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On Privatization's Cutting Edge | The Nation

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Rick Perlstein

Rick Perlstein

Where the past isn’t even past.

On Privatization's Cutting Edge


Former Chicago Mayor Richard Daley Jr. (Reuters/Chris Wattie)

Last week, for the opening of the school year, I wrote about my interview with Tom Geoghegan about his (so-far) failed suit to stop Mayor Rahm Emanuel’s morally and educationally disastrous crusade to close fifty schools in Chicago. But that’s not all I talked about with Tom. “I don’t want this just to be a Mayor Emanuel–bashing session,” I said. “Because we have to bash Mayor Daley.”

Everyone, I suppose, dislikes parking meters. Chicagoans hate them even more. That’s because Mayor Richard M. Daley in 2008 struck a deal with the investment consortium Chicago Parking Meters LLC, or CPM, that included Morgan Stanley, Allianz Capital Partners and, yes, the Sovereign Wealth Fund of Abu Dhabi, to privatize our meters. The price of parking—and the intensity of enforcement—skyrocketed. The terms were negotiated in secret. City Council members got two days to study the billion-dollar, seventy-five-year contract before signing off on it. An early estimate from the Chicago inspector general was that the city had sold off its property for about half of what it was worth. Then an alderman said it was worth about four times what the city had been paid. Finally, in 2010, Forbes reported that in fact the city had been underpaid by a factor of ten.

Well, Chicagoans, Tom Geoghegan is here to tell you that the whole damn thing is illegal under the Illinois Constitution—and most other constitutions, too. He’s in the middle of a suit to have the whole thing torn up. The argument is driven by the legal theory that “a seventy-five-year-agreement to run parking meters is an unconstitutional restriction on the police power—the sovereign right of the city to control its public streets and ways…. This is a very traditional, conservative, really, argument: what the City of Chicago did was not sell the meters. They sold the police power of the city.”

The deal, you see, is structured like this. Not only does CPM get the money its meters hoover up from the fine upstanding citizens of Chicago. It gets money even if the meters are not used. Each meter has been assigned a “fair market valuation.” If the City takes what is called a “reserve power adverse action”—that can mean anything from removing a meter because it impedes traffic flow, shutting down a street for a block party or discouraging traffic from coming into the city during rush hour—“CPM has the right to trigger an immediate payment for the entire loss of the meter’s fair market value over the entire life of the seventy-five-year agreement.”

Shut down one meter that the market-valuation says makes twenty-two bucks a day, in other words, and the City of Chicago has to fork over a check for $351,000—six days a week (why six days? more on that later), fifty-two weeks in a year, times seventy-five—within thirty days. Very easily, Geoghegan points out, a single shut-down of parking in a chunk of the city—say, for something like a NATO summit Chicago hosted last year—“could be more than the original purchase price of the deal.”

And if the city lowered the parking meter rates, the highest in the country? Same problem: that would trigger the “reserve power action” clause too. Chicago, meet your new City Council: the Sovereign Wealth Fund of Abu Dhabi.

And that’s just wrong—illegal, says Geoghegan: “You can’t bargain away—you can’t sell off—the police power of the city.”

He thundered: “This is privatization gone nuts. It’s almost a comical form of privatization—privatization at its very, very most toxic. Because here, what is being sold off is not really a city asset. It’s not really like Midway Airport”—a deal that might be just around the corner, the Chicago Sun-Times reports. “It’s not like a tollway”—the Chicago Skyway was leased for ninety-nine years to an Australian concern for quick cash in 2005 (“With that kind of money to be made,” The Washington Post said, “Americans are lining up to try their luck at Wall Street’s hottest new game—“investing in infrastructure.”) No, at least in those cases it was just property they were selling off. Here, “they’re selling off the governmental powers of a city. And that’s what’s so disturbing about this. And getting those back is insanely expensive. And the City said, in its brief in the court below, that if the deal were undone they would owe all this money and they can’t pay it back.”

Geoghegan cites the doctrine of in peri delicto—“something you learn your first year of law school”—to explain why this cannot stand. It means the contract is illegal, and thus not enforceable. He gives the example—“not this would ever happen”—of Perlstein selling Geoghegan a gram of meth for $100. (Damn right it wouldn’t happen. My going rate is $200!) “The judge would say this isn’t a legal agreement and I’m not going to enforce it. I couldn’t get restitution. And if this agreement is unconstitutional”—he’s using the Illinois Constitution, but the principle is one of wide application—“CPM is in the same boat.”

I say that this raises an interesting point—that his suit sounds great for Mayor Rahm Emanuel, who happens to be dealing with a huge municipal budget deficit. So he must support the suit! Especially since the parking meter deal was inked by his predecessor, not by him.

“Well!” Geoghegan responds with his inimitably cheerful, bright irony. “He simultaneously badmouths the deal and defends it to the death.”

The badmouthing part: there was the mayor’s proud boast to have “renegotiated” the deal, supposedly to make parking cheaper by making it free on Sunday, which ended up extending the hours on all the other days, making everything just about a wash.

The defending part: he won’t say anything too bad about CPM, because that would discourage investors from buying up other chunks of the city—like the deal to lease the digital billboard concession along the Dan Ryan Expressway for twenty years, which reform alderman Bob Fioretti points out was about as much of a rip-off for the City as the parking meters, not least because no one knows what kind of technology for advertising will be in use twenty years from now.

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Rahm Emanuel is a funny guy. He loves to simultaneously take credit for things and evade responsibility for them. In the school-closing case I wrote about last week, Geoghegan tried to sue the mayor as well as the Chicago School Board. The judge didn’t allow Emanuel to be included, buying the mayor’s office’s argument: “They said 'we have nothing to do with the schools'!”

That got a huge laugh: everyone knows that Emanuel is always saying the schools are his personal responsibility; after all, he alone appoints the school board.

So Geoghegan’s suit attached an op-ed signed by Emanuel arguing he was personally responsible for the school closings. And a press release saying much the same thing. In court, though, the mayor’s office said they were just providing “input.” More laughter: “A paralegal in our office described the mayor’s position as, ‘I’m responsible, but I’m not legally responsible.’ ”

A funny guy—and it isn’t just Chicagoans who, bitterly, are being forced to laugh. Our parking meter mess might someday be yours if it isn’t already—yes, this means you, New York, as Matt Taibbi reports. As Tom Tresser of Chicago’s CivicLab impressed upon me, they’re coming after your meters—and bridges, and billboards, and who knows what other public assets—next. “We have a massive global movement of capital which, because they’ve burned their own fucking houses down through their own greed, don’t have the gilt returns that they’re used to receiving…. So the new guaranteed annual returns that big business and big capital are looking for is our assets.”

And that’s about all of us.

Rick Perlstein writes about the resurgent protest culture that is fighting back against Rahm Emanuels’ austerity agenda.

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