Thursday, September 29, 2011

Mayor Ballard Misleads the Public on Sweetheart Parking Meter Deal

Mayor Greg Ballard
The blog Urban Indy has published an interesting Q and A with the Mayor. I found this question and answer on the parking meter contract with ACS quite interesting:
Q: What is your point of view on privatization of public assets? (ie: parking meters, utilities, etc)
A: As our record shows, we think privatization can be a great solution in the right circumstances.
The lease of the parking meters is also a solid transaction. Though it may require an adjustment period, the ability to use credit and debit cards in the meters has been met with rave reviews—over 40% of transactions on those new meters are done without cash. That is a clear indication that Indy residents and visitors are embracing this new technology. And with the feedback we received from the public, the City modified the contract with the ParkIndy team to allow us opportunities to get out of the contract if the deal is no longer beneficial to the City. So, done in the right way and with the right terms, these are great ways to leverage our assets.
To see the rest of the Urban Indy interview, click here.

You see what Ballard did?  The question was about whether privatization of public assets is a good idea. When talking about the parking meters, Ballard flipped it and started talking about modernization of the parking meters, which of course the City could have done on its own.  In fact for just $8 to $10 million the City could have bought the new meters themselves and kept 100% of the revenue instead of giving away 70% of it to ACS for the next 50 years.

Then Ballard brings up the right of the City to get out of the contract every ten years.  The fact is if you examine the contract closely you find out that right is illusory...the terms make it impossible for the City to ever exercise that opt out provision.

Last November, I wrote about my examination of this illusory opt out provision that the city was touting:
...according to Section 18.2, any decision to cancel the contract requires a year's notice. But it is much worse than that. Second, under Section 18.2, the City is not allowed to contract with another vendor to run the parking system for two years, unless:

the amounts paid or payable to any third parties by the City for outsourced services do not exceed, in the aggregate, the amounts paid under the Parking Meter Services Contracts during the Year 2010 and provided such payments do not include a revenue share with the City or revenue or collection guarantees with the City.
Given that this contract isn't likely to take effect until 2011, a vendor taking over the parking responsibilities within the two year window has to agree to be paid nothing since that's how much ACS will be paid in 2010 on the parking deal. Assuming the starting point is switched to 2011, any new vendor in the future, let's say 2031, would have to agree to take no more money on the contract that ACS received in 2011. Plus, even if a vendor can be found which will do that, the language of the section also prohibits the vendor from sharing its revenue with the City. So we'd have to go without any parking revenue for those two years if we turned it over to another vendor.

That language of Section 18.2 leaves the City with two options, none of which are good. First, the City can wait out the two year cooling off period, while doing the parking themselves. The second is to pay ACS an additional $5 million penalty on top of the tens of millions the City already has to pay for termination. $5 million is the additional price the City has to pay for contracting out during this two year window.

Well, if ACS does a really bad job, the City can just float a bond and pay the early termination penalties and $5 million penalty for breaking the two year window, right? Wrong. Section 18.2 contains a provision which prohibits the City from borrowing money to pay ACS's termination fee. Here's the language: "The City shall not ... obtain capital from any third party in order to fund the payment of the Termination Penalty..." The penalty at year 10 is $19.8 million. With the $5 million, the City would have to fund $24.8 million out of its general revenue stream to be able to terminate the contract at Year 10. At Year 20, this would be $21.25 million. Again, we are not allowed to borrow to make this payment.
People should demand more intellectual honesty from more our local officials than is witnessed in Ballard's answer to this question.  Ballard is not the only one.    Disingenuous discussion of the issues is practiced on both sides of the aisle, especially when it comes to shoveling tax dollars to politically-connected companies.

Note:  My November article also discusses why the 200 job promise made by ACS in a separate letter is completely unenorceable.  To see the entire article, click here.


varangianguard said...

Hmmmm. Leveraging our public assets?

Well, maybe the Mayor would consider privatizing his position, if he's reelected?

Gosh, I can see real benefits accruing from letting a private entity (oh say, like Barnes & Thornburg, for example) run the Mayor's office.

Although, I imagine that City Legal would stick us with some real doozies of contractual obligations and penalties that they would have missed (on purpose, or otherwise).

Still, it's a thought.

Paul K. Ogden said...

Varan, B&T already runs the Mayor's Ofice.

varangianguard said...

Guess I'm being too subtle, again.

Besides being meant as sarcasm, I was trying to imply that B&T could save themselves a bunch of money by just taking over the Mayor's office by contract. In effect, we would be paying them to run the City, not the other way around.

I suppose I'm just not as clever as I imagine.

Paul K. Ogden said...

Varan, it was obvious sarcasm. I'm just slow today.

Jon said...

So the mayor thinks we can break the ACS contract, which we can't, but ignored the contract termination clause in the Pacers contract that would have cost the Pacers to leave. And, in fact, expressed that the Pacers would have minimal penalties if the contract were terminated and used that flawed logic to justify another 33.5 million in taxpayer dollars for the Pacers. He truly is a master of doublespeak.