Out of Control Policy Blog

Parking Meter Privatization in the Spotlight, Part II

In Part I yesterday, I examined Chicago's parking meter privatization in the context of rate-related issues. Today I'll try to offer some perspective on the operational challenges that the city and its private partner, Chicago Parking Meters, LLC, have experienced thus far in the rollout of the months-old initiative. As the Chicago Sun-Times recently reported:

A private contractor that paid $1.15 billion to lease Chicago's 36,000 parking meters agreed Tuesday to delay price hikes in some areas and stop writing parking tickets to augment city enforcement until it gets a handle on a rash of broken, over-stuffed and mis-marked meters.

At a City Hall news conference with Mayor Daley's chief of staff, Chicago Parking Meters LLC CEO Dennis Pedrelli acknowledged what angry motorists already know: his company "under-estimated the resources required" to re-program meters to reflect sharply higher rates and make timely collections to make certain meters don't get jammed.

The difficult transition to private control has prompted Chicago motorists to vent their anger about sky-high parking meter rates tied to the 75-year lease—with a spike in vandalism and a drop-off in on-street parking.

Chief of Staff Paul Volpe noted that "at any given time, there are a certain number of meters" in need of maintenance. But, the number of jammed and inoperable meters since the Feb. 13 takeover has been "much greater than normal," he said.

"We know that people have been encountering problems, and they've been frustrated. We agree that these mistakes are simply unacceptable," Volpe said, demanding daily reports on the contractor's efforts.

After a rough start, Chicago Parking Meters LLC has hired 60 new employees, expanding from six to 14 teams the number hired to collect coins from meters that require motorists to pump 28 quarters in for two hours of downtown parking, Pedrelli said.

The company has also hired additional meter mechanics and reimbursed the city for the salaries of city mechanics. Every single meter is being checked to make certain the proper rates and hours of operation are posted, he said.

In tandem with these challenges, there certainly seems to be a concerted push by privatization opponents in the media and blogosphere to prematurely label the Chicago situation as a failure, even though it's just barely gotten started. The emotional energy spawned by the rate increases appears to be driving the discussion these days, with the unfortunate side effect that an invaluable piece of perspective goes unacknowledged.

It's simply this—in any large-scale privatization initiative like this (not to mention fresh turf in the policy world), you have to expect hiccups along the way in the transition. It's not just parking meters. You see the same thing in a lot of different areas—outsourcing for IT systems, welfare modernization, etc. Modernizing antiquated business practices isn't easy, and paradigm shifts are rarely a smooth ride. It's no small task to switch the gears of service delivery in government, and when you throw little things like replacing 36,000 parking meters on top that, well, there are inherently going to be some challenges that pop up along the way.

The keys are (1) keeping focused on the service delivery and avoiding playing "privatization politics;" and (2) having a good partnership between the city and concessionaire and responding quickly when issues arise. This is what seems to be happening now, as the the concessionaire's recent investment in more manpower in collections, maintenance, etc. indicates.

Further, the system overhaul is already underway, which will have a major positive impact on system operations and maintenance. Approximately 36,000 antiquated coin-based meters are in the process of being replaced by roughly one-tenth as many multi-space/multi-pay meters. As the Sun-Times reports:

LAZ now has 30 people assigned to meter maintenance and is paying the salaries of city mechanics to supplement the repair effort for the next two weeks. A 23-employee collection team is being beefed up to 30. And inspection teams are checking every one of the 36,000 meters to make certain they post the proper rates and hours of operation. [...]

"We have adjusted the [maintenance] program from a five-day work week to a seven-day work week and have extended the hours of coverage [to] 11 to 13 hours-per-day. We have shortened the time-frame between collections. In the busiest areas, we have also increased collection frequency," [Mike Kuziak, chief operating officer of LAZ Parking] said. "No one is more motivated than we are to ensure that all parking meters are working properly."

The collection problem could be short-lived. Kuziak disclosed that his company's plan to replace 36,000 single-space meters with 3,700 cashless "pay-and-display" boxes is "on track," with the first boxes expected to be installed "within the next few weeks."

The L.A. CAO report I mentioned in Part I yesterday adds this: "The concession agreement obligates the concessionaire to upgrade to non-cash payment technologies (e.g., pay by credit card or cell phone) within 180 days after the rate for a given space reaches $1.50 per hour. However studies have demonstrated that these technologies improve revenues approximately 30% per space, so the concessionaire is expected to upgrade more quickly than the contract requires."

As the Chicago Parking Meters, LLC website notes, the streamlined system allows the city to eliminate the "one car per parking space" rule and opens up any legally available curb space. And you can forget the coins that we all despise carrying around—the new meters offer customers more convenience and payment options that conform to the realities of 21st century personal finance (i.e., they take a range of credit and debit card options, in addition to coins).

It's also worth mentioning that a common issue we see in infrastructure privatization is that the reality of the system condition when the private sector shows up for work on day 1 can be a lot different than they anticipated. Again, from water systems to IT systems, we routinely see situations in which the first real look under the hood reveals deterioration and neglect the contractor didn't expect or want to see. I don't have the information to judge whether or not this was the case with Chicago's parking meters, but given the amount of times that story repeats itself in the world of government operations, I wouldn't be surprised if it happened to be the case.

The message I'll part with is, let's be patient and let this initiative mature. It's young and in a predictable state of flux given the scale and complexity. What matters most right now is that the public and private partners are adjusting course to respond to the challenges as they arise.

Next week in Part III, I'll turn my attention to transportation-related issues associated with parking asset privatization, and what we're starting to see on this front in Chicago.

» Reason's Privatization Research and Commentary

UPDATE: On the subject of vandalism, I was surprised to see this bit in an L.A. Times blog post on parking meter privatization. Apparently parking meter vandalism is a phenomenon in government-run parking systems as well:

The city of Los Angeles has managed about 43,000 parking meters for decades, and the results are there for everyone to see: Until a recent meter replacement project got underway, about 10% to 15% of the meters were broken at any given time, either because of vandalism or mechanical failure. Unlucky motorists who legally park at failed meters have also found they have a habit of resetting to healthy mode, often resulting in a ticket when a meter officer wandered past.

Leonard Gilroy is Director of Government Reform


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