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A public-private partnership has increased annual parking revenues from about $339,000 to more than $3.3 million, but it's sparked controversy, too.
Indianapolis’ inconvenient parking system was, as recently as 2011, plagued by antiquated meters that were often broken and still charging a 1970s-era, 75-cent rate.
The city faced a chicken-or-the-egg type of quandary: Should it increase parking fees to fund improved meters or invest in the new technology to raise rates?
In the end, Indiana’s capital city entered into the ParkIndy public-private partnership (P3), with Norwalk, Connecticut-based business services company Xerox, to circumvent budget constraints and invest in neglected parking infrastructure, tech and analytics.
“The focus of these deals should be on the customers and making the system as fair as possible because, too often, deals get maligned because the implementer was too aggressive or somewhat tone deaf to the needs of the community and failed to implement it in a methodical way,” Matt Darst, Xerox’s parking and mobility vice president, told Route Fifty in an interview. “From fairness flows legitimacy, and the revenues will just flow from that.”
Indianapolis netted about $339,000 in parking fees in 2010 compared to a little more than $3.3 million in 2014 through its 50-year, revenue-sharing concession agreement with Xerox, said Scott Manning, a spokesman for the Indianapolis Department of Public Works.
But critics of the partnership argue that number could be closer to $10 million had the city financed new meters on its own.
“In a perfect world Indianapolis would have been better off doing the upgrade itself,” said John Donahue, a privatization expert at Harvard University’s Kennedy School of Government. “But there may well have been factors that blocked that.”
It’s likely the city didn’t have and couldn’t hire the tech experts needed to update the system quickly and reliably, Donahue said, or sometimes cities don’t have and can’t easily borrow funds for capital investment or lack the management capacity to run things.
Manning conceded there’s “some truth” to the argument the city would be making more revenue today if it had made meter improvements and changes to the rate structure internally, as well as managed the parking system. But that ignores the “political difficulty” of revamping a decades-old rate structure and securing funding to make technical enhancements, he added.
“It’s much more challenging for the city to go out and float a bond to pay for updates to the parking system and bring the staff in house,” Manning said. “Not having to take on those costs through traditional government financing and bring on researchers, at that basic level the net revenue to the city is an improvement.”
ParkIndy finances new parking projects and tech on Indianapolis’ streets, and the percentage of the revenue the city gets must be reinvested in infrastructure like street resurfacing and sidewalk and streetlight repairs.
Since credit card and pay-by-cell meters were implemented in March 2011 around downtown, the Massachusetts Avenue corridor and then Broad Ripple Village, more than $12 million has been reinvested in infrastructure improvements, Darst said—not including $20 million Xerox paid upfront as part of the agreement.
Upwards of 75 percent of meter payments came via credit card in 2014 and the remainder via the ParkIndy mobile payment app, Manning said.
Xerox donates $25,000 a year to local charities and, through the Indianapolis Bicycle Community Advocacy Group, installed 100 bike racks around town and removed half of all parking meter poles while straightening and refurbishing the remainder.
“The crucial thing is not to swap long-term revenue for short-term needs. If the future is paying for it (via time-shifting revenues by means of the contract) the future should benefit (via putting the revenues into infrastructure or other long-lived investments.),” Donahue said in an email. “Beyond that, it’s important to recognize that your leverage with the private party erodes drastically once you sign the deal.”
“So prior to that point, it’s smart to use the leverage while you have it to negotiate good terms on: contract length (shorter is better); performance requirements, including but going beyond price schedules; ideally an eventual handoff of the technology to the city at the end of the contract; access to intellectual property and financial information that permits real competition for the next round at the end of the initial contract,” he said.
At the time the “mutually beneficial” partnership materialized, both Republican Mayor Greg Ballard and the GOP-controlled City-County Council supported the deal, Manning said, because they saw the need to modernize an underperforming, revenue-generating asset.
Indy’s history is flush with P3s, similar in conception. Downtown revitalization was built out of a strategy of leveraging amateur sports and building new team venues over the last 30 to 40 years in collaboration with the state and Indiana Sports Corp.
Upon entering office in 2005, Indiana’s then-governor, Republican Mitch Daniels, aggressively restructured state law to allow for more P3s, namely the Indiana Toll Road concession contract with Spanish infrastructure company Cintra and Australia-based Macquarie. Both foreign corporations filed for bankruptcy on the toll road project in 2014.
Ballard—who did not seek a third term in November and will be replaced by Indiana’s former secretary of state, Democrat Joe Hogsett—also orchestrated the sale of Indianapolis’ water and wastewater utilities to Citizens Energy Group in 2011.
Democrats regained control of City-County Council the same year, and in June the body sued the mayor’s office over a $32 million no-bid contract for a “Freedom Fleet” of electric cars for city employees it argues Ballard’s administration illegally negotiated.
In October, Marion County Auditor Julie Voorhies sued Indianapolis over a $6 million wire transfer to BlueIndy, the city’s electric car-sharing service, it claims was improper—asking for a temporary ban on construction on municipal land.
Still, Manning said the city’s “track record of success” with P3s made selling ParkIndy easy.
Democratic Councillor Zach Adamson, who joined the City-County Council in 2011 after the deal was announced and recently won reelection, has criticized both the revenue split and how the city’s smaller portion is reinvested.
“I have a problem with any kind of long-term deal that obligates generations of elected officials to a contract,” Adamson said. “You have to look at the details of these P3 agreements because, while I wouldn’t classify them as inherently bad, they are often bad because of these hinky details inside of them.”
Lack of funding and leadership on rate increases precipitated the “lopsided” agreement, he said, which was sweetened by Xerox’s upfront payment for infrastructure improvements in an election year. Ballard moved some of the money out of roads and into pet projects like cricket stadiums, Adamson added.
But the biggest controversy was council approving the agreement by a single vote with then-President Ryan Vaughn failing to recuse himself, despite being a registered lobbyist for Xerox subsidiary Affiliated Computer Services.
Adamson estimates Indy could’ve paid off the cost of meter upgrades within three years if it was pocketing 100 percent of the revenue, rather than the 30 percent it gets now.
The Future of Parking
The Department of Public Works manages the city’s parking meter fund, money from which can be reinvested in projects anywhere where there are meters and—as critics of the deal are quick to point out—not necessarily where the revenue was made. The mayor’s office helps provide oversight on contract bid awards.
While the fund frees up transportation money that would otherwise go to projects inside parking meter areas, it’s not enough to cover the city’s $1.1 billion infrastructure gap.
“The need always outpaces the funding that we have available,” Manning said. “Local businesses, residents and city councillors asking, ‘Why did you do project X and not Y?’ or ‘Why was it in so-and-so’s council district?’—those needs exist regardless of parking meter revenue.”
“But we have been able to address some needs much more quickly than we would have otherwise.”
Unlike many other, similar parking P3s, revenue-sharing continues throughout the life of the deal, and the city assumes ownership of the technology when it ends.
IndyLab, a virtual laboratory created through the partnership and staffed by data scientists, pilots innovative parking tech and evaluates the return on investment before making policy recommendations to the city.
“We have a robust analytics team, unlike most operators; not all we do is just taking money out of meters,” Darst said. “There’s a lot more you can do with data to make parking easier for everybody.”
Viewing parking as a process rather than simply pulling in or out of a space, IndyLab strives to make it more convenient by testing everything from metering to citation processing tech. Three different occupancy sensor companies came through the lab.
The lab can tell cities what value parking meters should default at to limit customer button pushes and uses analytics to set meter time limits—increasing turnover where necessary and improving utilization where poor.
“Gotcha ticketing” isn’t the goal in Indianapolis, Darst said—mobile payments up 18 percent from the previous year.
Elsewhere in Los Angeles, Xerox implemented demand-based pricing for parking, and it’s running a tech pilot in Washington, D.C. Cincinnati and St. Louis are also counted among the company’s close to 30 U.S. municipal parking customers.
An aggressive public information campaign is critical with any new parking system rollout, Darst said, one that uses social media and uniform font and coloring to ensure drivers parked at a meters recognize the brand, like ParkIndy. Indianapolis’ team has public representatives available who continue to update the public on what’s happening with the system.
“These concession agreements are only really as good as the people who put them together,” Darst said. “A number of philosophical protections can be implemented to ensure things run smoothly, and policy is as important as financing.”
Adamson wished the city would’ve given itself a better out, pointing out most people who approved the deal will be dead when it expires.
Indy has the option to pay Xerox back the $20 million it accepted at the outset after 10 years to exit the partnership, and that amount decreases every 10 years subsequent. But the money can’t be borrowed.
“You literally have to have the money on hand just sort of sitting there,” Adamson said. “So, even if they deliver horrendous service, we can’t get out of this.”
Dave Nyczepir is News Editor for Government Executive’s Route Fifty.
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