David Horner, senior counsel at the law firm Allen & Overy and former USDOT Deputy Assistant Secretary for Transportation Policy, discusses Chicago’s parking asset leases and the rationale for privatizing municipal parking systems in this Parking Today article:
A long-term lease can realize more monetary value for a city than conventional municipal financings, such as public bonding against parking revenues. As economists and financial experts note, the parking asset is worth considerably more in the operational hands of the private sector because the private sector has economic incentives that drive performance. Since a privately operated parking asset creates more value than the same asset under public management, a concessionaire and its investors are prepared to pay more for the right to operate the asset than lenders are prepared to lend against the same asset if managed by government. […]
Under a long-term lease, the private sector agrees to fund a multi-year capital investment plan for the parking system. The agreement ensures that critical investment in the system is continuous and not subject to the gamesmanship of annual budget negotiations and the shortterm decision-making imposed by election cycles. A lease transaction thus assures a steady commitment of capital to maintain the asset, including funds for technological upgrades that improve efficiency and convenience for users.[…]
A long-term lease also heightens accountability to the public. The lease establishes highly detailed, transparent and enforceable plans for private sector performancand creates remedies in favor of the public in the event the private sector fails to honor the specifications established by the lease, including termination of the agreement. In a well-structured PPP, the public clearly has more recourse against a concessionaire than it does against a public agency that is not subject to any binding agreement for performance and cannot be removed for its failure to perform.[…] [C]ritics paint a bogyman of the “for profit” operator. Somehow, it is suggested, the public interest is compromised by reliance on businesses, rather than government agencies, to deliver infrastructure to the public. But the claim overlooks that we routinely rely on regulated network utilities to provide electricity, water, telecommunications, freight rail transportation and other essentials, and that we have seen substantial gains in efficiencies within those sectors over the last several decades. In contrast, over the same period, we have seen chronic undercapitalization of infrastructure maintained exclusively by government agencies a function of the political cycle and not of agency leadership.
Read the whole thing. For more on parking asset privatization, see here, here and here.