As more colleges and universities look for ways to generate revenue and combat the rising cost of education, one Ohio university significantly increased its revenue by cashing in on a valuable asset — its parking facilities.
Ohio State University leased its university parking system, which encompasses approximately 37,000 parking spaces including surface lots and garages, to parking company CampusParc for a $483 million up-front payment in exchange for the responsibility and revenue associated with managing and maintaining the parking system for 50 years, according to Lindsay Komlanc, director of marketing and communications at OSU.
“We prepared the contract in such a way that it would bring the greatest overall benefit to the university while addressing key points that we knew were important to the university community, such as parking rate increases and service levels,” Komlanc said in an email.
OSU was the first university to privatize its parking and officially did so Sept. 21, 2012, according to a CampusParc.
The University of Cincinnati has considered doing the same thing.
“We understand OSU entered into a very long, complicated document which provided for OSU to sell its parking rights,” said Fran Barrett, chairman of the UC Board of Trustees. “There’s some concerns and there’s some benefits.”
Any lease of the university’s parking assets would require approval from the board of trustees.
Leasing public parking assets has become a controversial issue in the City of Cincinnati. The outgoing city administration presented a proposed 30-year lease early in the summer when city council was in the midst of heated budget debates. The contentious issue spurred lawsuits, petitions and court orders to halt the deal.
Recently sworn-in mayor John Cranley said, ultimately, the lease would not be approved.
But OSU is already reaping the financial benefits of its lease after one year.
The university invested its initial $483 million payment into an endowment fund that will provide $3.1 billion in investment earnings — money the university has already begun to use.
“In its first year alone, our $483 million infusion to Ohio State’s endowment yielded more than $50 million,” Komlanc said. “The long-term investment pool earned an 11.6 percent rate of return in fiscal year 2013. Approximately $20 million was distributed to directly support core university priorities including teaching, learning, research and transportation.”
Some of the remaining capital was used to fund academic initiatives such as “hiring more faculty, offering more student scholarships and supporting the arts and humanities, as well as increasing the long-term investment pool by $4.9 billion.”
And while very lucrative for OSU, the lease wasn’t finalized until everyone involved fully understood the arrangement and what it would mean for the university.
“The university moved forward with a request for qualifications for potential vendors only after more than 12 months researching the potential for a parking lease before,” Komlanc said. “This time was spent understanding every aspect of our parking system and how it might work under a potential leasing arrangement. In addition, we also engaged experienced advisers… who have each worked on a variety of similar transactions.”
Barrett understands UC would receive substantial funds for capital improvements and amendment programs if the university chose to follow OSU’s example.
“But that revenue would have to be replaced, and that’s something I for one, and other trustees who are very conscientious, would feel the same way [about],” Barrett said. “We have to look into this long and hard to see if this is in the best interest of the university.”
UC Parking Services currently operates 12 garages and 24 parking lots, and sells more than 14,000 parking decals for 11,954 parking spaces per year.
Online decal sales continue to increase through the online parking management system UC uses to streamline parking services and in-office processes by managing citations, permits, decals, asset management, appeals and finances.
The board hasn’t taken any steps to move forward and future lease agreements won’t be considered until UC administration instructs the board to further look in to the process.
“It is not on any agenda at the present time,” Barrett said. “It’s something that we’re aware of and expect to receive more information on.”