The great Chicago fire sale
looks at the city of Chicago's attempt to sell off some of the city's most important assets--a move that would cost the city tens of billions in future revenue.
DURING THE worst economic recession since the 1930s--and while facing a $500 million projected budget shortfall for 2010--Chicago is giving away revenue-generating public assets to private corporations for less than they are worth.
In March, Chicago Mayor Richard M. Daley gave a Morgan Stanley subsidiary a 75-year lease on Chicago's 36,000 parking meters for $1.15 billion. The mayor's office kept the negotiations secret and rammed a decision through City Council in just two days.
Morgan Stanley's consortium, Chicago Parking Meters LLC, quadrupled parking prices in many neighborhoods, raising the ire of drivers--as well as the propensity to meter vandalism. Three months later, the city inspector general's office concluded that the city leased the meters at a 50 percent discount, $974 million less than they were worth.
Chicago pioneered this trend of leasing public assets in 2004 with the first deal of its kind and magnitude in the U.S.--a 99-year lease of the Skyway bridge on the southeast side of the city. The terms permit the new operators to raise tolls to astronomical levels during the duration of the lease. The arrangement was so profitable for the winning bidders, Cintra-Macquarie, that Goldman Sachs, the Carlyle Group, Morgan Stanley and other investment firms quickly reorganized to assemble their own infrastructure funds.
This stampede of investment finance companies has sought similar deals on hundreds of public roadways, airports, bridges, and water, sewer, and mass transit systems across the U.S., including the Indiana Toll Road, the Pennsylvania Turnpike, New York's Tappan Zee Bridge, the Colorado Toll Roads and the Philadelphia International Airport.
These long-term leases are colossally shortsighted. Chicago's proposed 2010 budget "would leave less than $800 million from the more than $2 billion that private companies paid to run and collect all revenues from the Skyway and the parking meters for much of the rest of this century," noted the Chicago Tribune.
It's like burning your furniture to heat the house.
MANY ARE beginning to ask: If infrastructure is so profitable and prices are going to go up anyway, why not capture those funds for the public good?
One reason is that the up-front payments for these assets are an irresistible windfall for cash-strapped local authorities. In Chicago, Daley was able to raise $1.8 billion for the Skyway, $563 million for the downtown parking garages and $1.15 billion for the meters--all without the unpopular task of raising taxes. Politicians have to worry about re-election, but private companies can raise prices with impunity.
Secondly, city governments and their corporate clients don't care whether they bankrupt the public schools and hospitals--they're trying to privatize or eliminate those services anyway.
Renaissance 2010, Chicago's school "reform" plan, has closed nearly 70 public schools since 2004, and has created 50 private, non-union charter schools in their place, many times in same buildings. Similarly, Daley's proposed 2010 budget will cut funding for nearly 30 public health care facilities and lay off 1,500 health care workers. The Chicago Transit Authority is proposing to raise fares 33 percent and cut 1,100 jobs.
Free market ideology has suffered a major loss of credibility since the mortgage crisis brought global finance to the brink of collapse. Even so, the neoliberal crusade to deregulate industry, eliminate public services, privatize everything and magnify corporate profitability is still very much on course.
Next on the horizon in Chicago could be the Chicago Midway Airport, snow removal or the even the water and sewer systems. Daley told the Chicago Tribune, "Nothing is off the table...Everything is always on the table." The Midway Airport deal is the next most likely prospect, due to the groundwork laid in an earlier deal that fell through due to the global credit crunch.
We must mount a fightback before the mayor literally sells us down the (Chicago) River. We must defend the union jobs on the chopping block, and stop the massive hemorrhaging of assets to the private sector.
To balance the budget, we have to start by eliminating government subsidies and tax benefits for businesses like Boeing and MillerCoors. The latter was handed $24 million in tax subsidies this March to move their corporate headquarters to downtown Chicago. Meanwhile, ordinary homeowners were just hit with another annual property tax hike, with increases as high as 24 percent and even 46 percent in the already devastated neighborhoods of Englewood and West Garfield Park.
The profit system continues to steal from the poor to give to the rich. We have to be the ones to stop it.