Charles Crumpley is the Editor of the Los Angeles Business Journal. For more, visit the Fox & Hounds Web site.
When I go to the Hollywood & Highland Center, I park in the basement garage. It’s clean and secure, and if you get your ticket stamped by a merchant, it costs $2 to park for four hours. What a deal.
But the city of Los Angeles, which owns the garage, reportedly lost $989,000 running it during its 2008-09 fiscal year. For taxpayers, that’s a crummy deal.
This is one example of why it’s a great idea for the city to privatize that garage and nine others like it. The city has figured it could get $100 million or more by selling long-term leases on those garages, which would help it escape its financial crisis, at least for a while.
There are advantages beyond the up-front money. The city could step out of the debt service on those garages (which is a reason Hollywood & Highland lost money), it wouldn’t have to bother with operating and upgrading them, and – not insignificantly – it would put assets in the local private sector where businesses could grow and wealth could be created.
Beyond all that, think how immoral this situation is. The city is losing money subsidizing those who park in city garages at the same time it is looking to lop off a thousand or more employees and chop services.
Sure, privatized garages would mean we’d have to pay more than a couple of bucks to park. But better to pay a fair market rate to park than to get dinged by increased taxes or face the loss of police. Or drive another year on these ragged streets.
If anything, the city is being too timid. Instead of selling long-term leases on the garages and retaining a percentage of the revenue, why not just sell them outright? Sell the garages and all the future cash flow and any development rights that might go with the garages. How much would the city get then? $1 billion? More?
Why stop with garages?
When Laura Chick was leaving as city controller more than a year ago, she pointed out that everything from the operation of Ontario International Airport to part of the water system could be contracted out. Mayor Antonio Villaraigosa last year started pushing for the privatization of the Convention Center and the zoo. There’s payroll processing and all manner of city properties and functions that could be turned over to businesses. Talk about economic stimulus for the private sector. And a bonanza for the public sector.
One big argument against privatizing is this: If only the city would run its properties in a businesslike manner, then the city would get the profits.
That’s a great point except for one little problem: The city can’t do that. City bureaucrats can’t run businesses in a businesslike way. They’re not dumb or incompetent, but they are not motivated by the things that motivate business people. Bureaucrats are not hammered into shape on the anvil of profits and losses.
Bureaucrats respond instead to politics – to a shouting gallery of voters, to critical articles in the press, to the wants of their donors. If the people want low parking rates, the people get low parking rates, damned the cost. Any city’s impulse is to give similar breaks to convention- or zoogoers or arts patrons or whatever else is desired in the political process. Right up to the stairs of bankruptcy court.
It’s best to the let private sector take over the functions and properties that rightly belong in the private sector. The tragedy is that it takes a financial crisis for the city to see that. The bigger tragedy is that many in the city still don’t see it.