These Privatization Programs Are INSANE!

TW: Chicago is leading the way in privatizing public revenue streams. We have done so with the Chicago Skyway and Mayor Daley is proposing to do the same with our parking meters. These deals would more accurately be described as capitalization schemes. The City of Chicago is trading 75 years of revenue in return for $1.2 billion. The deal is getting huge press mainly as in order to get the $1.2 billion upfront the city is proposing to let the private firm raise meter rates by up to four X over the next four years. No doubt by weaving the increases into a "capitalization" scheme the city believes the increases will be more palatable but my far greater concern is what the deal means for the future finances of Chicago.

Perhaps if the $1.2 billion was put away into some form of annuity or investment vehicle (preferably not invested in CDOs or Icelandic currency), then such a deal would not be destructive to the long-term financial health of the City. However, the actual plans for the money are much different. The vast majority of the money will be used for standard operating budgets over the next three years

"The Daley administration said $400 million will go into a long-term reserve, $325 million will be spent in city budgets through 2012 and $100 million is earmarked for programs helping low-income people. An additional $324 million is headed toward a fund city officials said "may be used to help bridge the period until the nation's economy begins to grow again."

So about one-third of the money will be set aside (with no guarantees it will not be grabbed say next year) and the balance will be deployed over the next three years including that "$100 million of low-income" which is mere vig to insure the votes of the city alderman to approve the plan.

Chicago is trading 75 years of revenue to shore up the next 3 year's budgets!!

These capitalization schemes are toxic waste being planted in a bi-partisan manner throughout the country, they are fiscal insanity. They are literally equivalent to a 20 year old capitalizing her life time earnings and then going on a three spending binge.
http://newsblogs.chicagotribune.com/clout_st/2008/12/city-parking-me.html