Reinventing Suburbia The Price Tag for Structured Parking Richard F. X. Johnson

For more than 50 years, the idea of suburban living has been woven into the fabric of the American Dream, with its promise of a sense of space, affordability, family life and upward mobility. With the cost of congestion totaling an alarming $65 billion per year and the price of crude oil over $60 per barrel, serious questions are now being raised as to the sustainability of this now costly way of life.

With the growing desire for quality urban living—away from traffic congestion—the idea of transit-oriented development (TOD) has quickly caught on across the country. Of the many components of TOD design, structured parking has been the most widely discussed.

Structured parking refers to an above-grade, ramp-accessible structure specifically designed to accommodate vehicle parking. It uses less area and saves valuable land for other uses. People sometimes consider land used for parking facilities to have little to no value. For example, building and campus managers may only consider operating and maintenance expenses when calculating parking costs, treating land used for parking facilities as “free.” But there is an “imbedded opportunity cost” to devoting land to parking and currently used for off-street parking can be used for buildings, landscaping and parks, or could be leased or sold. Curb space used for parking can be converted to traffic lanes, busways, bike lanes, or additional sidewalk space.

While parking garages are significantly more expensive to build than surface parking, the long-term value of integrated mixed-use development and efficient land use can help justify the cost. Parking decks can sometimes be “tucked into” the existing grade of a site, in many cases doubling parking capacity when compared to a sloping surface lot. Parking garages enhance access to town center commercial and office uses without consuming more valuable land.

The capital and operating costs of a garage are highly dependent on the design of the facility and its site, and the anticipated revenue is highly dependent on the market. The cost of structured parking ranges from $15,000 to $30,000 per space, and the revenue derived from each space varies from $60 to $300 per month. Utilizing approximate “midpoints” of $22,500 for cost per space and $150 for monthly revenue—and even with RAD/RAB financing and PILOT payment structures, the value/cost gap is still not closed.

So what can be done to close this ever-widening gap? The Urban Land Institute recommends that the state establish an Urban Parking Program (UPP) within its organization for the chartered purpose of revitalizing urban areas through the financing and potential ownership of parking structures within the urban and transit village locations. We believe the most appropriate agency to oversee this program would be the New Jersey Economic Development Authority, because of the extensive experience of its staff in complex financing structures and creative real estate development ventures. Providing a menu of financial instruments that range from credit enhancement all the way through to ownership would allow critical redevelopment projects that create jobs (office buildings) and provide market rate housing to go forward. This type of development can help turn a commuter city into a true 24/7 environment.

The UPP could be “seeded” with an initial capital investment of at least $40 to $50 million and eventually grow to $100 million. The “seed” amount should be sufficient to be economically meaningful to acquisition and development program. The UPP could have a “revolving debt” feature, wherein the cash flow from an existing, stable parking structure securitizes the debt on a newly developed but unstable garage. Upon stabilization, this new garage could be sold (with the proceeds rolled back into the program) or retained, with the cash flow securing an additional start up garage.

As growth and development occur, urban parking solutions need to be considered. They should be viewed as infrastructure projects, not real estate developments, and their financing and construction should be underwritten as such. Minimizing the acreage used by parking lots can help adjacent uses function better together.

The Urban Land Institute (ULI) is a nonprofit education and research institute that is supported and directed by its members. Its mission is to provide responsible leadership in the use of land in order to enhance our total environment. Established in 1936, the Institute today has over 20,000 members and associates representing the entire spectrum of the land use and development disciplines. It is comprised of developers, builders, property owners, investors, architects, public officials, planners, real estate brokers, appraisers, attorneys, engineers, financiers, academics, students and librarians.

The objectives of the ULI District Council Program are to provide a forum for exchange of information about real estate and planning issues at the local level, offer associate members additional opportunities to interact with full members and to participate in ULI programs, raise awareness of local land use issues among public officials, academics, students, and the public at large and introduce nonmembers to ULI and its high-quality programs.

For more information, contact Pat Hanley at ULI’s Northern New Jersey District Council at 201-997-7468 or visit www.nnj.uli.org.

Article published in March 2006, New Jersey Municipalities