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City rolls out revised parking-meter deal

October 20, 2010
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The city of Indianapolis has revised a controversial plan to lease its parking meters to a private operator, but its efforts to make the plan more favorable haven’t appeased critics.

Under the revised terms, made public Wednesday, the term of the contract would remain 50 years, but the city would have a right to terminate the deal with a fee.

The city also would reap a smaller upfront payment for the lease in exchange for a larger revenue share over time to spend on roads and sidewalks in areas near the meters.

To provide the city more planning flexibility, Indianapolis would get to remove up to 200 spaces without paying a penalty to Dallas-based Affiliated Computer Services Inc. And the city would get to keep all revenue from advertising on the meters if the ads were initiated by the city.

Those changes were designed to address some of the key concerns voiced since the city unveiled details of the 50-year lease to ACS  in August. City leaders said they’ve met with concerned parties over the last few weeks.

“We listened to the public and listened to councilors and businesses,” said Michael Huber, the city’s deputy mayor for economic development. “We think we took a good deal and made it a better deal.”

But to those rankled by the idea of a long-term lease, the revisions are not enough to make the proposal appealing. Their principal concerns – that the city would limit its flexibility and that the terms are overly favorable to ACS – remain.

“There are some modest improvements, but certainly nothing that would make me think this is a great deal for the city to be undertaking,” said Aaron Renn, an urban policy observer and blogger who has studied the city’s original proposal in-depth. “I think (meters are) a bad candidate for leasing long-term in any case. There’s no reason you should do a 50-year deal. You shouldn’t tie the hands of future.”

Huber, however, said the city had provided itself with more flexibility by creating a provision for 200 spaces to be removed without charge. After the 200 cap is hit, the city would have to pay a fee based on a complex formula for meters removed.

Huber added that the city determined a 50-year lease was most advantageous to taxpayers because meters begin generating more revenue later in the lease as rates increase and more meters are installed.

The revised terms would allow the city to end the contract every 10 years, starting 10 years after its inception. There would be financial penalties for termination starting at $19.8 million after the first ten years and decreasing to $8 million after 40 years.

The city also would reap a smaller payment upfront – $20 million instead of $35 million – but its revenue over the 50-year lease would grow from $268 million to $515 million, according to city estimates.

According to city calculations, that means the city would take away $73 million between the upfront payment and the ongoing revenue in present-day value, compared with $67 million under the original deal.

The growth is based on a change in the formula that determines how much revenue the city reaps. Indianapolis initially would have gotten 20 percent of meter revenue to ACS’s 80 percent up to $8.4 million, and 55 percent to ACS’s 45 percent for revenues above that threshold.

Under the new terms, Indianapolis would get 30 percent of revenue up to $7 million and 60 percent of revenues after that.

Jackie Nytes, a City-County Council Democrat who has questioned the proposal, said vendor ACS still stands to benefit handsomely from the arrangement.

Based on the original proposal, an IBJ analysis estimated the deal could generate as much as $1.2 billion in revenue for the vendor, but the city’s financial advisers estimated ACS might earn between $177 million–$265 million in profit over the life of the contract.

The city’s calculations, based on the new revenue share, project ACS would reap between $700,000 and $1 million per year in profit in the initial years of the deal, Huber said. The city had not yet calculated how much ACS would receive over the 50 years under the revised provisions, but Huber said it would be a minimal decrease.

Nytes advocated for the city to handle the meter upgrade as a government function instead of outsourcing it.  But city leaders have balked at that notion.

“The object is to improve parking and grow revenues, not bureaucracy,” said Robert Vane, Mayor Greg Ballard’s communications director and deputy chief of staff.

The council will review the proposal in coming weeks. To move forward, the proposal must get the council’s approval.

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