Privatization and the Sale of Tax Revenues

Abstract

Although there is a large literature exploring the advantages and drawbacks of the privatization of governmental activities, most of this work fails to confront the issues raised by the newest wave of privatization transactions. These transactions are motivated less by the possibility of achieving efficiency advantages than by politicians’ desires to borrow money surreptitiously. Using the example of the City of Chicago’s recent “sale” of its parking meter system - which is to say the future revenues and operation of pay-for-on-street parking - the analysis shows why such transactions should be viewed as a particularly noxious form of governmental debt. The discussion then explores possible legal rules designed to curtail such debt, masquerading as privatization, in the future.

Keywords: State debt, local debt, local debt limitations, state debt limitations, privatization, leases, transparency