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Privatization Blues

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The New York Times' Midwest edition last week carried a story by Dan Mihalopolous finding that the private operators of Chicago's parking meter system are bringing in $1.1 million in revenue every week. That's a lot of quarters. So many, in fact, that analysts are yet again questioning whether Chicago got its money's worth when it signed a 75-year lease for its system of 36,000 parking meters with a Morgan Stanley-led consortium.

Chicago's experience with privatization of public assets -- including the Chicago Skyway toll road and four downtown parking garages -- was the subject of a recent Frontier Group report: Privatization and the Public Interest. It was also the topic of a panel discussion I participated in last week at New York University's Institute for Public Knowledge.

The good news coming out of that forum is that decision-makers -- at least in metro New York -- are paying attention to what's happening in Chicago and vowing to avoid the many mistakes the Windy City has made in its privatization deals. Those mistakes have their roots in the behind-closed-doors process Chicago's leaders have used to develop and implement privatization -- a process that does not allow for the consideration of reasonable alternatives for privatization, treats public assets as "cash cows" with no real evaluation of the impact of privatization on other aspects of the public interest, and which allows virtually no time for public consideration or debate. (In the case of parking meter privatization, the City Council took only two days to approve a 75-year lease of the system, and held no public hearings.)

Speaking at the NYU panel, both Samara Barend, Executive Director of the New York State Commission on State Asset Maximization and New Jersey’s Kris Kolluri, former Commissioner of the state’s Department of Transportation and current CEO of the New Jersey Schools Development Authority, vowed not to make the same mistakes and expressed broad agreement with the principles for thoughtful privatization laid out in our report.

The Chicago experience provides, in some ways, a worst-case scenario for privatization (though our report on toll road privatization, Private Roads, Public Costs, has some examples that provide stiff competition). But as states like New York and New Jersey try to break new ground in harnessing private capital to improve public infrastructure, it's important that they set a high bar for ensuring that privatization provides better value for the public than traditional infrastructure development methods, and ensure that those projects are fully responsive to, and accountable to, the public interest.