In 2008, Chicago leased its 36,000 parking meters to a private consortium for 75 years in exchange for $1.15 billion. It sounded like a windfall. Within a decade, the city realized it had sold off an asset worth far more than what it received—and residents were stuck with skyrocketing meter rates they couldn't vote to change.

This pattern repeats around the world. Cash-strapped governments, facing budget holes they can't fill with taxes or borrowing, look at the assets they own—toll roads, airports, utilities, parking systems—and see a way out. Sell or lease the asset, pocket the cash, close the gap. But what happens after the check clears? Let's walk through the economics of why governments sell, what they actually give up, and why these deals so often end in regret.

Governments sell assets for the same reason anyone sells something valuable: they need cash now. Maybe there's a pension shortfall, a crumbling bridge, or a budget deficit that needs closing before the next election. A privatization deal offers something irresistible—a large lump sum that appears on this year's balance sheet without raising taxes or cutting popular programs.

But here's what that transaction actually is: the government is trading a stream of future revenue for a single payment today. A toll road that generates $50 million a year for the next 50 years is worth far more than $50 million right now. The private buyer knows this. They're not being generous—they're buying a predictable income stream at a discount. The gap between what the buyer pays and what the asset will actually earn over the lease term is the buyer's profit. It's also the public's loss.

The math gets worse when you consider what happens to the lump sum. In theory, governments should invest it in something that generates comparable long-term returns—infrastructure, debt reduction, endowment funds. In practice, the money often gets absorbed into general spending, patching short-term holes. The one-time cash disappears into operational budgets, and the revenue stream that could have funded services for decades is gone. You've essentially used your retirement savings to pay this month's rent.

Takeaway

Selling a revenue-generating asset to cover a budget gap is like selling your car to pay for gas. You solve today's problem by creating a bigger one tomorrow.

The most common argument for privatization isn't just about raising cash—it's that private companies run things better than governments. They face competitive pressure, answer to shareholders, and have incentives to innovate and cut waste. In theory, privatization should mean better service at lower cost. Sometimes it does. Private operators have modernized outdated systems, introduced technology faster, and reduced bureaucratic bloat in certain sectors.

But there's a critical distinction that often gets lost: cutting costs and improving efficiency are not the same thing. A private toll road operator can cut costs by reducing maintenance crews, deferring road repairs, or eliminating customer service staff. On a spreadsheet, that looks efficient. On the actual road, it looks like potholes and longer wait times. When a private water utility cuts costs, it might mean fewer water quality tests or deferred pipe replacement. The savings are real. So is the decline in service.

The incentive structures matter enormously. A private operator maximizing profit on a long-term lease has every reason to raise prices to whatever the contract allows and minimize spending on service quality to whatever the contract requires. If the contract is poorly written—and many are, because governments often lack the specialized legal expertise that private consortiums bring to negotiations—the public ends up paying more for less. The efficiency gain goes to shareholders, not citizens.

Takeaway

Private efficiency often means efficiency at extracting profit, not efficiency at delivering public value. The question isn't whether the private sector can cut costs—it's who bears the consequences when they do.

Privatization deals are typically structured as long-term leases—30, 50, even 99 years. That time horizon creates an enormous problem: nobody can predict what a city or country will need half a century from now. When Chicago locked in its parking meter deal, it couldn't have anticipated how urban transportation would evolve, how land use priorities would shift, or how much those meters would actually be worth. The private operator could. Or at least, they built in enough margin to profit regardless.

The regret often comes in waves. First, there's the rate shock—private operators raise prices because the contract allows it, and citizens blame the government that signed the deal. Then there's the flexibility loss. Want to remove parking meters for a street festival? The city has to compensate the private operator for lost revenue. Want to build bike lanes where meters used to be? Same problem. Public policy becomes hostage to private contracts. The government sold not just an asset but its ability to make future decisions about its own city.

Perhaps the deepest regret is the simplest: governments realize they sold something for less than it was worth. Independent analyses of major privatization deals—from Chicago's meters to Indiana's toll road to countless water system sales—consistently find that governments received 50 to 70 cents on the dollar compared to what the assets would have generated under continued public ownership. The fiscal crisis that made the deal seem necessary passes. The loss of the asset doesn't.

Takeaway

The worst part of a bad privatization deal isn't the money lost—it's the future flexibility surrendered. Governments don't just sell assets; they sell their ability to adapt.

Privatization isn't inherently wrong. Some assets genuinely work better under private management, and some government operations benefit from competitive pressure. But the pattern of selling valuable, revenue-generating public assets during fiscal emergencies—under pressure, without adequate valuation, through contracts that favor sophisticated private buyers—has cost citizens billions.

The principle is straightforward: public assets belong to the public across generations, not just the officials in office today. Before selling, we should ask whether we're solving a problem or just postponing it—and who's really getting the better deal.