Posts Tagged ‘Business’

History has a way of repeating itself, and that certainly seems to be the case with the parking privatization dispute going on in Cincinnati. The city has been in negotiations with Xerox and Denison Parking to lease out all of the city’s parking meters and parking garages (the meters being leased to Xerox, the garages to Denison Parking). Specifically, the city council voted back in March to lease the city’s parking assets to the Cincinnati Port Authority, which in turn would be turning over operations to Xerox and Denison parking; the lease would be for 30 years, though the Port Authority has been unclear on how long they intended to allow Xerox and Denison to manage the properties. In exchange, the city would receive $92 million upfront for the sale, as well as $3 million annually which would gradually increase over time. Of course, none of this is certain, as much of the deal still remains vague or is yet to be determined, and there have been conflicting statements about the exact nature of the deal throughout the negotiation process.

Local residents are less than thrilled to say the least, especially many members of the local business community. One area of particular contention is whether Xerox would be allowed to extend meter hours from 6 pm to 9 pm; local business owners worry this would impact their businesses and that they would have far fewer avenues to address this going through Xerox instead of the city. Another concern is that Xerox would be incentivized to step up enforcement, which in turn could drive away customers. While there have been assurances that Xerox wouldn’t see any extra money from writing extra tickets, the reason for that is rather flimsy; extra revenue from enforcement would go into a an infrastructure fund for Port Authority and parking improvements, but there haven’t been any specifics into how this fund would be sequestered off and safe from being raided. Finally, how much parking rates might rise under Xerox management is unclear, since as yet there haven’t been any rate controls mentioned as part of the deal. If rates got too onerous, residents would have far less options for recourse with Xerox than they would with the city.

Of course the biggest indicator of there being something fishy with this deal is how city officials have tried to ram this deal through. First, there was the move by the city to use a parliamentary trick to shield this deal from a public referendum like many residents wanted. A lawsuit has been brought against the city over this, and while the city’s case was upheld by an appellate court, the case has now moved to the Ohio Supreme Court. This is of particular concern since the entire lease is going to be funded by public bonds issued by the Port Authority. As I’ve discussed before, Port Authorities frequently issue bonds, sometimes massive bonds, with no input or control from the public, and this can quickly lead to massive debt or even bankruptcy for a city without them even knowing about it until it happens. As usual, the city is interested in using the funds from the lease of their parking assets to pay for other city projects and to shore up holes in the city budget, while the Port Authority is trying to claim about a third of the $92 million upfront payment for itself (while ultimately the city and its residents are on the hook for the bonds issued to generate that money). It also recently came out that the original consulting firm that was hired to assess the deal, Walker Parking Consultants, had issued a memo critical of the deal, saying that Xerox would be making too much profit off of this deal and the revenue projections were too high (particularly concerning considering that bonds were being issued based on these revenue projections); but this memo was kept secret from the city council by city management, not coming out until after the city council had voted in favor of the deal. Right around the time this memo was issued, the Port Authority insisted that Walker no longer be used in the deal because of a potential “conflict of interest” created by Walker working for both the city and the Port Authority. After some of the information that has come out since the vote, a number of city council members have said they would change their vote and kill the deal, but city management says that the city council no longer has the ability to vote on or kill the deal. So basically, the city council voted on the deal before it was done being written, and now they’re being told they can’t vote on the actual deal that would take place.

So essentially, Cincinnati is looking at a deal being ramrodded through by the Port Authority and city management, one to generate short term profits and to deal with short term problems at the cost of real, long term solutions to the budget problems the city and Parking Authority are facing, with an all but guaranteed chance of major issues stemming from this deal down the line, and all of this being funded by public debt while those behind the deal try to exclude the public from having any input, control or even basic knowledge about it. It stinks to high heaven, and while leasing Cincinnati’s parking assets is not an inherently bad idea on paper, doing it this way certainly is. The deal should be killed and a new one started, this time with input from the public and transparency throughout the whole process. If all of that wasn’t damning enough, these numbers sum it up pretty well: in today’s dollars, the city’s parking assets over the next 30 years would be worth approximately $475 million, and they’re looking at making a total of $197.4 million off of this deal. With the city and the Port Authority fighting tooth and nail to keep citizens from having any say in this, I don’t know how much hope Cincinnati residents have, but with 2014 around the corner it might be a bad idea to start reminding the elected officials of Cincinnati who they have to rely on to vote them back into their jobs, and it sure as hell isn’t Xerox and the Port Authority. So to anyone in Cincinnati, good luck, it looks like you’re going to need it.

Last week I talked about how local governments have been putting a squeeze on the travel parking industry, citing a few examples across the country in addition to the numerous instances I have covered in this blog. This week, we’re going to examine the motivations behind this industry squeeze and how these efforts have progressed beyond individual instances and turned into an endemic that is having a chilling effect on the entire industry.

So what’s the motivation behind this abuse of government power? Well money of course, though more specifically budget deficits. Parking is usually one of the only sources of revenue with a low relative overhead available to most municipalities, and these funds are frequently used to pay for special projects and budget shortfalls, as well as too infrequent infrastructure improvements to parking facilities. More often, infrastructure improvements are funded with bonds, which can come back to bite the city in the ass and all too often end up being used for unnecessary projects rather than vital improvements. With so many local governments struggling with a severe shortage of funds, they’ve been leaning even more heavily on their parking revenue, and more than a few have been willing to wield their authority to squash out any perceived competition. Because hey, why rise to the challenge of your competition when you can just change the rules so no one else can play the game?

A common way that parking authorities put the squeeze on off-site operators is through the access fees they charge to allow their shuttles onto the airport. You see, for each shuttle run to the port (air or sea) a fee is charged to the offsite parking facility. These fees typically were only a few dollars if that, but whenever budget shortfalls occur or there’s a new project that needs to be funded, raising these fees is usually one of the first things that happen. Since many offsite parking businesses operate with a low profit margin, having to rely on the quantity of their business to remain profitable. As these fees have risen, parking  businesses have had to pass that access cost onto the consumer, hence the one-time access fee of a couple dollars that’s added onto your bill at most offsite parking facilities. Not only will port authorities raise these fees to beef up their budget, they’ll also wield it as a weapon against offsite businesses, such as in Port Canaveral where they wanted to raise the fee so high that it would have instantly forced the closing of all the offsite parking businesses. In other cases, such as what’s unfolding in Nashville, they’ll selectively raise the fees on offsite parking facilities (more than tripling it in Nashville) while reducing the fees for hotel shuttles to access the port, even when those hotels are actively running an offsite parking business out of their lots as many of them do these days. It is literally robbing Peter to pay Paul, and this happens because the hotels typically hold far more sway over municipal authorities as such large economic drivers in their local economies, to say nothing of the typically incestuous relationship between hotel management and the commissions that run most air and sea ports. It’s one of the oldest forms of political corruption out there and it’s alive and well in many port and parking authorities.

Another way that municipalities have been having a chilling effect on the parking industry is through the way they’ve put a squeeze on investment, slowing or preventing the growth of parking businesses. As most of us are aware, since the recession, investment capital has been much harder to come by unless you’re already a mutli-million dollar corporation. The parking business is generally seen as a safe investment, as there is very little capital or debt needed after the initial development phase and it provides stable long term returns. While there’s nothing to be done about the general investment climate but to weather it, the real damage is being done by the uncertainty that is being created by local governments. One of the three key factors in investing in parking is how stable and sustainable the business in question is, and for travel parking businesses that means how likely it is that the business will retain ownership of their land, the ability to acquire more land down the line for expansion and growth, and how likely continued access to the air or cruise port in question will be in the short and long term. Traditionally this has been a strength for parking businesses, aw air and cruise ports don’t move often and the land around them tends to be undesirable for most other business and residential concerns, but that has changed since the recession, particularly in the past year. Whether it’s Indianapolis’s airport fighting to keep parking businesses from buying land for years on end, Port Canaveral pulling a 180 and refusing to issue permits to businesses that had already bought the land and marketed their grand opening in good faith as happened to Premier Parking, or trying to seize offsite parking businesses through eminent domain as happened to Cramer Airport Parking in Pennsylvania, these actions, particularly their ramped up frequency and aggression, has made for an uncertain and unstable investment environment. While the parking management giants continue to barrel ahead and reap ever greater profits, the industry as a whole has been suffering from this uncertainty and investment crunch, something that is borne out by 2012’s being the markedly slowest year of growth since the 2008 crash.

So what’s the remedy to this endemic corruption throughout our municipal system? Well daylight seems to be one of the best solutions. Most of these things are able to happen because no one is paying attention. I’m someone who works in and writes about the parking industry, and even I find it dull at times. And of course anyone who’s been to a city council or municipal committee meeting knows that those are typically duller than traffic court. When the Port Authority in Canaveral was declaring all-out war on the parking industry, it was the public outcry in support of the only two non-cronies on the Port Commission that stopped all their shenanigans and led to the ouster of the Port Authority’s CEO and greedy-bastard-in-chief Stan Payne. At the end of the day, it’s up to the public to take a stern look at their public servants, hold them accountable and tell them to stop being lazy and corrupt and to deal with their competition by rising to the challenge instead of trying to poison the well, because, frankly, no one else is going to do it. Surprisingly, many of these incidents happen in areas that have very active Tea Party and anti-government movements, yet none of these groups have pounced on these instances of government abuse; hopefully that will change and government watchdog groups will realize that tackling these abuses are not only good for their local economy and government, but great publicity for the need for keeping an eye on the government and the good that watchdog groups can have.

The economic crash and recession has affected everyone’s lives, and it’s no secret that the travel industry has been hit particularly hard. While many sectors of the travel business have been receiving government support, whether in the form of giant subsidies like the airlines receive or marketing from local government to promote tourism, one important sector has not been completely ignored, but has been actively under siege: offsite travel parking businesses. Whether cruise port or airport parking, parking businesses across the country have been facing obstacles whose size and number the industry has never seen before.

One of those obstacles, one more easily dealt with but still of concern, has been the privatization of parking management at many cruise ports and airports. Parking authorities and management are notoriously plagued with waste, inefficiency and corruption, so much so that they’ve bankrupted cities on more than one occasion (I’m looking at you Scranton). As many municipalities have been gripped by crushing budget shortfalls, they’ve finally been paying attention to their under-utilized and mismanaged parking programs. One relatively easy solution to these problems has been to lease or contract out their parking services to a large private parking firm such as Standard Parking. These private management firms will typically pay a lump sum to lease the parking infrastructure from the city for years or even decades at a time, giving the city a big short term windfall, such as what Chicago did with their entire parking system. When they take over a parking facility, these companies frequently invest in infrastructure improvement as well as upgrading facilities with the latest parking technologies and management systems, dramatically improving service and efficiency and putting far more competitive pressure on offsite travel parking businesses.

Now this in and of itself is not a bad thing. Competition is good for the market, as it means better service and prices that more accurately reflect the level of service that you’re getting. And frankly, there are offsite parking businesses that are not well run and have only been able to survive because their county-owned competition was even worse; these businesses being forced to meet basic business standards or go under is a good thing for travelers and the parking business as a whole. Where this becomes a problem is when local governments try to interfere with the market and use their ability to control and abuse the laws and ordnances governing the business to drive out the private competition. A great example of this is Port Canaveral, Florida. I’ve written about the Port Authority there and their downright repugnant attempts to kill the local parking businesses there on a number of occasions (and about one incredibly unsavory illegal business “owner” that they allowed to operate under their noses for years with no license). And the situation there, while extreme, is far from unique. Across the country, local governments have been using their authority to unfairly bludgeon offsite travel parking businesses.

For instance, earlier this month the Indianapolis airport finally gave up their fight to keep any parking businesses from opening near the airport. You see, back in 2008 the Indianapolis International Airport moved to a new location, while at the same time not approving any permits for new parking facilities to be built near it. This move had forced a number of off-site parking facilities to close, as they no longer were close enough. It was rather shocking, as I lived in Indiana until the end of 2008 and flew out of Indianapolis frequently, and always parked in one of the close to half dozen parking facilities there. When I started working in the parking business a few years later and was looking to contact Indianapolis parking facilities, I was shocked to find that that there was only one left. That was because the Airport Authority has been wasting money in court for years fighting the development of new off-site parking, a battle which they finally gave up earlier this month after three failed appeals and more than $55,000 wasted, and more than $250,000 in legal fees spent by the business they were fighting. And all so they could maintain a government created monopoly.

And these are just a couple examples. In part two of this story, we’ll look at some of the other ways local governments have been putting the squeeze on the travel parking business and the motivations behind those moves, and how they have had a chilling effect on the investment side of travel parking, changing what was once viewed one of the most stable industries to invest in to one which now faces unprecedented amounts of uncertainty. All this and more in part two of The Big Squeeze.