Is There a Smart Way for Cities to Privatize Parking?

[fflint]

Will Yet Another Fiasco Finally Convince Rahm Emanuel to Cancel Chicago’s Parking Meter Lease?

The Urbanophile
Thursday, May 10th, 2012

Chicago’s parking meter lease is the gift that keeps on giving. Put aside for the moment the fact the parking meters are a bad type of asset for a long term lease in the first place. Even ignoring this, this deal continues to be Exhibit A in What Not to Do for privatization.

Recently the parking meter lessee claimed $13.5 million dollars in compensation for just one year’s worth of allowances for free handicapped parking. Over the course of the lease and with inflation at 3%, that would be over $3.3 billion paid to the vendor just for this!!! Figure in a discount rate of 12% and that’s a net present value of $173 million. Rahm Emanuel is strongly disputing the payment, but the fact that he’s quietly pushed legislation in Springfield that would end free parking except for the most disabled is almost an implicit admission that the compensation claim is valid.

Now the Sun-Times reports that the vendor is demanding an additional $14 million in compensation for meter closures – and that just for the first nine months of 2011. Just as a refresher, whenever the city closes meters temporarily for construction, a street festival, or a NATO conference, it has to compensate the vendor for lost revenue if the duration exceeds the contractually agreed to closure allowance. Obviously the allowance wasn’t sufficient as this compensation on an annualized basis would be $18.6 million. With 3% inflation over the 72 years left on the contract, that would be $4.6 billion!!! Again, with a 12% discount rate that’s $238 million.

So if these compensation claims hold up, here’s the math for Chicago. The city took an asset that generated $23.8 million in revenue for the city and converted it into one where the city has to pay $32.1 million annual in compensation to the vendor. This is on top of the meter money the vendor gets to collect for the next 72 years.

In return for this, the city got $1.1 billion, which it promptly spent to paper over budget deficits. But even so, given the net present value of $411 million in compensation payments alone to the vendor, the city really only got about $740 million for the meters!

Now the compensation may be adjusted by legislation, arbitration, or negotiation. And these are back of the envelope calculations to be sure. You might prefer different assumptions around inflation and discount rates. But whatever the case, clearly this is a whole huge steaming pile of Bad News for the city.
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[M II A II R II K]

City Explores Private Deal For Meters


May 13, 2012

By TED MANN

Read More: http://online.wsj.com/article/SB1000...644925706.html

New York City is taking tentative steps toward turning over the operation of its nearly 39,000 parking meters to a private company, with a cautious eye toward avoiding costly missteps made in other cities. Mayor Michael Bloomberg's administration hasn't made a decision to go ahead with a deal. But it will put out requests in the coming weeks to weigh the capabilities of potential bidders.

Officials said they are motivated in part by a belief that a private company could help alleviate some of the well-known frustrations of parking in New York: circling block after block in a search for an empty spot or dashing out in the middle of dinner to feed a meter. Although other cities have embraced more driver-friendly technologies, New York has been slow to catch up. The city's 7,800 muni-meters represent only a slightly more modern approach—they accept credit and debit cards—than the 31,000 single-space meters that gobble coins in boroughs outside Manhattan.

With enough incentive, officials believe, an outside party could come up with innovations for the Internet age, such as a system to pay with a smartphone or a mobile app that would direct drivers to vacant spaces detected through sensors in the pavement. In the Bronx, the city Department of Transportation is running a pilot program to test pavement sensors, including whether they will work in New York's climate. But that is a small test, and broadening that program, or one like it, to the entire city could be risky and expensive. "The odds are higher that [private companies] will move with greater alacrity," Deputy Mayor Robert Steel said. A deal also could offer potential savings for the city on labor costs, but officials said it is too soon to say what a contract might look like.

Still, officials are aware that privatizing parking meters has been fraught with problems—and political fallout—in other cities, most notably in Chicago.

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[M II A II R II K]

Ohio State Gets $483 Million Bid for Parking Lease


June 4, 2012

By RICHARD PÉREZ-PEÑA

Read More: http://www.nytimes.com/2012/06/05/us...imes&seid=auto

As state universities try to fill in gaps left by shrinking government support, Ohio State University is taking steps to open a new financial frontier with its parking lots. University officials say that a private bidder has offered $483 million in a lump sum for a lease to operate university parking facilities for 50 years. The deal, still tentative, appears to be the first of its kind at a large university, according to higher education groups, though Indiana University confirmed on Monday that it is in the early stages of exploring a long-term lease of its parking facilities.

- The Ohio State deal is one of several that the university is pursuing in a drive to build its financial reserves. The university recently sold 100-year bonds, a first for a public university, raising $500 million; it made a $25 million exclusive deal with a local bank for campus A.T.M.’s and other services and is looking into privatizing its airport. Joseph A. Alutto, the provost, noted that state aid now accounted for only 7 percent of the university’s $5 billion annual budget, and that the federal government’s budget troubles could lead to even deeper cuts. “We need to address an increasingly uncertain environment and set some money aside,” he said. “We can’t go on raising tuition forever. We’re looking at all our assets and asking, ‘If they’re nonessential assets, how can we turn them into revenue?’ ”

- The money will be used to maintain other transportation services, and for basic university functions like hiring faculty and awarding scholarships. Colleges and universities have increasingly looked to deals with outside businesses to raise money, turning over parking lots or campus bookstores to private operators, typically in return for a stream of revenue. But a half-century deal with a huge upfront payment is another matter. “This isn’t a conversation that would have taken place 10 years ago,” said Daniel J. Hurley, director of state relations and policy analysis at the American Association of State Colleges and Universities. “But state disinvestment in higher education is spurring universities to be more entrepreneurial.”

- The deal is expected to be formally recommended to the university trustees, who would vote on it on June 22. The plan has stirred controversy on a campus where, according to the school, about 100,000 students and employees park each day. Responding to concerns, the university has included in the deal limits on price increases, and flexibility to increase parking supply. Chicago’s parking meter lease raised $1.15 billion for the city, but it has been widely criticized as leading to steep price increases and a chronic problem of malfunctioning meters.

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[mhays]

A university should actively encourage transit, walking, biking, etc. Just guessing, but I bet the contract would have language deterring OSU from going very far in that direction.

The University of Washington in Seattle is an example of being fairly activist on this, probably one of many. In the late 1980s they wanted to expand the university substantially but the neighborhoods around them didn't want more traffic, land was limited, and they didn't want the expense of building parking (which for a university rarely draws much revenue and wouldn't pay for its construction).

So they adopted the U-Pass, subsidizing transit and doing a bunch of other stuff to encourage transit use. And they stopped building parking, basically capping the total number of spaces. As a result, per a 2010 report, 21% drive alone, 39% use transit, 25% walk, 8% bike, and 5% carpool. Just since 1995 (after some success already), vehicle trips are down 15% while campus population is up 40%.

Would that be encouraged to the same degree with a parking operator?

[M II A II R II K]

Half a billion dollars upfront is one hell of a deal, and with plenty of investment opportunities and borrowing against it in the long term.

[mhays]

It's small compared to the operational needs of the university, and it's small compared to the capital projects needs of the university over even a single decade. Given the reduction in control and self-determination, it doesn't sound worth it.

[BevoLJ]

That is a lot of money for tOSU. Though not all that surprising I guess. I bet the operator makes a nice profit off it. UT - Austin charges $750 for Fall and Spring semester or $380 per semester for student parking passes. For schools as large at tOSU or UT that can be quite a bit of money over 50 years.

Originally Posted by mhays

A university should actively encourage transit, walking, biking, etc. Just guessing, but I bet the contract would have language deterring OSU from going very far in that direction.

The University of Washington in Seattle is an example of being fairly activist on this, probably one of many. In the late 1980s they wanted to expand the university substantially but the neighborhoods around them didn't want more traffic, land was limited, and they didn't want the expense of building parking (which for a university rarely draws much revenue and wouldn't pay for its construction).

So they adopted the U-Pass, subsidizing transit and doing a bunch of other stuff to encourage transit use. And they stopped building parking, basically capping the total number of spaces. As a result, per a 2010 report, 21% drive alone, 39% use transit, 25% walk, 8% bike, and 5% carpool. Just since 1995 (after some success already), vehicle trips are down 15% while campus population is up 40%.

Would that be encouraged to the same degree with a parking operator?

Until recently UT Austin didn't allow Freshmen to have cars. But now that they are allowed to live off campus, obviously they are allowed to have cars. I think they can buy student parking passes now too.

I think generally unless the school is out in the suburbs or in a small rural town, most large universities don't really need to be that active to encourage transportation other than cars. It is something that is naturally done or takes care of itself. It is just kinda silly for an undergrad to have car at such a school. I mean like UT it is a 20 min walk from their dorms to most of the parking. And that parking is very expensive. Given all the options they have to get around town it just isn't worth it. Typically many freshmen will show up with cars thinking they want them to be able to go home on the weekends. Which is always a big concern for young new college kids. But most all large schools like Washington and UT have shuttles on the weekends to pretty much anywhere in the states they are in. After a couple weeks all those cars vanish, left at their parents homes because it is just to much trouble to keep them in the city as a student. Not worth it.

[mhays]

At the UW, the SOV/transit ratio was roughly the opposite in 1991 vs. 2007, per a report I read after I posted. This was mostly attributed to the U-Pass.

[M II A II R II K]

NYC Seeks Private Companies to Operate 90,000 Parking Spaces


June 11, 2012

By Henry Goldman

Read More: http://www.sfgate.com/cgi-bin/articl...E901-M5GV6.DTL

New York City is giving private operators until July 31 to show their interest in running the biggest U.S. municipal parking system. In a request for qualifications issued today, the Department of Transportation offered an opportunity to compete for "a potential private management agreement" to oversee almost 90,000 parking spaces across five boroughs.

- New York officials have set up the competition as they confront a deficit of at least $3 billion in a projected $72.4 billion fiscal 2013 budget. Cities around the U.S. have begun to view their street curbs as assets. They're installing meters, sometimes equipped with devices that adjust rates higher during times of peak demand, to deal with rising labor costs and insufficient revenue. Since the idea of private meter operation arose last year, New York officials have said they want to avoid repeating the experience of Chicago.

- Minimum qualifications for operators include running systems of at least 100,000 spaces, 20,000 of which must be on- street, and the financial capacity to post a $100 million letter of credit or cash collateral, enough to guarantee at least one year of net revenue for the system, according to the city request, which was posted on the Internet today. Responses are due July 31. Technology-based amenities such as pay-by-phone may be part of the system, Wood said.

- Indianapolis approved a 50-year agreement in November 2010 placing Xerox Corp.'s Affiliated Computer Services in charge of managing and collecting revenue from its 3,600 parking meters. The Indiana city agreed to accept a smaller upfront payment so that it could retain a 30 percent stake in future revenue and also has the right to buy out the private operator, Michael Huber, deputy mayor for economic development, said in an interview last year.

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