IBJNews

City's parking deal similar to much-maligned Chicago pact

Back to TopCommentsE-mailPrintBookmark and Share

City leaders promoting a 50-year lease of Indianapolis’ parking meters have taken pains to point out the differences between their proposal and a 75-year parking meter lease in Chicago.

For good reason: Chicago’s pact has been so universally reviled that some residents there have said it will negatively define Mayor Richard Daley’s legacy.

But a closer look at contracts for both deals shows that Indianapolis’ agreement largely uses the Chicago lease’s template.

There are some striking similarities in the contracts, including:

• Both are long-term leases that greatly restrict the cities’ abilities to break the agreements.

• Both require the cities to pay steep fees for removing meters.

• Both require the city or others to pay fees when meters are shut down for festivals, construction or other events.

And in some instances, Indianapolis’ contract is even more favorable to the vendor than the Chicago agreement.

The Chicago-style restrictions have caused some policy experts and local elected officials to conclude that Indianapolis would take on too much risk—and limit its ability to respond to changing conditions—by entering into its proposed agreement with Dallas-based Affiliated Computer Services Inc.

Renn Renn

The private company would get 80 percent of annual meter revenue to the city’s 20 percent up to $8.4 million, and the city would keep 55 percent above that point.

For its part, Indianapolis would get $35 million upfront and as much as $400 million over the 50 years of ACS ownership—money that would be spent on roads and sidewalks.

An IBJ analysis last month estimated the deal could generate as much as $1.2 billion in revenue for the vendor over the five-decade term of the contract. The city’s financial advisers estimate ACS might earn $177 million–$265 million in profit over the life of the contract.

The proposal also calls for doubling meter rates over two years in some areas, extending hours into the evening, and adding high-tech meters that accept credit cards.

Officials in Mayor Greg Ballard’s administration point out that Indianapolis has averted a flaw that has helped drive the anxiety about Chicago’s deal: Chicago took all its cash—$1.2 billion—for the meters upfront to spend on running the city.

Still, some experts question whether Indianapolis leaders drove a tough enough bargain in creating their contract.

“It’s reasonable for people to wonder how the two parties are sharing the risk here and whether too much risk hasn’t been placed on the shoulders of the city,” said Sergio Fernandez, an assistant professor who studies contracting and privatization at Indiana University’s School of Public and Environmental Affairs in Bloomington. “It seems a little one-sided.”

Fenced in?

parking tableOthers worry that ways in which Indianapolis’ agreement resembles Chicago’s could bring negative consequences to Indianapolis.

Aaron Renn is an urban policy observer and blogger who highlighted the contractual similarities in a recent blog analysis of the contracts.

He said the most obvious resemblance between the two deals—the length of the leases and the difficulty of breaking them—is the one that causes him the most consternation.

Indianapolis’ agreement doesn’t give the city the right to terminate the contract unless ACS doesn’t hold up its end of the bargain. Chicago’s lease also has tough restrictions on breaking the contract.

City leaders say having the ability to terminate more easily would dampen companies’ incentives to put up money. They point to other deals, such as the Indiana Toll Road lease, which involved a larger upfront payment but didn’t give the state an easy right to terminate.

“There’s no precedent for it in these kinds of transactions,” said Michael Huber, the city’s deputy mayor for economic development.

But such limited flexibility, some say, could pigeonhole the city from adapting as Indianapolis’ landscape changes along with technology.

“I think it’s going to hurt the city in the way it’s hurt Chicago,” Renn said. “I applaud that they tried to learn some lessons, but using that contract was the root of the issue.”

The city’s flexibility would be limited in other ways.

If Indianapolis wanted to increase the number of meters by more than 10 percent and ACS determined those additional meters were not economically viable, the city would foot the bill to install the meters. Indianapolis also would get a higher share—75 percent—of the revenue than it would with existing meters.

And, as in Chicago, removing meters—to replace them with electric car-charging stations or to build a mass transit line, for example—would come with a price.

Under the contract, Indianapolis would pay a flat fee up to $15,400 for each meter removed in the first year of the deal. After that, the fee would be based on a complicated formula that takes into account the amount of revenue the meter generates.

Chicago’s removal fee is based on a similar type of formula.

Chicago Alderman Scott Waguespack, a vocal critic of his city’s parking deal, said that policy restricts his ability to do long-term planning.

“The underlying value of a meter is that it’s an urban planning tool,” Waguespack said. “The company that valued the meters for the city looked at it as a revenue tool.”

And in certain respects, Indianapolis’ deal provides the vendor a more generous revenue tool than Chicago’s.

Chicago’s agreement would let the city keep all revenue if a company were to buy naming rights for the parking system or advertise on the meter boxes. It also gives Chicago 100 percent of revenue from parking tickets.

In Indianapolis, money from those sources would be shared with ACS.

‘Obvious’ differences

The city disputes that the deal will cause challenges like those in Chicago, where criticism has centered on the financial structure of the city’s arrangement.

Chicago reaped an upfront payment from the lease but cut off its future revenue stream. The city has spent most of that money in about 1-1/2 years since the deal was inked.

By contrast, Indianapolis would take a smaller upfront payment and continue getting revenue throughout the 50 years of ACS’ ownership. None of that money would go toward the city’s general operating budget.

Michael Huber Huber

“The contract does in some respects resemble Chicago,” Huber said. “But [it] bears no resemblance to Chicago in terms of how we handle the money. We hope the ways in which it’s different are obvious.”

Striking a deal in the 50-year range, city leaders said, was necessary to attract the kinds of firms that could help the city get a sizable upfront payment and significant revenue from the lease.

And while there’s no current fee for removing meters, the city still loses the revenue from meters that are removed. City leaders acknowledge the cost to remove meters under the deal will be higher than it is now, but they say that’s only logical. Higher rates mean the meters would generate more revenue.

They also contend ACS is taking on lots of risk in the deal. If parking revenue decreases, the company still has to pay the cost of operating the system.

But City-County Council Democrat Jackie Nytes said she thinks the city could handle its parking operations in-house by creating a stand-alone, government-run parking authority that would have the ability to issue bonds to pay for putting in the new high-tech meters.

City leaders have balked at that notion, in part because they’d have to increase rates initially and would incur additional expenses for operating the system.

Nytes is worried that certain contract provisions would restrict the city too much.

“We have to have the ability to respond to changes in our community,” Nytes said. “All of those things—that are so locked in and have such huge penalties if we change them—absolutely concern me.”

But Ryan Vaughn, the council’s Republican president, said he thinks the proposal allows enough room for the city to do community planning.

“The council would reserve the right to decide if we want to add or remove meters,” Vaughn said. “There’s a lot of built-in flexibility.”

Both sides of those issues will be vetted in coming weeks as the council publicly reviews the issue. The city is expected to hold additional public meetings, including a council committee hearing, before the full council votes on the proposal. It’s uncertain when that vote will be, but it’s not expected this month.•

ADVERTISEMENT

  • What Risk to ACS?
    Lets see they get a guaranteed bump in 2 years, are entitled to the income stream. Can Huber disclose the operating costs? It cannot be much relative to the incoem stream.

    I submit a Securitization for 35 to 40 million say plus another 8 million for new meters be created and the bonds there with be sold with say an income stream to be outstanding for a period of 50 years (if based on the ridiculous income split with ACS)or more appropriately 10 years and let the business owners, ratepayors and taxpayers have the first right of refusal to the SUBSCRIPTION AGREEMENT in that exact order... Thus you align the interest of the business owners, taxpayers and ratepayers.

    I guarantee this SUBSCRIPTION would be over subscribed. If not the State of Indiana can fill the gap as it would be a solid investment WITHIN INDIANA. Thus the City of Indianapolis merely sells off a right to receive income for a period of time but never severed i.e. sold the entire asset.

    I cannot believe the inept, possibly unethical leaders that surround themselves around Ballard.

    Think this stuff cannot happen in Marion County, think again.. Link to this

    http://www.cleveland.com/countyincrisis/index.ssf/2010/09/county_commissioner_jimmy_dimo_1.html

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Uh, sorry Johnnie, but you are incorrect. Despite the assertions by yourself and various defenders and captains, sports attendance is NOT off significantly at most sporting events in the US. Variances in attendance has been in the range of single digits, both + & - for years now. MLB has had most of its best overall attendance nubers in the last decade, and that trend has been consistent for most major sporting events. The number one issue cited by most fans when asked about attendance is the overall cost of attending. The presence of HD and big screen televisions in home doesn't even register, as a factor for not attending an event. VALUE in the product is the key, and apparently is something lacking in the current ICS. What other explanation is there when with what is routinely touted as the "best" racing on the planet, fans are staying away in DROVES. A "close" title battle into the last event at Fontana, with the "cars and stars" of the ICS, and who showed up? MAYBE 8K. Sorry, but HD TV isn't to blame for that kind of fan apathy.

  2. Do you need finance to establish your business ? Are you interested in getting a loan at 3% from our private company? If so please Email: suntrust_oil@blumail.org

  3. If she was worth the $ the public outcry over direct tv dropping them would have kept them on their dishes as we have seen with other companies. I too quit watching channel 13 after she showed up since I left channel 8 because of her all show rather than production results. When Randy on 8 corrected her she had a big head and incorrectly challenged his correction for pronunciation of a city. Other antics while she matures was too much for me with her very inaccurate forecasts. All the forecasters were predicting rain until Thursday except Chris. They predicted sunny on Thursday but instead of rain until Thursday upon which the sun would finally make it out in full glory Chris was right on the money just as I too predicted looking at the radar on weather.gov. One thing I love about Angela is the fear you can see in her every time it thunders in the winter. It far exceeds the entertainment value of her body language (high heel noise drags, depression, etc) when her forecasts are so incorrect. Her hair stands on end, you have to see it!!!

  4. Good Day, Apply For A Loan I am Mr Fernadez Antonio, a private Loan lender and a cooperate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and cooperate bodies at 3% interest rate We offer any kind of loans. email us via fernadezloaninvest@outlook.com LOAN APPLICATION FORM First name:......................... Middle name:......................... Last name:........................................ Date of birth (yyyy-mm-dd):....................... Gender:........................................... Marital status:................................... Total Amount Needed............................... Loan Duration.................................... Address:.......................................... City:............................................. State/province:................................... Zip/postal code:.................................. Country:.......................................... Phone:............................................ Fax:.............................................. Mobile/cellular:.................................. Monthly Income.................................... Occupation:....................................... Best Regard, Mr Fernadez Antonio.

  5. i will love to share my testimony to you all the people in world i got married to my husband about 2 year ago we start having problems at home like we stop sleeping on the same bed,fighting about little things he always comes home late at night,drinking too much and sleeping with other women out side i have never love any man in my life except him. he is the father of my child and i don't want to loose him because we have worked so hard together to become what we are and have today .few month ago he now decided to live me and the kid,being a single mother can be hard sometimes and so i have nobody to turn to and i was heart broken.i called my mom and explain every thing to her,my mother told me about DR.okoro how he helped her solve the problem between her and my dad i was surprise about it because they have been without each other for three and a half years and it was like a miracle how they came back to each other. i was directed to DR. okoro on his email:okorospell@gmail.com and explain everything to him,so he promise me not to worry that he will cast a spell and make things come back to how we where so much in love again and that it was another female spirit that was controlling my husband he told me that my problem will be solved within two days if i believe i said OK So he cast a spell for me and after two days my love came back asking me to forgive him i Am so happy now. so that why i decided to share my experience with every body that have such problem contact Dr okoro the great spell caster on his email addresses spellcasterforlove@outlook.com

ADVERTISEMENT