After months of careful consideration and analysis, the university has decided it will not pursue leasing its campus parking facilities to a private operator.

Last April U-M retained Greenhill & Co. to complete an assessment of the value of a public-private partnership (P3) arrangement for parking operations at the Ann Arbor campus and U-M Health System. 

The investigation of P3 was one of a number of cost-saving or revenue-enhancement initiatives being considered as part of the university’s overall efforts to keep U-M affordable to students, and to protect resources for the university’s core missions of teaching and research.

Since 2004, the university has trimmed or reallocated $265 million in recurring expenses in the general fund. The university is committed to save another $120 million by 2017.

U-M’s exploration of the possible arrangement followed a decision by Ohio State University to award a 50-year concession to a private consortium for an up-front lease payment of $483 million. The private operator, CampusParc, also is responsible for all of OSU’s parking facility upkeep.

Since that transaction, a number of other universities including U-M, Indiana University, and University of Florida have examined similar arrangements.

Timothy P. Slottow, executive vice president and chief financial officer, said a rigorous external analysis of the U-M parking services revealed that U-M Parking & Transportation Services is managing U-M’s parking assets very efficiently and with very little deferred maintenance.

Slottow added the analysis led the university to conclude that the financial return from a lease was not at a level that would justify the inherent risks and loss of flexibility that would come with a 40- to 50-year lease of its nearly 28,000 parking spaces.

Instead, the university will develop its own long-term plan that will include service improvements and enhancements through technology, Slottow said.

As that planning moves forward, parking employees will be involved in developing and implementing technology and service improvements, said Steve Dolen, executive director of Parking & Transportation Services.

“While we are not entering into a P3 arrangement, we did learn a few things through this analysis about our own operations and it has also provided additional impetus to speed up some process and technology initiatives to improve service,” Dolen said. “That’s where we will focus our efforts.”

Before a final decision was made, Slottow explained, the university consulted with a number of external and internal advisory committees. What emerged through all of the discussions was the importance of preserving maximum flexibility with the land and parking assets, and avoiding potential rigidity that a long-term lease of 40-50 years might impose.

Additionally, it was determined that the university could find alternative ways to reduce operating expenses, while maintaining flexibility and control over the use of land that is now dedicated to parking.

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