City of Toronto may sell off public parking assets to private companies?

When Toronto’s executive committee reconvenes next month, residents will finally learn if one of the city’s biggest assets is up for auction.

Consultant KPMG, hired to identify ways the city can stopgap its massive $774 million deficit, suggested selling parking lots and garages owned by the Toronto Parking Authority, which annually pumps $50 million or more into the city’s operating budget.

The city-owned corporation is the largest municipal parking operator in North America, with 17,500 on-street metered parking spaces and 20,000 off-street spaces in 20 parking garages and 140 surface lots.

The corporation also nets millions for Toronto in real estate deals, recently selling its garage on Yorkville Ave. near Bay St. to a developer, who will build a highrise condo building and replace the lost parking with an underground garage.

So why would the city want to sell a goose that keeps laying golden eggs? Because, like the couple in the story, the city needs the money right now.

“We can sell the TPA because it makes money. There will be people lining up to get ahold of it,” says Councillor Shelley Carroll (Ward 33, Don Valley East), who was budget chief under former mayor David Miller. “But that would be one-time money,” she cautions.

During her four-year tenure, the parking authority pumped $293 million into city coffers. “The beauty of the TPA is that those are not one-time monies,” says Carroll. The money included $223 million in profits, $63 million in property taxes paid by the TPA and $6.5 million in rent for lots managed on behalf of other city departments.

The city created the parking authority in the ’50s after department stores complained customers weren’t shopping downtown because of price gouging by private lot operators, says Ian Maher, TPA’s vice-president of strategic planning and information technology.

The TPA’s mandate was to create a higher standard of parking and be self-sustaining. Today it makes a tidy profit, charging a maximum of $3.50 an hour for on-street parking and setting its lot prices — determined by the TPA board — at 75 per cent of any nearby competitor’s.

But selling the garages, as suggested by KPMG, could mean those rates go up. A private operator “will immediately triple the rates to compete with Impark and other (private) operators,” says Carroll. “And make a large amount of money.”

Chicago — facing the recession and a 2009 budget deficit — decided to lease on-street parking for 75 years to a fund led by Morgan Stanley. In return the city received close to $1.2 billion and a promise that meters would be upgraded. Earlier, the city had leased some of its parking garages for $563 million to the same fund.

However, drivers protested when the private company doubled and quadrupled hourly rates. Then drivers discovered the city’s aging meters couldn’t handle the extra quarters needed to pay the higher fees and began receiving tickets because of the equipment limitations. The old meters are slowly being replaced.

But Chicago’s new mayor, Rahm Emanuel, is reportedly exploring ways to undo the deal.

In Toronto, the parking authority charges as little as $1 an hour for street parking on downtrodden retail strips, but as much as $3.50 in the downtown core. Hourly rates can be higher in its Green-P lots.

On-street rates were set in 1999, after city amalgamation, and have risen only once since then — a 50 cent increase in 2007.

Carroll thinks it’s a better idea to raise rates than privatize the garages. “KPMG was extremely limited in the scope that they could look at. And what they didn’t look at was: What are our rates?” says Carroll. “Do we need to change them?”

The city also doesn’t need outside money to upgrade its meters. Right after amalgamation, the TPA started installing solar-powered on-street pay-stations. The stations were easy to install and so the city put in more of them. Not only that, but credit card use went through the roof, says Carroll, and that reduced the number of physical visits to the machines to remove cash.

The parking authority is currently conducting a comprehensive city-wide rate review, says Maher, and they could go up in some areas of the city as early as next year. Although the maximum rate for on-street parking is set out in a bylaw, it could easily change if council approved an increase.

Location, location, location….

The city’s Toronto Parking Authority may offer reduced rates, but one of North America’s biggest private parking companies says it doesn’t look at municipal operators as competition.

And that’s because the number one consideration for drivers who want parking is location.

“We operate in a fairly free market and it’s easy to see that the customer’s buying decision is made, number one, on location,” says Julian Jones, senior vice-president of business development at Impark, North America’s largest private parking operator. The company was part of a consortium that considered bidding on the Chicago lease, but didn’t do so in the end.

But he says the second consideration is price, and it’s what municipal and private operators alike use to ensure there are always spaces open for new customers.

To that end, the Toronto Parking Authority charges higher rates in busier areas to ensure there’s turnover.

“We’re parking as many short-stay cars as people want to park,” says Ian Maher, TPA’s vice-president of strategic planning and information technology. “Unfortunately, we have to charge higher rates than we need to in order to turn the spaces around. So we do generate a substantial amount of profits.”

And even with a cap of $3.50 an hour for on-street parking, and a mandate to offer lower rates in its lots than private operators, Maher says the city-owned corporation is doing well.

“It’s our impression, and it’s difficult to prove this because it’s a secret industry, is that on a per-space basis we’re probably doing better than or at least equal to the competitors,” says Maher.

By the numbers

1952: Year the Parking Authority of Toronto was established.

5 cents: Lowest hourly parking rate in 1998 (pre-amalgamation)

1 dollar: Lowest hourly rate today

780: Spaces charged at the maximum rate

$5,500: Annual revenue generated by a space at the top rate

17,500: On-street metered parking spaces

20,000: Off-street spaces

SOURCE: Toronto Parking Authority