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Bloomington Herald-Times

October 8, 2012

IU workers launch petition against outsourcing parking
By Mike Leonard
October 7, 2012

While Indiana University administrators explore the possibility of leasing the university's Bloomington and Indianapolis parking operations to a private enterprise for a potentially large up-front payment, opposition on campus continues to mount.

Various faculty and staff members have expressed skepticism about the initiative and opposition to the proposal to investigate outsourcing since IU Trustee William H. Strong raised the issue in a February meeting. Strong, an executive for the global Morgan Stanley financial services firm, pointed to his company's involvement in a similar scenario at Ohio State and suggested that leasing "concessions" such as parking could provide immediate cash that IU could put to good use.

Last summer, Ohio State inked a deal to lease its parking operations for an up-front payment of $483 million on a 50-year lease. The contract with Australia-based QIC Global Infrastructure and Connecticut's Laz Parking Ltd. builds in performance expectations but also the ability for the private companies to increase parking rates by up to 5.5 percent annually for the first 10 years of the contract.

The IU trustees will hear a report this Thursday on progress an IU committee has made in drawing up the specifications it would like to see in any request for proposals on a parking operations lease.

Last week, a petition drive opposing any such transaction began circulating publicly. Edward Vasquez, president of Communication Workers of America Local 4730, said CWA leaders crafted the petition and were pleased to see hundreds of faculty and staff sign on within days.

Concerns listed in the petition include loss of price controls, loss of service, loss of jobs and loss of perspective -- alleging problems with previous outsourcing initiatives.

Communications and culture professor Phaedra Pezzullo happily distributed the petition to the Progressive Faculty Council and beyond.

"The petition is a clear and compelling statement about when selling off, the university sells out the people who study and work at the university. Currently, the university collects money from faculty, staff and students for parking permits. Giving up that function of the university leads to a loss of revenue and puts faculty, staff and students who drive to campus in a less secure position," she said in an email exchange.

"Certainly, some could take public transportation or ride bikes back and forth to the university, but think of people who are disabled or elderly or those who cannot afford to live in the city limits of Bloomington -- would a private corporation care about affordable parking access for all members of the university community?" she asked.

Coincidentally, an academic paper with some relevance to the leasing issue recently appeared in Public Administration Review, the official journal of the American Society for Public Administration. It is edited by IU School of Public and Environmental Affairs professor James L. Perry.

Author John B. Gilmour of the College of William and Mary asserted in his paper that the 75-year Indiana Toll Road Lease amounts to essentially an intergenerational cash transfer in which the majority of benefits are enjoyed in the early part of the lease, while the bulk of costs fall late in the lease.

"There are laws in place to protect younger generations against the debts of their parents. Your parents can borrow money from the bank, but they can't obligate you to pay it back after their death," he writes.

Gilmour said in a phone interview last week that parking leases such as Ohio State's or one that IU might sign impose a similar scenario in removing a revenue stream from future university officials.

"One of the things that bugs me about these transactions is that if the university were willing to raise the parking fees itself it could capture more value, but maybe not all immediately," he said. "You get a short-term reprieve and create another problem in the long run."

Gilmour said such leases can make some sense in a crisis. The financially beleaguered state of Arizona, for example, sold off its office buildings for a quick cash infusion and now is paying to lease the same space.

"They were effectively borrowing the money disguised as a sale," he said. "The big question is, what happens next year? And the year after that? What happens is you've spent the money and you have to come up with new revenue from somewhere."

IU faces financial concerns from the recent recession and decline in percentage of operating expenses provided by the state -- but the university's cash reserves are strong and its bond rating is the highest possible.

"Look," Gilmour said. "There's a reason why state constitutions often limit bond issues to no more than 30 years, because it's just good public policy that you don't borrow to buy something for a longer period than the purchase will last."

No one finances a car for 20 years because cars typically need to be replaced, and certainly, repaired, much sooner than that, and the interest paid over that length of time would make the purchase imprudent at best, he said.

Highways have a 30-year lifespan before they essentially need to be rebuilt, Gilmour said, so the argument that the state gets the benefit of a lease now doesn't take into consideration the need to finance new construction and repair on the same assets in the future.

"These 50- and 75-year leases create the opportunity for the intergenerational transfer of debt and that's something we've always resisted," he said.

"If the state can't issue a bond for 50 or 75 years, why can it enter into a lease for that long? It's just a way to get around the state constitution."

The William and Mary analyst said that in all the lease transactions that he and others have examined, the alleged greater efficiency of the private sector has been greatly exaggerated.

"If your university needs money, why doesn't it just raise parking rates on its own and capture more of the value?" he asked. "Every one of these leases we've seen allows for rate increases. So if you're going to do that, why not do it yourself and not pass off the heat to someone else?"