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Whom You Pay to Park

November 2, 2011

Remember when colleges fought over outsourcing bookstores? At Ohio State, the new outsourcing fight is over a resource used by faculty members every single day: parking spaces. University officials describe the university’s plan to outsource its parking operation as an entrepreneurial approach that would raise money; detractors say the plan goes against the idea of a university as a community.

Although no decisions have been made yet, users of the approximately 36,000 parking spots may see the entire parking operation at the university privatized by next summer or fall.

As part of this proposal, the university would earn at least $375 million up front for signing away the rights to its parking spaces for the next 50 years. This money would then be used for university transportation systems, academic programs and faculty hires. That’s enough money that the university is excited about the possibilities.

Geoffrey Chatas, Ohio State’s chief financial officer, said the idea revolves around looking at "non-core" operations to generate revenue to support academic systems. “It is an asset we can use to generate funds,” Chatas said. A parking advisory group will guide the process, he said. “This is a process here and nothing has been decided. We plan to have hearings and engage all the constituencies at the university,” he said.

Trustees at the university authorized the plan in September, and a request for proposals is due this month. Chatas, who was previously the managing director of the Infrastructure Investments Fund at JP Morgan Asset Management, said the university would consider caps on parking rate increases.

According to the plan authorized by the trustees, the private company running the operation could double the parking rates in the next 10 years and then increase rates at 4 percent annually or at the rate of inflation, whichever is higher. Currently, parking could cost as much as $720 a year; rates have nearly doubled in the last 10 years.

Ohio State’s total revenue from parking this year is estimated to be about $28.4 million.

In an era of decreasing revenues, such innovative models might be the future, said Thomas C. Longin, president of the Society for College and University Planning.

Longin said outsourcing at universities has been ongoing for the last 40 years in areas like food services, housekeeping and bookstores. “The fact of the matter is that a lot of these auxiliary services can be run a lot more efficiently by companies with specialized knowledge,” he said.

The flip side of this kind of decision, critics say, is that universities can get too focused on the maximization of profit.

A somewhat similar move by the city of Chicago that privatized 36,000 parking meters has fueled debate and controversy. In 2008, the city leased out its meters for 75 years in exchange for nearly $1.15 billion. The next year, the city’s Office of the Inspector General published a scathing report, calling it a dubious financial deal. The office determined that in one scenario, the parking-meter system could be valued at approximately $2.13 billion.

Morgan Stanley owns a stake in the Chicago company managing the parking meters, according to newspaper reports, and has also been retained by Ohio State to assist in its parking outsourcing plan.  

A different kind of example is that of the Vanderbilt University Medical Center in Nashville, Tenn., which had a contract with a parking management company for 30 years but recently went back to managing its own parking. Gary Streaty, the director of VUMC parking and Transportation Services, said the center always had control over parking issues, and their arrangement was very different from what is being proposed at Ohio.

“The services provided by this company were good, we wanted to do better,” Streaty said. The center has about 15,000 parking spots, he said.

At Ohio State, Chatas said the university will look at all precedents and examples before moving forward with a course of action.

About 70 employees who now work for OSU parking could be offered jobs with the new vendor or with the university, officials said. The rights and revenues to game-day parking would remain with the university, but it was unclear how this process would work.

Gordon Gee, Ohio State’s president, recently told faculty that in order to thrive, the university has to reinvent everything it does. “It is about acknowledging that we must seek fundamentally new ways to fund our core purposes, and we must re-shape and simplify ourselves to both make it easier to do what we need to do and to save time and resources in the process,” he said.

One of the more vocal opponents of the plan is Gordon Aubrecht, a professor of physics and president of the American Association of University Professors chapter at Ohio State.

“I think it has to do with the idea of a university as a community,” he said.

The approximately 36,000 parking spaces represent about a quarter of the university’s physical space, according to Aubrecht’s calculations. "Parking affects everybody," Aubrecht said. "Whoever runs this thing will be doing it for profit and will have no care for the university."

He said he was worried about the vendor hiring employees and not paying them enough and doubted how committed the vendor would be to the university.

He said it was a short-term scheme with long-term ramifications, and likened the effort to a breaking of trust.

Bernie Mulligan, professor emeritus of physics at OSU, said once the parking was signed away, it would give rise to a potential for problems. “What we are really doing is selling a part of the university where we will have less ability to control our own environment,” Mulligan said. “We should have had public meetings months ago, not now as catch up.”

There is a potential there for the university to make some money, and they are giving it away, he said.

“The fear is that someone else will be managing students and faculty,” he said.

Students like Nick Messenger, president of the undergraduate student government, said the two big questions are how parking services would change or be impacted and what the money would be used for.

“We are taking our time to look at all the scenarios,” said Messenger. “Everyone is trying to keep an open mind.”

 

 

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