Examining parking privatization as a fiscal solution: there are pros and cons for governments to consider when looking at leasing their parking assets in public-private partnerships.

• Author: Taxman, David
• Position: Solutions

Most cities are facing fiscal difficulties and significant budget deficits, and many are instituting hiring freezes or layoffs, delaying or canceling infrastructure projects, or implementing cuts across the board in an effort to improve their situations. Cities are also trying to raise revenues by increasing charges for services, property taxes, and sales taxes. These bailout methods either reduce a city's resources or place a greater financial burden on citizens. However, cities have also begun finding new, creative ways to generate money to finance projects, pay off debt, and secure employee pensions. This has led to numerous cities considering public-private partnerships that involve leasing their on-street or off-street parking assets.

A public-private partnership involves the long-term lease of a city's parking assets to a private operator in exchange for periodic payments, or an upfront lump sum. The private operator receives the revenue generated by the parking system over the course of the lease and is responsible for the management, capital repairs, and maintenance of the parking system. Public-private partnerships are not a new concept in the United States; cities have outsourced the operation and management of toll roads, wastewater management, urban development, utilities, financial management, and the operation of schools. But the United States has lagged Europe, Australia, and Canada in privatizing parking assets. This is not because of a lack of private investors--large financial investment firms have both available capital and interest in parking investments, viewing them as a safe spot in an otherwise risky market. The question for a city, then, is whether privatizing its parking systems is an effective solution to help raise capital and improve its financial situation.

MAKING THE DECISION

In a public-private partnership, a city still has some rights in the management of the parking system. To set the parameters and guidelines of the deal, a concession agreement is designed with input from both the seller (the city) and potential buyers (investment firms or a parking operator). The concession agreement is formulated to determine points including who will collect enforcement revenue, what happens if meters are removed, and how new meters are installed. Many issues need to be considered, and the city should have a plan that promotes development and allows for checks and balances. Some cities seek a parking consultant to...