking-rate hour at a time.

Chicago’s parking meter fiasco is just one example. Outsourcing occurs throughout the country, because it’s an often stealthy way for Wall Street privateers to pad their pockets, while working families are left behind. Wall Street-backed politicians are making their job that much easier.

It doesn’t have to be this way. Keep reading.

So You’ve Decided to Increase Transparency and Accountability in Public Dealings

AFSCME works closely with In the Public Interest, a resource center whose mission is to promote transparency and accountability in public contracts. Working together, we’re increasing awareness of the dangers of outsourcing and preventing bad deals from harming the public. In Chicago, we are working together to pass an ordinance that would increase accountability and transparency in outsourcing schemes.

In other words, no more backroom deals with little public review.

In the Public Interest’s Taxpayer Empowerment Agenda contains many essential elements. Among other things, it seeks to ensure that:

Private companies receiving tax dollars are forced to open their books and meetings to the public, just like government does.

Governments are allowed to cancel contracts made with private companies if the companies don’t live up to their promises of quality and cost savings.

Before a deal is signed, a study is produced and made public showing how outsourcing would affect the larger community.

Competitive bidding occurs when a contract expires, rather than the contract’s automatic renewal.

What You Can Do

Perhaps the only good to come out of terrible outsourcing deals like the Chicago parking meters scheme is that it offers a clear-cut example of past mistakes and offers a roadmap for how avoid them in the future.

Don’t be afraid to call your local and state representatives, or go to a city council meeting, and tell them that you oppose selling off city assets to the highest bidder, and that you demand transparency and accountability in all public matters. Here are some points you can share with them:

To learn more about the privatizers who sell out our democracy, watch this video at itpi.org
To learn more about the privatizers who sell out our democracy, watch this video at inthepublicinterest.org

Our tax dollars should stay in our communities, not profit Wall Street or be sent overseas.

When corporations cut corners to make a profit, the quality of the work suffers and the public’s health and safety is put in jeopardy.

We shouldn’t hand over control of public services to big corporations because they are in the business of making a profit, not protecting the public welfare.

Corporate CEOs make decisions that affect us all, but taxpayers don’t have any say in who they are or how they operate, and they can’t vote them out. That’s not right.

Your representatives are listening, too. In West Haven, Conn., a city councilman concerned about a proposal to outsource school food services in his city to a for-profit company proposed new protections for taxpayers. After hearing from AFSCME Council 4 members, Councilman David Forsyth introduced a series of protections that will ensure public services remain under local taxpayer control.

And while the current mayor of Chicago, Rahm Emanuel, entered into several unwise and harmful outsourcing deals, even he recognized the need for more transparency and accountability in public-private agreements. Recently, he cited mistakes in the city’s parking meters lease in justifying his decision not to outsource the operation of Midway Airport, showing it’s possible to learn from one’s mistakes.

Send comments to pros@afscme.org

Get news & updates from AFSCME