Parking A Public Private Enerprise

February 14, 2005
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GRAND RAPIDS — Parking Commissioner Jack Hoffman and Parking Services Director Pam Ritsema both feel it would be a mistake to privatize the city's parking system, a move recently called for by the Mackinac Center for Public Policy.

In its latest Michigan Privatization Report, the center said "municipalities should sell their garages outright" to the private sector — even if those buildings are cash cows — for efficient government. And whether a ramp makes money is a "red herring," according to the report, as cities are "supposed to provide public services, not make profits."

Grand Rapids owns and operates five ramps in the Central Business District and it also operates the DeVos Place ramp for the Convention and Arena Authority. The city and the Downtown Development Authority also own more than a dozen surface lots that Parking Services operates. The department runs a shuttle service through downtown and owns the lots in the city's neighborhood business districts.

But the Mackinac Center report, which claimed that Grand Rapids was one of only four Michigan cities that operates garages on its own, said cities would receive benefits from selling their ramps to a private operator. These paybacks are revenue from a sale, property-tax income after a sale, and better customer services resulting from a sale.

"I think it would probably not be a good thing if all the parking were public parking," said Hoffman, who chairs the city's Parking Commission.

"I think having a private provider, like the Ellis Parking Co., is a healthy thing — both for them and for us."

Hoffman said the current arrangement, which has Ellis Parking owning and operating a ramp near the Waters Building and a handful of lots downtown, was a good one. He felt proof for his statement could be found in all the activity downtown has.

"I'm of the feeling that if it's not broke, don't fix it," he said of whether the city should sell its ramps.

Ritsema wondered how many ramps would get built in anticipation of developments if the city weren't in the parking business. Ellis Parking Co. President Michael Ellis told the Business Journal years ago that the cost of constructing its $12 million ramp was quite a financial undertaking for the family-owned business.

He added that the demand for parking from existing office tenants in the Waters Building and having Kent County contribute $3 million to its construction for reserved parking at the courthouse made the numbers work.

But Ritsema said Parking Services builds ramps to support projects, such as the one at Ottawa and Fulton that went up first to provide parking for the then-upcoming arena and the Monroe Center ramp that opened while the foundation for the new art museum was just being dug.

She said new facilities don't often produce an immediate profit, and she felt there wasn't a lengthy list of private operators that would invest tens of millions of dollars into a garage and then wait for the revenue to appear while they made mortgage payments.

Ritsema also took issue with the Mackinac Center for insinuating that her department was siphoning parking dollars to support government services.

"We're not a cash cow for the general fund, because we're not part of the general fund. Nor are we a drain on the general fund, because we're not part of the general fund. We're an enterprise fund," she said.

"I have the best of the private sector and the government sector in that we run parking like a business. We're expected to pay our own way and use money for expansion, but yet engage in some parking for economic development," she added.

Ritsema said consumers wouldn't get an hour's worth of free parking downtown without the city's system. They wouldn't have as many parking spaces to chose from, either. And they'd also have to pay higher rates.

"Their sole goal is to maximize revenue. If you can keep supply just under demand, you can have a price that maximizes revenue," said Ritsema of private operators.

"I totally agree with Pam. A private market would not support urban densities for parking structures. Their goal would be to tear down buildings and provide surface parking, and we'd be back to the 44th Street model of development," said Hoffman.

"We're trying to do something different for downtown."

In the Central Business District, the city has replaced lots with ramps in order to provide more spaces on fewer parcels so more projects can be built on more parcels. The city also is selling one of its former ramp sites at Division and Fulton, in hopes that someone from the private sector will build a successful development there.

Ritsema said if it was such a bad thing for cities to invest in public parking facilities, then why have so many done so for so long? Hoffman wondered when public money is used to subsidize a private project that results in sprawl, why those who favor privatization don't complain?

"It's got to be a mix of the private market plus government involvement. I think that's the best model," said Hoffman, instead of Mackinac's call for only private parking.

"I think it would be an unwise and hasty move for the city to pull out of the parking supply operation at the present time." 

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