Leasing away public parking spaces—either by lot or by meter—has proven to be a huge pain. Just ask the Scottish hospital system.
In 2008, the Scottish National Party eliminated parking fees at nearly all of Scotland’s hospitals. But the decision only applied to publicly owned parking lots. That meant that hospitals operating under Scotland’s version of public/private partnerships (P3s), Edinburgh Royal Infirmary, Glasgow Royal Infirmary, and Dundee’s Ninewells Hospital, would continue to charge for parking.
And then Covid came. During the height of the pandemic in Scotland, when the use of public transportation was discouraged while the use of hospitals was increasing, the government decided to make parking free even in the lots for those three hospitals. To do so, the government had to pay the private company for the use. In total, according to the organization Jubilee Scotland, the Scottish government paid £5,595,690 (more than $7 million) to private companies in order to allow free parking at the three hospitals.
“To put that sum into perspective, had this money been spent on extra personnel it would have paid the yearly salary for 214 newly qualified midwives, or 137 experienced nurses with specialized skills,” a report from Jubilee Scotland stated. The organization pointed out the funds could have also been spent on much needed safety equipment and urgent patient care. So much for “We’re all in this together.”
If this scenario sounds familiar, you might either be a regular reader of this newsletter—or perhaps a resident of or visitor to Chicago.
In 2008, that city made a deal to lease its on-street parking operation—about 36,000 metered parking spaces–to private investors for $1.16 billion for a term of 75 years. By June of 2023, the company had recouped its initial investment—plus $530 million more. And there’s 60 years left on the lease. Some estimates put the eventual profit at $1 billion.
While the deal brought in much-needed cash to the cash-strapped city in the midst of an economic downturn, it lost revenue in the long run—and something more: control over the public asset that would have allowed it to change with the times. A lot can happen over 75 years.
As I point out in my book The Privatization of Everything, Chicago agreed to pay the investors for any public decision that took any meters offline for any period of time—what’s called a “compensation event.” Such events include street fairs, removals for improvements, temporary closures of parking lanes for roadwork, or long term closures to add bus or bike lanes. Instead of public servants working for elected leaders making decisions for the benefit of all, that decision-making power is diluted at best, eliminated at worst. Concerns over triggering a compensation event now factor into every effort to alleviate traffic or introduce new and cleaner modes of transportation.
Parking Today Media, an industry publication, sees no problem with the arrangement.
“It seems that if the city decides to close a street or block some parking spaces (for a parade or whatever), then the city has to reimburse the private company that contracted for the parking system for the lost revenue,” editor and publisher John Van Horn writes. “Politicos think this is unfair. Those of us who work for a living understand.”
A billion-plus in pure profit? Nice work if you can get it.
Oddly, he kind of hits the nail on the head on what gives the private concern its advantage.
“(I)t is extremely difficult for politicians to raise parking fees. It takes a lot of political will. Private companies, particularly if there is no competition, can do so at will.”
“The efficient private sector is doing what it always does,” he concludes. “It’s maximizing the bottom line.”
He’s not wrong. Even if it’s not right.
NOTE: This weekly newsletter will be on a holiday hiatus for the following two weeks. We will return with our next issue on January 4, 2024.