in Parking Privatization Also, the installation of new revenue control


equipment allows the seller to maximize the conces- sion payment received and to inherit a parking sys- tem with upgraded revenue control technology when the lease period has expired. Assessing the revenue potential of a parking


system is only half of the equation. The parking consultant also needs to perform a conditions assessment to determine the future capital costs associated with maintaining the physical condition of the parking assets (e.g., structural, architectural,


mechanical, electrical, fire protection systems, etc.). By privatizing a parking system, a city or institution is able to avoid capital repairs to the system’s infrastructure


(e.g., garages, parking lots, meters, etc.) and instead place that financial responsibility on the investment firm/private opera- tor (buyer). The city of Chicago, with privatization of its Grant


Directly related to an increase in parking rates is an “elas-


ticity factor,” which is the change in demand correlated with the increase in price. A limited number of studies have been done that assess the elasticity of demand factor related to park- ing rate increases. However, the bestmethod to determine the elasticity factor


for a parking system is to assess the decrease in parking demand between prior years where the park- ing


rates were


increased and no other significant changes were


implemented


(e.g., increase in park- ing inventory, changes in hours of operation, large or small popula- tion changes, etc.). This would provide a controlled example to use in determining the unique elasticity of demand factor asso- ciated to the parking system. Another potential increase in revenue is from the imple-


Park/Millennium Park Garages, received $563 million and was able to avoid capital repairs to the four garages. In addition, sig- nificant costs could be anticipated for on-going maintenance and repair of the other parking facilities, even though they had been recently constructed and/or renovated. This would have become a significant financial burden on


the city to maintain these garages. By leasing the garages, it placed the repair obligations on the private operator and freed up capital for other projects.


Privatization allows cities and institutions to get out of the parking business and have a specialized and expert private operator manage the system


For either a city/institution or investment firm to become


mentation of enhanced revenue collection equipment.Whether for on-street or off-street parking, such equipment can improve the accounting program, provide tighter security controls and permit multiple payment options. For an on-street parking system, the implementation of


pay-and-display equipment provides revenue enhancements by increasing the on-street capacity and eliminating piggybacking (parking on the last parker’s extra time). Installation of updat- ed revenue control equipment is advantageous to both seller and buyer. The seller receives a lump sum payment based on the


assumption that the parking system is operated with the imple- mentation of best parking practices and enhanced revenue equipment.The buyer is able to generate extra revenue fromthe parking system with enhanced revenue control equipment.


involved in the privatization of a parking system, it is important that each party performdue diligence to assess the system’s rev- enue potential, future capital expenses and necessary technolo- gy upgrades. A city or institution does not want to be later accused of selling its parking assets well under value and short- changing its residents or employees. Understanding the full revenue potential of the parking


system is necessary for a city or institution to ensure that it is being offered a fair price.As with any financial study, it should be the parking consultant’s goal to provide its client (buyer or seller) with themost accurate financial assessment, which takes into account the many issues, factors and nuances related to each individual parking system.


David Taxman, a Parking and Traffic Planner at Desman Associates, specializes in the financial analysis of parking privatization agreements. He can be contacted via e-mail at dtaxman@desman.com.


PT NOVEMBER 2009 • PARKING TODAY • www.parkingtoday.com 39


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