The Real Chicago Way: A Privatization Scheme That's A Loser For Taxpayers

The Real Chicago Way



A Privatization Scheme That's A Loser For Taxpayers



By Thomas Frank

Wall Street Journal

December 8, 2009

http://online.wsj.com/article/SB10001424052748703558004574584232074750544.html



When the entertainers of the right aren't declaring

their disgust with President Obama for groveling before

foreign potentates, they're pretending to fear him as a

left-wing thug, an exemplar of what they call "the

Chicago way." As imagined by the right, the men in the

West Wing are like a demonic cross between the antiwar

demonstrators who gathered in Grant Park in 1968 and

the Chicago cops who cracked their hippie skulls.

Tremble, men of commerce, before this infernal

combination.



Myths like this are fun to invent. The problem, as

ever, is reality.



Consider one of the actual news stories to emerge from

Chicago of late: The city's decision to privatize its

parking meters. Thanks to a deal finalized in 2008,

Chicago's parking meters will be operated for the next

75 years by a group of investors put together by Morgan

Stanley, including the sovereign wealth fund of Abu

Dhabi. DaleyJmp Chicago Mayor Richard Daley DaleyJmp



As it happens, Chicago is the nation's leader in

municipal privatization efforts. That's right: The city

that conservatives portray as the citadel of the power-

grabbing, government-growing left has been selling

itself off in pieces for years. It signed a 99-year

lease for the Chicago Skyway, a toll road in the city's

South Side, back in 2005. It did the same for its big

downtown parking garages in 2006. Last year, it

approved a deal to privatize Midway Airport;

fortunately, the arrangements fell through.



The city's longtime mayor, Richard M. Daley, is such a

keen enthusiast of privatization that he has promoted

it as the budget solution for every government in the

land. "If they start leasing public assets—every city,

every county, every state and the federal

government—you would not have to raise any taxes

whatsoever," Mr. Daley told the Chicago Sun-Times in

January. "You would have more infrastructure money that

way than any other way in the nation."



Selling public property is the true Chicago way. Had

Mr. Obama not been elected president, the nation's

business journals would be falling over one another to

praise his city for its daring, market-friendly

innovations.



And if they chose, they would also find just as much to

criticize in Mayor Daley's real-life privatization

spree as they do in the brutality that they imagine

President Obama shows his opponents.



The details of the parking meter deal, for example,

were negotiated by the Daley administration with almost

no public scrutiny. When it came time to approve the

billion-dollar arrangement, the city council got

exactly two days. It was a farce. According to a report

issued by Chicago's inspector general, "No financial

analysis was provided of the value of the parking-meter

system to the City if it retained the system, since no

such analysis had been done. . . . There was no public

comment; no testimony from critics or experts; no

presentation of recent studies" on privatization

elsewhere.



It was not until months later that Chicagoans

discovered what a lousy deal it was. The inspector

general's report estimates that the private investors

paid a little more than half the amount that the system

would have generated had the city held onto the meters

itself.



One alderman, described at length in the Chicago Reader

last May, figures that the parking system might be

worth four times what the investors paid. "The

taxpayers had been hosed," the Reader concluded.



Meanwhile, the cost of parking increased dramatically,

as the new parking-meter proprietor sought to maximize

its return. Meters broke down from the unaccustomed

load of quarters. Tickets were handed out with abandon.

Chicagoans were furious.



What they eventually learned is that they had handed

over a component of self-governance to a private

company that is, by definition, unconcerned with the

public interest. Chicago police will still hand out

parking tickets; the state of Illinois will still

suspend drivers' licenses; but for the next 75 years

all of it will be done to ensure that citizens render

proper tribute to Wall Street.



And now comes the inevitable denouement. Last week, the

Chicago City Council voted to plug a hole in its 2010

budget using funds remaining from the billion-dollar

parking-meter haul, despite earlier plans to invest the

money for the long term. Almost all of it will be gone

by the end of next year.



It may not fit the myth, but that's the real Chicago

way. Sell off public property without public scrutiny.

Prohibit public input on an essential public service.

Rationalize the whole thing, as Mr. Daley's

administration has done, by insisting that government

can't run such things as well as the private sector

can.



And then, when the money runs out, privatize something

else: The water supply, maybe. The sewer system. An

airport or two.



Why not privatize a U.S. Senate seat, too? Just imagine

what Abu Dhabi would pay for that.



Write to thomas@wsj.com.