True Privatization of Parking Assets Could Benefit City and Residents

As the City of Pittsburgh has discussed a solution to its underfunded pension fund, both Mayor Luke Ravenstahl and City Council continue to cite the plan to lease city controlled parking assets.  Despite offering different methods, the end result is often the plan being relayed to the public as a “privatization” of those parking assets.   However this definition of “privatization” is wildly confusing.

A real world comparison would be that of leasing a car.  While you have immediate control over the vehicle, in the end, you do not own it.  The dealership still maintains absolute ownership, as you are required to return it to them at the end of a specified time period.  Despite their absolute ownership, you have the ability to enjoy the car as if it were your own.  However, any maintenance, insurance, gas or other upkeep is your burden.

This is the same concept behind the City’s efforts to lease its parking assets.  Yes, the controlling company would stand to make significant profits during its 50 year lease, but would still be required to pay for the staffing, upkeep and taxes on their own.  In the end, their actual control over the assets would be in name only.

When the Mayor announced that a group led by JP Morgan had offered $452 million for the city’s parking assets for a lease term of 50 years, the reactions by Pittsburgh City Council and the media were mixed.  The public was apprehensive of future parking costs, while City Council was quick to offer their own solutions.  Although City Council declared the deal dead, City Council has been less than clear with why they’ve refused to vote for the Mayor’s plan.  Most of the Council’s plans still include selling off the assets or raising parking rates.  While this would provide the quick infusion of cash that is desired, this plan would run the risk of forfeiting massive future profits.

Perhaps some insight to the Council’s hesitation was provided when the Commonwealth of Pennsylvania revealed that the Mayor’s office was overstating the desperate need to subsidize the public pension fund.  These revelations eventually led to City Council subpoenaing the Mayor’s office for their data regarding the state takeover.  While the proposal had been hotly contested up until this point, this new information seemed to kill any good will that had been built up with both the public and City Council.

When I first heard that the city would be privatizing some of their assets, I was excited.  I saw the private market as being able to improve the quality of city-owned lots and meters.  But as more concrete plans were revealed, the excitement quickly faded.

Privatization tends to imply competition.  For this reason, it never made much sense for the Mayor to sell the parking assets to one group.  As many critics of the plan have pointed out from the beginning, the city ran the great risk that meter and garage pricing would soon become astronomical.  And due to an effective monopoly with only one company setting those rates, the critics would have been proven correct.

True capitalism should not be confused with corporate welfare or cronyism.  So why would the city want just one group to control the parking property?  Why not allow one group to lease the meters on one side of Forbes Avenue, and another group the control of the meters on the other side?  With such a plan, legitimate competition would have been introduced and pricing would have been set by the aggressive competition that surely would have followed.  By selling off the parking assets to a variety of buyers, the city would also have been free of the burden of the upkeep on the garages and lots (as well as the highly paid unionized workers who, apparently, don’t even know how to shovel snow).

Additionally, the city would see tax income from the businesses that would control the parking assets.  Most importantly, however, by truly privatizing their parking assets, the City of Pittsburgh would be able to tell its citizens that they were doing their best to serve the public, without having to cross their fingers behind their backs.

Lost in this whole leasing business is the question of whether the city should even own and operate parking assets in the first place.  If government’s role is to provide essential services to its public, we must ask ourselves, “Are meters and parking garages really an essential service?”  I would say no.  Perhaps not shockingly, Pennsylvania by far leads the country in revenue collected from government-run parking authorities (which implies that most of the rest of the country has learned that they do not belong in this sector).

Call me pessimistic, but I don’t believe that this fire sale of assets will solve the City’s pension crisis while simultaneously serving the needs of Downtown workers and residents.  Look no further back than the recent Drink Tax.  During its first year, it pulled in over double than projected or needed.  Yet, just a few short years later, the Port Authority is already in serious trouble again.  What happened to the revenue from that tax? How many restaurants were forced to close as a result of the tax that caused many patrons to dine elsewhere?

Let’s not forget that Mayor Ravenstahl first looked to collecting a portion of that tax for the underfunded pension, over a year ago.  And, with additional taxes being proposed (the Student Tuition Tax and the Soda Tax come to mind), I would say the evidence is clear that the city needs to begin shedding many of its non-essential services in an effort to cut costs that are quickly spiraling out of control and to better serve its residents.

As of now, the plan appears to be dead.  The Mayor could not secure the required votes from City Council members.  The Publius Foundation implores the City of Pittsburgh to explore true privatization of all City-owned parking assets.  However, if our city’s track record with financial matters is any indications, a similar or worse proposal could very well be coming shortly.