November 28, 2009

Privatization of Parking

I stumbled across a blog that linked to an NYT piece about Chicago's very recent experience with privatizing some of their parking.  Now, i'm very open to the real concerns of such things - for instance it is hard on a social justice level to completely justify increasing the costs of parking downtown.  It is bound to discourage some of the disenfranchised from being able to afford to park and other similar issues.

Where I hold much less pity is where people use bastardized and nonsensical thinking to bash the economics of these deals outright.  Having done a lot of financial modeling, I'm keenly aware that there are many ways to 'get one over' on others in contractual negotiations.  But to immediately play the 'corporate greed' card without any real backup doesn't hold any water. Here is a section of the blog:

It’s Official: Chicago Parking Privatization a Massive Rip-Off

Last December, Streetsblog estimated that the Chicago deal would cost taxpayers "several hundred million to even a billion dollars in foregone parking revenue." Using the latest Morgan numbers, privatization expert Roger Skurski told reporters his "conservative estimate" -- Chicago could have earned about $670 million more by holding on to its meters. Back in June, before Morgan's revenue was known, Chicago's inspector general estimated the city could have gotten $2 billion in revenue, or $850 million more than it did from Morgan, had it raised rates and kept meter revenue to itself.
And the Times Piece:

"The parking meter company projects total revenues of more than $75 million and net income of about $58 million in 2010, after a second round of rate increases go into effect across the city on Jan. 1. In the first 10 ½ months of operation ending Dec. 31 of this year, the company expects $32.7 million in net operating profit, for a 70 percent profit margin."

“At this rate, it was a great deal for the parking meter company,” he said. “I don’t know if it was a good deal for the city. We should have just bit the bullet and done it ourselves.”

Obviously I disagree with their characterizations and posted this below on the blog.

There are quite a few points here to discuss.. 

First off, it is quite obvious that both the author AND the New York Times have a misconception of what the term "net revenue" means. Gross revenue means the amount of money you take in. Net operating revenue is gross revenue minus the expenses that you incur as part of being a business. At this point, it seems that the NYT and author believe that everything here is private profit, and there is some 70% profit margin, conveniently forgetting that the City of Chicago received a 1.15 BILLION DOLLAR CHECK upfront. 

Lets assume that the NYT data is correct, $58M in "Net Revenue" in 2010. Throwing aside many things such as interest or income growth to make it simple - they would need to spend EVERY dollar of that net revenue for the first twenty years or so to even pay back their initial $1.15 Bn investment with the City. But seeing as how we're all familiar with how loans work, you can rest assured that the firms that put up this money borrowed a significant portion of it, and have to pay back those loans with a large interest portion. Its quite likely that 40 + years of operating revenue will go directly into paying down that initial investment.

Second, the amount of revenue that Chicago would have made from their current parking scenario would be LESS than a third of 1.15 Bn over the seventy five year period. (taking into consideration that A)the previous streetsblog link said that the City hadn't raised rates in 2/3 of the meters for over twenty years and B)a fairly standard estimate of discount rate) 

Those parking rates are set and don't change because that is how local politics works. Assuming a hypothetical world where the City has the risk tolerance, political capital and actual capital to invest in running their parking as more of a business and then the will to pass substantial and regular parking rate increases to the level where they would equal or beat the privatization deal is akin to assuming that democrats and republicans in congress will all gather up with ponies and lollipops and pass bipartisan climate change, healthcare and budget legislation bills tomorrow. Too many important people will be worried about getting voted out of office and other political considerations for that to ever happen. 

But even more ridiculous is then setting that fantasy scenario as your "Baseline" for comparing whether the City is getting a raw deal. Its like being upset at McDonalds because they don't have a vegan soy-portobello burger on menu.  The anger and aspirations might be justified but frankly the place just doesn't work like that.

November 22, 2009

Science: A pursuit of truth or of politics?

There was very rightfully a backlash a few years ago about the politicization of science. From the GWB administration actively muzzling stem cell research to corporatism influencing the process of approving drugs at the FDA to the social and political debate on intelligent design there was all kinds of discussion about the manipulation of science for political reasons.

In that vein, recently a series of hacked emails was recently released from a prominent research university that included quite a few climate research scientists discussing things such as:

* Manipulating a series of data to create the infamous 'hockey stick effect' for showing a trend of recently rising global temperatures
* Admitting that certain datasets show no warming since 1998, but refusing to admit that this warrants any further discussion. Rather - "the data are surely wrong. Our observing system is inadequate."
* Discussing ways to avoid releasing their climate model and emails if forced to through freedom of information laws.

Now, I am no climate scientist nor am I qualified to understand a tenth of the jargon that is referenced in these emails so this critique is in no way an indictment of the pure concept of global warming. However, as someone who has created a lot of analytical models in his life - using data to end a forecast with an upward trendline as opposed to a lower trendline is typically done for one purpose, to give the reader an inherent bias upon first glance. There is also only one reason that you want to fight hard keep your data and/or model private. I'll let you guess what that reason is but it has nothing to do with being confident about what your model's accuracy, assumptions or how you've used your data says about your findings. Finally, the only reason that you don't want to care about competing data is that it shows that you might be wrong. Better to ignore it than have all that work go to waste, hmm?

In any case, I don't think that many people, impartial or otherwise, believe that humans have no effect on this Earth's air, water or atmosphere. Take a look at the skyline of any city or look at any large powerplant or factory and you can tell that we as humans impact this world. However, I fail to see how trying to "enhance" this position with false or misleading data is any better than the injustices to science that have happened in the past.

The ends never justify the means, and science should be motivated first, second and last by the pursuit of the truth. Lets have a global climate change discussion based on a REAL understanding of what is happening, and not some idealized version promoted by a small group of technocrats. After all, we're talking about enacting reforms that could have extreme impacts on the way that we live, work, play and exist as human beings.

We all deserve that, without compromise.

Fool me once, Shame on me. Fool me twice, Shame on.. me?

I was reading an article in the Times today, about how Wall Street was busy making money off of mortgages again. This time the gambit involves packaging distressed sales and refinancing them into government insured mortgages, then taking that money out immediately - serving to shift all of the backside risk onto the government.

Ostensibly, this article serves as yet another example of Wall Street behaving badly. But I ask - exactly how does any of this work without the implicit acceptance of the government agencies that allow, no, perpetuate this kind of behavior?

The government has no business investing our tax money into the housing market. It has no business guaranteeing mortgages and no business monopolizing the housing finance market, whether through fannie/freddie or through the FHA/VHA. The housing market is dominated by the federal government and yet it claims no responsibility for what happened.

Through its actions, it is as complicit as the very banks that helped to cause the housing meltdown. The only difference that I see is that those banks are vilified and yet the government still holds itself up the solution.

November 9, 2009

Universal Coverage: A Backdoor to Roe v Wade?

There are quite a few articles in the news right now about the potential to restrict the availability of abortions to women in any new healthcare reform bill. To be quite frank, I can't imagine how anyone could be surprised at this.

There are probably fewer issues that are more 'hot button' in American politics than abortion. And it has been demonstrated that there are blocks of both Republicans AND Democrats in Congress who don't believe in the rights of women to have access to abortions, as i'm sure that most Democrats are shocked to discover right now. And those politicians, through their ability to derail the bill in entirety, have banded together to severely restrict the availability of funding for abortion procedures in any plans that participate in the government exchange - at least in the House version of the bill.

This is the Faustian bargain that healthcare reform advocates need to accept and embrace as part of any potential success. As long as abortion remains a politically relevant issue,they can rest assured that there will be a lot of politicians fighting to make sure that it doesn't get paid for out of publicly contributed funds. In fact, the more successful that they are (i.e. - this initial system either ends up in the adoption of a European system of government provided and paid health care or the government ends up as the sole provider for health insurance), the more likely that the long-term debate won't be about the availability of coverage for abortion but rather the real capacity to even obtain one.

November 6, 2009

If you could go back in time to the beginning of 2002, before the White House started its PR campaign for WMD's and the invasion of Iraq you'd find that our overwhelming national priorities at that time started and ended with capturing Osama bin Laden and halting the spread of global terrorism, primarily with al Qaeda.

The American people, in a blind panic, accepted the theory that doing "something" was both immediate and necessary - even more so than taking the time to think through how to solve our most important problems at the time. Thus began our multi-century commitment to Iraq, to the detriment of the capacity to actually disable al Queda or capture bin Laden.

Was Iraq actually a pressing issue at the time? Yes. Did it deserve attention? Yes.

Was it anything that was worthy of expending almost all of our global political capital for? In hindsight (always 20/20), certainly not. It was just the most convenient way for the guys in the White House to finish an unfinished Iraq War 1.

Fast forward to 2009 and we're still committing troops to Afghanistan, trying to correct the errors of the past. Except now we're under different global conditions and under attack from the global economy in addition to global terrorism. Though terrorism is still a major pressing issue, right now the most important thing on people's minds is the economy.

The American government, starting with George W Bush and continuing through Obama has decided rightly or wrongly that the best way to try to stem this problem is to throw tremendous amounts of money at carefully and not so carefully calibrated targets. The effectiveness of these tactics can only be theorized, as to date there hasn't been a great depression style collapse of the economy. However, with national unemployment measurements exceeding 10% as of this week and millions of other Americans chronically underemployed, we find ourselves struggling as communities, as states and as nations with trying to find the best way to set ourselves back on track.

And in this context, here we are again in 2009 with our most important issue to deal with as the economy. And what has been the major political solution to helping the economy?

A massive reorganization of the entire healthcare system.

Now, I will in no way attempt to justify the massive cluster!@#k that is our healthcare system. In addition to recently being denied individual healthcare insurance because I was taking high blood pressure medication, my disabled mother was denied any more than two weeks of in-house nursing care by her insurance (Medicare based, by the way) after a medical issue that left her bedridden for the last 6 months. So I understand the comedy of errors that is our healthcare system.

This system as its currently designed and executed is solely concerned with providing services at the expense of patients themselves. There is absolutely no connection between what any doctor may or may not charge in fees and what I see from my insurance company. The tax code penalizes individuals and small business owners while benefiting large corporations and organizations, and I could just go on forever..

But frankly, I fail to see the connection between our global economic concerns and this solution. Will it help some people that may face large healthcare bills? I'm sure. But the other thing that it does is that it will expend so much political capital and increase the size of our economic liabilities so much that it will wipe out the capacity for any major legislation concerning the actual economy for a long time.

This solution is not an answer to fix our most important problems. Again, it is the most convenient way for the guys in the White House to finish their own unfinished war. Except in this case its the healthcare reform circa 1993 instead of Desert Storm circa 1991.

I'm hoping that 6 years from now, we're not in the same position we are today - spending resources to fix our healthcare solution and still trying to find enough will to tackle our most important problems.