JUANA SUMMERS, HOST:
Recently, there have been a variety of proposals to privatize things that are usually run by the government, like social security, air traffic control, the post office. But the government's been privatizing infrastructure for a long time. Chances are you've driven on a private toll road. You've flown out of a privatized airport. You've drunk from a privatized water system. Well, Nick Fountain, from our Planet Money team, has a cautionary tale about one privatization effort.
NICK FOUNTAIN, BYLINE: In 2008, Chicago's mayor, Richard M. Daley, was staring down a budget shortfall and looking around for things to privatize to bring in some cash. He decided upon the city's parking meter system. The idea was some company would give the city a big, upfront lump sum payment. In exchange, they get the revenues for the parking meters for decades. When Sadek Wahba, who worked at Morgan Stanley Infrastructure Partners, heard this, he was interested. So he flew to Chicago to get a lay of the land.
SADEK WAHBA: We rented a car and went around, understanding what it meant to have a parking meter in a particular area.
FOUNTAIN: You went to the Loop. You went to neighborhoods like Logan Square.
WAHBA: Everywhere.
FOUNTAIN: Wahba was trying to figure out what the future profits from all these parking meters would be and how much he should pay for those today. He submitted a bid of $1.16 billion for 75 years of profits and won. Well, except the city council had to approve the deal. Scott Waguespack was a young alderman at the time, and he says when it came time to vote, his colleagues didn't fully understand the deal.
SCOTT WAGUESPACK: One of the aldermen next to me, Dick Mell...
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DICK MELL: Thank you, Mr. President.
WAGUESPACK: He stood up and he said...
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MELL: How many of us read this stuff when we do get it?
FOUNTAIN: He actually said, how many of us read this stuff?
WAGUESPACK: That was his quote.
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MELL: OK?
(LAUGHTER)
MELL: Let's face it.
WAGUESPACK: And so I hold it up, and I kind of yelled out. I was like, I read it. I read it.
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MELL: All right. We've got it.
WAGUESPACK: I read it.
MELL: I know some do, and some do not.
FOUNTAIN: Waguespack voted against it, along with a handful of others. But the vast majority voted yes, to sell off their parking meter system. And pretty quickly after the company took over, things went awry. Meter rates went up. The private parking company didn't hire enough staff to handle all the quarters. There were protests.
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UNIDENTIFIED PROTESTER: The vast majority of the people reject the parking meter deal and reject Morgan Stanley's ownership of the parking meter deal.
FOUNTAIN: People start stealing parking meters.
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UNIDENTIFIED PERSON: They've been grabbing these like hotcakes. I don't know who and where. I don't see how you can get away with it, you know what I mean?
FOUNTAIN: And when people discovered other details of the deal, they got even more angry. The city had to reimburse the private company anytime they wanted to use a parking space for a dumpster or a street fair. And if they wanted to add a bike lane or a bus stop - something more permanent - they'd have to add paid parking spots somewhere else.
But the worst of it was, Chicago's inspector general ultimately determined that the parking meter system was worth about double what the private company had paid for it. The city, in the midst of a budget crisis, had jumped at the chance to make fast cash, but they'd vastly underestimated the longer-term value of the meters to Chicago's residents.
WAGUESPACK: It is the worst deal, I think, in municipal history in the United States.
FOUNTAIN: Wow.
WAGUESPACK: Oh, yeah. It's absolutely the worst deal in the history of municipalities.
FOUNTAIN: And sadly for Waguespack, it's not one they can get rid of easily. The meter on this deal contractually runs out in 2084, meaning generations of Chicagoans will be cursing this one for decades to come.
Nick Fountain, NPR News.
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