Comments on: How New York will improve its on-street parking

By: JamesLiu

JamesLiu — Sat, 23 Jun 2012 03:14:53 +0000

I just want to chime in here supporting the Chicago parking deal, well, halfheartedly. Mostly, I don’t care how much drivers have to pay for parking since I ride a bike everywhere. When I do care about parking, it’s when my parents from the suburbs visit, and they need to find a parking space, and boy howdy it’s been a lot easier since parking rates went up. And municipal governments will always find ways of making ridiculously bad loans at shockingly poor implied interest rates. People just notice the parking because they encounter it day to day.

By: BiffOmney

BiffOmney — Thu, 21 Jun 2012 18:53:15 +0000

I think Taibbi makes the more convincing argument. Salmon is dismissive of the short-term pressures on the city for revenue. If those short term pressures did not exist, this would simply be a matter of the city believing it would come out ahead in the long term, but it’s hard to believe that’s the case, considering the political expedience associated with Bloomberg’s term limit (cough cough).

By: goldenbp

goldenbp — Tue, 19 Jun 2012 15:00:12 +0000

Regardless, it doesn’t sound like there is anywhere near to enough public input on whether the city should sell off this asset.
Also, re: “apps showing where the spots are” Umm, yeah wonderful, so now we’ll have tourists checking for spots on their phones while trying to drive. Great idea. Does the city get to keep the moving violation fines from drivers checking phones while driving (currently illegal), or do you advocate privatizing that as well?

By: TinyTim1

TinyTim1 — Mon, 18 Jun 2012 11:23:06 +0000

BrPH – as long as you don’t work in finance, don’t give up the day job.
– Have you heard of costs?
– WACC is not = inflation.
– Revenue is not = income.

Given your calculations above – would you like to buy some GRPN or FB?

By: Sechel

Sechel — Mon, 18 Jun 2012 09:46:10 +0000

Nice piece. Agree on this.

By: johnhhaskell

johnhhaskell — Mon, 18 Jun 2012 07:42:18 +0000

@ crocodilechuck – the LT lot at BUD costs the equivalent of $13 per day. You think that’s the most expensive airport parking in the world? Please don’t comment any more on NYC-related posts. thanks

http://www.bud.hu/english/passengers/acc ess_and_parking/parking/parking-terminal -2-1082.html#long

By: niveditas

niveditas — Sat, 16 Jun 2012 21:51:06 +0000

Its also not clear where this 11bn number came from in the first place, unless Taibbi misread the article he was referring to, which says Chicago motorists might pay 11bn in parking fees to the private operator.

The NYC proposal does NOT involve any upfront payment, nor does it involve giving up future revenues. Rather its supposed to be about the private manager operating the system more efficiently than the city anticipates, and receiving some percentage of the improvements as incentive payments.

By: niveditas

niveditas — Sat, 16 Jun 2012 21:40:07 +0000

BrPH, according to the BBG article, parking revenue was 156mm in 2011, with net earnings of 93mm. Also real discount rates over 75-year horizons for uncertain earnings tend to be positive, not zero.

By: TFF

TFF — Sat, 16 Jun 2012 12:22:34 +0000

LOL! A NYC denizen calling the suburbanites “parasitical”? The entire CITY is a parasite, taking its 2% annually from the wealth of the nation. **frothing at the mouth as I type**

By: CarlWeetabix

CarlWeetabix — Sat, 16 Jun 2012 04:46:14 +0000

I would be careful Simon – you may be a lot smarter, but not only is Taibbi no slouch, he’s a dangerously talented rhetorician. I would venture to say more talented than you.

So while you may be right and all, sticking to the facts probably would have been wiser (not to mention more classy).

In the mean time I fear you have brought a knife to a journalistic gunfight. Hang on – you may have earned a wild ride.

By: f.fursty

f.fursty — Sat, 16 Jun 2012 00:45:52 +0000

I think you’re confusing two issues here. The first has to do with the use of variable pricing. I agree that it’s a good thing though I’m sensitive to the charge of it favoring the wealthy.

The second is the issue of privatizing public assets, getting up front cash now to plug budget holes by selling off long term income streams. Here, I think you’re way off base.

There is no good reason that NYC cannot institute variable pricing by itself and keep the increased revenue streams. There is every reason to think that if they do sell it off, it will be at a major discount. If it were not a great deal for investors, why would they be interested? And there is no reason to think that Bloomberg will use the money for long-term investments. It’s the worst kind of short-termism there is. I hope the plan falls apart.

In the meantime, keep biking.

By: BrPH

BrPH — Fri, 15 Jun 2012 22:42:01 +0000

http://quantiger.wordpress.com/2012/06/1 5/is-11-billion-a-fair-price-for-new-yor k-citys-parking-meters/

Wrote a blog post on it. Cheers, Felix. :-)

By: BrPH

BrPH — Fri, 15 Jun 2012 22:12:36 +0000

Oh, yeah. The total 75 year gross revenue off all those meters in the optimum return scenario of 10X current pricing is $600 billion. The final year revenue in that scenario is $15 billion.

By: BrPH

BrPH — Fri, 15 Jun 2012 22:08:54 +0000

In other words, Felix, unless I seriously screwed up my calculations, that $11 billion price for 90,000 NYC parking meters is a solid 6 banger, and could easily be a 23 banger. Downside risk is so miniscule you may as well forget it.

The people of NYC deserve more money for their meters – a lot more.

By: BrPH

BrPH — Fri, 15 Jun 2012 22:05:33 +0000

A rough calculation for 90,000 parking meters yields around $4,000 per meter-year at $1 per meter hour 12 hours a day after discounting for people who don’t pay their meter. That’s roughly $360 MM per investment-year. Assuming a 2% inflation rate on parking rates, yearly income rises to over $1.5 BB by year 75.

The present value of that income stream is exactly the same as the present value of the $360 MM per year at a zero discount rate. In that scenario, roughly $27 billion is the current PV for 90,000 NYC parking meters on a total income of approximately $66 billion over 75 years. That assumes you can raise rates to keep up with inflation.

But, there’s a kicker. As the buyer, you have been ordered to maximize your revenue as described in the article. That’s what variable pricing does – optimize revenue.

What is the maximum revenue possible? At least double, and probably triple what it is now with fixed-rate parking. Let’s choose 2.5X and figure that after an investment of $1 BB and three years, the buyer multiplies revenue from its year 3 level by 2.5.

That problem is a 3 year annuity at zero discount plus a 72 year annuity at zero discount. But in year 4 (year 1 of the 72 year annuity) you multiply the income of year 3 by 2.5X. Working that out, I get PV of approximately $1.08BB + $64.799 BB.

So for the investors who are buying NYC’s 90,000 parking meters for $11 BB, their median case scenario has a PV of around $66 billion.

What’s their downside risk? They could go to zero because of war, global warming flooding the city, etc. NYC could outlaw automobiles. Seventy-five years is a long time. But is that likely? No.

What’s their upside potential? They could find that optimum revenue to meet their curbside parking availability targets is 10X current revenue. Working that out, the PV of those meters is $260 billion.