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Annual Privatization Report 2013

Public-Private Partnerships for Parking Assets

Subsection of Annual Privatization Report 2013: Local Government Privatization

Harris Kenny
May 6, 2013

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Public-Private Partnerships for Parking Assets

Reason Foundation has covered public-private partnerships for parking assets extensively in previous editions of Reason Foundation’s Annual Privatization Report. It is a burgeoning, innovative area of local government reform that is reshaping America’s communities. This section outlines the highlights from 2012–13 by jurisdictions.

Chicago, Illinois: The Chicago parking meter public-private partnership is still in the news and drawing high-profile attention. The city-owned, privately operated parking meter rates will rise to the highest in the nation in 2013, as much as $6.50 an hour in the Loop area.1 In 2012 there were several conflicts relating to contract terms where the private operator sought additional revenue from the city. Initially Chicago Parking Meters sought $27 million in additional revenue from the city.2 This revenue fell into two categories.

Firstly, Chicago Parking Meters calculated that drivers with disabled parking placards and plates had received $17.9 million in free parking over 2010–11. The company is required to cover a portion of this expense, based on revenue calculations, which added up to $4.4 million. This meant the city would owe the remaining $13.5 million.3 An investigation by the Chicago Sun-Times found:

[There are] widespread disability-parking abuses in Chicago. The number of parking tickets and court cases involving placard abuse is on the rise, with able-bodied people using relatives’ placards, fake placards and even stolen placards to park for free…

There’s now one disabled-parking placard in circulation for every 13 passenger vehicles throughout Cook County.4

Mayor Rahm Emanuel responded in three ways. He endorsed city-level reforms to the system to pursue disabled parking fraud, i.e. able-bodied drivers using fraudulent placards or using legitimate placards without the owners’ consent. He also backed state-level legislation that would end free metered parking, except in the case of seriously disabled Chicagoans, which would take this concern off the table. Finally, he disputed Chicago Parking Meters’ $13.5 million claim and requested the dispute be sent to an independent arbitrator.

Secondly, Chicago Parking Meters asked the city for $14 million based on periods in 2011 when the city took meters out of service for street repairs, festivals and other city-sponsored activities.5

Over the course of 2012, Chicago Parking Meters eventually raised the total requested payment to $61 million. At press time the city was entering arbitration to settle the disputes. Meanwhile, new legislation reforming disabled parking by only allowing exceptions for individuals who are physically unable to get to parking pay boxes, combined with stepped up enforcement, should bring these costs down over time.6

Despite these contract disputes there is reason to believe that the city is turning the corner and ironing out some of the challenges in the public-private partnership. For example, in the business community there is support for increased parking availability, according to Omar Duque of the Illinois Hispanic Chamber of Commerce:

Many of the businesses that we work with and we’ve talked to actually appreciate the fact that now, their customers have a place to park. Because in the past, it was somebody’s employee or somebody that lived in the neighborhood that either parked for free and left their car there all day and so when customers would come, there’d be no place to park.7

Perhaps more significantly, Mayor Emmanuel’s administration remains committed to working within the confines of the contract. Indeed, the administration’s attorneys have been defending the contract in court, fighting off claims that it is unconstitutional. So far the courts have found in the Emmanuel administration’s favor on that issue: Cook County Judge Richard J. Billik, Jr. ruled that the agreement was constitutional and that as long as the city claimed to be benefitting from the deal, he couldn’t declare it illegal. Billik, Jr. further ruled that the city does retain control of its streets, and that control is not jeopardized if it entails city payments of “relatively minimal amount” relative to the $1.2 billion deal.8

Emanuel’s attorneys agree with Chicago Parking Meters that new meter pay boxes and the upfront cash payment are benefitting the city. But they are also arguing that this is not the legal issue before the judge. According to Roderick Drew, a spokesman for the city’s law department:

The city is aggressively doing everything within its power to ensure that the city's interests are being vigorously asserted and protected under that agreement… But the issue in the lawsuit was not whether the parking meter deal was a good one for the city, but rather whether the agreement was, on its face, unconstitutional. On that issue the law controls, and the city believed and the court agreed that the agreement was not illegal.

Further litigation may arise to clarify whether or not the city is benefitting from the deal. If the city is determined to not benefit from the deal, then the previous ruling by Judge Billik, Jr. suggests the deal could be ruled unconstitutional.

Indianapolis, Indiana: Indianapolis was the second major U.S. city to pursue a public-private partnership for its parking assets. The deal with ParkIndy has been covered extensively in previous editions of the Annual Privatization Report in 2011 and 2010, but has received a lot less media attention than Chicago in part because the transition has gone so smoothly. In February city officials announced the city generated $2.5 million in revenue in 2012—a $2 million increase since the partnership was implemented in 2010, and a $1 million increase since 2011.9

For a review of the partnership, watch the following reason.tv video below:

A June 2012 presentation by Michael Huber, deputy mayor of economic development for the city of Indianapolis and county of Marion, and Matt Darst, director of operations, Parking and Justice Division at Xerox, outlined the specifics of the partnership. They explained the partnership is making Indianapolis a leader across a broad range of metrics. For example:

In July ParkIndy announced it would donate $4,000 to INDYCOG, an organization dedicated to promoting bicycling as a safe and viable means of transportation and recreation in Indianapolis. The funds are dedicated to installing 50 bicycle meter rings throughout the city that attach to paybox poles currently used for automobile parking. ParkIndy also donated in-kind all of the labor to install the rings for INDYCOG.10

In November ParkIndy extended time limits for parking meters, allowing motorists to purchase up to three hours before 5 pm in the downtown area, six hours in the near downtown areas and up to ten hours in all other meter locations.11

Ohio State University: In September 2012, The Ohio State University (OSU) announced that it had reached financial close on a groundbreaking 50-year, $483 million lease of its parking assets (totaling over 35,000 spaces in garages, surface lots and metered spaces) to a private consortium composed of QIC Global Infrastructure (an Australian infrastructure investment fund) and parking operator LAZ Parking.12

The bulk of the $483 million upfront payment will be placed into the university’s endowment and invested to support the long-term academic mission of the university. The investment is expected to provide over $3 billion for academic initiatives in coming decades, to be used for scholarship support, academic hiring and similar educational uses. Under the deal, the concessionaire will operate, maintain, manage and collect revenue from the parking spaces for 50 years, and the deal caps rate increases on parking at 5.5 percent annually for the first 10 years of the lease.

OSU's parking deal is the first transaction completed as part of a larger, comprehensive review of all of its non-core assets to see how they could be leveraged to generate additional revenue to support the university's academic mission. After parking, the OSU administration has announced that it will review the university’s airport, golf courses and other assets to determine if leasing or selling them could benefit the school's core mission.

Cincinnati, Ohio: Lawmakers are grappling with a $34 million budget deficit and their latest budget relies on $21 million in annual revenue from leasing some of the city’s parking assets.13 The total procurement includes four parking garages (a fifth to be completed by the winning bidder), three lots and 6,000 on-street spaces, 5,700 of which are metered. Procurement would exclude eight city-owned parking facilities.14

In November 2012 the city issued an RFP and by December the city had received nine bids, one coming from the Greater Cincinnati Development Authority, which pledged $40 million upfront and a 50 percent profit share moving forward.15 Some predict that a partnership could exceed those figures, with estimates ranging from $100 to $150 million upfront plus revenue-sharing over the course of the contract.16

Based on early discussions, the public-private partnership is expected to allow the firms to:

The plan has support from City Manager Milton Dohoney Jr. and Mayor Mark Mallory, so it will be interesting to see how this develops in 2013 and beyond.

Indiana University: Officials issued an RFP and in November 2012 selected Goldman Sachs to serve as a financial advisor for the potential 30–50 year contract for parking operations on the university’s Bloomington and Indianapolis campuses. According to the university’s Board of Trustees, the agreement is projected to generate at least $250 million over the course of the contract. University President Michael McRobbie explained his interest, saying "I think we have to take a look at this… Every single source of revenue open to the university is open to threat. So we have to be creative."18

In terms of the procurement, the two campuses have distinct parking assets. Indiana University-Purdue University Indianapolis has almost 25,000 spaces that generated $17.1 million in revenue last fiscal year. The Bloomington campus has 21,000 spaces that generated $6 million in revenue last fiscal year. University spokesman Mark Land attributes the difference in revenue to the real estate costs, turnover and other factors between the two campuses.19

Goldman Sachs will work with the university for six to nine months to help evaluate bids on the parking system. The school plans to hire two other financial advisors if they move forward, one to serve as a parking advisor and the other to oversee the entire deal. The agreement is driven in part by a $75 million parking fee-backed debt that would need to be defeased in the event of a long-term lease or sale. Decreasing aid from the state of Indiana over the last few years also motivates officials as they consider this deal.20

Harrisburg, Pennsylvania: Pennsylvania’s state capital is currently in receivership due to fiscal woes including $317 million in debt from a city-owned and operated incinerator. The city is pursuing a wide range of streamlining initiatives to right size the city’s books, notably pursuing a public-private partnership for parking assets, which are currently owned and operated by the Harrisburg Parking Authority. In February 2012 the city announced that 14 firms had expressed interest in operating/maintaining the parking system under a long-term lease that would ensure the city retains ownership.21

On October 10, 2012 the city announced that it would enter exclusive negotiations with Harrisburg First, LLC, a venture led by Guggenheim Securities with Standard Parking and AEW. On October 24, 2012 the city receiver, General William Lynch, and his advisor, Steven Goldfield, met with Harrisburg Parking authority employees to discuss the pending lease agreement. Employees were anxious about the goals of privatization and how it might impact their tenure with the city.22 Goldfield explained that securing jobs for existing employees is a priority and clarified the city’s mindset in certain terms:

The first order of business of this team is to take care of the City, not the creditors. The first order of business of this team to fix the structural deficit.23

Terms of the deal are still being negotiated, but given the city’s dire fiscal situation an agreement will likely be reached in 2013.

New York City: City officials were considering an asset management partnership to oversee the city’s 89,500 parking space system spanning all five boroughs—the largest municipal parking system in the United States. New York City’s large parking system also generates significant revenue. In 2011 the city generated $156 million in parking revenue, a 6.3 percent increase from 2010.24

In January 2013 city officials shelved procurement, opting instead to pursue modernization on their own and focusing on improving the city’s financial and operational performance.25

Sacramento, California: In May 2012 city officials abandoned plans to partner with the private sector to lease city-owned parking operations. The proceeds of the agreement were expected to go toward a new arena for the Sacramento Kings, a men’s National Basketball Association team. However, the team eventually opted to relocate elsewhere. The city report found that efforts on a parking lease were informative for future potential projects. The report reads:

However, based on staff's discussions with financial and parking experts as well as other jurisdictions that have considered this process, the proceeds from parking monetization should be invested in a city-owned capital asset that yields a return on investment for the city.26

Wilkes-Barre, Pennsylvania: Wilkes-Barre weighed leasing the city’s parking garages, lots and meters. After proceeding with procurement, the city council nixed pursuing a deal in June. However a partnership for Wilkes-Barre’s 2,113 garage spaces, 160 surface lot spaces and 800 parking meters is still being considered. In November 2012 Mayor Tom Leighton said during the Parking Authority board meeting that companies are still interested in the city’s parking infrastructure. The city was hoping to earn at least $20 million from a deal last time around, though it's unclear what would have to change in order to receive support from city officials and the city council.27

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Endnotes

1 “Chicago parking meter rates will be nation’s most expensive in 2013,” Associated Press, December 26, 2012. http://www.huffingtonpost.com/2012/12/27/chicago-parking-meter-rat_0_n_2370192.html?utm_hp_ref=chicago

2 Dan Mihalopoulos and Chris Fusco, “Chicago parking meter company wants more money; mayor balks,” Chicago Sun-Times, May 4, 2012. http://www.suntimes.com/news/12299030-452/chicago-parking-meter-company-wants-more-money-mayor-balks.html

3 Fran Spielman and Chris Fusco, “Mayor rejects parking company’s bill for disability parking,” Chicago Sun-Times, December 13, 2011. http://www.suntimes.com/news/metro/9423159-418/mayor-rejects-parking-companys-bill-for-disability-parking.html

4 Chris Fusco, “Meter company sends city $13.5 million bill for disabled parking,” Chicago Sun-Times, December 13, 2011. http://www.suntimes.com/news/metro/9398725-418/meter-company-sends-city-135-million-bill-for-disabled-parking.html

5 Mihalopoulos and Fusco, “Chicago parking meter company wants more money.”

6 Hal Dardick, “Disputed city parking meter tab up to $61 million,” Chicago Tribune, December 3, 2012. http://www.chicagotribune.com/news/local/ct-met-emanuel-parking-meter-lease-1204-20121204,0,2303891.story

7 “Businesses take ‘half-full’ approach to parking meter deal,” CBS Chicago, November 20, 2012. http://chicago.cbslocal.com/2012/11/20/businesses-take-half-full-approach-to-parking-meter-deal/

8 Mick Dumke, “Mayor Emanuel ensures parking meters remain in private hands,” Chicago Sun-Times, November 14, 2012. http://www.chicagoreader.com/Bleader/archives/2012/11/14/mayor-emanuel-ensures-parking-meters-remain-in-private-hands

9 “Parking deal paying off for Circle City,” Fox 59, February 2013. http://fox59.com/2013/02/21/parking-deal-paying-off-for-circle-city/

10 “Parking Modernization Update,” News from ParkIndy, LLC (Indianapolis, IN: ParkIndy) July 5, 2012.

11 “Parking Modernization Update,” News from ParkIndy, LLC (Indianapolis, IN: ParkIndy) November 30, 2012.

12 For more information and resources on The Ohio State University’s parking system lease, see: http://www.osu.edu/parkingproposal/.

13 Andy Brownfield, “Council passes budget reliant on parking lease,” Cincinnati CityBeat, December 14, 2012. http://www.citybeat.com/cincinnati/blog-4268-council_passes_budget_reliant_on_parking_lease.html

14 Barry M. Horstman, “Warning: Parking prices may soar,” Cincinnati.com, December 1, 2012. http://news.cincinnati.com/article/20121201/NEWS0108/312010035/Warning-Parking-prices-may-soar

15 Sehar Rasul, “RFPs in for Cincinnati parking,” Inspiratia, December 6, 2012. http://www.inspiratia.com/infrastructure/transport/north-america/usa/ohio/news/RFPs-in-for-Cincinnati-parking/

16 Brownfield, “Council passes budget reliant on parking lease.”

17 Horstman, “Warning.”

18 “IU leaders question wisdom of parking lease plan,” Associated Press, October 12, 2012. http://www.ibj.com/iu-leaders-question-wisdom-of-parking-lease-plan/PARAMS/article/37253

19 Kathleen McLaughlin, “IU may hit jackpot by leasing parking in Bloomington, Indy,” Indianapolis Business Journal, August 25, 2012. http://www.ibj.com/iu-may-hit-jackpot-by-leasing-parking-in-bloomington--indy/PARAMS/article/36281

20 Caitlin Devitt, Indiana University taps Goldman as advisor for parking privatization,” Bond Buyer, November 5, 2012. http://license.icopyright.net/user/viewFreeUse.act?fuid=MTY3NjY2OTM=

21 Eric Veronikis, “Harrisburg receiver releases names of firms interested in leasing parking system,” The Patriot-News, March 14, 2012. http://www.pennlive.com/midstate/index.ssf/2012/03/harrisburg_receiver_david_unko_13.html

22 Tara Leo Auchey, “The office of the Harrisburg Receiver meets with the Harrisburg Parking Authority,” Roxbury News, October 25, 2012. http://www.roxburynews.com/index.php?a=5489

23 Ibid.

24 Henry Goldman, “NYC seeks company to run 90,000 parking spots,” Bloomberg News, June 11, 2012. http://www.businessweek.com/news/2012-06-11/nyc-seeking-private-companies-to-operate-90-000-parking-spaces

25 Caroline Porter and Ted Mann, “New York scraps privatizing parking meters,” The Wall Street Journal, January 25, 2013. http://online.wsj.com/article/SB10001424127887323854904578264331152227780.html?mod=googlenews_wsj

26 David Bienick, “City spent $686K on failed arena project,” KCRA, May 4, 2012. http://www.kcra.com/r/31011276/detail.html

27 Christopher Hong, “Leighton revives plan to lease parking assets,” Citizens Voice, November 21, 2012. http://citizensvoice.com/news/leighton-revives-plan-to-lease-parking-assets-1.1406663


Harris Kenny is Policy Analyst


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