NYC Asks Banks For Ideas on Parking Privatization

Is a public-private partnership the path to high-tech parking sensors like this one? Or will a deal handcuff the city's parking policy? Photo: Matthew Roth

New York City is moving forward with possible plans to privatize its on-street parking to some degree. An RFP released last week by the city’s Economic Development Corporation asks investment banks to submit their best ideas for privatizing city assets. Parking tops the list of assets the city is interested in contracting with the private sector over. (Large pieces of transportation infrastructure are also on the list).

So far, the city is just asking for ideas. Mayoral spokesperson Marc LaVorgna told us that the city wants to retain “central control” over the operation of city assets, confirming that a private company would not be allowed to set parking meter rates, for example. The city is also “not interested in selling city assets to plug short-term budget deficits,” he said.

Beyond that, he said, the city hasn’t made any decisions about how to proceed. Issues like whether parking enforcement might be contracted out, for example, haven’t been determined yet.

The Wall Street Journal today that Deputy Mayor Stephen Goldsmith has suggested one possible model for an on-street parking deal: having a private company install new technology that would enable higher revenues, whether by introducing demand-based pricing or ensuring that meters function more reliably. The company and the city would split the increased income.

The best-known parking meter privatization deal was finalized in Chicago in 2008, and it is now widely viewed as a debacle. After a closed-door process, the city signed a 75-year deal with Morgan Stanley in exchange for a one-time payment. It was later reported that the one-shot revenue for the city was worth several billion dollars less than what Morgan Stanley is likely to earn from the meters. What’s more, Morgan Stanley now holds a veto over the removal of metered parking, a potential roadblock for street redesigns.

New York City could structure a meter privatization deal in a very different manner, however. Budget watchdogs will need to be sure that if the city signs any privatization deals, it gets every dollar it can. They’ll also need to ensure that this isn’t a one-shot revenue deal dressed up as efficiency finding. If there’s a need for better parking technology, for instance, why couldn’t the city install it in-house and avoid splitting the revenues?

There are a lot of open questions about the transportation policy implications of any potential deal. Who handles parking enforcement under a privatized system — and what their incentives are — could have a big impact on how on-street spaces are used. Would the terms of the deal strengthen or weaken the incentives for the city to begin metering some of the city’s overwhelmingly free on-street parking? Will the terms of the deal put an additional roadblock in the way of innovative street redesigns that remove metered parking spaces? Will a deal lock in curbside practices that decades from now will be utterly outdated, in ways we couldn’t even predict?

City Council transportation committee chair Jimmy Vacca told the Post that he’d be opposed to any privatization deal that served as cover for an increase in parking rates. From this distance, it’s hard to game out how a privatization deal that didn’t directly touch meter rates would shift the politics of parking. But with reducing the subsidy for on-street parking critically important for reducing congestion, it’s a question to start thinking about.

  • What is privatized cannot be eliminated. That would prevent the denser parts of NYC from moving toward car-free status, which might be a more attractive option someday. But if the contract were very short term — renewed, say, for no more than a year at a time — that would reduce the possibility of setting the parking glut in stone forever.

  • TKO

    What is privatized can be eliminated. Just ask school teachers in Rhode Island.

  • Kevin Love

    Car drivers are a distinct minority in New York. A functioning democracy would have them paying market prices for car parking.

    In Toronto, public parking ranges from $4.00 per hour for downtown on-street parking to $18.00 per hour for some hospitals. And it is strictly enforced.

    This brings in a pile of cash to the City and discourages people from driving cars downtown.

  • capt subway

    Mark Walker is absolutely right. And TKO is absolutely wrong. Privately maintained parking will not be eliminated. Like school teachers the only thing that will be eliminated, or downsized, will be the number of lowly wage slaves employed by the privatized parking corp to maintain the parking meters.

    This is a terrible idea. The city of Chicago got taken completely to the cleaners by that 75 year privatization deal and it has been calculated that they will loose billions in revenue over those years.

  • Joe

    Dear NYC:

    Don’t do it.

    Love,

    Chicago

  • J:Lai

    I don’t think you can realistically claim that Chicago got that bad of a deal.
    When you take a risky income stream and cash out the present value, of course you should expect to pay someone else to assume the risk.
    This is really not much different from bonding the revenue on any public asset, which is done all the time. From a balance sheet perspective, however, this does not show up as borrowing, so it doesn’t increase the municipal debt load.
    The main difference would be if the private operator has some control over setting rates and/or enforcement. Given the complete lack of political willpower to raise parking rates anywhere near the market rate, or to enforce uniformly, bringing in a third party can only benefit.

    And to speculate that the same city which fights a 0.25 meter increase tooth and nail will make significant parts of Manhattan car free is just wishful thinking. I’d say you have about as much chance as seeing grade-separated bikeways over the avenues of Manhattan.

  • J:Lai, on the contrary, I don’t think you can realistically claim that Chicago got a good deal. The contract requires the city to pay a punitive fine if it ever restricts access to or removes a parking spot, based not on actual monetary losses to the consortium but on presumed losses at 100% occupancy. This way, the city has made it prohibitively expensive to remove parking spots to make streets more livable.

  • After the time system contract scandal and absurdities of the Chicago and Indianapolis parking contracts, you would think that the lesson would be well understood that privatizing public activity is not necessarily beneficial for the public.

    The new technologies available for SALE to the City include various sensor based systems that make parking enforcement automatic and therefore extremely efficient. (The San Francisco system is one of many.) New systems also aid people looking for spaces and thus reduce traffic that is simply looking for an empty space. These technologies are changing rapidly, and any private contract would likely lock the City into yesterdays meter technology.

    I would agree that the adjudication portion of parking ticket enforcement is inefficient, but I would also argue that it is inefficient by design because the general citizenry likes to have their day in court to argue about the circumstances of the ticket.

  • This is a really bad idea.

  • This is a really bad idea.

    The deadline is Thursday and the decision will be made by the week March 21. I suppose “Just looking for ideas” is referring to the RFP stating that is an RFP and not a request for bids.

    Also from the RFP:

    “In particular, NYCEDC is interested in Proposals that address the following asset classes:
    1. City parking assets (including on-street meters and off-street lots and garages).
    2. City real estate assets (including management, revenue generation and use proposals for new construction and existing City assets).
    3. Other City assets that require large capital or operational expenditures, including environmental, transportation and other infrastructure assets.”

  • J:Lai

    Alon Levy –
    I should clarify. Chicago got an ok deal in terms of the economics.
    The policy issues, such as ability to change or remove parking, are another matter.

  • cabanes

    Greetings from Chicago, I wanted to add my perspective to the discussion. You may have heard of the Chicago parking meter ‘debacle’ but I think this is an extreme exaggeration. From a ‘transportation’ perspective the outcome has been generally positive. The single largest complaint from city residents has to do with the fact that parking prices are now too high. There is a tiered pricing system throughout the city. If you are in the CBD, current on-street rates are $5/hr. If you are in the neighborhoods (equivalent to the outer boroughs?) rates run $1.50 hr. In the buffer zone between the two, $3/hr. Rates are likely to rise in the future by amounts prescribed in the contract.

    This is exactly what proponents of an equitable transportation have been vouching for. The argument, which certainly doesn’t need to be rehashed here, is that automobile travel/parking is under priced. In discussions with fellow Chicagoans, the ‘debacle’ stems from the fact that it is now more expensive to get from a to b in an automobile when you have to park on street. Some people complain of faulty ticket machines, but if there is a faulty machine you don’t have to pay.

    If the city continued to control parking, I believe there would be a next to zero possibility that on-street rates would rise. Through the privatization of parking, the city has been able to achieve sensible transportation policy goals it otherwise would have been unable to reach.

    Not everything is 100% rosy. The contract could have been better but I must say what we have now is an unquestionable improvement over the ‘pre-parking deal’ era. I can personally attest that for certain trips I would have taken by car in the past, I now take transit or bike. Certainly others are behaving similarly. There is more on-street turnover.

    I read somewhere that the companies who make these deals expect to recoup their costs in less than half the time of the contract terms. I think this makes for an interesting negotiating point during contract formulation. Based on the comments here, a recurring complaint and a possible negotiating point in future contracts centers around the problem of reclaiming of street space.

    It seems to me like if a company were to make x profit margin in y years since the deal was made, there should be the ability to renegotiate terms of the contract. That’s all I really have to say on this topic. Companies take a risk by entering into these deals but from what I know (although I am no expert), the risk is generally minimized by all sorts of clauses, terms, conditions, etc… like the fact these deals run for 75 years. If the deal turns out to be incredibly good for the company, and it makes x profit in y years there should be the opportunity to renegotiate – maybe reclaiming of street space is part of the equation.

    Streetsblog readers, the important question I have for you is “How would you improve a parking privatization deal?

  • JK

    The red flag with this EDC RFP is that it is written for an investment bank already doing P3’s, not for a parking operator or vendor. A company with expertise solely in parking operations and payment wouldn’t qualify for the real estate and large project financing part of the RFP.

    NYC didn’t need this RFP to find vendors eager to modernize the city’s parking system, with pay-by-phone/SMS or street sensors. And, it would be straightforward to create an incentive system for vendors to get a higher percentage of meters operational, or price new spots etc. Also, there is no need for private finance to modernize the city’s meter system. The budget has already appropriated $75m for meter modernization. Consider that the ambitious SFPark intelligent parking system cost $25mil for 6k curb and 12k garage spots. NYC sank $30m into the new BX Botanic Garden parking deck.

    So, if the city can easily write incentive contracts to improve meter operations and purchase new technology, and has enough money to build new parking decks at private tourist attractions, why do we have an RFP for fee driven investment banks?

    Civic watchdogs should keep a very close eye on this RFP and what comes out of it.

  • Big T

    Don’t be surprised if they already have an entity in mind.

  • Les

    Cabanes: has no idea how bad the chicago debacle is. But the Mayor daley people defend the deal to the death. they won’t admit the deal was the worst possible thing that could happen to Chicagoans.
    We lost billions, are getting fleeced by private companies now operating 24/7 racking up tickets along with the city, and the rates go up every year, and worst of all the money goes to Abu Dhabi and overseas. none of the money stays in chicago. They knew this before signing off on a debacle that will hurt the next ten generations. (75 years!). There was one city councilor Waguspack who wrote a report telling people it was a bad deal all around. Bad for parking, and the economics. They even pointed out that Chicago could do it and keep the money in house. So Cabanes, there is nothing good about this deal. Daley was in on the fix and sold Chicago out. There is nothing good about the Chicago Way.

  • Nathanael

    Stupidest idea ever.  Privatization of public services is always a disaster.  Always.

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