Privatized parking meters?

Union, auditor raise questions about sale, lease-back idea

By Nick Budnick

The Portland Tribune, Jun 5, 2008, Updated Oct 30, 2009 (32 Reader comments)

L.E BASKOW / TrIBUNE PHOTO

Portland’s transportation office has crafted a plan to sell the city’s SmartMeters, purchased in 2002, and then lease the machines back in a deal that includes a maintenance contract.

A proposal to sell the city’s electronic parking meters – and then lease them back – is drawing opposition from public employees and questions from the city auditor.

The city’s Office of Transportation is preparing to sell the bulk of its now-ubiquitous green SmartMeters to a Canadian firm for about $9.5 million. As part of the deal, the agency then would lease the 1,150 machines back for $2.2 million a year over a period of five years. The city would continue to receive the revenue from the machines.

Though the idea has been bubbling inside the transportation office for years, it has not been discussed publicly. The city posted a sole-source contract notice in April 2007. A sole-source contract is one that bypasses the city’s normal competitive bidding process and goes directly to a specific company.

The City Council approved a consent-agenda resolution supporting the sole-source process without discussion in February 2008. The council considers consent-agenda resolutions so uncontroversial they do not require any public debate. At press time, the actual contract is scheduled to go before the City Council for a vote later this month.

Under the terms of the agreement, Fovere Capital Management, a Canadian investment firm, would buy the machines and lease them back to the city. The city also would pay about $500,000 a year to Precise Parklink, another Canadian firm, for an asset protection plan that amounts to an extended warranty for maintenance and parts. Both companies were chosen because Fovere is Parklink’s financing partner.

Ellis McCoy, the city parking manager spearheading the project, says the “sale and lease-back” contract will ensure that the city is not hit with unexpected price hikes for parts. It also would eliminate the risk that the manufacturer could stop servicing the machines.

“It’s a simple issue, as far as I’m concerned,” he said. “It’s an ownership versus lease scenario … under a leasing scenario, you share the risk.”

The union representing parking meter service technicians for the transportation office last year filed several grievances to block the plan, saying it would improperly privatize city jobs.

“I think they are being shortsighted,” said Richard Beetle, business manager for Laborers Local 483. “We can do it better in-house. They are becoming more dependent on this vendor, and I think that’s a mistake.”

Auditor seeks postponement

The auditor’s office has for months been preparing a report on whether the SmartMeters have paid for themselves. It only recently learned that the city now intends to resell the machines.

This prompted the elected auditor, Gary Blackmer, to send an e-mail to the City Council this week asking it to postpone a vote on the contract.

“Given the financial significance of this arrangement, we are expanding the scope of our current audit to include a review of the leaseback proposal and its costs and benefits,” he wrote in a June 3 e-mail.

City Transportation Commissioner Sam Adams said that he agreed with the auditor’s proposal, and he expects the contract to come up for a vote in late July. He said he hasn’t had a chance to look at any agreement. Staff, he said, “hasn’t gotten back to me with the result of their efforts, for me to determine whether they’ve gotten a good deal.”

Portland purchased its machines in 2002 and has operated them since. According to McCoy, the city owns 1,162 pay stations manufactured by Parkeon, a French firm, and about 200 manufactured by Cale Parking Systems USA, affiliated with a Swedish manufacturer.

At a cost of about $6,100 apiece, the machines were promised to pay for themselves by significantly increasing the capacity of the money they collect, compared with old-fashioned manual meters, as well as cutting maintenance costs and making parking easier.

McCoy says they’ve been successful, but the machines’ five-year warranties have already started expiring. Thanks to the U.S. dollar’s weakness, the price of European-made replacement parts has been going up steadily.

Meanwhile, because the software for the machines also is owned by Parkeon, the city cannot easily resell the machines to anyone not willing to contract with the company, potentially reducing their value to scrap metal.

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