Two years ago, the idea of “concessioning” parking at The Ohio State University (OSU) was under discussion. As head of its parking operations at the time, the concept of taking a university parking system and turning it over to a private company to operate in a manner that was “equal or better” was something I was convinced could not be done.
Having worked in the nonprofit setting my whole career, I assumed that the profit motive of private business would completely overshadow the service focus that we consistently strived to provide to the university.
The past year has been an interesting opportunity for me, as President of CampusParc – the private business entity that manages the OSU parking system – to see the differences in approach to operating a parking system as a university service vs. using the parking assets in a business model. We have managed to provide the same level of service in a way that is as good as, if not better than, it was before. How could this be? What’s the same? What’s different?
A concession usually represents the outcome of an investment decision by a long-term investor to deploy capital. Many such investors are infrastructure funds and, as in the case of Ohio State, such funds are seeking to invest the pension fund capital of retirees into long-term assets with predictable and stable cash flows likely to produce inflation-protected returns.
Such investments meet the investment mandates of pension funds. However, for the investment to provide an appropriate return over the life of the concession, the asset or underlying business must be operated as a successful business, meeting the demands of its customers and thereby ensuring the longevity of the business.
Once the infrastructure investment is made, the investor becomes focused on asset management. At this point, it becomes all about successful business management over the long term to ensure customer satisfaction, minimize risk and maximize the stability of the underlying cash flow.
In the infrastructure investment world, the roles of asset manager and operator are often separated – with strategic and financial management retained by the asset manager and the day-to-day operating role contracted out to an industry operator under an Operations & Maintenance Agreement. This arrangement allows the investor to rely on industry expertise in the daily operation of its assets. The “operator’s” marching orders are inevitably to improve efficiency and customer service.
Despite very different motivations, the university (with its goal of delivering an essential service) and the investor (with its goal of stable and predictable cash flows) both strive for the same outcome – a high level of customer satisfaction.
A well-run concession is a partnership. In a partnership, goals are aligned and the parties work together for success.
The concessionaire benefits if the university community is pleased with the service, because customers continue to use their parking services; resources can be devoted to service enhancements instead of service recovery; and they are seen in a positive light by others within the industry.
The university benefits by tapping into the expertise of the concessionaire and its operator in deploying best practices and innovative technology, as well as opportunities for research and joint ventures. And the university can benefit “reputationally” by touting its interest in focusing on its primary mission of teaching, research and service.
Operational efficiencies can be gained by using a national parking operator. They do nothing except run parking systems, so are able to focus exclusively on providing excellent service and implementing the latest technology to maintain their competitive edge in the industry.
The concession agreement dictates what must be accomplished, but not how it must be done. And private industry is always looking for ways to accomplish tasks in the most efficient manner possible. These benefits help reduce operating costs and incentivize excellent service.
With this in mind, there are many things within the OSU parking system that now use a different mode of delivery, yet provide the same result:
Goals and long-term strategy. Parking is an essential service for any campus, but with the university’s broad mission, it was challenging to set a strategy for its Transportation & Traffic Management (TTM) department. Absent clarity, we established goals that we believe were valuable; however, the focus would change regularly as new university leadership came on board with new ideas, making achievement of a long-term strategy difficult. Operating parking as a stand-alone business provides the needed clarity. The university mission is still broad, but the scope for the parking service has narrowed, and there are clearly defined deliverables. The concession also has provided the university the ability to articulate – and enforce – a clear parking strategy where none previously existed.
The effective use of human resources. This is one of the most sensitive topics that arise when the word “privatization” comes up. The common rhetoric is that private companies pay people poorly, use part-time staff to avoid paying benefits, and replace staff with machines where possible. The reality is that careful staffing models are built to ensure every position has a purpose and to optimize efficiency in service delivery. Talented staff are trained and encouraged to grow into higher skilled positions, earning higher pay as they go. Staff who cannot perform to expectations are mentored and coached, but if they still do not perform as needed, they are asked to move on to a better fitting company or role. This is no different than the standard policy in most universities. Just because a company can terminate an employee at will does not mean they will. Companies who do not treat their people well do not succeed.
Use of technology. The push to use technology and require customers to self-help is occurring everywhere. How many elevator operators and gas station attendants have you encountered lately? Our focus at CampusParc is to use our staff to solve problems, instead of providing routine information that customers can easily retrieve for themselves. This allows the customer to “self-help” for the routine questions at their convenience and allows our staff to spend the majority of the time with customers who have special needs. We promote permit sales online; encourage online citation appeals and payments; and recommend that customers actively manage their accounts via our website.
We at CampusParc have eliminated the need for physical parking permits for daily parking and use license plates as the registration identifier. Customers can manage their account anytime, anywhere. This minimizes the need for enforcement staff to walk through parking lots looking for violations and frees up their time to assist customers with directions, information or attend to other departmental needs. Using license plates as “permits” provides short-term parking customers the option of utilizing a smartphone app for purchasing hourly parking from the lot or extending their time if they are stuck in a class or meeting.
For years, OSU had booth attendants at each exit lane who could process payment, provide information and call a supervisor if there was an issue. Now, with CampusParc, we have machines at each exit lane to process payment, signs to provide information, and call buttons and ambassadors on-site to summon a supervisor if there is an issue.
In summary, the Ohio State parking system today looks very much like it did before the concession. The same parking policies are in place, everyone wants to park next to their classroom, the same parking lots fill quickly, and, of course, snow still does not melt fast enough. However, behind the scenes, things have changed dramatically to provide a more responsive and efficient business model.
As noted at the outset, a concession also is a financial transaction, and just as pension funds charged with the cautious investment of retiree capital benefit from a stable cash flow, no discussion of the changes at Ohio State would be complete without reference to the financial benefits to the university by redeploying capital from parking assets to education mission-critical goals.
OSU has benefitted by not only avoiding risk and financial responsibility for all capital and operational expenses of the parking system for the next 50 years, but has generated new income.
During the first year of the concession, for example, the university earned $50 million from the initial $483 million investment. Part of this profit was reinvested in the endowment, and $20 million was directed toward hiring new faculty, providing new student scholarships, and laying the groundwork for enhanced investment in a new OSU Arts District.
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