Commentary

Checking In on Indy, Pittsburgh Parking Privatization

Over the last few years, Chicago has tapped over $1.7 billion through long-term leases of its downtown parking meter system and four city-run parking garages, effectively turning boring, old brick-and-mortar assets into sexy investment opportunities.

As I discussed here, these moves were a wake-up call to policymakers in other cities that didn’t realize they were sitting on similar opportunities to extract capital from dead assets and get government out of the parking business, hardly a core function of government. Indianapolis, Pittsburgh and Allegheny County, PA appear to be out ahead of the pack in terms of becoming the next to follow in Chicago’s footsteps.

The latest on Indianapolis, courtesy of today’s Indianapolis Business Journal:

The city is set to release requests for qualifications from private operators interested in entering a long-term agreement to manage parking. The final deal should net the city tens of millions of dollars, said Michael Huber, director of the Mayor’s Office of Enterprise Development. […]

“We’re trying to create a more efficient parking system that manages all of the downtown parking assets,” he said. “Many of the garages, lots and certainly the meters could be more efficiently managed by one team.” […]

Under the proposal, management of the city’s 4,000 metered parking spaces and 10,000 off-street spaces would be wrapped into a single, long-term lease.

Huber also declined to divulge the expected length of a lease [but] said it would be long enough for the chosen operator to recoup its investment in new parking meters it would install as part of the agreement.

In Indy’s case, the proceeds of any parking asset lease would be used to fund citywide infrastructure improvements. By contrast, Pittsburgh is looking to parking asset privatization as a means of shoring up its vastly underfunded public pension fund to avoid a state takeover. Per the Pittsburgh Tribune-Review:

The Pittsburgh Parking Authority plans to hire a law firm on Thursday to provide legal advice for the privatization of the city’s parking garages, lots and meters, city officials said today.

“We felt it was important to get the best and brightest for these transactions,” said Scott Kunka, city finance director. “There are a lot of moving pieces, and you can structure it in any way you can.”

Ravenstahl announced last year his plan to sell or lease the city’s parking assets, which would include Downtown garages, and possibly surface lots and parking meters totaling 17,000 spaces throughout the city. Ravenstahl hopes to gross more than $300 million from a long-term lease. That money would pay off the authority’s debts and pump $200 million into the city’s pension fund to address a major shortfall. The pension fund contains about a third of the money it needs to cover nearly $1 billion in obligations.

Nearby, officials in Allegheny County, PA are considering a lease of parking facilities at Pittsburgh International Airport to retire $475 million in bonds used to finance a new midfield terminal in the 1990s. It turns out that debt service on those bonds is running $62 million per year compared to about $22 million in annual parking revenue, so the airport authority would save more per year by defeasing the bonds than it actually collects in parking revenue. Per the Pittsburgh Post-Gazette:

The Allegheny County Airport Authority board unanimously approved a contract with Walker Parking Consultants yesterday to appraise the Pittsburgh International parking lots and to evaluate the potential for privatization.

The airport authority board members have been considering the sale of the airport’s parking garage and surface lots, 13,200 spaces in all, for months at the urging of Allegheny County Chief Executive Dan Onorato, who sees it as a means of driving down the airport’s cost per enplanement, among the highest in the country. […]

Mr. Onorato has said he believed that a sale could generate more than $500 million. Officials hope to generate enough money to eliminate the airport’s $475 million to $480 million debt. The bulk of the airline payments each year go to pay down that debt, most of it stemming from the construction of the midfield terminal, which opened in 1992. […]

If the authority could get enough to pay off the debt, fees to the airlines would plummet to almost nothing. […]

Officials are hoping dirt-cheap charges would entice more airlines to take a chance on Pittsburgh after repeated cutbacks by US Airways left the airport a shell of its former self.

Seems to me like policymakers in each of these jurisdictions owe a debt of gratitude to Mayor Daley for entering the policy terra incognito and emerging with a roadmap. Thanks to this map, policymakers in Indy and Pittsburgh/Allegheny County have found their way to an innovative solution to help them address major fiscal and economic challenges.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.

The project aims to promote solvent, sustainable retirement systems that provide retirement security for government workers while reducing taxpayer and pension system exposure to financial risk and reducing long-term costs for employers/taxpayers and employees. The project team provides education, reform policy options, and actuarial analysis for policymakers and stakeholders to help them design reform proposals that are practical and viable.

In 2016 and 2017, Reason's Pension Integrity Project helped design, negotiate and draft pension reforms for the state of Arizona's Public Safety Personnel Retirement System and Corrections Officer Retirement Plan, which both passed with overwhelming bipartisan support in the state legislature and were signed into law by Gov. Doug Ducey.

Gilroy is also the Director of Government Reform at Reason Foundation, researching privatization, public-private partnerships, infrastructure and urban policy issues.

Gilroy has a diversified background in policy research and implementation, with particular emphases on competition, government efficiency, transparency, accountability, and government performance. Gilroy has worked closely with legislators and elected officials in Texas, Arizona, Louisiana, New Jersey, Utah, Virginia, California and several other states and local governments in efforts to design and implement market-based policy approaches, improve government performance, enhance accountability in government programs, and reduce government spending.

In 2010 and 2011, Gilroy served as a gubernatorial appointee to the Arizona Commission on Privatization and Efficiency, and in 2010 he served as an advisor to the New Jersey Privatization Task Force, created by Gov. Chris Christie.

Gilroy is the editor of the widely-read Annual Privatization Report, which examines trends and chronicles the experiences of local, state, and federal governments in bringing competition to public services. Gilroy also edits Reason's Innovators in Action interview series, which profiles public sector innovators in their own words, including former U.S. Transportation Secretary Mary Peters, former Florida Gov. Jeb Bush, former Indiana Gov. Mitch Daniels, former New York City Mayor Rudy Guiliani and more.

Gilroy's articles have been featured in such leading publications as The Wall Street Journal, Los Angeles Times, New York Post, The Weekly Standard, Washington Times, Houston Chronicle, Atlanta Journal-Constitution, Arizona Republic, San Francisco Examiner, San Diego Union-Tribune, Philadelphia Inquirer, Sacramento Bee and The Salt Lake Tribune. He has also appeared on CNN, Fox News Channel, Fox Business, CNBC, National Public Radio and other media outlets.

Prior to joining Reason, Gilroy was a senior planner at a Louisiana-based urban planning consulting firm. He also worked as a research assistant at the Virginia Center for Coal and Energy Research at Virginia Tech. Gilroy earned a B.A. and M.A. in Urban and Regional Planning from Virginia Tech.