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Monday, September 20, 2021

Setting the Record Straight: What the Parking Lease Proposal Says

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Reason Foundation’s Leonard Gilroy recently issued a response to U.S. PIRG’s analysis of the Indianapolis parking privatization proposal which selectively misreads the contract before the council and ignores other crucial details. This response clarifies those omissions.

Their blog skates past most of the issues identified in the U.S.PIRG fact sheet, but claims that the proposal empowers the council to refuse any meter increases after the initial increase to $1.50 per hour. Several sections of the new contract say precisely the opposite:

In the Definitions section of the contract, the definition of “Metered Parking Fee,” states:

“… Concessionaire may, in its sole discretion set the Metered Parking Fee at any $.25 measurable increment so long as it does not exceed the maximum allowable rate…”

Further, the section dedicated to determining the rate of meter increases, Schedule 5 of the contract, says nothing to indicate the city retains control over setting future meter rates. Instead, it lays out the allowable rate of increase based on a pre-established index:

“Beginning 1/1/2014 and continuing until the end of the Term, the hourly Metered Parking Fee shall be increased by the percentage increase of the Index.”

If members of the council believe the proposed 50-year contract grants them authority to veto future rate increases, they should confirm that provision and its meaning in the proposal. Voters will not easily forgive council members who sign a bad deal because they haven’t read it carefully. ACS’ lawyers will surely point to the above clauses to support their own claims to sole decision-making authority.

Contrary to Mr. Gilroy’s unsupported assertions, the parking rates could increase 1000-percent from the initial hourly rate of $0.75 cents to $7.50 per hour, even with economy-wide inflation advancing merely at traditional rates. Mr. Gilroy correctly points out that the concessionaire is not required to raise rates this high. However, to say that ACS is unlikely to raise rates, as he suggests, is wishful thinking. It also ignores the historical evidence that in Chicago, after the city privatized its parking meters, in just a few years rates skyrocketed to 3 and 4 times their previous level in some places.

Throughout the remainder of Mr. Gilroy’s response, he claims that ACS has “inherent pressure to perform well” and attempts to exonerate its past history of mismanagement.

Mr. Gilroy’s suggests that ACS would be compelled to perform well by the competitive “infrastructure marketplace.” A simple look at the deals being struck throughout the country show that the same small number of players are involved as brokers, advisors, and lessees from coast to coast. The terms of the Indianapolis proposal furthermore go to great length to restrict ongoing competition. If the city pays the stiff penalties to end the lease prematurely, it must pay even steeper penalties to subsequently contract with other companies. Moreover, the proposed contract (Section 3.18 (a)) states:

“…the City will not operate, and will not permit the operation of, a Competing Public Parking Facility.”

In his discussion of ACS’ past, Mr. Gilroy ignores the scathing report that Washington D.C.’s auditor released criticizing ACS’ performance in the district’s parking system lease. The record shows that from the years 1999 to 2005, costs under ACS privatization were 33.4 percent higher and resulted in $8.8 million additional spending of taxpayer funds than if services remained in-house. ACS also improperly fined patrons $159,975 when they parked at broken meters. Overall meter complaints increased over 900 percent. ACS even inappropriately billed the city $644,952 in penalties that the city did not owe them for temporary meter closures.

Mr. Gilroy contends not only that the contract provides “tremendous flexibility” for the city, but that it does not penalize the city for temporary closures related to parades, street fairs, and road repairs. In fact, the contract requires the city to pay hefty “Concession Compensation” for such Temporary Closures, which it defines:

“‘Temporary Closure’ means any interruption to, or any suspension of, Metered Parking System Operations by the City…due to street closures, the closure of a street to vehicular traffic, emergency parking bans, weather related closures, sidewalk closures related to building construction, sidewalk construction or repair, street construction or repair, utility work and similar activities…”

The contract does provide exceptions for meters on 19 days and 11 special events. While it “includes provisions for how to handle future events not yet devised” as Mr. Gilroy says, the provision is fairly narrow and restrictive. Just a month ago the latest version of the contract listed ten valid special events and omitted Veterans’ Day – an indication of the need to continually revise terms that will be largely foreclosed if the proposal is signed.

Additionally, while the proposed contract allows for limited removal of 200 of Indianapolis’ 3,700 meters, this can hardly be considered “tremendous flexibility.” For one thing, the city must designate 130 newly metered parking spaces at the outset. Over 50 years, the provision then represents an average of just four meters that can be removed for urban planning purposes per year. Mr. Gilroy claims that the city can relocate meters to other areas without incurring a penalty, but he again ignores that this right is contingent upon ACS’ approval and lack of objection.

Mr. Gilroy apparently foresees few urban planning needs over the next 50 years and hopes that ACS will sacrifice its own profits to approve publicly desired changes. This wishful thinking should not be confused with factual analysis of the proposal and the legal constraints the lease would impose on the city.

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