Wednesday, September 08, 2010

More On Indy's "Son Of Chicago" Parking Meter Deal With ACS

The Urbanophile blog has done an excellent job of breaking down the proposed 50-year parking meter lease deal the Ballard administration has forged with the politically-connected ACS that is a must read for anyone who cares about the future of the City of Indianapolis. Urbanophile aptly dubs the lease deal as the "Son of Chicago" in reference to the highly criticized $1.16 billion parking lease deal Mayor Richard Daley entered into with LAZ Parking. No other issue during Mayor Daley's 20 years in office did more to hurt him politically than the parking lease deal, which critics say gave away the store to the private vendor. Daley just announced yesterday he will not seek re-election to office.

By comparison, Indianapolis' deal is much smaller, an up front payment of only $35 million, and it could generate as much as $1.2 billion in revenues to ACS compared to about a third of that amount accruing the city's benefit over that period of time. Arguably, the deal Ballard has inked with ACS is an even worse deal than the deal Daley inked for Chicago. The "Son of Chicago" term Urbanophile uses to describe the one-sided lease agreement in favor of ACS is particularly apt given the fact that this lease deal, which the City paid big bucks to the law firm of Ice Miller to draft, is actually a "cut and paste" job.

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.
Unbelievable. We should be demanding a refund of the money Ice Miller billed the City. Hell, a first-year law student could have written a better contract for the City. Click here to see Indianapolis' lease agreement to compare to the Chicago agreement found here. Bart Lies has made it easy for you to view a side-by-side comparison of the two agreements here.

Urbanophile details the absurdity of the lease agreement in a way the Star or other news organizations in this town should have been looking at the agreement if they were truly interested in the public's interest. Here are a few observations Urbanophile made that should send chills up your spines as taxpayers:

  • The City has no right to terminate the agreement. Yeah, that's right. You'll be hard pressed to find other government contracts that make it virtually impossible for the government to get out of a long-term deal like this one. As Urbanophile notes, ACS will cough up $35 million up front and maybe invest as much as $7 million in new parking meters. After those investments are made by the vendor, it will be virtually impossible to declare ACS in default on a deal that will last more than a generation.
  • As I've mentioned before, the City will be required to pay penalties to ACS whenever parking meters are taken out of use. As Urbanophile notes, these penalties are often higher than if the meters had been in use and 100% occupied during the period they were out of service.
  • Under this lease deal, ACS gets all of the parking ticket revenues, advertising and naming rights revenues. By contrast, Chicago's deal let the City keep parking ticket revenues and all of the advertising and naming rights revenues. It is difficult to place a value on what the City gave up in that big concession to ACS.
  • The lease deal specifically establishes a process for residential permit parking such as has been done by council action in some other neigbhorhoods, including my own Lockerbie neighborhood. Hefty tickets are handed out to persons who park in residential permit parking areas only without a permit. In my neighborhood, I see people getting ticketed all the time, including contractors legitimately doing work in the neighborhood! All those ticket revenues will go to ACS.
  • What if a police officer writes a ticket as is usually the case in residential permit parking areas currently? Yes, ACS gets to keep those ticket revenues as well, but the City has to pick up the tab for adjudicating disputed tickets. How convenient. And if people start appealing tickets issued to them at a rate more than 30% of those currently appealed, the City has to pay money to ACS whether the appeals have merit or not. So if ACS decides to just write bogus tickets for the hell of it to earn more revenues, the City will reward the company with even more revenues.
  • If the City decides to add new metered spaces, ACS automatically gets the rights to them under this deal unlike the deal Chicago negotiated. The City has to pay ACS a large fee for removing any existing metered spaces, $15,400 in Zone 1, but there is no offset for that removal deal in the agreement for the parking meters the City adds. And get this, if the City enlarges by 10% the number of metered spaces, ACS can reject them, which means the City is responsible for the cost of installing them but ACS gets paid to operate them. "That hardly sounds like what we’ve been told that all the risk is outsourced," Urbanophile writes. "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."
  • Urbanophile ponders whether event organizers will face hefty new fees for holding various festivals that require bagging meters for the event to cover the exorbitant penalties the City will be required to pay to ACS.
  • Urbanophile also believes the deal will require even city-owned vehicles to pay fees to park in metered spots because the placard program that exists today is cancelled.
I've yet to hear a single member of the City-County Council that is currently considering this one-sided deal ask any tough questions or even give any indication that they grasp the long-term implications of this deal. It's just moving right along just like the utility transfer deal. People are only concerned about getting their hands on that up front cash to fund their favorite pork barrel projects with no concern to the long-term ramifications the deal will have to Indianapolis residents.

The sad thing is that a deal could have been structured without turning over yet another prized city asset to a private vendor and still reaped major financial benefits to the City. If you see the profit margin Urbanophile has projected for ACS, it looks like it translates into about a 90% profit margin. "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," the blog writes. "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?" I know why. The deal is intended to put a pile of money into the pockets of the law firms and financial advisers who brokered this one-sided deal for the sole benefit of ACS, a valued client of the law firm that also serves as Mayor Ballard's own personal adviser. It's just another way of rewarding those who have contributed generously to Mayor Ballard's re-election campaign. As I've said time and time again, Pay To Play Is The Ballard Way.


Bart Lies said...

Would you find it helpful to see the two side-by-side with differences highlighted?

ACS vs Chicago

Admittedly there are deficiencies in this technique because the lines 'break' in different places, but it makes the differences (er, lack thereof) plainly visible.

Gary R. Welsh said...

Thanks for sharing.

artfuggins said...

Beware of Jackie Nytes´and how she votes on this. She has sided with Ballard on almost every vote for tax increases. She has never seen a tax hike that she did not like.

Gary R. Welsh said...

Nytes posted a comment on the Urbanophile blog story indicating the author had raised some issues of which she was not aware. I also spoke to one of the Mass Ave. business owners who testified in support of it. He was rethinking his support after I further explained the lease deal to him. There were many issues which Mike Huber conveniently omitted in his public presentations that distorted the true agreement the city inked with ACS.

kate said...

Mayor Ballard - WHAT A DISGRACE to our political system. A disgrace to the people of Indianapolis. ACS should be the new poster SYMBOL OF WHAT IS WRONG WITH OUR POLITICAL SYSTEM & CORPORATE GREED. We should make no distinction between the CEO and directors who committed this unethical proposal and the politicians who enabled them. The political ties that allowed this greedy company to rip off the public, not to mention its own employees.
Where's the investigation?
The financial mistakes that Ballard is making will affect peoples lives and their jobs and they should be held accountable for the risky actions. Affiliated Computer Services has no sense of National responsibility because, the only thing they care about is the bottom line. Like, how do you make a profit from the WELFARE system? How do you make a profit from FOOD STAMPS? When did social services become a "for-profit" agency?
The truth is when the rich fail, the working middle class and poor come to their rescue but when the ordinary working people are in trouble, the rich pound the ordinary people 3 feet down.
Corporate and government corruption is unfortunately beyond repair at this juncture. This in itself will just lead us all down a path spiraling toward socialism and the final chapter in complete economic ruin with a government run a muck.