Financing University Parking Structures

Richard A. Rich

More students attend college and have cars than ever before, so finding parking on campus is becoming a greater concern for university officials. Many privately fund residence halls and academic buildings, but it wasn’t until parking became an issue on campuses that they began to consider private funding for parking structures. Recent studies on student retention have shown that one of the top two reasons students leave a university is because it lacks parking. To stay competitive and increase retention, universities must provide accessible parking to students.
In the past, parking structures were typically financed through a university’s general fund. However, as on-campus parking became more common, most universities created their own parking departments. Universities expected parking departments to finance improvements from their revenue. These parking departments were considered self-sustaining “enterprise funds,” cultivated from parking fees and fines, which were used to build additional parking or improvements and also to fund parking maintenance costs on campus.
About 15 years ago, privatization came and changed the way universities finance parking projects. Today’s universities have a host of new options when it comes to financing parking structures.
Privatization allows a college or university to be independent from managing the development, design and construction process. The entire development process can be partly or totally controlled by an outside concern. The university hires one team consisting of a designer, contractor and developer that builds and finances the parking development.
One variant of this is a turn-key project. The developer/designer/contractor team develops the parking, and when the project is completed, the university buys the project at the agreed-upon price. This saves money because the price was set prior to construction to ensure that any mistakes or unforeseen costs are not the university’s responsibility and are not added on to the final price.
Another option is to have the developer own the parking facility outright. In this case, the developer either buys or leases the land from the college or university and develops and manages the end product. Sometimes the parking will be developed with another development such as commercial or office space in the parking structure.
Privatization tends to lower the cost and time required for constructing an on-campus parking facility. A private entity may be able to get a lower cost for construction than a university since they can do a negotiated contract with a contractor as opposed to a public bid.
The downside to privatization is that the universities may not have control over the project process unless they take steps in the beginning. It’s important to make sure that the development team is capable of meeting or exceeding those standards. The campus facilities department should still be involved with the project from inception to completion.
One way to do this is for the university to control the development and design documents, so they can tell the development team exactly what they want. In the end, it’s the university that pays for the project, so they should also monitor the development team to ensure they’re doing quality work. The problem is that for these financing partnerships to work, universities must relinquish some control over the project process.
Another challenge many universities face is how to finance a parking addition. With the turn-key project, the university must pay for the project when complete. Most often, the debt service and operating expenses are paid for by user fees and fines. Where a parking structure is privately financed and developed, the question is: Will the developer be allowed to charge higher parking fees than the university currently charges, since many view privatized parking as competition for parking demand? This could further alienate faculty, staff and students. What the developer is able to charge for parking, hours of operation, etc. need to be negotiated up front.
One solution may be a lease-back. A private developer that partners with a university may provide a lease-back to the university when the project is complete. This way, the university can possibly complete the transaction off-balance sheet and then control the parking charges, hours of operation, etc. to meet their standard service levels. Using an off-balance sheet type of lease may not affect future borrowing by the university because the lease payment may not show as a debt.
So what happens if a university needs additional parking but can’t afford to hire a turn-key team or use university funds to finance a new structure? There are other partnership options where the cost is divided and funding partly comes from the university’s partner. For instance, municipalities often partner with universities to provide additional parking within the community for students and faculty. Universities bring in thousands of dollars of revenue to the community, so the municipalities want to keep students and faculty local. One way for a municipality to do this is to partner with a university and construct a parking facility that can accommodate both the university and the local community.
Building a parking facility in a busy downtown area reduces parking congestion on the streets while providing parking on nights, weekends and in the summer. The city’s revenue will increase because students and faculty park downtown, so they spend more time and money in the community. The university also benefits from the partnership because more parking spaces are available on campus so fewer students will transfer because of parking issues.
Although parking ranks highly in terms of importance to students, many school officials are more concerned with academic and recreational buildings and don’t understand how parking significantly impacts the quality of life on campus. While some schools hold fundraising campaigns and rely on donations to fund parking facilities, it can take years to generate enough money. At some campuses, parking is an immediate necessity, and this system may take too long
Aside from partnering with municipalities, there is another solution for universities experiencing difficulty in coming up with funding for parking structures. Combining parking development with the development of a new facility, such as a sports venue, can give students the additional service while also providing additional parking. In the case of a sports facility, incorporating parking into the building’s development may allow the parking structure to be financed through the capital project of the sports facility. This makes the new facility easily accessible to university visitors and the outside community, which generates revenue while providing enough parking to increase student retention levels and make the university a top competitor among its peers.
While it’s important to remember that parking is a crucial element for any university, it’s equally as vital to know that there are a variety of financing options for developing a parking structure. Whether it’s through a privatized system, turn-key team, municipality partnership or funding parking in combination with another building, colleges and universities can develop the parking they need to attract and retain students and to give the university a competitive advantage.

Richard A. Rich is Director of Parking Planning and Services at Rich and Associates. He can be reached at

Article Abstract from September, 2007

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