Thursday, March 08, 2012

Wait, Projections Fell Short?

Get outta here! A government entity overprojected revenues? Underestimated the gloriousness of its new ways? That never happens! From the Indy Star:

The first year of Indianapolis' 50-year parking meter lease brought doubled rates in some areas as a tradeoff for a wholesale upgrade of equipment and the convenience of paying by credit card or smartphone.

Was it worth it?

New financial data provided by the city shows its share of revenue from the vendor in 2011 -- nearly $1.4 million, or 30 percent -- fell well short of the city's own projection of $2.1 million.

And the city didn't end up seeing the full amount: After the vendor subtracted $286,000 in charges to compensate for the city closing metered spaces, often for RebuildIndy road construction work, the city pocketed $1.1 million.

The vendor, ParkIndy -- a trio of local and national companies led by Dallas-based ACS, a Xerox company -- kept more than $3.5 million.

But most of the city's share was profit, and Mayor Greg Ballard, whose office hatched the deal before it was signed in late 2010, touts the privatized system as a success story that will only get stronger.

Ok, I was kidding. Inflating the projections is what always happens. It sells the thing. After the reality sets in, you can't undo it, because a contract is in place. The future is always painted as a rosier picture.

I was pleased with the reporting on the opposition.

Democrats weren't the only skeptics of the city's deal with ParkIndy.

Some privatization experts questioned the 50-year length, prompting the addition of an opt-out clause for the city every 10 years. But that option comes with a fee, starting at nearly $20 million and decreasing over time.

Mahern was among vocal critics who noted many large cities have modernized their meters by borrowing or striking shorter-term contracts.

"We should have just worked with a vendor to provide us the service for a fee," he said, "rather than granting somebody an equity stake for what is a basic service."

Just like the toll road, this deal was way too long. Both should have been for 5-10 years, tops. It's too hard to predict the financial picture 10 years down the road, let alone 50. 2061 is a long time to wait to learn if the city sold out cheap. But, eager to get money into the city coffers because revenues are down and spending is sacrosanct, and probably to be seen at least a little like Mitch Daniels, Mayor Ballard got this rushed along.

I'm a huge fan of privatization of services, but deals like this smack of desperation and haste, and tend to give needless fuel to the critics of privatization who would dismiss the practice out of hand.

1 comment:

Doug said...

Not all privatization is created equally. In theory, there is a lot of potential for delivering services more effectively through the pressures of market forces. In practice, too often, privatization is just code for cronyism where highly placed officials transfer government/taxpayer wealth to friends and well-wishers.

Not that I'm under the illusion I'm telling you anything you don't know.