Privatization ordinance poised for City Council approval

One month after shelving his plan to privatize Chicago’s 311 nonemergency system, Mayor Rahm Emanuel is finally getting around to delivering on his campaign promise to establish rules of the road for privatizing city assets and services to make certain that the parking meter debacle is never repeated.

The City Council’s Budget and Finance Committees held a hastily arranged meeting Tuesday to consider an ordinance introduced by the mayor and co-sponsored by Ald. Roderick Sawyer (6th), chairman of the City Council’s Black Caucus.

A final vote on the ordinance was put off until Wednesday. But with the Better Government Association and AFSCME Council 31 involved in the negotiations and on board with the final version, the outcome is not in doubt.

“Complete unanimity is rarely found in politics or government. But it is certain that everyone in the city of Chicago wants to avoid another parking meter deal like the one hastily agreed to in 2008,” BGA policy coordinator Judy Stevens told aldermen.

“The ordinance … represents an important step forward in preventing another such travesty by providing for enough time, transparency, information and public input to allow the council to make informed decisions about proposed privatizations.”

Adrienne Alexander, policy and legislative specialist for AFSCME Council 31 representing 3,500 city employees, said too often privatization of vital city services and assets has occurred “without a full accounting of the potential costs and consequences.”

“Too often privatization is a way to push down wages and benefits, and quality service suffers. The process set up through this ordinance will ensure the ability to have a robust debate around privatization attempts. A study will be conducted on the cost effectiveness of privatizing a service prior to award of any contract and will include a comparison of privatizing versus maintaining the services in house. Employees will have the opportunity to comment and submit a proposal to maintain the services in house,” Alexander said.

The 75-year, $1.15 billion deal that privatized Chicago parking meters is widely despised for several reasons.

The City Council was rushed into a deal that locked in steep rate hikes because then-Mayor Richard M. Daley had already counted on the revenue to balance his budget. The transition to private management was poorly executed, with parking meters jammed with quarters. And Chicago taxpayers ended up getting the short end of the stick — with millions in hidden reimbursement costs — while private investors made a killing.

The ordinance is aimed at addressing all of those concerns even though there are no privatization proposals in the pipeline.

The ground rules would apply to privatization of city assets valued at a minimum of $400 million with terms that last at least 20 years. The city’s chief financial officer would be required to issue a request for qualifications; identify an independent adviser to evaluate the deal; and notify chairmen of the City Council’s Budget and Finance Committees 90 days before a City Council vote.

The city also would be required to hold a public hearing and accept public comments using an online inbox. Seven days before the final council vote, the appropriate City Council committee would hold a hearing. Summary information and the independent adviser’s report would be made public.

Privatization of city services would be covered if the proposed service contracts are valued at $3 million or more. Construction, engineering and demolition contracts would be exempt because those services are viewed as critical to maintaining government operations.

The city’s budget director would prepare a “cost effectiveness” study that outlines the potential benefits to Chicago taxpayers. Unions representing city employees who perform the service and stand to lose their jobs would have 10 business days to provide a written response. That would be followed by at least one Budget Committee hearing.

If an asset is ultimately privatized, annual performance reports would be required of the contractor and oversight would be maintained by Inspector General Joe Ferguson. Services that are privatized would be subject to twice-a-year performance reports by the overseeing department.

The ordinance also takes aim at Daley’s decision to privatize the parking meters and spend most of the proceeds to balance his last few budgets.

The city would be required to invest 10 percent of the proceeds “not used for investment earnings, expenses, debt service, public infrastructure, or pension payments” into an “intergenerational fairness fund” to be invested by the city treasurer.

The fund could not be touched until the lease was half over or by a three-fourths vote by the City Council. The asset would have to be returned to the city at the end of the lease in a “state of good repair.”

During Tuesday’s debate, Ald. Tom Tunney (44th) relived the parking meter nightmare that most aldermen would rather forget.

Tunney noted that there was an independent analysis prior to the parking meter deal, but it was dead wrong.

“We brought in outside people and this was a unique asset sale that had not happened so there weren’t a lot of comparisons. There were comparisons about parking garage values, but not the public way. Value was based on a set of assumptions where we, as aldermen, were misled — especially when it comes to handicapped parking and that affected the valued immensely by interpretation on page 400 and something,” Tunney said.

“Maybe with more scrutiny or more time to evaluate that [the assessment would be more accurate]. But fair value, in my opinion, is not necessarily as objective as you might think.”

Ald. John Arena (45th) noted that the $400 million threshold would not have covered Emanuel’s lucrative digital billboard deal. That deal was worth $155 million.

Sawyer said he started pushing for a privatization ordinance in 2012, when aldermen were blindsided to discover that the Water Management call center was being outsourced.

“It justifiably provoked some concern because, in that instance, a vast majority of those jobs were those of black and brown color. African-Americans and Hispanics. It became a fight … that we have an option or a vehicle where we could see the potential … and be able to weigh in on it,” Sawyer said.

The 311 privatization was shelved in response to a mini-rebellion by the City Council prior to approval of Emanuel’s tax-laden, 2016 budget.

On Tuesday, Budget Director Alex Holt assured aldermen that, if the 311 deal is revived, “It would need to go through this process.”