Privatizing and University Parking

Parking is the most emotive issue on campus. One time University of California president Clark Kerr once said that he “has sometimes thought of the modern university as a series of individual faculty entrepreneurs held together by a common grievance over parking.”  He also added that the purpose of a university was to supply sex for the students, sports for the alumni, and parking for the faculty.

The Ohio State University is considering privatizing its parking. Their CFO is from JP Morgan, an investment bank that has been involved in these programs before. He says the university should look at all it’s non core functions (food, book store, parking, maybe even residence halls) and see them as potential revenue generators, rather than solely service providers. According to this article from “Inside Higher Ed”  The OSU could generate upwards of $375 million now, and lease out its parking spaces for 50 years. It currently generates about $28 million a year from parking. Assuming no rate increases (and one is already proposed that would double the rates), parking would generate $1.4 billion over the 50 years.  And probably twice that with rate increases.

The staff notes that the university is a ‘family’ and that privatizing parking could ruin this atmosphere. Students are of course complaining that parking costs, and that the university would be making money on the ‘backs’ of the students. WOW!  Where do they think the money is supposed to come from, anyway.

Parking professionals in the public sector concern themselves with the quality of service provided by private industry. All these issues seem fair enough. Or do they.

First of all, there are over 65,000 students and 40,000 staff at OSU.  That equates for you mathematically challenged to 105,000 people vying for 36,000 parking spaces. It means that most of the people at the university aren’t going to park on campus. So a professor’s concern about the university ‘family’ is well, not so much.

Second, students complain about everything. So be it.  They are going to get very few permits to begin with.  And most of those should go to those who have been there the longest and from my point of view, those that get the best grades.

Third, it seems to me that the concern about the quality of service could be dealt with the same way cities deal with utilities.  Standard are set, and if they don’t meet them, they could lose their right to run the parking. I don’t see why this is such an issue.

The big issue to me is the same one that got the inspector general in Chicago so hot and bothered about the Windy City deal: The money left laying on the table.  It seems to me that the university, or city for that matter, that gets into these deals, trade a smaller amount of money now for a larger amount of money later. The OSU thinks it will get $375 million, but it is leaving up to 2 BILLION laying on the table. Granted its a big table and that money won’t appear for years, but think about it. The $375 is going to appear next fall and by the end of the year it will be committed — salaries, new buildings, pay off existing debt and it is gone. Five years from now the university will most likely be looking for more ways to find money and the money generated by parking will be gone.

I’m sure that considering Clark Kerr’s thoughts on university parking, the senior staff at The OSU would love to have someone else to blame when the faculty began to complain about parking, its lack of convenience, its cost, and even whether it exists at all.  However I don’t really think privatizing would get them off that hook.

So let’s see — assuming the existing parking staff get new jobs with the incoming private company and that the quality equals what exists today, it really boils down to  $375 million now vs an ongoing annuity of as much as $50 million a year.

Did I miss something here?

JVH

 

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2 Responses to Privatizing and University Parking

  1. Keith says:

    Don’t forget that college tuition is up over 450% over the past 30 years. That’s even more than health care, if you’re looking for a comparison.

    So, that $50 million per year will escalate as well. Present value of $50 million per year at 3% average inflation over time gets to be a pretty big number – larger than $375 million.

    Interesting that the CFO at OSU is from JP Morgan. Wonder where he got this idea…?

  2. CJD says:

    There is an assumption that the University is going to spend ALL the money soon. What if they invest it most of it? Even if they commit $100 million and invest the other $275 million, over 50 years that still translates into $1.9 billion and they are still ahead. But even then, they are “committing” the money, not spending the money. There is a difference. Committed money still earns interest . The $50 million dollar building does not cost $50 million in year 1. They could in thoery “commit” to spend all of it over the next 50 yeasr, and still come out ahead.

    The CFO knows his stuff and will do what Chicago didnt, properly manage the windfall.

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