Annex 4 Parking Measures by PPP

Concessions

Concessions may be defined as contractual arrangements through which a private entity obtains the right from a government agency to provide a service under market conditions. The arrangement allows asset ownership to remain in public hands, but allows the private operator to take responsibility for new investments in addition to operation and maintenance.

The underlying characteristics of concession contracts make them successful models for attracting private sector participation. They also give the Municipality maximum protection in its role as public owner.

Typical key characteristics of concessions are as follows:

  • The concession permits the Municipality to conduct and oversee monitoring functions, while the private investor is responsible for and obligated to provide parking services, which may include financing of activities and constructing new public properties. The Municipality is obliged to repay invested money to the concessionaire (for construction activities) in the case of early termination of the concession. A minimum investment amount may be determined for the entire concessionary period, either annually or by other terms.
  • The property of newly constructed parking facilities remains within the public sector. After the concessionary term expires, the concessionaire transfers the facilities to the Municipality.
  • Failure to meet established operating performance requirements in the contract is sanctioned (as agreed upon) by monetary penalties paid to the Municipality. It is possible that in the concession contract, requirements for off-street parking facility construction may be defined, as well as performance requirements. The concessionaire has relative operational independence, as far as the scope of obligations established under the concession contract set in consideration of initial activity parameters, are met.
  • On-street parking prices are regulated by the Municipal Council under the Traffic Law, which the concessionaire must comply with. Off-street parking prices may be set by the concessionaire, so long as consent is granted by the Municipality.

Advantages and Disadvantages of Granting a Concession

The option of granting a concession to involve the private sector within parking operations has the following characteristics:

  • The concession is a method by which all responsibility (in terms of financial and technical, depending upon the agreement) is transferred to the private sector.
  • A concession permits an operator to have greater freedom and flexibility to obtain maximum operating effectiveness (using its own management, financial, and technical abilities and knowledge) and guarantee the success of the project.
  • A concession allows the Municipality to guarantee the construction of needed facilities despite the fact that existing funds are insufficient to publicly finance them.
  • The clear division of obligations between the contract parties decreases the likelihood of conflicts between the Municipality and the concessionaire, leading to improved project results.
  • The public sector has the opportunity to concentrate on monitoring and regulation of the concession obligations from the contract, as well as in other areas.

Negative aspects of a concession include the facts that:

  • A concession is a binding agreement with a long-term contract, which naturally requires longer period of research and preparation.
  • Expenses for concession preparation are significant, emanating from various administrative procedures (including bid organization and preparation, coordination between different municipal departments, preparation of concession contract, and contract signing). It should be noted that possibilities exist to reduce the cost and expedite the process, based on worldwide best practice in similar projects. Furthermore, international financial institutions may be invited to assist in the financing of preparatory activities using their broad international expertise to facilitate the process.
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