Privatization and the sale of tax revenues

Minnesota Law Review

Volumn 95, Issue 6, 2011, Pages 1965-2034

  Roin, Julie A ^a  

^a UNIVERSITY OF CHICAGO LAW SCHOOL   (United States)

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EID: 84055184907     PISSN: 00265535     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (172)

1. See Vaughan Byrnes, Getting a Feel for the Market: The Use of Privatized School Management in Philadelphia, 115 AM. J. EDUC. 437, 439 (2009), available at http://journals.uchicago.edu/doi/pdf/10.1086/597486 (describing the decision to hire Edison Schools to run some of Philadelphia's public schools).
2. See William Sabol et al., Prisoners in 2008, BUREAU JUST. STAT. BULL., Dec. 2009, at 32, 38 app. tbl.18, available at http://bjs.ojp.usdoj.gov/content/ pub/pdf/p08.pdf (claiming eight percent of state and federal prisoners held in private correctional facilities in 2008).
3. The privatization of airports "has been a significant worldwide trend" since the 1980s. Richard de Neufville, Airport Privatization: Issues for the United States, 1662 TRANSP. RES. REC. 24, 24 (1999), available at http://trb.metapress.com/content/f27u52582j22787v/. In the United States, though major commercial airports are technically owned by governmental entities, many have always been "run through a form of partnership between the federal government, local civic interests, and private companies."
4. In 1996, Congress authorized a pilot program under which the FAA may permit up to five airports to be fully privatized. The agency has accepted preliminary privatization applications for four airports, though none has yet finalized an agreement with a private contractor. See FAA Accepts Preliminary Privatization Application for Georgia GA Airport, AVIATION NEWS TODAY (May 27, 2010), http://www.aviationnews.net/?do=headline&news-ID=179741.
5. See U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-08-44, HIGHWAY PUBLIC-PRIVATE PARTNERSHIPS: MORE RIGOROUS UP-FRONT ANALYSIS COULD BETTER SECURE POTENTIAL BENEFITS AND PROTECT THE PUBLIC INTEREST 15-16 (2008) [hereinafter GAO REPORT], available at http://www.gao.gov/new.items/d0844.pdf (listing current and contemplated U.S. public-private highway projects)
6. Celeste Pagano, Proceed with Caution: Avoiding Hazards in Toll Road Privatizations, 83 ST. JOHN'S L. REV. 351, 355-56 (2009) ("So far, twenty-three states and Puerto Rico have passed laws to allow for road privatization."). Such partnerships exist in many other nations as well.
7. See CITY COUNCIL, CITY OF CHI., JOURNAL OF THE PROCEEDINGS OF THE CITY COUNCIL OF THE CITY OF CHICAGO, ILLINOIS, SPECIAL MEETING (2008) [hereinafter CHICAGO PARKING METER CONCESSION], available at http://www.chicityclerk.com/ journals/2008/dec4-2008/120408-SP.pdf#search= "parking meter lease 2008" (enacting an ordinance that authorizes a contract for sale/lease of Chicago parking meters and reprinting the lease agreement). Other cities are considering similar proposals.
8. See Mick Dumke, Spreading the Privatization Gospel, CHI. READER BLOG (Feb. 9, 2010), http://www.chicagoreader.com/TheBlog/archives/2010/02/09/ spreading-the-privatization-gospel (discussing cities such as Pittsburgh, Los Angeles, and Las Vegas).
9. See, e.g., JOHN D. DONAHUE, THE PRIVATIZATION DECISION: PUBLIC ENDS, PRIVATE MEANS 217 (1991) ("When it works well, privatization can boost efficiency through accelerated innovation, more appropriate technologies or management styles, or a more sensible scale of operation.")
10. Ellen Dannin, Red Tape or Accountability: Privatization, Public-ization, and Public Values, 15 CORNELL J.L. & PUB. POL'Y 111, 113 (2005) ("[T]hose who advocated privatization argued that markets and competition could always be relied upon to provide the highest quality services at the lowest cost.")
11. Michael Schill, Privatizing Federal Low Income Housing Assistance: The Case of Public Housing, 75 CORNELL L. REV. 878, 902 (1990) ("Several studies have noted that the absence of market discipline may contribute to the increased cost of public housing.")
12. Dru Stevenson, Privatization of Welfare Services: Delegation by Commercial Contract, 45 ARIZ. L. REV. 83, 83-84 (2003) ("Advocates of privatization argue that market forces automatically bring more efficiency to any government undertaking . . . .").
13. This is not a debate I am prepared to enter, though it is worth noting that the evidence of effectiveness is mixed. Compare DENNIS C. MUELLER, PUBLIC CHOICE II 262-66 (1989) (finding that in only two of more than fifty comparisons of similar service provisions by public and private firms were public firms found to be more efficient).
14. See John D. Donahue, Privatization and Public Employment: An Essay on the Current Status and the Stakes, 28 FORDHAM URB. L.J. 1693, 1712 (2001) (calling for "informed public deliberation" over the "virtues and drawbacks . . . of shift[ing] resources from citizens-as-producers to citizens-as-consumers").
15. See generally CHICAGO PARKING METER CONCESSION, supra note 5 (reprinting the lease contract). Although denominated the "lease" and a "concession," section 2.6 of the Concession provides: [The] Agreement is intended for United States federal and state income Tax purposes to be a sale of the Metered Parking System and the Metered Parking System Assets to the Concessionaire and the grant to the Concessionaire of a right for and during the Term to collect and retain Metered Parking Revenues.
16. Present value is the value on a given date of a future sum of money or stream of cash flows, discounted to reflect the time value of money. See David R. Henderson, Present Value, in THE CONCISE ENCYCLOPEDIA OF ECONOMICS 408, 408 (2008), available at http://www.econlib.org/library/Enc/PresentValue.html. A present value calculation is essentially the reverse of a compound interest computation.
17. See WILLIAM A. KLEIN ET AL., FEDERAL INCOME TAXATION 30-31 (14th ed. 2006). Choosing the discount or interest rate usually is the most fraught and contested part of a present value calculation.
18. This would resemble the medieval practice of "tax farming" in which governments auctioned off the right to collect a group's tax obligations. See Myriam E. Gilles, Representational Standing: U.S. ex rel. Stevens and the Future of Public Law Litigation, 89 CALIF. L. REV. 315, 356 n.222 (2001) (tracing tax farming to the Roman era) (Pubitemid 33636463)
19. Timur Kuran, The Absence of the Corporation in Islamic Law: Origins and Persistence, 53 AM. J. COMP. L. 785, 824 (2005) (describing this practice as "known in antiquity and, under Islam, used from an early period . . . to maximize the ruler's tax revenue, which he received partly in advance, in the form of a down payment").
20. See GEORGE K. YARROW & PIOTR JASIŃSKI, PRIVATIZATION: CRITICAL PERSPECTIVES ON THE WORLD ECONOMY 193 (2004) (noting that governments that sell off nationalized industries generally find less favorable returns).
21. See JAMES MACDONALD, A FREE NATION DEEP IN DEBT: THE FINANCIAL ROOTS OF DEMOCRACY 36 (2003) ("From the end of the fifth century until the middle of the first century B.C., more than one hundred records of civic borrowing exist.").
22. See William G. Bowen et al., The Public Debt: A Burden on Future Generations?, 50 AM. ECON. REV. 701, 702 (1960) (arguing that the public debt "shifts the burden" to future generations).
23. See, e.g., RICHARD BRIFFAULT & LAURIE REYNOLDS, CASES AND MATERIALS ON STATE AND LOCAL GOVERNMENT LAW 792 (7th ed. 2009) ("[B]orrowing is a means of achieving intergenerational equity.")
24. E. Donald Elliott, Constitutional Conventions and the Deficit, 1985 DUKE L.J. 1077, 1092-93 ("[W]hen the government borrows money to build a highway, future generations receive a capital asset that offsets the liability incurred to build the highway.").
25. Clayton P. Gillette & Thomas D. Hopkins, Federal User Fees: A Legal and Economic Analysis, 67 B.U. L. REV. 795, 817 (1987) (describing the special case of "merit goods")
26. Laurie Reynolds, Taxes, Fees, Assessments, Dues, and the "Get What You Pay For" Model of Local Government, 56 FLA. L. REV. 373, 388 (2004) ("In general, though, commonly accepted values about the government's obligation to provide essential services and deeply held convictions about the public benefit of those services will operate to restrain the zeal with which local government seeks to recoup the cost of some services from the user.")
27. See ROBERT S. AMDURSKY & CLAYTON P. GILLETTE, MUNICIPAL DEBT FINANCE LAW: THEORY AND PRACTICE 11 (1992) ("In addition, the increased burden on the first generation of users will induce them to undersupply these [long-lived] resources.").
28. See David A. Super, Rethinking Fiscal Federalism, 118 HARV. L. REV. 2544, 2609 (2005) ("Declining economic activity unbalances state and local budgets: revenues shrink while demand rises for some public services, such as welfare and Medicaid.").
29. In theory, governments can run surpluses in good years so that they can avoid borrowing money in bad years; the alternative is constantly raising tax rates. See Claire Suddath, A Brief History of the U.S. Deficit, TIME.COM, Aug. 25, 2009, http://www.time.com/time/nation/article/0,8599,1918390,00.html ("The federal government's spending oscillated over the subsequent decades [following World War II], running a surplus in the good years and a deficit in the bad ones, until the early 1980s.").
30. Few teams actually move. Instead, they threaten to move unless the host city provides yet another new stadium, rendering an existing (and often fully functional) stadium obsolete. See Mildred Wigfall Robinson, Public Finance of Sports Stadia: Controversial But Permissible . . . Time for Federal Income Tax Relief for State and Local Taxpayers, 1 VA. SPORTS & ENT. L.J. 135, 137 (2002) (discussing Pittsburgh providing the Pirates with a new stadium, plus paying for demolition and retirement of outstanding debt on the old stadium).
31. See, e.g., Seymour Harris, Postwar Public Debt, in POSTWAR ECONOMIC PROBLEMS 169, 177 (Seymour Harris ed., 1943) ("The net effect of . . . public debt will depend on the value of the assets created in the process of public investment . . . .").
32. See Walter McMahon, The Social and External Benefits of Education, in INTERNATIONAL HANDBOOK ON THE ECONOMICS OF EDUCATION 211, 217 (Geraint Johnes & Jill Johnes eds., 2007) (noting that the economic advantages of education "operate very slowly and are long delayed, most primarily affecting future generations").
33. See Nancy C. Staudt, Constitutional Politics and Balanced Budgets, 1998 U. ILL. L. REV. 1105, 1128 ("[O]ne of the surest ways for congressional representatives to lose political support is to impose costs upon their constituents through tax increases or spending decreases.")
34. Catherine Rampell, Stiffening Political Backbones, N.Y. TIMES, Feb. 14, 2010, at WK-5, available at 2010 WLNR 3111739 ("[P]oliticians see fiscal profligacy as a prerequisite for re-election . . . ."). The story is no different at the state and local level.
35. See Matt Bai, State of Distress, N.Y. TIMES, Oct. 25, 2009 (Magazine), at MM-38, available at 2009 WLNR 21157948 (describing how governors "find themselves retreating to a kind of fiscal Honalee, a make-believe world in which the state can magically raise less revenue and spend ever more of it"). Nor is this a peculiarly American phenomenon.
36. See Staring into the Abyss, ECONOMIST, July 10-16, 2010, at 23, 24 ("As Jean-Claude Juncker, prime minister of Luxembourg, said memorably in 2007: 'We all know what to do, but we don't know how to get re-elected once we have done it.'").
37. See Clayton P. Gillette, Fiscal Home Rule, 86 DENV. U. L. REV. 1241, 1259 (2009) ("Debt can be a dangerous tool in the hands of local officials who have incentives to spend money in the short term, especially money that has to be repaid only when they have left office.").
38. See A. Prskawetz, Government Debt, Budget Surplus, and Popularity of Politicians, 98 J. OPTIMIZATION THEORY & APPLICATIONS 131, 146 (1998) (noting that over the long term "it is optimal for the politician to alternate phases in of savings (primary surplus) and spending (primary deficit), since the marginal gain in popularity from an additional dollar spent is sufficiently large").
39. See Stewart E. Sterk & Elizabeth Goldman, Controlling Legislative Shortsightedness: The Effectiveness of Constitutional Debt Limitations, 1991 WIS. L. REV. 1301, 1309 ("[P]rior to 1840 no state constitution contained a limitation on debt . . . .").
40. See B.U. RATCHFORD, AMERICAN STATE DEBTS 433-35 & tbl.38 (1941) (categorizing state restrictions and explaining the differences between the categories). Some state debt was exempted from the requirements. For example, New York's constitution gave its legislature the right to issue unlimited debt "to repel invasion, suppress insurrection, or defend in time of war."
41. See generally A. JAMES HEINS, CONSTITUTIONAL RESTRICTIONS AGAINST STATE DEBT 11 tbl.4 (1963) (outlining exceptions to state limitations on debt)
42. D. Roderick Kiewiet & Kristin Szakaly, Constitutional Limitations on Borrowing: An Analysis of State Bonded Indebtedness, 12 J.L. ECON. & ORG. 62, 67 tbl.1 (1996) (charting state constitutional limitations on state-guaranteed long-term debt).
43. See Clayton P. Gillette, Direct Democracy and Debt, 13 J. CONTEMP. LEGAL ISSUES 365, 371 (2004) [hereinafter Gillette, Democracy and Debt] (discussing restrictions on local government debt enacted subsequent to the Panic of 1873)
44. Paul K. Bardack, Comment, State Constitutional Prohibitions Against the Lending of State Credit to Municipal Corporations, 26 AM. U. L. REV. 657, 667 (1977).
45. See Gillette, Democracy and Debt, supra note 42, at 370 ("The constitutions of approximately twenty-seven states require a vote of the electorate prior to the issuance of municipal debt.").
46. See Gillette, Democracy and Debt, supra note 42, at 370 (noting that twenty-seven states have these constitutional voting requirements)
47. See Gillette, Democracy and Debt, supra note 42, at 374-75 ("Finally, bond elections themselves impose significant costs on the localities that hold them. These are not only the costs related to the bond election itself, which frequently occurs at times other than the general election and thus requires marshalling the resources of election officials and inducing constituents to turn out to vote on a single issue, but also delay in issuing debt and the risk that voters will fail to represent the preferences of constituents as a whole.").
48. CLAYTON P. GILLETTE & LYNN A. BAKER, LOCAL GOVERNMENT LAW: CASES AND MATERIALS 639-40 (2d ed. 1999) (describing the use of public authorities and problems posed by them)
49. C. Robert Morris, Jr., Evading Debt Limitations with Public Building Authorities: The Costly Subversion of State Constitutions, 68 YALE L.J. 234, 234 (1958) (describing building authorities as "the most recent" of the "evasive devices and fine distinctions [that] are employed to escape debt limitations")
50. See, e.g., Opinion of the Justices, 49 So.2d 175, 181-82 (Ala. 1950) (holding that bonds are not "indebtedness of the municipality" when payable out of revenues derived by the corporation from the lease or sale of its facilities)
51. Norman R. Williams & Brannon P. Denning, The "New Protectionism" and the American Common Market, 85 NOTRE DAME L. REV. 247, 252 (2009) ("This favorable tax treatment significantly reduces the private companies' cost of borrowing, and . . . provides local private enterprises with a substantial economic edge . . . ."). Such investment may (or may not) bring desirable jobs and tax revenues with it.
52. See Peter S. Fisher & Alan H. Peters, Tax and Spending Incentives and Enterprise Zones, NEW ENG. ECON. REV., Mar./Apr. 1997, at 109, 128 (reviewing literature on the impact of industrial revenue bonds and concluding the results are "mixed")
53. Sherry L. Jarrell et al., Law and Economics of Regulating Local Economic Development Incentives, 41 WAKE FOREST L. REV. 805, 826 (2006) ("Studies on the impact of industrial revenue bonds offer no firm conclusions . . . .").
54. See Richard Briffault, The Most Popular Tool: Tax Increment Financing and the Political Economy of Local Government, 77 U. CHI. L. REV. 65, 67-68 (2010) ("More commonly for larger TIF districts, the district may issue bonds backed by the projected incremental revenues. The bond proceeds are then used to make major public investments upfront, thus jumpstarting the development process.").
55. See Christina G. Dudley, Note, Tax Increment Financing for Redevelopment in Missouri: Beauty and the Beast, 54 UMKC L. REV. 77, 85 (1985) ("[I]nvestors . . . will be left empty-handed if the anticipated revenue does not materialize."). Whether municipalities actually allow defaults to occur with respect to TIF bonds is an open question.
56. See Josh Reinert, Note, Tax Increment Financing in Missouri: Is It Time for Blight and But-For to Go?, 45 ST. LOUIS U. L.J. 1019, 1028 (2001) ("[D]efault is generally considered to be the option of last resort. Prior to taking this step, the municipality may either reduce its expenditures in the other project areas, or utilize intragovernmental grants or other interest income to service the debt." (citations omitted)).
57. See Rachel Weber et al., The Effect of Tax Increment Financing on School District Revenues: Regional Variation and Interjurisdictional Competition, 40 ST. & LOC. GOV'T REV. 27, 27-28 (2008) (speculating that "overlapping governments may raise tax rates to compensate" for TIF revenue losses, unless constrained by tax caps)
58. Joseph F. Luther, Note, Tax Increment Financing: Municipalities Avoiding Voter Accountability, 1 DETROIT C. L. REV. 89, 104-05 (1987) ("[T]he school districts will be forced to ask the voters for a new school millage increase just so that they can stay abreast of inflation.")
59. Alyson Tomme, Note, Tax Increment Financing: Public Use or Private Abuse?, 90 MINN. L. REV. 213, 233-34 (2005) ("Municipal-service costs, such as police, fire, sanitation, and transportation, typically rise as TIF projects develop. Since property taxes for those property owners within the TIF district are based upon assessments made before the commencement of the TIF project, property taxes collected within the district are likely to fall short of being able to meet the increasing cost of municipal services. Consequently, taxpayers outside the district may be called on to pay additional taxes to account for lost revenue.").
60. But see Randall V. Reece & M. Duane Coyle, Urban Redevelopment: Utilization of Tax Increment Financing, 19 WASHBURN L.J. 536, 542 (1980) ("[A]ny such indirect subsidies may be more than recouped by increased sales taxes from new commercial growth within the redevelopment area.")
61. Michael L. Molinaro, Comment, Tax Increment Financing: A New Source of Funds for Community Redevelopment in Illinois-People ex rel. City of Canton v. Crouch, 30 DEPAUL L. REV. 459, 475 (1981) ("[T]ax increment financing does not necessarily require additional municipal services because substandard property often demands more public services than properly maintained property. Other potential infirmities of tax increment financing may be avoided through carefully drafted statutes.").
62. Julie A. Goshorn, Note, In a TIF: Why Missouri Needs Tax Increment Financing Reform, 77 WASH. U. L.Q. 919, 941 (1999) (identifying Indiana, Colorado, Florida, Utah, and Missouri). Other state courts have disagreed, and held that TIF bonds are real debt subject to the states' particular constitutional limitations, at least when they are funded by increases in property tax revenues.
63. See Christian Schnieider, The Exploding Use of Debt to Finance Government in Wisconsin, WIS. POL'Y RES. INST., http://www.wpri.org/Reports/Volume-20/ Vol20no9p1.html (last visited Apr. 24, 2011) (reporting on how Wisconsin debt exceeds tax revenue).
64. For example, Daimler-Chrysler had to build its own plant in Toledo, Ohio. See Peter D. Enrich, Business Tax Incentives: A Status Report, 34 URB. LAW. 415, 427 (2002).
65. See, e.g., Stephen R. Kruft, Leveraged Aircraft Leases: The Lender's Perspective, 44 BUS. LAW. 737 (1989) (describing aircraft leaseback arrangements).
66. See Peter Carbonara, Cash-Hungry States Are Putting Buildings on the Block, N.Y. TIMES, May 5, 2010, at B8, available at 2010 WLNR 9265999.
67. Asset owners are entitled to depreciation deductions, which are usually accelerated relative to economic depreciation. This acceleration generates time value of money gains for taxpayers with sufficient outside income against which the accelerated depreciated deductions can be applied. These tax benefits supply part of the economic rationale for the transaction, and increase the price the purchaser is willing to pay for the asset. However, if the alleged owner of the property retains too little risk of ownership, the Internal Revenue Service (IRS) can recharacterize such transactions as mere financing arrangements, insufficient to shift ownership of the assets (and their associated depreciation deductions) to the purchaser/lessor, thereby reducing the economic benefits of the transaction for the buyer and seller. See BORIS I. BITTKER ET AL., FEDERAL INCOME TAXATION OF INDIVIDUALS 14-17 (3d ed. 2002) ("[M]any tax shelter arrangements entailed transfers of legal ownership of property, such as a movie, while associated contracts effectively shifted the benefits and burdens of ownership to other persons. In such cases, the taxpayers holding legal title to the property have been denied depreciation deductions with respect to the property."). In the Arizona transaction, the leases ran for twenty years, after which ownership reverts to the state.
68. Privatization is a tool by which local governments "contract with private companies for the provision of services." Scott D. Maker, Local Government, Privatization, and Antitrust Immunity, 68 FLA. B.J. 38, 38 (1994).
69. See, e.g., David M. Herszenhorn, Senate Rejects Repeal of Health Care Law, N.Y. TIMES, Feb. 3, 2011, at A20, available at 2011 WLNR 2136789.
70. See generally C.D. FOSTER, PRIVATIZATION, PUBLIC OWNERSHIP AND THE REGULATION OF NATURAL MONOPOLY (1992) (describing the relationship between monopoly and privatization).
71. See generally Steven J. Horvitz, Rate Regulation and Video Competition, 674 PRAC. L. INST. 155 (2001) (discussing regulating cable TV rates)
72. Claire A. Watkins, Nuclear Power Rate Regulation After Eastern Enterprises: Are Ratepayers Being Taken for a Ride?, 28 B.C. ENVTL. AFF. L. REV. 191 (2000) (discussing legal challenges to monopolistic nuclear power rates).
73. For example, "[e]cotourism generates funds through concession fees that can be used to maintain protected areas and parks." Alexander O'Neill, Note, What Globalization Means to Ecotourism, 9 IND. J. GLOBAL LEGAL STUD. 501, 519 (2000).
74. But cf. John Ziegler, Note, The Dangers of Municipal Contracts, 40 PUB. CONT. L.J. 571, 572 (2011) (describing a poorly managed concession contract that led to very high prices for taxpayers).
75. Before enactment of the 1984 Cable Act, "competition among rival companies for a de facto monopoly cable franchise" led to high franchise fees in some cases. See Robert W. Crandall et al., Does Video Delivered over a Telephone Network Require a Cable Franchise?, 59 FED. COMM. L.J. 251, 270 (2007). This competition all but ended when Congress passed a statute in 1984 limiting franchise fees to no more than five percent of the cable system's gross revenues.
76. see also Jeffrey N. Buxbaum & Iris N. Ortiz, Protecting the Public Interest: The Role of Long-Term Concession Agreements for Providing Transportation Infrastructure 14 (USC Keston Inst., Research Paper No. 07-02, 2007), available at http://www.camsys.com/pubs/ Protecting%20the%20Public%20Interest-Report.pdf ("The ability to depreciate the 'value' of the asset for tax purposes seems to be one of the driving factors behind the longer lease terms in the United States."). Because the only physical assets involved in the parking meter deal were the parking meters themselves, with an expected useful life of about ten years, the beneficial tax results may have been obtainable with a shorter lease term.
77. See OFFICE OF THE INSPECTOR GEN., CITY OF CHI., REPORT OF INSPECTOR GENERAL'S FINDINGS AND RECOMMENDATIONS: AN ANALYSIS OF THE LEASE OF THE CITY'S PARKING METERS 19 (2009) [hereinafter INSPECTOR GENERAL'S REPORT], available at http://www.chicagoinspectorgeneral.org/pdf/IGO-CMPS-20090602.pdf ("[T]he useful life of the parking meters is not likely to exceed 10 years. Thus, extending the length of the lease to 75 years was not necessary to allow the concessionaire to claim accelerated depreciation and thus increase the size of the upfront payment.").
78. INSPECTOR GENERAL'S REPORT, supra note 107, at 1. Chicago has been a leader of the privatization movement. In addition to the parking meter deal, Chicago entered into long-term leases of its municipal parking garages and the Skyway. A fourth lease, of Midway Airport, was cancelled when the concessionaire failed to raise the capital necessary to make the agreed-upon upfront payment.
79. Joe Smydo, City Looks to Chicago for Privatized Parking Ideas, PITT. POST-GAZETTE, Mar. 14, 2010, available at 2010 WLNR 5354050 (noting that Pittsburgh has paid attention to Chicago's transactions)
80. Leonard Gilroy, Setting the Record Straight on Chicago Parking Meter Privatization, REASON FOUND. (Aug. 7, 2009), http://reason.org/news/show/ setting-the-record-straight-on-1 (noting that Chicago "is already serving as a model for Los Angeles, Indianapolis and other local governments contemplating similar deals").
81. See CHICAGO PARKING METER AGREEMENT, supra note 5, at 50,586. The Concessionaire does have the right to supplement the City's enforcement efforts. Id. at 50,566. According to a recent newspaper article, the company managing the parking meter system on behalf of the Concessionaire is taking advantage of that right, having hired "10 ticket writers and plan[ning] to add another five this year" despite compliance rates of about seventy-five percent.
82. Dan Mihalopoulos & Mick Dumke, Outrage Aside, Drivers Fuel High Parking Meter Profits, N.Y. TIMES, July 30, 2010, at A17, available at 2010 WLNR 15156453.
83. The Concessionaire was a newly formed company, Chicago Parking Meters, LLC, created by Morgan Stanley on behalf of some of its investors. More than twenty-five percent of the new company is held by the "investment arms of the oil-rich Abu Dhabi government," another substantial chunk belongs to the German financial company Allianz, and the remainder is held by assorted partnerships. Dan Mihalopoulos, Abu Dhabi Shares Profits from Parking Meters, N.Y. TIMES, Dec. 6, 2009, at A45, available at 2009 WLNR 24590062. Chicago Parking Meters, LLC, in turn hired LAZ Parking to handle the actual operation of the parking meter system, including the replacement of coin-operated meters with electronic meters. The transition period did not go well, as even LAZ Parking "acknowledged that it did not have enough workers to deal with the turnover,"
84. Dan Mihalopoulos, Company Piles Up Profits from City's Parking Meter Deal, N.Y. TIMES, Nov. 20, 2009, at A29, available at 2009 WLNR 23426449, leading to a temporary moratorium on parking enforcement. However, after a few months, the profits started rolling in.
85. See INSPECTOR GENERAL'S REPORT, supra note 107, at 18.
86. See William Blair & Co., Chicago Metered Parking System Transaction Summary and Valuation Analysis, CITY OF CHI., 4 (June 30, 2009), http://www.cityofchicago.org/content/dam/city/depts/rev/supp-info/ParkingMeter/ ValueAnalysisByWilliamBlair.pdf [hereinafter Blair, Valuation Analysis] (describing the assumption of annual parking rate increases of three percent as "probably aggressive given the fact that the rates on 75% City meters [sic] had not increased in over 20 years" despite a "rate of inflation average [of] approximately 3.2% per year"). For a more complete discussion of the argument and its application to the Chicago parking meter deal, see infra note 129.
87. See INSPECTOR GENERAL'S REPORT, supra note 107, at 15.
88. Actually, the debt incurred by Chicago was about $50 million larger than the $1.156 billion payment received by the City because the Concessionaire bore the cost of purchasing and installing the new parking meters. See Blair, Valuation Analysis, supra note 114, at 4.
89. See GAO REPORT, supra note 4, at 20 (listing "avoid[ing] the legislative or administrative limits that governed the amount of outstanding debt these states were allowed to have" as an "advantage[] for the states" of using highway public-private partnership agreements).
90. See INSPECTOR GENERAL'S REPORT, supra note 107, at 16-17.
91. See, e.g., Illinois Opens Online Bidding for Surplus Property, CHI. DEFENDER ONLINE (Aug. 16, 2010), http://www.chicagodefender.com/article-8510- illinois-opens-online-bidding-for-surplus-property.html (discussing the wide variety of city and state property auctioned to the public by the State of Illinois).
92. The City planned to put $400 million of the $1.156 billion in a "longterm reserve/revenue replacement fund," $100 million in a "human infrastructure fund," $325 million "in a mid-term budget relief fund to help balance our budgets through 2012," and $320 million "in a budget stabilization fund that may be used to help bridge the period until the nation's economy begins to grow again," while using $150 million "to balance the 2009 budget." Chicago Parking Meter Facts, CITY CHI., http://www.cityofchicago.org/content/dam/city/ depts/rev/supp-info/ParkingMeter/ParkinMeterBrochure.pdf (last visited Apr. 24, 2011). Splitting the numbers up this way makes it only slightly harder to discern that of the $1.156 billion received, the City expected to spend fully $795 million within three or four years of entering into the contract. In fact, the City spent almost $400 million from the parking meter deal in 2009, and expects to spend another $600 million in 2010.
93. See Dan Mihalopoulos & Hal Dardick, Daley Steers Clear of More Layoffs, Taxes, CHI. TRIB., Oct. 22, 2009, at A1, available at 2009 WLNR 20922022.
94. See Blair, Valuation Analysis, supra note 114, at 4-5 (calling rate and utilization "challenges and risks" that the transaction "shifted . . . to the concessionaire" under the agreement).
95. See Blair, Valuation Analysis, supra note 114, at 10 ("The City will also benefit from a risk transfer, as the investment returns on the revenue replacement fund will be less volatile and more certain than the cash flow produced by the System."). As the recent recession has amply demonstrated, tax revenues can fall rather than increase.
96. See supra text accompanying note 11 (discussing the practice of "tax farming"). The IRS experimented with outsourcing its debt collection activities beginning in 2006, though it paid its contractors a percentage of collections rather than accepting an up-front fee. See David Cay Johnston, IRS Enlists Outside Help in Collecting Delinquent Taxes, N.Y. TIMES, Aug. 21, 2006, at A12 (announcing award of contracts)
97. Press Release, Internal Revenue Serv., IRS Selects Three Firms to Take Part in Delinquent Tax Collection Effort (Mar. 9, 2006), available at http://www.irs.gov/newsroom/article/0,id=155069,00.html (same). The program was terminated in 2009 after the IRS determined it was more efficient to use in-house workers.
98. See Stephen Ohlemacher, IRS Collecting Own Debts, SEATTLE TIMES, Mar. 7, 2009, at A4.
99. Gillette, Democracy and Debt, supra note 42, at 379 ("In a recent New Jersey case challenging the state's use of alternative financing mechanisms, one of the judges noted that the state had outstanding $3.5 billion of general obligation debt that typically requires a bond election, while it had outstanding $10.8 billion of a different form of debt that required none."
100. But not always. See Gillette, Democracy and Debt, supra note 42, at 375-76 ("Nevertheless, in recent years, there have been multiple instances in which the local electorate has rejected proposed bond issues, only to have local officials finance the same project through an alternative mechanism not subject to the bond election requirement.").
101. See GAO REPORT, supra note 4, at 33 (cautioning that in exchanging future revenues for immediate cash, "the public sector may give up more than it receives in a concession payment").
102. No market is free from abuse possibilities. In 2004, municipal bond dealers engaged in refinancings of municipal debt were found to have cheated the federal government by inflating the cost of Treasury bills being sold to municipal governments. See Press Release, Sec. & Exch. Comm'n, SEC Settles with Ten Brokerage Firms as Part of Global Resolution of Yield Burning Claims (Apr. 6, 2000), available at http://www.sec.gov/news/press/2000-45.txt
103. Issue Brief: Yield Burning, GOV'T FIN. OFFICERS ASS'N (Jan. 2008), http://gfoa.org/downloads/yieldburning.pdf. More recently, federal agencies have been investigating allegations that financial intermediaries colluded to set unreasonably high fees for underwriting municipal bonds or derivatives based on the bonds, sometimes paying kickbacks to public officials to direct the deals (and the fees) their way.
104. See Mary Williams Walsh, Nationwide Inquiry on Bids for Municipal Bonds, N.Y. TIMES, Jan. 9, 2009, at A1, available at 2009 WLNR 441316. For a description of an earlier incarnation of this scheme and attempts to combat it
105. see generally Jon B. Jordan, The Regulation of "Pay to Play" and the Influence of Political Contributions in the Municipal Securities Industry, 1999 COLUM. BUS. L. REV. 489. All of these scandals involve alleged malfeasance by intermediaries rather than mispricing of the underlying securities. There is no reason to believe that the intermediaries involved in putting together privatization deals are more or less corrupt than those involved in the municipal bond market; indeed, they may be the same institutions and people.
106. See George J. Stigler, A Theory of Oligarchy, 72 J. POL. ECON. 44, 44 (1964) (positing that secret price cutting by cartel members may undermine attempts at price collusion).
107. The move toward the use of special funds (rather than general obligation) debt has been criticized for some of the same reasons this Article argues against debt masquerading as privatization: the added costs of complexity and the restraints on future policymaking. See RICHARD BRIFFAULT, BALANCING ACTS: THE REALITY BEHIND STATE BALANCED BUDGET REQUIREMENTS 45-47 (1996).
108. Of course, markets are only as good as the underlying information on which they are based, and criticism has long been leveled at the rating agencies providing information to the bond markets. See, e.g., John Patrick Hunt, Credit Rating Agencies and the "Worldwide Credit Crisis": The Limits of Reputation, the Insufficiency of Reform, and a Proposal for Improvement, 2009 COLUM. BUS. L. REV. 109, 114 (criticizing rating agencies' rating of novel financial instruments)
109. Joel Seligman, The Municipal Disclosure Debate, 9 DEL. J. CORP. L. 647, 658 (1984) ("One critic went so far as to argue that in light of the number of municipal bonds and the number of rating analysts, the average bond rating should take only twenty seconds.")
110. Francis A. Bottini, Jr., Comment, An Examination of the Current Status of Rating Agencies and Proposals for Limited Oversight of Such Agencies, 30 SAN DIEGO L. REV. 579, 579 (1993) ("An analysis of the current market for ratings of both financial securities and insurance companies reveals significant problems with rating agencies, such as lethargy in changing ratings, political influence, unsolicited ratings, and inaccurate ratings."). Some believe that the current municipal bond market is overvalued.
111. See Page Perry LLC, Risks Grow in the Municipal Bond Markets, INVESTMENT FRAUD LAW. BLOG (June 17, 2010), http://www.investmentfraudlawyerblog.com/2010/ 06/risks-grow-in-the-municipal-bo.html (noting controversy over current safety of municipal bond investments). However, despite the market's problems, large numbers of investors routinely invest significant amounts of money in municipal bonds, indicating their belief that the prices set in the market are reasonably accurate.
112. Cf. Ellen Dannin, To Market, To Market: Legislating on Privatization and Subcontracting, 60 MD. L. REV. 249, 268-69 (2001) (discussing the difficulty of pricing privatization deals given the unique circumstances of each).
113. See Connie Wilson, Chicago Residents Outraged over Mayor's Sale of Chicago Parking Meters and Lots, ASSOCIATED CONTENT, June 21, 2009, available at http://www.associatedcontent.com/article/1866529/chicago-residents-outraged- over-mayors-sale (noting the substantial fee William Blair received for effectuating the deal, his contributions to the mayor's wife's favorite charity, and other personal linkages)
114. see also Ben Joravsky & Mick Dumke, FAIL, Part Two: One BILLION Dollars! New Evidence Suggests Chicago Leased Out Its Parking Meters for a Fraction of What They're Worth, CHI. READER (May 21, 2009), http://www. chicagoreader.com/chicago/one-billion-dollars/Content?oid=1123046.
115. See Craig L. Johnson et al., Toll Road Privatization Transactions: The Chicago Skyway and Indiana Toll Road, CARL VINSON INST. GOV'T, 3-4 (Sept. 2007), http://www.cviog.uga.edu/services/research/abfm/johnson.pdf (reporting bids of $505 million, $700.5 million, and $1.82 billion). Though most rejoiced at the high price, some believed that even the winning Skyway bid was too low.
116. See CHICAGO PARKING METER CONCESSION, supra note 5, at 50,573 (limiting the right of the City to construct competing off-street parking lots)
117. It is worth noting that later parking meter leases were configured quite differently than Chicago's. See Darrell Preston, Morgan Stanley Chicago Parking Makes Cities Redo Deals, BLOOMBERG.COM, Nov. 15, 2010, http://www.bloomberg.com/ news/print/2010-11-15/morgan-stanley-chicago-parking-windfall-makes-cities-redo- deals.html (comparing Indianapolis, which "would rather take less money up front in favor of more total fees" and "exit clauses that let the city end the lease," to "Los Angeles, which may get a larger initial payment by giving up control over rates").
118. See INSPECTOR GENERAL'S REPORT, supra note 107, at 13 (describing how ten bidders responded to the RFQ for the parking meter deal, of which eight were qualified, but only two made actual bids).
119. Again, this does not mean that the governments entering into these deals necessarily lose out; they may benefit from the "winner's curse," which suggests that the highest bid in an auction is likely to be too high. See RICHARD H. THALER, THE WINNER'S CURSE: PARADOXES AND ANOMALIES OF ECONOMIC LIFE 50-51 (1992) (explaining the winner's curse). There is, however, no way of knowing when, or if, the winner's curse will occur, though it is less likely to occur when there are few bidders.
120. See Clayton P. Gillette, Business Incentives, Interstate Competition, and the Commerce Clause, 82 MINN. L. REV. 447, 455-56 (1997) (detailing circumstances making the winner's curse less likely).
121. But see PHINEAS BAXANDALL ET AL., U.S. PUB. INTEREST RESEARCH GRP. EDUC. FUND, PRIVATE ROADS, PUBLIC COSTS 23 (2009), available at http://cdn. publicinterestnetwork.org/assets/rXyTdCxiacJTXJi3Cm-W1w/Private-Roads-Public- Costs-Updated.pdf (noting that one investor had to write down the value of its tollway investments in late 2008). The underlying question is what purpose is served by putting future ratepayers at the mercy of this sort of valuation lottery.
122. See Yvette Shields, Illinois Holds Hearing on Leasing Toll Road, BOND BUYER, June 1, 2006, at 1, 53 ("[A] widening pool of potential bidders could help increase competition and prices. While initially some bidders sought high rates of return on their investment in the area of 12%, those figures have dropped in some cases to 7% to 9% . . . .")
123. Emily Thornton, Roads to Riches: Why Investors Are Clamoring to Take over America's Highways, Bridges, and Airports-And Why the Public Should Be Nervous, BUS. WK., May 7, 2007, at 50, 52, available at http://www.businessweek.com/ magazine/content/07-19/b4033001.htm ("Now a slew of Wall Street firms . . . [are] piling into infrastructure . . . . Rob Collins, head of infrastructure mergers and acquisitions at Morgan Stanley, estimates that 30 funds are being raised around the world . . . ."). Despite this discussion, there has been little indication of efficacious competition in actual deals. In Spain, a leader in the privatization of tollways, "two private companies dominate the industry-accounting for 70% of the country's tolled traffic."
124. Jessica Hurtado, For Whom the Road Tolls: A Two-Year Moratorium on Highway Privatization in Texas, 41 TEX. TECH L. REV. 653, 657 (2009). Projected rates of return from privatization projects in the United States remain high.
125. See Blair, Valuation Analysis, supra note 114, at 7-8 (justifying the pricing of the Chicago deal at ten to fourteen percent rate of return). It is worth noting that in concluding that the contract price fell within these parameters, Blair assumed that the investor would have to replace the parking meters several times over the course of the lease, at substantial expense.
126. See Parking Fee Paid via Mobile Phone, ECOMMERCE J. (Aug. 15, 2008, 4:46 AM), http://ecommercejournal.com/news/parking-fee-paid-via-mobile-phone (describing a pilot program in England). The investors will reap an even higher rate of return if future meter expenditures are avoided or reduced.
127. See HOUSE ARMED SERVS. COMM. PANEL ON DEF. ACQUISITION REFORM, FINDINGS AND RECOMMENDATIONS 9 (2010), available at http://www.ndia.org/Advocacy/ LegislativeandFederalIssuesUpdate/Documents/March2010/Defense-Acquisition- Reform-Panel-Final-Report-3-23-2010.pdf ("The length and scope of weapon system programs has accelerated defense industry's consolidation around a handful of aerospace firms that now control large amounts of production capacity . . . . The Panel is concerned that the end result of this process is the gradual erosion of competition and innovation in the defense industrial base.").
128. See Joint Strike Fighter: Strong Risk Management Essential as Program Enters Most Challenging Phase, Testimony Before the Subcomm. on Air and Land Forces of the H. Comm. on Armed Servs., 111th Cong. 5 (2009) (statement of Michael Sullivan, Director, Acquisition and Sourcing Management), available at http://www.gao.gov/new.items/d09711t.pdf (defending continuing development of an alternate engine for the Joint Strike Fighter program because "[r]esults from past competitions provide evidence of potential financial and nonfinancial savings")
129. Nathan Hodge, Navy Weighs Ship's Design, Along with Its Own Future, WALL ST. J., July 11, 2010, at A2 (noting that the Navy will order ten warships from one shipyard and five from a competing shipyard).
130. See Defense Acquisitions: Managing Risk to Achieve Better Outcomes, Testimony Before the Subcomm. on Def. of the H. Comm. on Appropriations, 111th Cong. 5-7 (2010) (statements of Paul Francis, Managing Director, Acquisition and Sourcing Management; Michael Golden, Managing Associate General Counsel, Acquisition and Sourcing Management; William Woods, Director, Acquisition and Sourcing Management), available at http://www.gao.gov/new.items/d10374t.pdf (describing types of contracts used by the Defense Department and objections to them)
131. Daniel Michaels & August Cole, Defense Contractors Resist Fixed-Price Jobs, WALL ST. J., Dec. 14, 2009, at B3 (same).
132. See Gillian Lester & Elizabeth Ryan, Choice of Law and Employee Restrictive Covenants: An American Perspective, 31 COMP. LAB. L. & POL'Y J. 389, 393 n.21 (2010) (discussing "covenants not to compete . . . connected to the purchase and sale of a business or its assets").
133. See Douglas G. Baird, Discharge, Waiver, and the Behavioral Undercurrents of Debtor-Creditor Law, 73 U. CHI. L. REV. 17, 30 (2006) ("Covenants not to compete are suspect under nonbankruptcy law. They must be reasonable, and they can last only for a limited period of time . . . .")
134. See, e.g., CHICAGO PARKING METER CONCESSION, supra note 5, at 50,637 (establishing the City's responsibility to pay "the Metered Parking System Concession Value as of the date of" the buyout).
135. Privatization agreements generally require governmental entities to make them whole for any interference with contractual rights. See GAO REPORT, supra note 4, at 46 (describing "compensation clauses"). Under the terms of the Chicago parking meter lease, the Concessionaire would be entitled to such an amount in the event Chicago attempted to terminate the agreement for its "convenience" as this would constitute a breach of the agreement.
136. See, e.g., CHICAGO PARKING METER CONCESSION, supra note 5, at 50,637 (establishing the City's responsibility to pay "the Metered Parking System Concession Value as of the date of" the buyout).
137. See Daniel R. Fischel & Alan O. Sykes, Governmental Liability for Breach of Contract, 1 AM. L. & ECON. REV. 313, 354 (1999) ("The effect of 'termination for convenience' is to reduce the government's liability to the contractor relative to what the government would owe if the termination were treated as a branch (which would entitle the contractor to expectation damages).")
138. Gillian Hadfield, Of Sovereignty and Contract: Damages for Breach of Contract by Government, 8 S. CAL. INTERDISC. L.J. 467, 492 (1999) (discussing the measure of damages for breach of federal procurement contracts). Even calculating reliance damages for a contract such as the Chicago parking meter lease would be difficult. Given the absence of a stated principal amount, interest rate, or amortization schedule, it would be far from obvious how much of the initial payment received by the City would remain to be recouped through damages and how much would have already been recouped through the parking fees received prior to the contract's termination.
139. See CHICAGO PARKING METER CONCESSION, supra note 5, at 50,622 (describing the computation of compensation required in the event of a "Reserved Powers Adverse Action").
140. See U.S. TREASURY DEPT., TREASURY ANALYSIS OF BUILD AMERICA BONDS AND ISSUER NET BORROWING COSTS 9 (2010), available at http://www.treasury.gov/ resourcecenter/economicpolicy/Documents/ 4%202%2010%20BABs%20Savings%20Report%20FINAL.pdf ("[T]he weighted average of the underwriting fees for tax-exempt bonds issued in 2009 and early 2010 was $6.19 per $1,000.")
141. Eddie Baeb, Bond Advisers Irk Wall Street, Curb Fees on Public Finance, BLOOMBERG.COM, June 30, 2005, http://www.bloomberg.com/apps/news?pid= newsarchive&sid=aXuOdXOe6Jt4&refer=canada (noting that "[u]nderwriting fees range from $5.53 to $6.45 per $1,000 of bonds," but providing examples where "independent advisors" negotiated substantially lower prices). Underwriting fees are only part of the cost of issuing debt; financial advisors, attorneys, and credit agency rating fees also can be substantial.
142. See Gillette, Democracy and Debt, supra note 42, at 400-01 ("Bond lawyers, financial advisors, and underwriters earn significant fees for putting together and marketing transactions involving municipal obligations . . . . The pursuit of such business has apparently been so lucrative that the Municipal Securities Rulemaking Board intervened in 1994 to promulgate a rule against political contributions to municipal officials by 'municipal finance professionals' on the grounds that such contributions had become a primary means
143. See Jenny Anderson, Turning Asphalt to Gold: Australian Bank Pursues Toll Roads and Other Public Works, N.Y. TIMES, Jan. 20, 2006, at C-1, available at 2006 WLNR 1081037 ("The potential for fees in these public infrastructure deals is astounding, even by Wall Street's obsessive and excessive fee standards. Bankers can make advisory fees on the sale of the often-large assets. Then, once packaged into funds, the assets earn Macquarie management fees (1 to 1.5 percent) as well as incentive fees: 20 percent on profits above a certain threshold . . . . In essence, its deals are like leveraged buyouts: it provides the equity, borrows the debt and rakes in rich fees."). Of course, in many jurisdictions and for some types of debt, the cost of a successful referendum must be added to bond issuance costs.
144. INSPECTOR GENERAL'S REPORT, supra note 107, at 1.
145. See INSPECTOR GENERAL'S REPORT, supra note 107, at 6 ("93% of the lease payment was to pay the City for the value of the first 50% of the 75-year period (37 years).").
146. Much of the purchase price can be depreciated over the fifteen-year period specified in § 197 of the Internal Revenue Code, rather than over the longer lease term. See GAO REPORT, supra note 4, at 27 n.18 (describing the effect of § 197 on tollway leases)
147. Memorandum from Subcomm. on Highways and Transit Staff to Members of the Subcomm. on Highways and Transit 7 (Feb. 12, 2007), available at http://books.google.com/ (search "Memorandum to Members of the Subcommittee on Highways and Transit Re Hearing on Public-Private Partnerships: Innovative Financing and Protecting the Public Interest") (explaining that the portion of the upfront payment in a tollway lease allocated "to the right to impose and collect tolls" is amortized over fifteen years). The portion of the payment allocable to the right to collect parking meter revenues in the parking meter lease is analogous to the right to impose and collect tolls.
148. But see INSPECTOR GENERAL'S REPORT, supra note 107, at 19 (arguing that a shorter lease period would have been sufficient).
149. See INSPECTOR GENERAL'S REPORT, supra note 107, at 5 ("While there are arguments in favor of longer leases (like 75 years) in certain situations - namely, the unavailability of favorable tax-depreciation status . . . - they simply do not apply here.").
150. See, e.g., Calvin H. Johnson, A Thermometer for the Tax System: The Overall Health of the Tax System as Measured by Implicit Tax, 56 SMU L. REV. 13, 17 (2003) ("Indeed, the § 103 exemption probably does considerably more harm than good overall.")
151. Stanley A. Koppelman, Tax Arbitrage and the Interest Deduction, 61 S. CAL. L. REV. 1143, 1177 (1988) ("The differential between taxable and tax-exempt bond rates has not approached the highest marginal tax rate.").
152. See Richard M. Daley, How We'll Weather the Storm, CHI. TRIB., Nov. 11, 2009, at C-21.
153. This was the discount rate used by the City and the purchaser in valuing the Skyway's future cash flows. See Greg Hinz, City Council Giddy over Skyway Lease, CRAIN'S CHI. BUS. (Oct. 27, 2004), http://www.chicagobusiness.com/ article/20041027/NEWS02/200014397.
154. See CITY OF CHIC., COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2008, at 81, 127-28, available at http://www.cityofchicago. org/dam/city/depts/fin/supp-info/CAFR/2008/CAFR2008.pdf (listing bonds "defeased" with proceeds from the Skyway deal)
155. U.S. DEPT. OF TRANSP., INNOVATION WAVE: AN UPDATE ON THE BURGEONING PRIVATE SECTOR ROLE IN U.S. HIGHWAY AND TRANSIT INFRASTRUCTURE 11 (2008), available at http://www.ncppp.org/councilinstitutes/dotpppreport-20080718.pdf (describing the $465 million in Skyway revenue bonds redeemed out of proceeds of the Skyway transaction).
156. See, e.g., Hal Dardick, Property-Tax Rebates Unclaimed; Small Refunds Were Part of Deal on Parking Meters, CHI. TRIB., May 23, 2010, at C-7
157. Fran Spielman, Daley 2009-Flubs and Fiascoes: Privatizing Parking Meters, Failing to Win Olympic Bid Leave the Mayor Reeling, CHI. SUN-TIMES, Dec. 27, 2009, at A-16
158. David Zahniser & Phil Willon, Risks Are Seen in L.A.'s Plan to Privatize Garages: A Rushed Bidding Process Could Lead to Undervalued Leases of Parking Structures, L.A. TIMES, Feb. 8, 2010, at AA-1.
159. See Chicago Parking Meter Facts, supra note 123 (describing reserves created by Skyway and parking meter transactions as "a financial cushion most cities don't have").
160. See Blair, Valuation Analysis, supra note 114, at 7-8 (using a discount rate of ten to fourteen percent to value parking meter concession)
161. Mick Dumke, Fact-Checking Mayor Daley's Budget Address, CHI. READER (Oct. 21, 2009, 2:53 PM), http://www.chicagoreader.com/TheBlog/archives/2009/10/21/ fact-checking-mayor-daleys-budget-address (questioning the ability of the City to earn even its projected five percent return on reserve funds).
162. The City trumpeted the rating increase as a benefit of its Skyway and parking meter privatization deals. See Chicago Parking Meter Facts, supra note 123. Chicago's bond rating went up after its Skyway and parking meter deals went through.
163. See Tim Jones, Chicago Mayor Candidate Wants Bond Rating Protected, BLOOMBERG.COM, Nov. 10, 2010, http://www.bloomberg.com/news/2010-11-10/chicago- mayor-candidate-calls-for-protecting-parking-meter-fund.html (noting that both Standard & Poor's and Fitch downgraded Chicago's credit rating due to its "heavy reliance on nonrecurring revenues to bridge its 2011 budget gap, including the use of most of its remaining reserves from the sale of its parking meters")
164. Yvette Shields, Chicago to Tap Stimulus Programs, BOND BUYER, July 30, 2010, http://www.bondbuyer.com/issues/119-255/chicago-council-budget-2010- 1005876-1.html ("Chicago's reliance on reserves from its parking meter lease to erase a good chunk of its $520 million 2010 deficit raised concerns among some [and some worried continuation could] drive a downgrade.").
165. See Richard Briffault, Foreword: The Disfavored Constitution: State Fiscal Limits and State Constitutional Law, 34 RUTGERS L.J. 907, 940 (2003) ("Indeed, the debt provisions are often treated as little more than technical shoals to be navigated by clever lawyering rather than as embodiments of substantively valuable principles.")
166. See Robert C. Longworth, Privatizing-Yes or No?, MIDWESTERNER (Sept. 29, 2010), http://globalmidwest.typepad.com/global-midwest/2010/09/privatizing-yes- or-no.html (arguing that almost all deals privatizing the delivery of transportation infrastructure are too long). To put the parking meter lease into perspective, the contract's length is only slightly longer than the history of the automobile. Ford's Model T went into production in 1909, nearly one hundred years before the seventy-five year contract was signed.
167. See WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1451 (1976).
168. See INSPECTOR GENERAL'S REPORT, supra note 107, at 4 ("The City has also argued that it would make no sense to calculate the value of the parking-meter system to the City under the terms of the lease, because . . . it would have been impossible for the City to have both kept the parking-meter system and raised the rates to the same extent as the lease, because there was not sufficient political will to do so . . . .")
169. Blair, Valuation Analysis, supra note 114, at 4 (describing the assumption that the City would increase parking rates at annual rate of three percent as "aggressive given the fact that the rates on 75% [of] City meters had not increased in over 20 years [despite] . . . the rate of inflation average [of] approximately 3.2% per year").
170. According to the City's own press releases, the 2010 budget takes "$270 million . . . from the parking meter long-term reserve" and "advance[s] the $100 million 2012 parking Meter [sic] mid-term reserve." Press Release, Peter Scales, Mayor Daley Presents 2010 Budget Proposal (Oct. 21, 2009), available at http://www.cityofchicago.org/city/en/ depts/obm/provdrs/city-budg/news/2009/oct/mayor-daley- presents2010budgetproposal.html. For how this corresponds to the original projections
171. see Fran Spielman, Bye-Bye to Almost $1 Billion; 2010's $6.1 Billion Budget Has Property Tax Relief, No Tax Hikes, but It's Eating up Huge Chunk of Parking Meter Windfall, CHI. SUN-TIMES, Dec. 3, 2009, at 14.
172. See CHICAGO PARKING METER CONCESSION, supra note 5, at 50,547 (defining "Regular Rate Adjustment").