Does the 25th floor really believe we'll buy this load of bullfeathers? This Indianapolis Observer hopes a huge citizen turnout will quash this monster before it's implemented.
Here's the press release, straight from the Mayor's Office (bold face added by yours truly):
INDIANAPOLIS – The City-County Council Rules and Public Policy Committee will continue its review of Mayor Greg Ballard’s parking proposal during their regularly scheduled meeting Tuesday, Sept. 28. The committee will discuss the proposed ordinance and hear updates on the parking modernization effort from Mayor (sic) Michael Huber and Deron Kintner, Indianapolis Bond Bank Executive Director.
WHAT:
Council Rules and Public Policy Committee Meeting
WHERE:
Room 260, City-County Building
WHEN:
Tuesday, Sept. 28
5:30 p.m.
The City has been undergoing a bid process to determine opportunities for efficiencies in the present parking system to include curbside meters and garage parking. On Aug. 20, Mayor Ballard announced the ACS team as the proposed operator of the parking system. If approved by the Council, ACS will provide the City with a $35 million upfront payment, then a continuing stream of revenue from parking meter proceeds and violations. It is anticipated the City will collect approximately $400 million in ongoing revenue share over the length of the agreement as compared to an estimated $37 million if the city were to do nothing.
This innovative public-private partnership will provide a $35 million upfront payment that will be directly invested in improving the City’s infrastructure in the downtown and Broad Ripple areas, along with an increased revenue stream over the life of the agreement. In addition, the proposal will also modernize the City’s parking meters with new meter technology, increase convenience by allowing users to pay with a credit or debit card and spur economic development.
By modernizing the City’s parking system, residents, employees and visitors of downtown and Broad Ripple will have a better parking experience. New multi-space meter technology will enhance quality of life, making parking more convenient for customers by accepting credit cards and increasing available space. Convenience and turnover are key elements of creating a vibrant economic environment.
For more information about the public parking system initiative and to view all submitted proposals, please visit www.indy.gov/parking.
Tuesday, September 28, 2010
Monday, September 27, 2010
Indianapolis to Finance...What?
According to IBJ.com, "An upscale Dolce hotel and 75,000-square-foot YMCA are among the tenants slated for a $150 million mixed-use development being built on 10 acres of land Eli Lilly and Co. owns near its Indianapolis headquarters.
"The development, details of which were announced at a Monday morning news conference, also include plans for 320 high-end apartments and 40,000 square feet of restaurant and retail space.
"The city plans to fund the project by issuing bonds...."
Wait! Hold it right there!
The city? The city plans to fund the project? That means you 'n' me, folks! Why do we want to build a hotel and YMCA for Lilly employees?
We can't even keep our libraries open!
More here and here.
"The development, details of which were announced at a Monday morning news conference, also include plans for 320 high-end apartments and 40,000 square feet of restaurant and retail space.
"The city plans to fund the project by issuing bonds...."
Wait! Hold it right there!
The city? The city plans to fund the project? That means you 'n' me, folks! Why do we want to build a hotel and YMCA for Lilly employees?
We can't even keep our libraries open!
More here and here.
Maybe the Parking Meter Sale Won't Happen?
Fox 59 tried to set up a "Face Off" on the issue of the ACS deal, notes Indy blogger Paul K. Ogden. However, no administration official or council Republican would participate.
Saturday, September 25, 2010
Art in the Garden
When many people think "garden art," they probably think of gazing balls, garden gnomes, wind catchers and plastic flamingos. The Indianapolis Zoo’s Hilbert Conservatory’s new fall show "Art in the Garden" is sure to change this way of thinking. From today through 14 November. Zoo visitors can get into one of the hottest trends in gardening.
For the show, local artists were asked to create original pieces of art based on their interpretation of "art in the garden." Selected pieces are displayed among the plant material and floating throughout the vertical space of the Hilbert Conservatory above visitors’ heads. Imagination knows no limit when it comes to creating pieces that are unique, appropriate for the elements and emblematic of the combination of art and nature.
Zoo visitors can also check out the 3.3 acres of the DeHaan Tiergarten outdoor gardens, which are home to outdoor art pieces such as limestone sculptures, fonts and ponds, hand-cast bronze animals, metal sculptures, interactive limestone art and more.
This event is free for members and included with regular Zoo admission.
The artists who contributed to this show include Matt Warren, Joanie Drizin, Donna Johnson, Mirvia Sol Eckert, Hector Del Campo, Maryellen Cox and Brian Callahan.
For the show, local artists were asked to create original pieces of art based on their interpretation of "art in the garden." Selected pieces are displayed among the plant material and floating throughout the vertical space of the Hilbert Conservatory above visitors’ heads. Imagination knows no limit when it comes to creating pieces that are unique, appropriate for the elements and emblematic of the combination of art and nature.
Zoo visitors can also check out the 3.3 acres of the DeHaan Tiergarten outdoor gardens, which are home to outdoor art pieces such as limestone sculptures, fonts and ponds, hand-cast bronze animals, metal sculptures, interactive limestone art and more.
This event is free for members and included with regular Zoo admission.
The artists who contributed to this show include Matt Warren, Joanie Drizin, Donna Johnson, Mirvia Sol Eckert, Hector Del Campo, Maryellen Cox and Brian Callahan.
Friday, September 24, 2010
Fire Danger Means No Open Burning
Mayor Greg Ballard signed an executive order yesterday banning open burning in Indianapolis and Marion County.
Under the mayor's order, all open burning in Indianapolis and Marion County is prohibited until further notice.
About half of Indiana's 92 counties, including all in the Indianapolis metropolitan area, have adopted burning bans because of the prolonged dry spell.
Under the mayor's order, all open burning in Indianapolis and Marion County is prohibited until further notice.
About half of Indiana's 92 counties, including all in the Indianapolis metropolitan area, have adopted burning bans because of the prolonged dry spell.
Thursday, September 23, 2010
An Evening at the President's Table
“The President’s Table”, a special four-days-only exhibit, opens next Monday at the President Benjamin Harrison House, 1230 North Delaware Street, Indianapolis. Hours from 28 September through 1 October are 10 a.m. to 3:30 p.m. Visitors will view exhibit as part of mansion tours.
The exhibit showcases United States Presidential artifacts from the personal collection of Barry H. Landau, a Presidential historian and author of The President’s Table – Two Hundred Years of Dining & Diplomacy.
Landau will be the featured speaker at “An Evening at The President’s Table” (part of the Mary Tucker Jasper Speaker Series) at 4:30 p.m. 30 September. The reception, dinner and program with Landau takes place at the Harrison Home and the Conrad Indianapolis.
Recognized as one of America’s foremost experts on the Presidency and White House protocol, Landau will regale guests with stories of the rich, famous and politically connected at this special fund-raising event. Reservations are required; call 317:631-1888.
The exhibit showcases United States Presidential artifacts from the personal collection of Barry H. Landau, a Presidential historian and author of The President’s Table – Two Hundred Years of Dining & Diplomacy.
Landau will be the featured speaker at “An Evening at The President’s Table” (part of the Mary Tucker Jasper Speaker Series) at 4:30 p.m. 30 September. The reception, dinner and program with Landau takes place at the Harrison Home and the Conrad Indianapolis.
Recognized as one of America’s foremost experts on the Presidency and White House protocol, Landau will regale guests with stories of the rich, famous and politically connected at this special fund-raising event. Reservations are required; call 317:631-1888.
Saturday, September 18, 2010
Friday, September 17, 2010
Durham Faces Foreclosure
JPMorgan Chase has slapped embattled financier Tim Durham with a mortgage-foreclosure suit, and is asking a court to order his Geist mansion sold through a sheriff’s sale, reports Greg Andrews at IBJ.com.
The New York-based banking company said Durham stopped making payments this spring on a $3.5 million mortgage he took out in 2007. Because the mortgage runs 30 years, Durham had barely made a dent in the principal, despite required monthly payments of $18,329.
The New York-based banking company said Durham stopped making payments this spring on a $3.5 million mortgage he took out in 2007. Because the mortgage runs 30 years, Durham had barely made a dent in the principal, despite required monthly payments of $18,329.
Thursday, September 16, 2010
Plowman (Finally) Indicted
Former Indianapolis and Marion County, Ind., City-County Councilman Lincoln Plowman has been charged with attempted extortion and soliciting a bribe, announced Assistant Attorney General Lanny A. Breuer for the Criminal Division and U.S. Attorney Timothy M. Morrison of the Southern District of Indiana.
The indictment, returned by a federal grand jury in the Southern District of Indiana, alleges that between 11 August 2009 and 22 December2009, while a member of the City-County Council, Plowman solicited an undercover FBI agent to pay $5,000 in cash and to make a $1,000 campaign contribution for Plowman’s benefit. In exchange for the payments, Plowman allegedly would use his official actions and influence to facilitate the opening of a strip club in Indianapolis. According to the indictment, Plowman was a member of the Metropolitan Development Committee of the City-County Council. He was also a major with the Indianapolis Metropolitan Police Department.
The indictment, returned by a federal grand jury in the Southern District of Indiana, alleges that between 11 August 2009 and 22 December2009, while a member of the City-County Council, Plowman solicited an undercover FBI agent to pay $5,000 in cash and to make a $1,000 campaign contribution for Plowman’s benefit. In exchange for the payments, Plowman allegedly would use his official actions and influence to facilitate the opening of a strip club in Indianapolis. According to the indictment, Plowman was a member of the Metropolitan Development Committee of the City-County Council. He was also a major with the Indianapolis Metropolitan Police Department.
Wednesday, September 15, 2010
Moving Forward in Indiana
"Moving Forward in Indiana: The Facts on Mass Transit and the Impact on Real Estate Development" takes place from 4 to 7 p.m. tomorrow at of Kite Realty Group Trust, 30 South Meridian Street, Indianapolis. It's sponsored by the Urban Land Institute Indiana.
Speakers are Bob Dunphy, transportation consultant and emeritus fellow, Urban Land Institute, and Ehren Bingaman, executive director, Central Indiana Regional Transportation Authority.
Registration information is online. Information: Rebecca Wagner, 317:663-4806.
The Urban Land Institute is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use.
Speakers are Bob Dunphy, transportation consultant and emeritus fellow, Urban Land Institute, and Ehren Bingaman, executive director, Central Indiana Regional Transportation Authority.
Registration information is online. Information: Rebecca Wagner, 317:663-4806.
The Urban Land Institute is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use.
Tuesday, September 14, 2010
Library Cutbacks Start Next Month
According to IBJ.com, the Indianapolis-Marion County Public Library will close the Central Library on Thursdays and reduce hours at all branches by a collective 26 percent to help reduce a projected $4 million revenue shortfall next year, it announced Tuesday.
The cutback in hours, effective 3 October, should help save about $1.5 million and keep all branches open in 2011, library officials said.
Of course, this is at the same time the city is giving the Pacers $1.6 million for a new scoreboard. (see this)
Why is this Indianapolis Observer not surprised?
What's more important to Indy, after all!
The cutback in hours, effective 3 October, should help save about $1.5 million and keep all branches open in 2011, library officials said.
Of course, this is at the same time the city is giving the Pacers $1.6 million for a new scoreboard. (see this)
Why is this Indianapolis Observer not surprised?
What's more important to Indy, after all!
Sunday, September 12, 2010
Daniels to Run for President?
According to Newsweek, Indiana governor Mitch Daniels is ready to run for the GOP presidential nod.
Friday, September 10, 2010
Collegiate Energy Summit in Indy
The second annual Collegiate Energy Summit will be held from 10 a.m. to 4:30 p.m. 17 September at the Indianapolis Museum of Art, 4000 Michigan Road, Indianapolis. It's hosted by Sen. Richard G. Lugar (R.-Ind.)
It is designed to engage, motivate and encourage collegiate student leaders in efforts to make a difference in America’s energy security. Through workshops run by student, community and business leaders, the event offers opportunities for students to learn from one another’s efforts to organize campus clubs, undertake energy and environmental activities on campus and in their communities, and learn about energy policy and technology.
The Summit is open to all Indiana college students and is free of charge. To ensure adequate space, students are encouraged to register by 15 September. Walk-up registration is also available beginning at 9:15 a.m. 17 September at the IMA.
There's more information online.
It is designed to engage, motivate and encourage collegiate student leaders in efforts to make a difference in America’s energy security. Through workshops run by student, community and business leaders, the event offers opportunities for students to learn from one another’s efforts to organize campus clubs, undertake energy and environmental activities on campus and in their communities, and learn about energy policy and technology.
The Summit is open to all Indiana college students and is free of charge. To ensure adequate space, students are encouraged to register by 15 September. Walk-up registration is also available beginning at 9:15 a.m. 17 September at the IMA.
There's more information online.
Thursday, September 9, 2010
Indy’s “Son of Chicago” Parking Meter Lease to Be a Disaster for City
The next couple of generations will pay the price…It’s despicable, the way it went down…I don’t think the aldermen understood the long-term consequences of what they did. – Chicago Ald. Scott Waguespack
These deals are rarely done under the bright light of public scrutiny. Often the facts come out long after the deal is done. – Richard Little, Director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California
Note: This is republished from The Urbanophile.
I previously explained why signing a long term lease on parking meters was a bad public policy idea. Today I’ll show the practical dangers, using the Indianapolis example as a cautionary tale of how a parking meter lease can go wrong and turn into a civic fiasco. Even if you don’t live in Indy, this is relevant to you as your city is likely looking at privatizing parking or other services where these are things to look out for.
I’m not in Indy anymore, so perhaps this should be of no concern to me. But when I see something so terrible about to befall a place I care about, I have to say something. The deal Indy is signing with its vendor (ACS) is so bad and so one-sided, it almost defies comprehension.
Parking Meters Will Be a Cash Register That Never Stops Ringing for the Vendor
The first and most fundamental question is why the city needs to pay a third party vendor so much for something as basic as running a parking meter system. The city says it will get $400 million under this contract. The Indianapolis Business Journal estimated that the vendor would get between $724 million and $1.2 billion. How much of that is profit to the vendor? No one will ever know since according to the contract, the city is specifically barred from learning anything about the cost or profitability of the system, and any information it does get from the vendor has to be treated as confidential with the city’s people signing non-disclosure agreements, unless the law compels otherwise. The city has said the vendor’s profits are no concern of theirs.
But let’s do the math for ourselves to take a quick look. According to Schedule 9 of the concession contract, the operations of the parking system only costs the city $844K/year right now. That’s not very much, and shows that whatever efficiencies might be gained, they won’t be big dollars in the grand scheme of things. Let’s assume this remains constant in real dollars, and inflates at the same 2.5% rate used in the contract. According to this presentation from the city (slide 50), it will cost $7 million to upgrade the system to pay and display and such. So let’s also assume the vendor has to pay that $7 million in capital every ten years, also adjusted for inflation. That adds up to about $82M in operating expenses and $61M in capital expenses for a total cash outlay of $143M.
On a pre-tax basis, this deal is almost pure profit for the vendor, adding up to between ~$600 million and ~$1.1 billion, or a potential profit margin of almost 90% in the high scenario.
The totals would need to be discounted back to find the present value of the profits, but it is very clear that the city is giving away a huge chunk of the system profit. And for what? Collecting quarters out of meters? Doing basic maintenance? Writing tickets? These could easily be obtained on the open market on a simple service contract basis. Denison Parking does the job today in fact, and I haven’t heard complaints. The vendor is assuming Denison’s contract, so why is the city forking over all this money again?
The Timing and Approach Is Flawed
Indy is signing a 50 year deal in a terrible market. We are in the middle of the worst recession since the Great Depression. Are asset values likely to be high or low now? It’s obvious. Is now a good time to be selling a house? Clearly not, so why would be it a good time to do a 50 year sale of parking meters? The Toll Road lease was masterfully done at the peak of the bubble. The city is under no pressure to do a deal, but is selling at a time when it will only get fire sale prices.
Also, it does not appear the city engaged an independent financial advisor to look at the deal from the public’s perspective, repeating a key failure in the Chicago lease process. The Chicago Reader noted a Chicago Inspector General’s report critical of that city’s deal: “In its damning report on the agreement, the inspector general’s office concluded that the city may have leased the meters for $974 million less than they were worth. The reason, the report concluded, was that William Blair’s calculations of the system’s value were all done from the perspective of an investor—they were based on what that investor might be willing and able to pay for the meters, not what their value was to the city.”
No financial advisor other than Morgan Stanley (which is in William Blair’s role on the Indy deal) was listed on the city’s parking web site or in a presentation (slide 58) listing the city’s team members. By contrast, Pittsburgh not only hired Morgan Stanley as an investment bank, they hired Scott Balice Strategies as an independent advisor to represent the city’s interests.
Incidentally, Morgan Stanley is the concession holder on the Chicago lease deal. They appear to have fleeced that city. Don’t take my word for it, read the independent financial press, such as this Bloomberg piece, “Morgan Stanley’s $11 Billion Makes Chicago Taxpayers Cry” or in the New York Times: “Company [Morgan Stanley] Piles Up Profits from City’s Parking Meter Deal.” This should be raising major questions about their role in the Indy deal.
The Contract Is Unconscionably Awful for the City
I also read the entire concession agreement. While I’m not a lawyer, I’ve negotiated multi-million contracts on both sides of the table and actually used to work in the outsourcing business, so I’m extremely familiar with the issues from a corporate perspective. I would certainly encourage anyone to do their own due diligence and study this for themselves, but even if I’m wrong on a few of these, the overall thrust is almost surely accurate.
Among my findings:
1. This is the Chicago parking meter lease.The city has said this deal is very different from Chicago’s notorious parking meter lease. But what they didn’t tell you is that not only is this very much like Chicago’s, it’s literally the exact same contract. That’s right, Indy took the Chicago contract, did a Save As, and tweaked it. Check for yourself. Indy’s deal is here and Chicago’s is here. Given that Chicago’s deal is famously one-sided, this is mind-boggling. I estimate that the majority of the two contracts are word for word identical. This tidbit – “the foregoing sentence shall be interpreted and applied in a manner most favorable to the Concessionaire” – gives you a flavor of how the thing goes. And where Indy’s differs, it is often even worse. I never would have believed that possible.
2. The city has no right to terminate the agreement. The contract for this 50 year deal explicitly states: “The City hereby acknowledges and agrees that it may only terminate this Agreement in accordance with the express terms hereof and shall not, in any event, have the right to terminate this Agreement for convenience.” (Section 16.1). The city can only terminate the deal if the vendor defaults, which is virtually impossible. In a deal like Chicago’s meter lease or the Toll Road, where the only payment the government gets is a lump sum up front fee, perhaps there’s some logic in not allowing the deal to be terminated. But with a very modest $35 million up front fee (compared to a deal value of over $1 billion) and with a needed up front investment of only $7 million (according to the city), it’s unconscionable to not have the right to terminate. The citizens of Indianapolis with be irrevocably locked into a terrible deal for more than a generation – and for very little upfront cash.
3. Penalties are often higher than the actual meter value. One aspect of the Chicago deal that was heavily criticized is that when the city shuts down meters, it has to pay a penalty that assumes the meters were fully occupied at all times, regardless of how much they are normally occupied. Believe it or not, Indy even upped the game here. In two out of the four zones, the penalty for closing the meter is more than if the meter is 100% occupied. The closure fee is $15 for Zone 2 & 3, increasing with inflation. But fully increased rate for Zone 2 is $1 an hour for 13 hours a day – you do the math. It’s only $1 an hour for 11 hours a day in Zone 3. Those meters are literally worth more to the vendor bagged than they could ever be operational. These penalties have to be paid regardless of the actual average utilization of those meters. The penalty for the other two zones ($20) is just shy of the theoretical maximum, but still way too high. (See Definitions, “Temporary Closure Fee” and Schedule 5).
4. The vendor gets the rights to collect parking ticket revenue and sell advertising and naming rights. In the Chicago deal, the city gets all of the money for tickets, and retains all the rights and money for advertising and naming rights for itself. In the Indy deal, the vendor gets these rights, though the city has to approve the specifics of advertising. What is an advertising concession for thousands of locations downtown worth? It could easily be more than the meters themselves. This should have been bid to major outdoor advertising firms in an open process to maximize city revenue, not thrown into the parking meter deal, assuming festooning downtown with ads is something you want to do in the first place.
5. Residential permit parking is coming to Broad Ripple. The city says it plans to use the meter proceeds to build a new garage in Broad Ripple. Broad Ripple is Zone 4, and the contract says, “In the event the City builds a public parking garage in Zone 4 during the Term, the City will agree to institute a Residential Permit program for non-metered parking spaces in and around Zone 4 to be administered by the Concessionaire on terms mutually agreeable to the Parties.” Did you know that? The city is contractually obligating itself to specific permit parking policies in that neighborhood. Now perhaps permit parking’s not a terrible idea, but isn’t it something that should be vetted through the normal political process? And be subject to change over time, not locked in for 50 years?
Outside of Broad Ripple, the city has actually limited its ability to establish residential permit parking zones. Per the contract: “The City reserves the right to designate certain on-street parking that are not Metered Parking Spaces as residential parking requiring a Residential Permit, provided that such designation does not materially effect the Metered Parking System in the surrounding area.” How nice of the vendor to agree to this. If it does affect the vendor, they are entitled to compensation. Also, if the city does establish permit parking, the vendor gets to run that too – including getting the revenue from parking tickets.
6. The vendor even gets revenue from tickets written by IPD or other city agents. The vendor has the right to write tickets on the system, but the city also has the rights. And even if the city writes the tickets, the vendor still gets the money: “The Concessionaire shall have the exclusive right to collect and retain all Parking Violation Revenue during the Term in accordance with Enforcement Policies and Procedures, regardless of whether such Parking Violation Revenue resulted from Parking Enforcement conducted by the Enforcement Operator or the City’s designated law enforcement officers.”
The city retains the cost of adjudicating parking tickets, however. It does get to judge the validity of tickets, but disturbingly, the contract actually specifies the judicial outcomes it expects: “The City shall remain responsible for the adjudication related to the Parking Enforcement; provided that such adjudication shall be consistent with the historical practices of the City, including a consistent level of parking tickets that are dismissed or appealed.”
Incredibly, the city even owes money to the vendor if the public starts appealing tickets at a rate more than 30% more than currently, regardless of whether the appeals have merit or not (Section 7.8). It’s considered a “Compensation Event.”
Add this up and what it means is the vendor can write tickets, gets to have the revenue counted to it (minus the revenue share), and if the vendor just starts writing bogus tickets to inflate its own revenues, and the public protests them, the vendor gets even more money. That’s right, the vendor can literally print money for itself simply by writing as many tickets as it feels like.
Another hugely risky item. One other change from the Chicago deal is that the city is agreeing to indemnify the vendor against any court ruling that the vendor can’t write tickets or collect parking ticket revenue (Section 12.2). Someone is challenging the Chicago lease by saying that since the city transferred the meters by bill of sale (just like Indy), it’s a private business now and the city’s police powers can’t be used to enforce parking rules for the benefit of a private company. I believe this is still being litigated. I’m not sure what the law would be in Indiana, but if similar claims were raised and ended up being successful, the city could be on the hook for possibly hundreds of millions of dollars.
7. The vendor automatically gets the right to any new meters, but the city has to pay to remove any meters. In the Chicago deal, the city has to negotiate with the existing vendor for new meters outside the existing concession area, but is free to take its business elsewhere if the vendor won’t match what a competitor would offer. In Indy, any new meters are automatically enrolled in the new deal. (Section 7.7) I didn’t see where this was limited to the four specified zones, so it might in fact apply to any meter in the city.
However, if the city removes a meter, they have to pay a meter removal fee. In the first year, this is $15,400 per meter in Zone 1. I didn’t see any provision for offsetting adds and removes, meaning if the city adds three meters and removes one, the vendor gets the three new ones automatically and the city is still on the hook to pay for the one they removed. What’s more, the city is also on the hook for any lost parking ticket revenue the vendor would have gotten off that space too.
To show how one-sided this deal is, if the city adds more than 10% new meters, the vendor actually has the right to reject them. That doesn’t mean that the city can take its business elsewhere though. Rather, it puts them into a special category where the vendor runs them, but the city is responsible for the costs of setting them up (Section 7.7). That hardly sounds like what we’ve been told that all the risk is outsourced. By the way, Chicago has these types of meters too, but the vendor is only entitled to a 15% management fee for them, whereas in the Indy deal, they get a full revenue share.
8. Temporary closure policies are worse than Chicago’s. There’s a cost associated with closing meters for more than a very small temporary closure allowance. The Indianapolis closure allowance is worse than Chicago’s. In Chicago’s system, closures of six hours or more are treated as an entire day while those less than six hours are ignored. In Indy, anything greater than four hours is treated as a full day closure. In Chicago, Central Business District meters can be closed under the contract for up to 8% of the days without penalty. In Indy it is only 6% (see Definitions, “Temporary Closure Allowance”).
9. Will festival and events organizers see new fees? Section 7.6 says, “the Concessionaire shall charge, collect and retain the applicable Temporary Closure Fee from any Person (other than the City), in advance, in respect of any Temporary Closure requested by such Person.” What this sounds like to me is that if anyone other than the city wants to shut down meters, they’ve got to pay the vendor, and pay in advance. Does this mean anyone who wants to hold a festival or event downtown – even on a Saturday, since meters need to be fed then under the new contract – will have to pay this parking fee? And since the city has a revenue share, is this a stealth tax on those events? It’s not clear to me, but the contract explicitly says valet parking operators have to pay up.
10. Even the city has to pay to use the spots. As part of this program, all city issued parking placards are cancelled (Section 3.19). Now clearly this program has been abused in the past, but it seems legitimate that city vehicles on official business should be able to park on the city’s own streets for free. But I couldn’t find any provision of the deal that allows city owned vehicles to be parked in these spots for free even on city business, other than emergency response vehicles during an actual emergency. The contract does talk about an “employee parking program”, but the city or the employees will be paying for it. This is even more revenue for the vendor.
I could go on and on, but these are the highlights and should establish pretty clearly how bad this contract is for the city. It’s one of the worst I’ve ever seen. Even the Force Majeure clause is one way and only provides an out for the vendor, not the city.
An All Around Bad Deal
I’ll again reiterate that this deal is simply bad public policy. Because none of the parameters of parking policy can be changed unless they make the vendor even richer, the city has de facto frozen its parking policy for 50 years. This even applies to areas people probably have no idea of, like requiring permit parking in Broad Ripple.
An example. Imagine the city wanted to take 20% of its metered spots and replace them with electric car charging stations, making them free and reserved for electric vehicles in order to encourage that transition? Can’t do it. (If the city did that, it might fall afoul of the even worse Adverse Action clause I didn’t get around to).
Another example: Maybe the city decides it wants to close Monument Circle (or any other street) to traffic after all. It can’t do it without paying a big fee, both for the directly impaired meters, and for obstructing access to other meters, which the contract forbids the city to do.
The list goes on and on. We have no idea what the world will be like in 10 years, much less 50. This isn’t something like a water system where all it is really useful for is delivering water and it is pretty reasonable to assume we’ll still want plenty of safe, clean water tomorrow. This is general purpose real estate. This is one of the most precious assets of any city – its public space – a policy area that is experiencing rapid innovation. In fact, Indy is on the forefront of that with the Cultural Trail – but perhaps no longer. No matter what the contract might say, this is a de facto ground lease on the streets of downtown and Broad Ripple.
But beyond bad policy, again, it would appear given even a casual analysis to be a terrible financial deal for the city. And the market timing couldn’t be worse in the teeth of the Great Recession. And the contract is an unmitigated disaster.
If the City County County votes to approve this deal, the city will regret it for decades to come, just like Chicago. I hope city leaders see this and change course before it’s too late.
Published: Tuesday, 7 September 2010
SOURCE: http://www.urbanophile.com/2010/09/07/indys-son-of-chicago-parking-meter-lease-to-be-a-disaster-for-city/
These deals are rarely done under the bright light of public scrutiny. Often the facts come out long after the deal is done. – Richard Little, Director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California
Note: This is republished from The Urbanophile.
I previously explained why signing a long term lease on parking meters was a bad public policy idea. Today I’ll show the practical dangers, using the Indianapolis example as a cautionary tale of how a parking meter lease can go wrong and turn into a civic fiasco. Even if you don’t live in Indy, this is relevant to you as your city is likely looking at privatizing parking or other services where these are things to look out for.
I’m not in Indy anymore, so perhaps this should be of no concern to me. But when I see something so terrible about to befall a place I care about, I have to say something. The deal Indy is signing with its vendor (ACS) is so bad and so one-sided, it almost defies comprehension.
Parking Meters Will Be a Cash Register That Never Stops Ringing for the Vendor
The first and most fundamental question is why the city needs to pay a third party vendor so much for something as basic as running a parking meter system. The city says it will get $400 million under this contract. The Indianapolis Business Journal estimated that the vendor would get between $724 million and $1.2 billion. How much of that is profit to the vendor? No one will ever know since according to the contract, the city is specifically barred from learning anything about the cost or profitability of the system, and any information it does get from the vendor has to be treated as confidential with the city’s people signing non-disclosure agreements, unless the law compels otherwise. The city has said the vendor’s profits are no concern of theirs.
But let’s do the math for ourselves to take a quick look. According to Schedule 9 of the concession contract, the operations of the parking system only costs the city $844K/year right now. That’s not very much, and shows that whatever efficiencies might be gained, they won’t be big dollars in the grand scheme of things. Let’s assume this remains constant in real dollars, and inflates at the same 2.5% rate used in the contract. According to this presentation from the city (slide 50), it will cost $7 million to upgrade the system to pay and display and such. So let’s also assume the vendor has to pay that $7 million in capital every ten years, also adjusted for inflation. That adds up to about $82M in operating expenses and $61M in capital expenses for a total cash outlay of $143M.
On a pre-tax basis, this deal is almost pure profit for the vendor, adding up to between ~$600 million and ~$1.1 billion, or a potential profit margin of almost 90% in the high scenario.
The totals would need to be discounted back to find the present value of the profits, but it is very clear that the city is giving away a huge chunk of the system profit. And for what? Collecting quarters out of meters? Doing basic maintenance? Writing tickets? These could easily be obtained on the open market on a simple service contract basis. Denison Parking does the job today in fact, and I haven’t heard complaints. The vendor is assuming Denison’s contract, so why is the city forking over all this money again?
The Timing and Approach Is Flawed
Indy is signing a 50 year deal in a terrible market. We are in the middle of the worst recession since the Great Depression. Are asset values likely to be high or low now? It’s obvious. Is now a good time to be selling a house? Clearly not, so why would be it a good time to do a 50 year sale of parking meters? The Toll Road lease was masterfully done at the peak of the bubble. The city is under no pressure to do a deal, but is selling at a time when it will only get fire sale prices.
Also, it does not appear the city engaged an independent financial advisor to look at the deal from the public’s perspective, repeating a key failure in the Chicago lease process. The Chicago Reader noted a Chicago Inspector General’s report critical of that city’s deal: “In its damning report on the agreement, the inspector general’s office concluded that the city may have leased the meters for $974 million less than they were worth. The reason, the report concluded, was that William Blair’s calculations of the system’s value were all done from the perspective of an investor—they were based on what that investor might be willing and able to pay for the meters, not what their value was to the city.”
No financial advisor other than Morgan Stanley (which is in William Blair’s role on the Indy deal) was listed on the city’s parking web site or in a presentation (slide 58) listing the city’s team members. By contrast, Pittsburgh not only hired Morgan Stanley as an investment bank, they hired Scott Balice Strategies as an independent advisor to represent the city’s interests.
Incidentally, Morgan Stanley is the concession holder on the Chicago lease deal. They appear to have fleeced that city. Don’t take my word for it, read the independent financial press, such as this Bloomberg piece, “Morgan Stanley’s $11 Billion Makes Chicago Taxpayers Cry” or in the New York Times: “Company [Morgan Stanley] Piles Up Profits from City’s Parking Meter Deal.” This should be raising major questions about their role in the Indy deal.
The Contract Is Unconscionably Awful for the City
I also read the entire concession agreement. While I’m not a lawyer, I’ve negotiated multi-million contracts on both sides of the table and actually used to work in the outsourcing business, so I’m extremely familiar with the issues from a corporate perspective. I would certainly encourage anyone to do their own due diligence and study this for themselves, but even if I’m wrong on a few of these, the overall thrust is almost surely accurate.
Among my findings:
1. This is the Chicago parking meter lease.The city has said this deal is very different from Chicago’s notorious parking meter lease. But what they didn’t tell you is that not only is this very much like Chicago’s, it’s literally the exact same contract. That’s right, Indy took the Chicago contract, did a Save As, and tweaked it. Check for yourself. Indy’s deal is here and Chicago’s is here. Given that Chicago’s deal is famously one-sided, this is mind-boggling. I estimate that the majority of the two contracts are word for word identical. This tidbit – “the foregoing sentence shall be interpreted and applied in a manner most favorable to the Concessionaire” – gives you a flavor of how the thing goes. And where Indy’s differs, it is often even worse. I never would have believed that possible.
2. The city has no right to terminate the agreement. The contract for this 50 year deal explicitly states: “The City hereby acknowledges and agrees that it may only terminate this Agreement in accordance with the express terms hereof and shall not, in any event, have the right to terminate this Agreement for convenience.” (Section 16.1). The city can only terminate the deal if the vendor defaults, which is virtually impossible. In a deal like Chicago’s meter lease or the Toll Road, where the only payment the government gets is a lump sum up front fee, perhaps there’s some logic in not allowing the deal to be terminated. But with a very modest $35 million up front fee (compared to a deal value of over $1 billion) and with a needed up front investment of only $7 million (according to the city), it’s unconscionable to not have the right to terminate. The citizens of Indianapolis with be irrevocably locked into a terrible deal for more than a generation – and for very little upfront cash.
3. Penalties are often higher than the actual meter value. One aspect of the Chicago deal that was heavily criticized is that when the city shuts down meters, it has to pay a penalty that assumes the meters were fully occupied at all times, regardless of how much they are normally occupied. Believe it or not, Indy even upped the game here. In two out of the four zones, the penalty for closing the meter is more than if the meter is 100% occupied. The closure fee is $15 for Zone 2 & 3, increasing with inflation. But fully increased rate for Zone 2 is $1 an hour for 13 hours a day – you do the math. It’s only $1 an hour for 11 hours a day in Zone 3. Those meters are literally worth more to the vendor bagged than they could ever be operational. These penalties have to be paid regardless of the actual average utilization of those meters. The penalty for the other two zones ($20) is just shy of the theoretical maximum, but still way too high. (See Definitions, “Temporary Closure Fee” and Schedule 5).
4. The vendor gets the rights to collect parking ticket revenue and sell advertising and naming rights. In the Chicago deal, the city gets all of the money for tickets, and retains all the rights and money for advertising and naming rights for itself. In the Indy deal, the vendor gets these rights, though the city has to approve the specifics of advertising. What is an advertising concession for thousands of locations downtown worth? It could easily be more than the meters themselves. This should have been bid to major outdoor advertising firms in an open process to maximize city revenue, not thrown into the parking meter deal, assuming festooning downtown with ads is something you want to do in the first place.
5. Residential permit parking is coming to Broad Ripple. The city says it plans to use the meter proceeds to build a new garage in Broad Ripple. Broad Ripple is Zone 4, and the contract says, “In the event the City builds a public parking garage in Zone 4 during the Term, the City will agree to institute a Residential Permit program for non-metered parking spaces in and around Zone 4 to be administered by the Concessionaire on terms mutually agreeable to the Parties.” Did you know that? The city is contractually obligating itself to specific permit parking policies in that neighborhood. Now perhaps permit parking’s not a terrible idea, but isn’t it something that should be vetted through the normal political process? And be subject to change over time, not locked in for 50 years?
Outside of Broad Ripple, the city has actually limited its ability to establish residential permit parking zones. Per the contract: “The City reserves the right to designate certain on-street parking that are not Metered Parking Spaces as residential parking requiring a Residential Permit, provided that such designation does not materially effect the Metered Parking System in the surrounding area.” How nice of the vendor to agree to this. If it does affect the vendor, they are entitled to compensation. Also, if the city does establish permit parking, the vendor gets to run that too – including getting the revenue from parking tickets.
6. The vendor even gets revenue from tickets written by IPD or other city agents. The vendor has the right to write tickets on the system, but the city also has the rights. And even if the city writes the tickets, the vendor still gets the money: “The Concessionaire shall have the exclusive right to collect and retain all Parking Violation Revenue during the Term in accordance with Enforcement Policies and Procedures, regardless of whether such Parking Violation Revenue resulted from Parking Enforcement conducted by the Enforcement Operator or the City’s designated law enforcement officers.”
The city retains the cost of adjudicating parking tickets, however. It does get to judge the validity of tickets, but disturbingly, the contract actually specifies the judicial outcomes it expects: “The City shall remain responsible for the adjudication related to the Parking Enforcement; provided that such adjudication shall be consistent with the historical practices of the City, including a consistent level of parking tickets that are dismissed or appealed.”
Incredibly, the city even owes money to the vendor if the public starts appealing tickets at a rate more than 30% more than currently, regardless of whether the appeals have merit or not (Section 7.8). It’s considered a “Compensation Event.”
Add this up and what it means is the vendor can write tickets, gets to have the revenue counted to it (minus the revenue share), and if the vendor just starts writing bogus tickets to inflate its own revenues, and the public protests them, the vendor gets even more money. That’s right, the vendor can literally print money for itself simply by writing as many tickets as it feels like.
Another hugely risky item. One other change from the Chicago deal is that the city is agreeing to indemnify the vendor against any court ruling that the vendor can’t write tickets or collect parking ticket revenue (Section 12.2). Someone is challenging the Chicago lease by saying that since the city transferred the meters by bill of sale (just like Indy), it’s a private business now and the city’s police powers can’t be used to enforce parking rules for the benefit of a private company. I believe this is still being litigated. I’m not sure what the law would be in Indiana, but if similar claims were raised and ended up being successful, the city could be on the hook for possibly hundreds of millions of dollars.
7. The vendor automatically gets the right to any new meters, but the city has to pay to remove any meters. In the Chicago deal, the city has to negotiate with the existing vendor for new meters outside the existing concession area, but is free to take its business elsewhere if the vendor won’t match what a competitor would offer. In Indy, any new meters are automatically enrolled in the new deal. (Section 7.7) I didn’t see where this was limited to the four specified zones, so it might in fact apply to any meter in the city.
However, if the city removes a meter, they have to pay a meter removal fee. In the first year, this is $15,400 per meter in Zone 1. I didn’t see any provision for offsetting adds and removes, meaning if the city adds three meters and removes one, the vendor gets the three new ones automatically and the city is still on the hook to pay for the one they removed. What’s more, the city is also on the hook for any lost parking ticket revenue the vendor would have gotten off that space too.
To show how one-sided this deal is, if the city adds more than 10% new meters, the vendor actually has the right to reject them. That doesn’t mean that the city can take its business elsewhere though. Rather, it puts them into a special category where the vendor runs them, but the city is responsible for the costs of setting them up (Section 7.7). That hardly sounds like what we’ve been told that all the risk is outsourced. By the way, Chicago has these types of meters too, but the vendor is only entitled to a 15% management fee for them, whereas in the Indy deal, they get a full revenue share.
8. Temporary closure policies are worse than Chicago’s. There’s a cost associated with closing meters for more than a very small temporary closure allowance. The Indianapolis closure allowance is worse than Chicago’s. In Chicago’s system, closures of six hours or more are treated as an entire day while those less than six hours are ignored. In Indy, anything greater than four hours is treated as a full day closure. In Chicago, Central Business District meters can be closed under the contract for up to 8% of the days without penalty. In Indy it is only 6% (see Definitions, “Temporary Closure Allowance”).
9. Will festival and events organizers see new fees? Section 7.6 says, “the Concessionaire shall charge, collect and retain the applicable Temporary Closure Fee from any Person (other than the City), in advance, in respect of any Temporary Closure requested by such Person.” What this sounds like to me is that if anyone other than the city wants to shut down meters, they’ve got to pay the vendor, and pay in advance. Does this mean anyone who wants to hold a festival or event downtown – even on a Saturday, since meters need to be fed then under the new contract – will have to pay this parking fee? And since the city has a revenue share, is this a stealth tax on those events? It’s not clear to me, but the contract explicitly says valet parking operators have to pay up.
10. Even the city has to pay to use the spots. As part of this program, all city issued parking placards are cancelled (Section 3.19). Now clearly this program has been abused in the past, but it seems legitimate that city vehicles on official business should be able to park on the city’s own streets for free. But I couldn’t find any provision of the deal that allows city owned vehicles to be parked in these spots for free even on city business, other than emergency response vehicles during an actual emergency. The contract does talk about an “employee parking program”, but the city or the employees will be paying for it. This is even more revenue for the vendor.
I could go on and on, but these are the highlights and should establish pretty clearly how bad this contract is for the city. It’s one of the worst I’ve ever seen. Even the Force Majeure clause is one way and only provides an out for the vendor, not the city.
An All Around Bad Deal
I’ll again reiterate that this deal is simply bad public policy. Because none of the parameters of parking policy can be changed unless they make the vendor even richer, the city has de facto frozen its parking policy for 50 years. This even applies to areas people probably have no idea of, like requiring permit parking in Broad Ripple.
An example. Imagine the city wanted to take 20% of its metered spots and replace them with electric car charging stations, making them free and reserved for electric vehicles in order to encourage that transition? Can’t do it. (If the city did that, it might fall afoul of the even worse Adverse Action clause I didn’t get around to).
Another example: Maybe the city decides it wants to close Monument Circle (or any other street) to traffic after all. It can’t do it without paying a big fee, both for the directly impaired meters, and for obstructing access to other meters, which the contract forbids the city to do.
The list goes on and on. We have no idea what the world will be like in 10 years, much less 50. This isn’t something like a water system where all it is really useful for is delivering water and it is pretty reasonable to assume we’ll still want plenty of safe, clean water tomorrow. This is general purpose real estate. This is one of the most precious assets of any city – its public space – a policy area that is experiencing rapid innovation. In fact, Indy is on the forefront of that with the Cultural Trail – but perhaps no longer. No matter what the contract might say, this is a de facto ground lease on the streets of downtown and Broad Ripple.
But beyond bad policy, again, it would appear given even a casual analysis to be a terrible financial deal for the city. And the market timing couldn’t be worse in the teeth of the Great Recession. And the contract is an unmitigated disaster.
If the City County County votes to approve this deal, the city will regret it for decades to come, just like Chicago. I hope city leaders see this and change course before it’s too late.
Published: Tuesday, 7 September 2010
SOURCE: http://www.urbanophile.com/2010/09/07/indys-son-of-chicago-parking-meter-lease-to-be-a-disaster-for-city/
Wednesday, September 8, 2010
Bayh Aims to Replace Daniels?
Expect Sen. Evan Bayh to announce a run for governor after the first of the year.
Tuesday, September 7, 2010
"It's About the Superbowl, Stupid!"
Paul K. Odgen points out that the emperor has no clothes: "the Mayor wants to mortgage the next fifty years to get upfront cash so the City looks nice and presentable for one football game."
Saturday, September 4, 2010
Odd Indiana
Well, yeah, this Indianapolis Observer knows that the Hoosier state is, ummmm, odd, but this is a horse of a different color.
An exhibit titled "Odd Indiana" opened today (4 September) in the Indiana State Museum in White River State Park, downtown Indianapolis, and runs through 12 February 2012.
Here's what the press release says: "Put on your history detective hat and get ready for a hair-raising experience investigating the baffling and amusing aspects of the Hoosier state. Odd Indiana features objects selected from the museum’s own collections that are oddities, rarities or commonplace things with intriguing stories. Over 50 unusual items that represent science and culture reveal the museum’s collecting activities over the past 100 plus years."
There's even an online quiz to get you in the mood. How many of these oddities can you identify?
An exhibit titled "Odd Indiana" opened today (4 September) in the Indiana State Museum in White River State Park, downtown Indianapolis, and runs through 12 February 2012.
Here's what the press release says: "Put on your history detective hat and get ready for a hair-raising experience investigating the baffling and amusing aspects of the Hoosier state. Odd Indiana features objects selected from the museum’s own collections that are oddities, rarities or commonplace things with intriguing stories. Over 50 unusual items that represent science and culture reveal the museum’s collecting activities over the past 100 plus years."
There's even an online quiz to get you in the mood. How many of these oddities can you identify?
Friday, September 3, 2010
Politics 101
"Ballard has spent his time in office alienating conservative Republicans by raising taxes and fees at every opportunity."
So sez Paul K. Ogden in his blog today.
Agree or disagree?
So sez Paul K. Ogden in his blog today.
Agree or disagree?
Thursday, September 2, 2010
Delayed Trash Pick Up Next Week
There's no residential trash, heavy trash, or curbside recycling service on 6 September, otherwise known as Labor Day this year.
All residential trash, heavy trash, and curbside recycling routes will run one day behind for the entire week, according to the Indianapolis Department of Public Works, with Friday routes being serviced on 11 September.
All services will return to normal schedules on 13 September.
And, psst: Trash schedules are online.
All residential trash, heavy trash, and curbside recycling routes will run one day behind for the entire week, according to the Indianapolis Department of Public Works, with Friday routes being serviced on 11 September.
All services will return to normal schedules on 13 September.
And, psst: Trash schedules are online.
Wednesday, September 1, 2010
Democrats Take Aim at Ballard
"Like a pod of sharks circling their prey, Democrats on the Indianapolis City-County Council can taste the blood seeping from the Ballard administration and are going in for the kill."
Read the rest here.
Read the rest here.
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