Monday, October 25, 2010

Problems With ACS Parking Contract Persist

Wednesday of last week, the administration of Indianapolis Mayor Greg Ballard announced changes to the ACS parking contract. Democrats and Republicans had both panned the 50 year, no bid deal. Administration officials assured reluctant council members that the changes would alleviate their concerns. Tonight I spent some time flipping through the pages of the proposed new contract to see if that is true. It isn't. The deal still stinks.

Before getting into the specific flaws of the deal, let's not forget that the Ballard administration has never come close to making the case that the City can't do parking modernization itself and keep 100% of the profits rather than steer hundreds of millions of dollars to politically-connected ACS. The City's answer is that doing so is "risky." It's a disingenuous response. The City would be spending $10 million on fixed assets - the meters - which aren't going anywhere. We also know within a very narrow range, the amount of money Indianapolis can gain from the meters. This isn't the situation where you are going to lose your investment - the meters - or not know you're going to make money.

Looking over the revised contract, these are the problems I note:
  • If the administration was truly interested in the best deal for taxpayers, the deal should have been reopened for other companies to offer proposals rather than simply letting ACS make a new proposal.
  • Section 2.1 It is still a 50 year agreement. It is very unfair for today's generation of leaders to contractually obligate those who will be in power decades from now. As a side note, the legislature needs to pass legislation prohibiting local governments from mortgaging the future by entering into multi-generational contracts like this one.
  • Section 2.1. Upfront payment reduced almost in half. It's a mystery why the administration thinks getting $20 million upfront was better than getting $35 million. Of course, the administration will point to a better cut of the annual revenue as the reason. Of course, there's problem with that too.
  • Section 2.4(e) If ACS decides to cancel the deal because the Council doesn't approve the ordinance, the City is on the hook for $500,000.
  • Section 3.2(e)(iii) ACS gets to keep all the revenue from issuing parking tickets, while the City has to fund the adjudication of those tickets.
  • Section 3.15(a) ACS, under the revenue split, gets to keep most of any advertising revenue.
  • Section 7.4 The City can only remove 200 of 3,649 parking meters in 50 years without paying ACS a penalty. It's not a stretch to think that the City will change dramatically in the next 50 years, including in ways that may require the removal of hundreds of meters. Yet if we in 2010 can't accurately predict the future, we'll be paying ACS.
  • Section 7.8 If the legislature passes a law relating to parking ticket enforcement, or a court issues a decision affecting enforcement, the City will have to pay ACS a penalty.
  • Section 8.1(c) The City is not entitled to review ACS's records to ensure it is being provided the money it is entitled to under the contract. Rather the City is required to rely on ACS's volume figures and its calculations with no right to review ACS books to determine if those numbers are accurate.
  • Section 18.1. The penalties are substantial should the City wish to cancel the contract. If ACS is doing a poor job and the City wants to cancel nine years in, the City has to pay ACS back $19,800,000 of the $20 million ACS paid to the City. This decreasing liquidated damages provision actually makes it costlier for the City to get out of the contract. Before, the City could have urged a court to cancel the contract should ACS's performance be so poor as to indicate a breach. If successful, the City wouldn't have to pay a penalty; under the liquidated damages provision, now the City certainly will have to pay.
  • Section 18.2 It appears that the contract prohibits the City from borrowing money to pay ACS the liquidated damages provision (Section 18.1) to get out of the contract. The City is also prohibited for 2 years after termination to contract out parking to another vendor.
  • Section 19.4 I personally think it's wrong to obligate the City to use arbitration instead of the judicial process to resolve disputes.
  • The 200 job promise is still not in the revised contract. Although ACS has promised to bring the City 200 jobs (not specifying salaries or even that they'll be full-time jobs), the parties have gone out of their way to put the promise is in a separate letter rather than the contract. The contract has an incorporation clause saying there are no agreements outside the contract. The jobs promise, made outside the contract and without consideration, is completely unenforceable. The contract revision could have included the 200 job promise. It did not. The City's counters that the the jobs pledge can't be in the contract because it doesn't relate to parking. That claim has no legal basis whatsoever. I would note that the battery recycling program ACS has pledged to enact doesn't relate to parking either, yet that promise is in the contract.

Those of just some of the things I noticed in a quick review. I won't even get into the conflicts of interest involving members of the Mayor's staff and ethically-challenged Councilor Ryan Vaughn, who insists on casting a vote for the ACS deal even though his law firm lobbies for ACS as does his boss, Joe Loftus a top paid adviser to the Mayor. Indeed state records even showed Vaughn lobbied for ACS...that is before Vaughn had the records changed.


IndyDem said...

Also noticed, if the city wants out of the deal, it can only do so at 10 year intervals. If in 10 years, this deal goes sour, and we want out, a new city government will have to essentially Repay the 20M up front payment. Money long since spent by this group.

Had Enough Indy? said...

Thanks for reviewing this, Paul. You are absolutely correct - the parking meters can be kept completely under the controll of the City - at a lower cost than this year's gift of $10 million to the Pacers.

One does have to wonder aloud, why ACS? Why not open it up to an actual bid? Why sell if off at all?

This one doesn't pass the smell test.

dcrutch said...

No solicitation of other bids, high costs to the city to terminate, little flexibility, obvious conflicts of interest that incentivize some councilmen to favor it - all for something that isn't implausible for the city to do in-house themselves.

Issue one in this election is less government in our lives. On a superficial level, this should be a no-brainer. It's not.

This is the omnipresent Noah's Ark of leeches, sucker fish, tapeworms, and every other vile parasitic analogy you can think of preying upon the taxpayer for existence. Whether it's bloated government or the spoils system of some "privatization", the average citizen is screwed with an outside OR inside solution if there's not both an open mind and a finite pocketbook. It's not just open bids on a level playing field for the final solution, but further upstream in how we solve the problem given what we have to work with. Maybe it's a problem that we have to walk away from for a few years (and leave a hole in the ground). What have Pittsburg or other cities done that works or doesn't for this issue?

Different parties and levels of government, but President Obama and Mayor Ballard seem to be leading two different schools of corruption.

Anonymous said...

Pay the $500,000 and let ACS go back to Texas. This deal continues to exude a loathsome stench. The people of this city deserve better. It's time to say enough is enough.