Parking Structures

Driving a car into an Ann Arbor parking structure requires a certain degree of courage; 4 x 4 wood beams stand between floors and cracked concrete ceilings in the Maynard Street, Fourth and Washington, Fourth and William and Forest Avenue structures. This must not only unnerve patrons, but City Council members and taxpayers as well, since, as stated earlier, any combination of short- to long-term repairs ranges between six and 19 million dollars.

According to the 1987 Touche Ross survey, seven percent of governments had contracted out parking lots or garages and 10% had planned to in the next two years. [14] Privatization of parking structures has many forms. Private firms will simply operate and maintain a structure for a city, lease a structure from a city and operate and maintain it, or, take over a structure from a city, pay for all structural repairs, maintain and operate the facility and eventually either retain ownership or return the facility to the city.

Ellis Parking in Grand Rapids owns and operates parking structures in Flint, Lansing and Grand Rapids. According to Mike Ellis, owner/president of Ellis Parking, any city like Ann Arbor soliciting bids for a private firm to take over or operate its parking structures would spur intense competition. Not only would three or four Michigan firms be expected to bid – for example, Ellis Parking and National Garages and Miller Parking in Detroit – but five or six national firms – such as, APCOA, System, Republic, Allright and Square – might bid as well.

For fiscal year 1990, the City has budgeted $1.416 million to operate its seven parking structures. When the parking structures' share of "administration" is estimated, parking structure operation costs $1.815 million. If the City were to contract operation and maintenance of the facilities with a private firm, LGC figures estimate the City could save $127,000 to $281,000. Please note here: Kenneth Clarkson, co-author of The Role of Privatization in Florida's Growth reports that the "expected range of privatization cost savings" should be halved when applied to a government service run in the form of an "enterprise fund" – that is, virtually self-supporting, similar to a private business. Ann Arbor's parking system is set up as an enterprise fund. However, the system has yet to operate fully as a true enterprise fund. When the standard LGC expected savings range is applied, savings reach $254,000 to $562,000.

If the City were to turn ownership of the facilities over to a private firm, the City could also avoid $1.294 million budgeted for restorations in 1990-91, $3.790 million in "anticipated capital improvements" planned to be financed through revenue bonds and the millions of dollars in subsequent restoration expenditures required to keep the structures open well into the future. Depending on how ownership of the structures were negotiated, the City could possibly eliminate its annual depreciation and interest payments which, for 1990-91, amount to $1.627 million.

Ann Arbor's newest parking structures, Ann and Ashley and Liberty Square, are owned by the Downtown Development Authority while the City operates the structures. James Valenta, Ann Arbor's Director of Transportation, reports that the structure proposed to be built behind Kline's Department Store would also be owned by the DDA but would most likely be privately run. According to Valenta, the reason for that is two-fold: "[The City wants] to set up competition between our employees and the private sector in order to see who can come up with innovative ways to do things less expensively. [In addition,] there is a goal in the City budget to fix what is old before building anything new."

A recent Ann Arbor News article enumerates the improvements in Kalamazoo's parking structure service since that City privatized its parking system: improved lighting, free weekend parking, security guard patrols in golf carts which can also be used to chauffeur customers to their cars and free assistance to drivers faced with dead batteries or keys locked in the car. [15]

In Kalamazoo, the city leased its parking system to the Downtown Development Authority which is directed by Downtown Kalamazoo Inc. (DKI). DKI, in turn, has hired Parking Properties Inc. of Cleveland to operate and maintain the system which includes all city-owned metered street parking, surface lots and parking ramps. Parking Properties Inc. receives a fixed annual fee – paid out by DKI – for its services while DKI oversees the entire parking system budget. DKI pays the city around one million dollars per year to lease the structures. Those dollars essentially cover Kalamazoo's debt-service for the parking system. Any outlays for capital improvements are financed by DKI; the city has no fiscal responsibility for the parking system.

In Kalamazoo, privatization initially spurred an increase in parking ticket revenue due to more rigid enforcement. As drivers in Kalamazoo have realized they can not get away without paying for parking, meter revenue has increased 10% while the number of tickets issued is lower than pre-privatization ticket levels. [16]

Theoretically, Ann Arbor could save anywhere from $1.811 million to over $13 million dollars in fiscal year 1990 if it were able to immediately privatize solid waste collection, landfill management and parking structure operation, maintenance and possibly ownership. In reality, annual savings of this magnitude would not be realized in one year, but phased in over several years. Savings would be even larger if these figures included the opportunity cost of capital and revenues earned by the City selling or renting all equipment – garbage trucks, earthmovers, etc. – and property – storage and office space – related to those activities. In addition, once a property is in the hands of the private sector, it becomes a property-tax generating entity producing more government revenue.