spending

The Lessons of Long-Term Privatizations: Why Chicago Got It Wrong and Indiana Got It Right

Today, cash-strapped U.S. cities and states are selling or leasing government assets, particularly transportation infrastructure. The sale or lease of such assets can be beneficial to the public; but the long-term nature of these deals makes them potentially far more risky than contracts to run bus service or repair city-owned vehicles.

The Indiana Toll Road and Chicago parking-meter leases provide important lessons for governments considering major privatization transactions: the former is a case study in success; the latter is exhibit A in failure.

Getting long-term privatizations right starts with picking the right asset: toll roads—as well as assets with similar characteristics, such as airports—have a track record of success; but parking meters, or anything related to city streets, are poor candidates.

Assets whose privatization would result in having to pay regular, recurring compensation to the lessee as part of the ordinary business of civic life—such as offering discounted parking to the disabled or closing streets for special events—are best kept under the day-to-day management of municipal government.

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