Exciting Investment Opportunities Await In? Public Parking

Today my colleague Leonard Gilroy and I published a piece on Real Clear Markets entitled, “Exciting Investment Opportunities Await In… Public Parking.”

The piece begins:

U.S. policymakers in Chicago, Indianapolis and elsewhere have recently begun to unlock value trapped in a neglected treasure: municipal parking assets. This might not seem like a hot topic, but for investors seeking new places to park capital, creative partnerships to invest in and manage city parking garages, meters and lots are increasingly attractive.

Next, we explain that parking is a historically commercial enterprise that’s being crowded out, or captured, by the public sector. But investors drawn by steady returns in the 10-14 percent range are being lured into the market amid the post-recession flight to quality.

The piece continues:

American automobile ownership slowly proliferated in the early 20th century, and by the 1930s, cities began to face traffic congestion. In 1935, a private company installed the first Park-o-Meter, charging motorists five cents an hour to park in Oklahoma City’s downtown business district. New private meters successfully promoted higher turnover of parking spaces, satisfying the needs of retailers and customers who wanted access to them.

Over the next decade over 140,000 meters were installed across the nation. Unfortunately, innovation was subsequently stymied as the public sector assumed increased ownership and operation of parking assets, including meters, street-level lots and garages. The private parking market didn’t disappear; it simply calcified under public sector capture. But now it’s being reborn.

Today, the private sector is partnering with governments to deploy disruptive technology, from real-time parking meter sensors accessible via smart phones to variable pricing that more accurately values spaces. Meanwhile, investors are starting to pour capital into government-owned parking infrastructure.

We go on to walk through Chicago’s groundbreaking public-private partnership for most of publicly owned parking meter system. Chicago signed a 75-year concession (lease) agreement that netted the city an up-front $1.1 billion payment from a Morgan Stanley-led consortium in 2009. We also highlight the adapted approach taken in Indianapolis, who inked a 50-year lease of 3,700 of the city’s parking meters, opting for a $20 million up-front payment and revenue sharing agreement that will net between $300-600 million.

Next, we detail Ohio State University’s pending partnership, which is expected to yield $483 million for almost 36,000 spaces over a 50-year contract. Finally, we explore New York City’s new plan, which is in its embryonic stages, but at this point is likely to resemble a contract for management with guaranteed revenue to the city, alongside capital reinvestment for new technology.

The piece concludes:

Municipal parking assets haven’t been fully released into a free and competitive market, but innovative policymakers are finally unlocking value they’ve been sitting on for years. Meanwhile governments retain legal ownership of core assets, and important controls on things like meter rates and operating hours, for the duration of these agreements.

The increasingly relevant question in parking – and in public policy more broadly – is this: what other public infrastructure assets hidden in plain sight offer similar privatization opportunities?

Read the full piece available online here. For more of Reason’s work on parking, see Leonard’s recent post on New York City entitled, “Don’t Believe the Hype About NYC Parking Privatization.” For related infrastructure research, see our previous Real Clear Markets piece entitled, “States and Cities Going Private With Infrastructure Investment.”